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Chief Judicial Magistrates Competent To Entertain Applications U/s 14 SARFAESI Act

In CIVIL APPEAL NO(S). 6295 OF 2015, The Authorised Officer, Indian Bank  vs D. Visalakshi and Anr., the longstanding conflicting view of views of various High Courts on the whether the Chief Judicial Magistrate is competent to process the request of the secured creditor to take possession of the secured asset under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. (SARFAESI) has been decided.

Till this judgment, various courts had been deciding on this issue taking either the view that role of CJM and CMM are interchangeable, with  only the jurisdiction being different and therefore applicable to Section 14 while other courts have held that only CMM and DM is allowed under Section 14.

The Calcutta High Court agreeing with the Bombay High Court had opined that once an authority has been named for the purpose of rendering assistance, the Court cannot confer jurisdiction on any other
authority, who has not been named in the statutory provision for exercising such powers. That would amount to usurping legislative function. The disagreeing courts also held that the language of Section 14 of the 2002 Act was unambiguous and did not warrant construction to empower the CJM in non­metropolitan areas.

The Kerala High Court in Muhammed Ashraf and Anr. Vs. Union of India (UOI) and Others, on the other hand held that Section 14 of the 2002 Act is only for the purpose of executing the power and assisting the secured creditor to take possession of the secured assets. It can only facilitate the secured creditor in taking possession of the secured assets after verification of the basicmfacts regarding the entitlement of the secured creditor to get such possession. The court also took support from the dictum in Holmes Vs. Bradfield Rural District Council41 and also in Sri Nasiruddin (supra) wherein this Court adopted “just reasonable and sensible” interpretation of the provision. The Court also adverted to the enunciation of House of Lords in Inco Europe Ltd. and Ors. Vs. First Choice Distribution (a firm) and Ors.46 wherein it is observed that Court can add words in its interpretative process in suitable cases to give effect to the purpose of legislature.  Lastly, the Court adverted to the decision in National Insurance Co. Ltd. Vs. Laxmi Narain Dhut48 which had considered the dictum in Reserve Bank of India and Others Vs. Peerless General Finance and Investment Company Ltd. and Another49; and Kehar Singh and Others Vs. State (Delhi Admn.)50 to hold that if the statutory provision is open to more than one interpretation, then the Court must adopt the one which represents the true intent of the legislature. Thus, it concluded that exercise of power by the CJM in non­metropolitan areas, who exercises the same powers as that of CMM in metropolitan areas, would not in any way abrogate or contradict the dispensation predicated in Section 14 of the 2002 Act.

Section 14 of the SARFAESI Act empowers the Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking possession of secured asset. The Section does not expressly refer to Chief Judicial Magistrate.

The Supreme Court observed that indisputably, the expressions “CMM” and “DM” have not been defined in the 2002 Act. That definition can thus, be traced to the provisions of Cr.P.C.. It is also well established by now that the 2002 Act, is a self­contained code. An inquiry conducted by the stated authority under Section 14 of the 2002 Act, is a sui generis inquiry. In that, majorly it is an administrative or executive function regarding verification of the affidavit and the relied upon documents filed by the parties. That inquiry is required to be concluded within the stipulated time frame. While undertaking such an inquiry, as is observed by this Court, the authority must display judicious approach, in considering the relevant factual position asserted by the parties. That pre­supposes that it is a quasi­judicial inquiry though, a non­judicial process. The inquiry does not result in adjudication of inter se rights of the parties in respect of the subject property or of the fact that the transaction is a fraudulent one or otherwise. Also, the powers and functions of the CMM and the CJM
are equivalent and similar, in relation to matters specified in the Cr.P.C.. These expressions (CMM and CJM) are interchangeable and synonymous to each other. Moreover, Section 14 of the 2002 Act does not explicitly exclude the CJM from dealing with the request of the secured creditor made thereunder. The power to be exercised under Section 14 of the 2002 Act by the concerned authority is, by its very nature, non­judicial or State’s coercive power. Furthermore, the borrower or the persons claiming through borrower or for that matter likely to be affected by the proposed action being in possession of the subject property, have statutory remedy under Section 17 of the 2002 Act and/or judicial review under Article 226 of the Constitution of India. In that sense, no prejudice is likely to be caused to the borrower/lessee; nor is it possible to suggest that they are rendered remediless in law. At the same time, the secured creditor who invokes the process under Section 14 of the 2002 Act does not get any advantage muchless added advantage. Taking totality of all these aspects, there is nothing wrong in  giving expansive meaning to the expression “CMM”, as inclusive of CJM concerning non­metropolitan area, who is otherwise competent to discharge administrative as well as judicial functions as delineated in the Cr.P.C. on the same terms as CMM. That interpretation would make the provision more meaningful.

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