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Advocates can assist the CMM/DM in taking possession of the secured assets

In NKGSB Cooperative Bank Limited vs Subir Chakravarty & Ors., the seminal question involved in these cases is: whether it is open to the District Magistrate or the Chief Metropolitan Magistrate to appoint an advocate and authorise him/her to take possession of the secured assets and documents relating thereto and to forward the same to the secured creditor within the meaning of Section 14(1A) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ? This issue arises because of the expression used in the said provision, “may authorise any officer subordinate to him”.

The Supreme Court observed that various courts have expressed conflicting views on this issue. The SC said that the expression “any officer subordinate to him” has been used in several legislations enacted by Parliament/State Legislature. Somewhat similar expression has been used in Articles 53, 154 and 311 of the Constitution of India and in other legislations enacted by Parliament/State Legislature with little variation to further the intent of the concerned enactment.

The SC said that while considering the purport of the expression in Section 14(1A) of the 2002 Act, it must be noticed that the said provision was inserted vide Act 1 of 2013 with effect from 15.1.2013. In absence of express provision, such as sub-Section (1A) under the unamended Act, the CMM/DM could take possession of secured assets on a written application made by the secured creditor under Section 14(1); and while doing so in terms of Section 14(2) of the 2002 Act, it was open to the CMM/DM to take or cause to be taken such steps and use, or cause to be used, such force, as may, in his opinion be necessary. 

For taking physical possession of the secured assets in terms of Section 14(1) of the 2002 Act, as aforementioned, the secured creditor is obliged to approach the CMM/DM by way of a written application requesting for taking possession of the secured assets and documents relating thereto and for being forwarded to it (secured creditor) for further action. The statutory obligation enjoined upon the CMM/DM is to immediately move into action after receipt of a written application under Section 14(1) of the 2002 Act from the secured creditor for that purpose. It cannot brook delay. Time is of the essence. This is the spirit of the special enactment. However, it is common knowledge that the CMM/DM are provided with limited resources. That inevitably makes it difficult, if not impossible, for the CMM/DM to fulfil his/her obligations with utmost dispatch to uphold the spirit of the special legislation. It is common knowledge that in the respective jurisdictions, there is only one CMM/DM. If he is expected to reach at every location himself for taking possession, in some jurisdictions it would be impracticable, if not impossible, for him to do so owing to large number of applications in the given jurisdiction being a commercial city. Accordingly, strict construct would defeat the legislative intent and purpose for enacting the 2002 Act. Indeed, logistical problems of the Office of the CMM/DM cannot be the basis to overlook the statutory provision. We are persuaded to take the view that an advocate is and must be regarded as an officer of the court and subordinate to the CMM/DM for the purposes of Section 14(1A) of the 2002 Act.

The Supreme Court observed that prior to the various amendments to the 2002 Act, it was standard practise followed by most of the courts across the country in recognising the power of the CMM/DM to appoint an advocate as a commissioner to assist him in merely taking possession of the secured assets and documents relating thereto and to forward the same to the secured creditor.  The question is: whether the past practice needs to be discontinued as being prohibited owing to insertion of sub-Section (1A)?

The Supreme Court opined that nothing prevents him/her from continuing to follow the same regime even after the insertion of sub- Section (1A). At the same time, while entrusting the act of taking possession of the secured assets consequent to the order passed under Section 14(1) of the 2002 Act to any officer subordinate to him, the CMM/DM ought to exercise prudence in appointing such person who will be capable of executing the orders passed by him. Merely because he has power to appoint “any” officer subordinate to him, it would not permit him to appoint a peon or clerk, who is incapable of handling the situation.

The Advocate Commissioner is not a new concept. The advocates are appointed as Court Commissioner to perform diverse administrative and ministerial work as per the provisions of Code of Civil Procedure and Code of Criminal Procedure. An advocate is an officer of the court.

The Supreme Court ruled that applying the “functional subordination” test, we are persuaded to take the view that sub-Section (1A) of Section 14 of the 2002 Act is no impediment for the CMM/DM to engage services of an advocate (an officer of the court) — only for taking possession of secured assets and documents relating thereto and to forward the same to the secured creditor in furtherance of the orders passed by the CMM/DM under Section 14(1) of the 2002 Act in that regard. It does not follow that the advocate so appointed needs to be on the rolls in the Office of the CMM/DM or in public service. There is intrinsic de jure functional subordinate relationship between the CMM/DM and the advocate being an officer of the court. The apprehension of the borrowers about improper execution of orders of the CMM/DM passed under Section 14(1) of the 2002 Act by the Advocate Commissioner, is plainly misplaced. Further, being an officer of the court and appointed by the CMM/DM, the acts done by the Advocate Commissioner would receive immunity under Section 14(3) of the 2002 Act — as an officer authorised by the CMM/DM. There is no reason to assume that the advocate so appointed by the CMM/DM would misuse the task entrusted to him/her and that will not be carried out strictly as per law or it would be a case of abuse of power. Rather, going by the institutional faith or trust reposed on advocates being officers of the court, there must be a presumption that if an advocate is appointed as commissioner for execution of the orders passed by the CMM/DM under Section 14(1) of the 2002 Act, that responsibility and duty will be discharged honestly and in accordance with rules of law.

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