2011 (8) TMI 973 - HC - Indian Laws

Court Sets Aside Sub Divisional Magistrate's Order, Emphasizes Compliance with Section 14

Asset Recovery Corpn. India Ltd. Versus State of Maharashtra

The Court allowed the Petition, setting aside the Sub Divisional Magistrate's order and instructing compliance with Section 14 within a specified ... Validity of an order passed by the sub-divisional magistrate - petitioner, an asset reconstruction company, issued a notice under section 13(2) to the third and fourth respondents to take possession of the secured asset - third respondent had taken a loan from the ICICI bank for purchasing a house - third and fourth respondents declined to hand over possession - application was filed before the second respondent, the sub-divisional magistrate, for an order under section 14 - second respondent rejected the application holding that considering the legal and factual position, the petitioner had failed to the follow proper procedure laid down under the Act – Held that:- second respondent was duty bound to act in accordance with the law laid down by the Court, which is binding upon him. In failing to do so and in virtually entering upon the merits of the entitlement of the petitioner, the second respondent has exceeded his jurisdiction. There is absolutely no dispute about the position that a notice under section 13(2) was served on the third and fourth respondents and that the secured asset is within the jurisdiction of the second respondent. Once these two facts were established, the second respondent could not have refused to pass an order under section 14. petition is to be allowed by setting aside the impugned order of the Sub-Divisional Magistrate. The second respondent is to be directed to pass an order under section 14 and thereupon take steps forthwith to effectuate compliance with the order. Issues:Validity of the order passed by the Sub Divisional Magistrate under Section 14 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.Analysis:The Petitioner, an Asset Reconstruction Company, challenged the order passed by the Sub Divisional Magistrate at Solapur dismissing their application under Section 14. The Petitioner issued a notice under Section 13(2) to the Third and Fourth Respondents, calling for payment of a specified amount and informing them of the intention to take possession of the secured asset. The application under Section 14 was dismissed by the Sub Divisional Magistrate on grounds that the Petitioner had not replied to objections raised by the Respondents, the panchanama was doubtful, and the notice was not published in newspapers. The Petitioner argued that the Sub Divisional Magistrate exceeded jurisdiction by delving into procedural compliance rather than the two key issues of jurisdiction and notice under Section 13(2).The Division Bench's judgment in Trade Well v. Indian Bank outlined the District Magistrate's role under Section 14, emphasizing jurisdiction and notice under Section 13(2) as the only considerations, without adjudication at that stage. The Petitioner contended that since the property was within the Sub Divisional Magistrate's jurisdiction and the notice was served, the order under Section 14 should have been granted. The Respondents relied on a judgment from the Karnataka High Court supporting the Sub Divisional Magistrate's reasoning.The Court found that the Sub Divisional Magistrate had overstepped jurisdiction by delving into procedural compliance instead of focusing on the key issues of jurisdiction and notice under Section 13(2). The Court emphasized that objections to measures under Section 13(4) should be addressed before the Debt Recovery Tribunal under Section 17, not at the Section 14 stage. The Sub Divisional Magistrate was directed to pass an order under Section 14 within a week to ensure compliance with the Act.In conclusion, the Court allowed the Petition, setting aside the Sub Divisional Magistrate's order and instructing compliance with Section 14 within a specified timeframe, emphasizing adherence to the law's requirements without delving into procedural aspects beyond the Act's scope.