2015 (11) TMI 140 - HC - Indian Laws

Court upholds validity of SARFAESI Act orders, emphasizes correct forum selection. Parties bear own costs.

The Court upheld the validity of the orders passed by the In-charge Chief Metropolitan Magistrate under Section 14 of the SARFAESI Act, applying the ... Jurisdiction of In-charge Chief Metropolitan Magistrate - Application under section 14 of the SARFAESI Act - Held that:- Under section 14 of the SARFAESI Act, the bank / financial institution is to approach a pre-existing court already constituted under the provisions of the CrPC, 1973. It is well settled that the Chief Metropolitan Magistrate or the District Magistrate, as the case may be, whilst deciding an Application under section 14 of the SARFAESI Act, acts in a very limited jurisdiction and does not adjudicate any lis between the bank and the borrower. His jurisdiction is invoked only for the limited purpose of seeking his assistance in taking the possession of the secured assets. This assistance would be rendered to the banks/financial institutions subject to them complying with the conditions and stipulations set out in section 14. The argument canvassed on behalf of the Petitioners that the In-charge Chief Metropolitan Magistrate had no jurisdiction to entertain the Applications filed by the Respondent Banks under section 14, is wholly without merit. - This doctrine, which is now well established, propounds that the acts of officers “de-facto” performed by them within the scope of their assumed official authority, in the interest of public or third persons and not for their own benefit, are generally as valid and binding, as if they were the acts of officers “de-jure”. This doctrine is founded on good sense, sound policy and practical expedience. It is aimed at the prevention of public and private mischief and the protection of public and private interest. It avoids unnecessary confusion and needless chaos. Even though an illegal appointment may be set aside and a proper appointment may be made, but the acts of those who hold office “de-facto” are not so easily undone and may have lasting repercussions and confusing sequels, if attempted to be undone. Otherwise, as soon as the Judge pronounces a judgment, a litigation may be commenced for a declaration that the judgment is void because the Judge is not a Judge. This is exactly the case before us. Hence, the rule against collateral attack on the validity of judicial appointments cannot be permitted in such a fashion. We, therefore, find that even assuming that the In-charge Chief Metropolitan Magistrate did not have the actual authority, or was not clothed with the powers to entertain an Application under section 14 of the SARFAESI Act, by applying the “de-facto” doctrine, it would make no difference in the present case. - even if the Chief Metropolitan Magistrate’s order of 4th February, 2012 was held to be in excess of exercise of its powers, the orders passed pursuant thereto by the Additional Chief Metropolitan Magistrate ought not to have been set aside in view of the “de-facto” doctrine that has now been well settled and evolved in larger public interest. We, therefore, with great humility, find ourselves unable to agree with the decision of the Gujarat High Court in the case of Manjudevi R Somani [2013 (4) TMI 742 - GUJARAT HIGH COURT] - No merit in these Writ Petitions. Issues Involved:1. Jurisdiction of the In-charge Chief Metropolitan Magistrate under Section 14 of the SARFAESI Act.2. Application of the 'de-facto' doctrine to validate the orders passed by the In-charge Chief Metropolitan Magistrate.3. Interpretation and application of Section 14 of the SARFAESI Act and related provisions of the CrPC, 1973.Detailed Analysis:1. Jurisdiction of the In-charge Chief Metropolitan Magistrate under Section 14 of the SARFAESI Act:The Petitioners challenged the orders passed by the In-charge Chief Metropolitan Magistrate under Section 14 of the SARFAESI Act, arguing that only the Chief Metropolitan Magistrate has the authority to entertain and pass such orders. They contended that the orders passed by the In-charge Chief Metropolitan Magistrate are a nullity and should be set aside. The Petitioners relied on judgments from various High Courts to support their argument that the In-charge Chief Metropolitan Magistrate lacked jurisdiction.2. Application of the 'de-facto' doctrine to validate the orders passed by the In-charge Chief Metropolitan Magistrate:The Respondent Banks argued that the orders passed by the In-charge Chief Metropolitan Magistrate are valid under the 'de-facto' doctrine. This doctrine states that the acts of officers 'de-facto' performed within the scope of their assumed authority are generally as valid as those performed by officers 'de-jure.' The Respondent Banks relied on the Supreme Court decision in Gokaraju Rangaraju v. State of Andhra Pradesh, which held that judgments and acts done by a judge, even if later found to be defective, have the same efficacy as those done by a judge 'de-jure.'3. Interpretation and application of Section 14 of the SARFAESI Act and related provisions of the CrPC, 1973:The Court examined the provisions of the SARFAESI Act and the CrPC, 1973, to determine the jurisdiction of the Chief Metropolitan Magistrate and the Additional Chief Metropolitan Magistrate. Section 14 of the SARFAESI Act allows banks to seek assistance from the Chief Metropolitan Magistrate or the District Magistrate to take possession of secured assets. The Court noted that the applications were filed in the Court of the Chief Metropolitan Magistrate, and the In-charge Chief Metropolitan Magistrate entertained these applications in the absence of the Chief Metropolitan Magistrate.The Court found that the In-charge Chief Metropolitan Magistrate was acting under the color of lawful authority and that the 'de-facto' doctrine applied. The Court emphasized that the doctrine is aimed at preventing public and private mischief and protecting public and private interests. The Court also referred to a Notification issued by the High Court empowering the Additional Chief Metropolitan Magistrate to entertain and decide applications under Section 14 of the SARFAESI Act in the absence of the Chief Metropolitan Magistrate.Conclusion:The Court dismissed the Writ Petitions, holding that the orders passed by the In-charge Chief Metropolitan Magistrate were valid under the 'de-facto' doctrine. The Court found no merit in the Petitioners' arguments and emphasized that the Respondent Banks had approached the correct forum as stipulated in Section 14 of the SARFAESI Act. The Court also noted that the Petitioners, who were borrowers owing large amounts to the Respondent Banks, could not use a collateral attack on the jurisdiction of the In-charge Chief Metropolitan Magistrate to delay or thwart the securitization proceedings. The Court left the parties to bear their own costs.