2022 (7) TMI 1237 - SC - Indian Laws

Supreme Court clarifies powers of District Magistrates under SARFAESI Act

The Supreme Court ruled that District Magistrates and Chief Metropolitan Magistrates are not persona designata under Section 14 of the SARFAESI Act. The ... Interpretation of statute - Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement Security Interest Act, 2002 - District Magistrate, Chief Metropolitan Magistrate - persona designata for the purposes of Section 14 of the SARFAESI Act or not - whether the expression “District Magistrate” and the “Chief Metropolitan Magistrate” as appearing in Section 14 of the SARFAESI Act shall deem to mean and include Additional District Magistrate and Additional Chief Metropolitan Magistrate for the purposes of Section 14 of the SARFAESI Act? - HELD THAT:- The underlying purpose of the SARFAESI Act is to empower the financial institutions in India to have similar powers as enjoyed by their counterparts, namely, international banks in other countries. One such feature is to empower the financial institutions to take possession of securities and sell them. The same has been translated into provisions falling under Chapter III of the SARFAESI Act. Section 13 deals with enforcement of security interest. SubSection (4) thereof envisages that in the event a default is committed by the borrower in discharging his liability in full within the period specified in subsection (2), the secured creditor may take recourse to one or more of the measures provided in subsection (4). One of the measures is to take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset. That, they could do through their “authorised officer” as defined in Rule 2(a) of the Security Interest (Enforcement) Rules, 2002. Considering the scheme of the SARFAESI Act, it is explicit and crystal clear that possession of the secured assets can be taken by the secured creditor before confirmation of sale of the secured assets as well as postconfirmation of sale. For taking possession of the secured assets, it could be done by the “authorised officer” of the Bank as noted in Rule 8 of the Security Interest (Enforcement) Rules, 2002 - The Magistrate has to adjudicate and decide the correctness of the information given in the application and nothing more. Therefore, Section 14 does not involve an adjudicatory process qua points raised by the borrower against the secured creditor taking possession of secured assets. In view of the scheme of the SARFAESI Act, more particularly, Section 14 of the SARFAESI Act and the nature of the powers to be exercised by learned Chief Metropolitan Magistrate/learned District Magistrate, the High Court in the impugned judgment and order has rightly observed and held that the power vested in the learned Chief Metropolitan Magistrate/learned District Magistrate is not by way of persona designata. Whether, the Additional Chief Metropolitan Magistrate can be said to be subordinate to the Chief Metropolitan Magistrate? - HELD THAT:- The judicial powers and the powers, under the Cr.PC which may be exercised by the Chief Metropolitan Magistrate, can be exercised by the Additional Chief Metropolitan Magistrate also. Thus, the Additional Chief Metropolitan Magistrate can be said to be at par with the Chief Metropolitan Magistrate in so far as the powers to be exercised under the Cr.PC are concerned. The Chief Metropolitan Magistrate in addition, may have administrative powers. However, for all other purposes and more particularly the powers to be exercised under the Cr.PC both are at par. Therefore, the Additional Chief Metropolitan Magistrate cannot be said to be subordinate to the Chief Metropolitan Magistrate in so far as exercise of judicial powers are concerned. The view taken by the High Court are agreed upon that (i) the District Magistrate, Chief Metropolitan Magistrate is not a persona designata for the purposes of Section 14 of the SARFAESI Act; (ii) the expression “District Magistrate” and the “Chief Metropolitan Magistrate” as appearing in Section 14 of the SARFAESI Act shall deem to mean and include Additional District Magistrate and Additional Chief Metropolitan Magistrate for the purposes of Section 14 of the SARFAESI Act. The powers under Section 14 of the SARFAESI Act can be exercised by the concerned Additional Chief Metropolitan Magistrates of the area having jurisdiction and also by the Additional District Magistrates, who otherwise are exercising the powers at par with the concerned District Magistrates either by delegation and/or special order - Appeal dismissed. Issues Involved:1. Interpretation of Section 14 of the SARFAESI Act.2. Whether the District Magistrate and Chief Metropolitan Magistrate are persona designata under Section 14.3. Whether the term 'District Magistrate' and 'Chief Metropolitan Magistrate' includes Additional District Magistrate and Additional Chief Metropolitan Magistrate.Issue-wise Detailed Analysis:1. Interpretation of Section 14 of the SARFAESI Act:The Supreme Court examined the powers exercisable by the District Magistrate (DM) and Chief Metropolitan Magistrate (CMM) under Section 14 of the SARFAESI Act. The Court highlighted that the SARFAESI Act's purpose is to empower financial institutions to take possession of securities and sell them without court intervention. Section 14 mandates that upon receiving a written request from the secured creditor, the CMM or DM must take possession of the secured assets and forward them to the secured creditor. The Court emphasized that the powers exercised by the CMM/DM under Section 14 are ministerial and do not involve any adjudicatory process or quasi-judicial functions.2. Whether the District Magistrate and Chief Metropolitan Magistrate are persona designata under Section 14:The Court held that the power vested in the CMM and DM under Section 14 is not by way of persona designata. The Court reasoned that the steps taken by the CMM/DM under Section 14 are ministerial and do not require personal satisfaction or adjudication. The Court noted that the CMM/DM could delegate the task of taking possession of the secured assets to any officer subordinate to them, including an advocate commissioner.3. Whether the term 'District Magistrate' and 'Chief Metropolitan Magistrate' includes Additional District Magistrate and Additional Chief Metropolitan Magistrate:The Court analyzed the relevant provisions of the Code of Criminal Procedure (Cr.PC) and concluded that the Additional Chief Metropolitan Magistrate (ACMM) and Additional District Magistrate (ADM) have powers at par with the CMM and DM, respectively. The Court observed that the ACMM and ADM are not subordinate to the CMM and DM in terms of exercising judicial powers. The Court held that the expression 'District Magistrate' and 'Chief Metropolitan Magistrate' in Section 14 of the SARFAESI Act includes the ADM and ACMM, respectively. The Court emphasized that this interpretation aligns with the SARFAESI Act's objective of expeditious disposal of applications and the practical difficulties faced by CMMs and DMs due to their extensive administrative and judicial duties.Conclusion:The Supreme Court upheld the High Court's judgment, stating that the District Magistrate and Chief Metropolitan Magistrate are not persona designata for the purposes of Section 14 of the SARFAESI Act. The Court affirmed that the terms 'District Magistrate' and 'Chief Metropolitan Magistrate' include Additional District Magistrate and Additional Chief Metropolitan Magistrate for the purposes of Section 14 of the SARFAESI Act. The Court overruled contrary views taken by the Gujarat High Court, Calcutta High Court, and Kerala High Court. The appeal was dismissed, and the powers under Section 14 of the SARFAESI Act were affirmed to be exercisable by the concerned Additional Chief Metropolitan Magistrates and Additional District Magistrates.