2022 (1) TMI 1464 - HC - Indian Laws

Finance company wins challenge against rejection of Section 14 SARFAESI Act application by Chief Judicial Magistrate

Orissa HC allowed a writ petition filed by a finance company challenging rejection of its Section 14 SARFAESI Act application by Chief Judicial ... Rejection of application filed by the Petitioner-Finance Company under Section 14 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Whether the present writ petition is maintainable in view of the remedy provided under Section 17 of the SARFAESI Act, 2002? - HELD THAT:- The petitioner does not have any alternative and statutory remedy before the Tribunal to lay challenge to the impugned order of the Magistrate rejecting its application under Section 14 of the Act, 2002. It is well settled that any aggrieved person cannot be left remediless as held by the Hon’ble Supreme Court in Sunil Vasudeva V/s Sundar Gupta [2019 (8) TMI 374 - SUPREME COURT], which has been relied upon by a Division Bench of Punjab and Haryana High Court in Anu Bhalla V/s District Magistrate, Pathankot [2020 (9) TMI 1194 - PUNJAB AND HARYANA HIGH COURT]. Consequently, the present petition under Article 226 of the Constitution of India is held to be maintainable. Whether Chief Judicial Magistrate would have the jurisdiction to entertain an application under Section 14 of the SARFAESI Act, 2002? - HELD THAT:- A perusal of Section 14 nowhere reflects that the authorities mentioned therein are required to act only after issuance of a notification to that effect. Besides, learned Senior Counsel for the Opposite Parties have not been able to show any provision, where by a notification was contemplated to be issued for any authority to exercise jurisdiction and/or Chief Judicial Magistrate could only act thereafter. Once the notified provision (Section 14) itself enables the authority to exercise jurisdiction, it is sufficient for the said authority to exercise powers as provided for with in the ambit of the provision. Consequently, the aforesaid argument of the Opposite Party Nos.2 and 3 cannot sustain and hence is rejected - the issue in affirmative and therefore hold that the Chief Judicial Magistrate would be equally competent to entertain an application filed by the secured creditor under Section 14 of the Act, 2002 and would be entitled to pass such orders as would be required to provide assistance to the secured creditor to take over physical possession of the secured assets. Scope of exercise of jurisdiction by the authorities concerned, while examining an application under Section 14 of the Securitisation Act, 2002 - HELD THAT:- It is to be noticed that Section 14 of the Act, 2002 was amended with effect from 15.01.2013 and a proviso was added, which requires the secured creditor to file an application accompanied with an affidavit duly affirmed by the authorised officer of the secured creditor with respect to 9 points stipulated therein. Such recording of satisfaction is only to be restricted with regard to the factual correctness of the affidavit filed by the secured creditor and cannot be stretched to include any quasi-judicial or an adjudicatory function. The impugned order dated 09.03.2021 (Annexure P-1) passed by the Chief Judicial Magistrate, Cuttack is set aside - petition allowed. Issues Involved:1. Maintainability of the writ petition in view of the remedy provided under Section 17 of the SARFAESI Act, 2002.2. Jurisdiction of the Chief Judicial Magistrate to entertain an application under Section 14 of the SARFAESI Act, 2002.3. Scope of exercise of jurisdiction by the authorities concerned while examining an application under Section 14 of the SARFAESI Act, 2002.4. Relief to which the petitioner would be entitled to in the instant petition.Detailed Analysis:Issue No. 1: Maintainability of the Writ PetitionThe primary contention from the Opposite Party was that the impugned order dated 09.03.2021 is appealable before the Debt Recovery Tribunal (DRT) under Section 17(1) of the SARFAESI Act, 2002. They argued that an order passed by the Magistrate under Section 14 is to be treated as an action under Section 13(4) and hence is appealable before DRT. Conversely, the petitioner argued that the remedy under Section 17 is available only to a person aggrieved by an action taken by the secured creditor under Section 13(4), and since the secured creditor itself is aggrieved by the Magistrate's order, Section 17 would not be applicable.The Court found that Section 13(1) and Section 17 of the Act allow the secured creditor to enforce the charged securities without court intervention and provide a remedy to persons aggrieved by the secured creditor's actions. However, the Act does not provide a remedy for the secured creditor to challenge a Magistrate's order before the Tribunal. The Court cited precedents, including the Punjab and Haryana High Court judgments in Allahabad Bank v. District Magistrate, Ludhiana and Kotak Mahindra Bank v. Raj Paul Oswal, which supported the view that the secured creditor does not have an alternative statutory remedy under Section 17. Consequently, the writ petition was deemed maintainable under Article 226 of the Constitution of India.Issue No. 2: Jurisdiction of the Chief Judicial MagistrateThe petitioner argued that both the Chief Judicial Magistrate (CJM) and the District Magistrate (DM) have jurisdiction to entertain applications under Section 14 of the SARFAESI Act, 2002. The Opposite Party contended that the District Magistrate should be the sole authority to handle such applications. The Court referred to the Supreme Court's decision in Authorised Officer, Indian Bank v. D. Visalakshi, which held that the CJM is equally competent to deal with applications under Section 14 of the SARFAESI Act. The Court thus concluded that the CJM has jurisdiction to entertain such applications.Issue No. 3: Scope of Exercise of JurisdictionThe Court examined the scope of jurisdiction under Section 14 of the SARFAESI Act. It noted that the purpose of Section 14 is to assist the secured creditor in taking physical possession of the secured asset without involving any adjudicatory mechanism. The Court reiterated the legal position that the authority concerned does not possess any adjudicatory mechanism while entertaining an application under Section 14. The Court referred to the Supreme Court's judgment in Standard Chartered Bank v. Noble Kumar, which emphasized that the Magistrate's role is limited to examining the factual correctness of the affidavit filed by the secured creditor.The Court also referred to the judgment in Allahabad Bank v. District Magistrate, Ludhiana, which laid down principles for the scope of functions of the District Magistrate under Section 14. These principles include that the District Magistrate should not adjudicate inter se rights of the parties, must record satisfaction regarding the factual correctness of the affidavit, and that any aggrieved person can approach the DRT under Section 17. The Court directed all District Magistrates and Chief Judicial Magistrates in Odisha to act within the scope of these principles.Issue No. 4: Relief to the PetitionerThe Court found that the Chief Judicial Magistrate's order dated 09.03.2021, which dismissed the petitioner's application under Section 14 of the SARFAESI Act, was not sustainable. The Court allowed the petition, set aside the impugned order, and granted the petitioner liberty to file a fresh application before either the District Magistrate or Chief Judicial Magistrate. The Court also directed the Registry to circulate this order to all District Magistrates and Chief Judicial Magistrates of Odisha for compliance.Conclusion:The High Court held that the writ petition is maintainable, the Chief Judicial Magistrate has jurisdiction to entertain applications under Section 14 of the SARFAESI Act, and outlined the scope of jurisdiction for authorities under Section 14. The impugned order was set aside, and the petitioner was allowed to file a fresh application. The Court also issued directions for compliance to ensure uniform application of the law.