TaxTMI 
TaxTMI 
2016 (3) TMI 928
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....he reference. An application under Section 14 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short the SARFAESI Act) came to be filed by a Secured Creditor before the Court of Chief Judicial Magistrate, Nellore requesting the said Court to take physical possession of the schedule property by exercising powers under the said provision. By an order dated 08.05.2014, the learned Chief Judicial Magistrate passed an order appointing an Advocate-Commissioner to take physical possession of the schedule property by making an inventory of the articles in the schedule property after conducting a panchanama. He was further directed to deliver the property to the secured creditor under proper acknowledgment. Challenging the same, the above Writ Petition came to be filed. Referring to Section 14 of the SARFAESI Act, a Division Bench of this Court in W.P. No.5347 of 2014 while holding that in non- metropolitan areas District Magistrate alone is competent to pass an order under Section 14 of the SARFAESI Act, set-aside the order passed by the Chief Judicial Magistrate. A coordinate bench of this Court, differed with the view expre....
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....the respondents would submit that the purpose of the enactment would be defeated if the Chief Judicial Magistrate is excluded from exercising the power under Section 14 of the SARFAESI Act. He took us through the scheme and object of the SARFAESI Act in support of his plea. He further submits that in none of the cases referred to above, Section 37 of the SARFAESI Act was taken into consideration and if the same is done, the view taken by the Full Bench of Tamil Nadu High Court and also by the two Division Bench Judgments of the Mumbai High Court would be incorrect. He places reliance on a division bench judgment of the Kerala High Court in Mohd. Ashraf and Smt. C.Arifa v. Union of India in support of his case. In order to deal with the rival contentions, it would be necessary to refer to the history of the enactment and the statement of objects and reasons of the SARFAESI Act. Since several hundred crores of public money got blocked in unproductive ventures, the Government of India constituted a committee under the chairmanship of Shri T. Tiwari to examine the legal and other difficulties faced by banks and financial institutions in the recovery of their dues and suggest remedial ....
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....diting the recovery of debts due to banks and financial institutions. In its Second Report, the Narasimham Committee noted that the non-performing assets of most of the public sector banks were abnormally high and the existing mechanism for recovery of the same was wholly insufficient. The Andhyarujina Committee constituted by the Central Government for examining banking sector reforms also considered the need for changes in the legal system. Both, the Narasimham and Andhyarujina Committees suggested enactment of new legislation for securitization and empowering the banks and financial institutions to take possession of the securities and sell them without intervention of the court. The Government of India accepted the recommendations of the two committees and that led to enactment of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short 'the SARFAESI Act'). (United Bank of India v. Satyawati Tondon -2010(8) SCC 110) The crux of the Act is that any security interest created in favour of a creditor, who by definition under the Act becomes a Secured creditor, can be enforced without the intervention either of the ....
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....ay, for the purpose of taking possession or control of any such secured asset, request, in writing, the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction any such secured asset or other documents relating thereto may be situated or found, to take possession thereof, and the Chief Metropolitan Magistrate or, as the case may be, the District Magistrate shall, on such request being made to him. (a) take possession of such asset and documents relating thereto; and (b) forward such assets and documents to the secured creditor. [provided that any application by the secured creditor shall be accompanied by an affidavit duly affirmed by the authorised officer of the secured creditor, declaring that- (i) the aggregate amount of financial assistance granted and the total claim of the Bank as on the date of filing the application; (ii) the borrower has created security interest over various properties and that the Bank or Financial Institution is holding a valid and subsisting security interest over such properties and the claim of the Bank or Financial Institution is within the limitation period; (iii) the borrower has created security interest ov....
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....e called in question in any court or before any authority. A reading of the Section 14 of the Act would show that Where the possession of any secured asset is required to be taken by a secured creditor or if secured asset is required to be sold or transferred by the secured creditor, the secured creditor may, for the purpose of taking possession or control of such secured asset, shall request, in writing, the Chief Metropolitan Magistrate or the District Magistrate as the case may be within whose jurisdiction such secured asset or other documents relating thereto may be situated or found, to take possession thereof. Amended Act 1 of 2013 inserted to Section 14 contemplates delegation of power by Chief Metropolitan Magistrate or District Magistrate to any officers subordinate to them to take possession of such assets and documents thereto and forward the same to the secured creditor. Section 12 of the Code of Criminal Procedure (Cr.P.C.) provides that in every District (not being a Metropolitan area) the High Court shall appoint a Judicial Magistrate of First Class to be the Chief Judicial Magistrate. Under Section 17 of Code of Criminal Procedure the High Court shall, in relation....
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....the above, it is clear that the Chief Judicial Magistrate, Chief Metropolitan Magistrate and the District Magistrate are separately referred to in the Code and the High Court has been empowered to appoint Chief Judicial Magistrate and Chief Metropolitan Magistrate while the State Government appoints one of the Executive Magistrates as District Magistrate in every District and in every Metropolitan area. The Code of Criminal Procedure permits executive powers to be exercised by Executive Magistrate, whereas sifting of evidence, trial etc., shall be exercisable only by a Judicial Magistrate. One of the arguments that was advanced before us was that when the Legislature has made a clear demarcation of power by authorizing Chief Metropolitan Magistrates in metropolitan area and District Magistrates in non-metropolitan area to exercise the jurisdiction of assisting the secured creditors and the act being a self- contained code, there is no necessity to give such power to any other Authority than those referred to in Section 14 of the Act. But a plain reading of Section 14 of the Act does not anywhere indicate the same. It only authorizes Chief Metropolitan Magistrate or District Magist....
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.... Act held that the Chief Judicial Magistrate is always construed as Chief Metropolitan Magistrate and that the Chief Judicial Magistrate at Rajahmundry does not suffer from inherent lack of jurisdiction to entertain a petition under Section 14 of the SARFAESI Act. Similar view was taken by a Single Judge of the Madras High Court in Dhanalakshmi Bank v. Kovai Foods and Beverages (Crl.P.No.7312 of 2004). It is also brought to our notice that the Honble Court has issued a Circular dated : 21.01.2013 directing all the Principal District Judges/Unit Heads in the State to issue necessary instructions to all Chief Judicial Magistrates/Chief Metropolitan Magistrates working under their control to take steps for early disposal of cases filed under the SARFAESI Act. However, in Indus Ind Banks case, the Aurangabad Bench of Bombay High Court after referring to Section 14 of the Act held that in the absence of any reference to Chief Judicial Magistrate in the provision, it is only Chief Metropolitan Magistrate in the metropolitan area and District Magistrate in non metropolitan area who can entertain an application under Section 14. While dealing with Section 3 of the Code of Criminal Procedu....
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....on of other laws not barred:- The provisions of this Act or the rules made thereunder shall be in addition to, and not in derogation of, the Companies Act, 1956 (1 of 1956), the Securities Contracts (Regulation) Act, 1956 (42 of 1956), the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) or any other law for the time being in force. A reading of Section 37 discloses that the provisions of SARFAESI Act or the Rules made there under are in addition to and not in derogation to any other law for the time being in force. The phrase any other law for the time being in force used in Section 37 would definitely be inclusive of the provisions of Code of Criminal Procedure. The usage and interpretation of Sections 35 and 37 of the SARFAESI Act came up for consideration before the Apex Court in Mathew Varghese v. M.Amritha Kumar . In the said case the Apex Court was dealing with interpretation of Section 13(8) of SARFAESI Act read with Rule 8 and 9 of Security Interest (Enforcement) Rules 2002. Relying upon Section 29 of Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and Se....
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....f the RDDB Act will be in addition to and not in derogation of the provisions of the SARFAESI Act, the provisions contained in Rule 15, which is applicable by virtue of the stipulation contained in Section 29 of the RDDB Act, whatever stated in sub -rule (2) of Rule 15 should be followed in a situation where a notice of sale notified as per Rules 8 and 9(1) of the Securitisation Trust Rules, read along with Section 13(8) gets postponed. In our considered view such a construction of the provisions, namely, Sections 37,13(8) and 37 of the SARFAESI Act, read along with Section 29 with the aid of Rule 15 could alone be made and in no other manner. Therefore, the application of the provisions of Code of Criminal Procedure would be in addition to and not in derogation of the provisions of SARFAESI Act and the provisions of Code cannot be excluded from consideration while dealing with the SARFAESI Act. Hence, the finding of the Full Bench of the Tamil Nadu High Court that in view of Section 35 of the Act the provisions of SARFAESI Act would override the provisions of Cr.P.C., and the phraseology used in Section 14 should be given its true meaning without any assistance of Cr.P.C., in our....
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....n the property concerned. It is for this reason that the NPA Act ousts the intervention of the courts/tribunals. In Union Bank of India v. The State of Maharashtra through the Office of the Government Pleader, Public Works Department and others , the Bombay High Court held that Section 14 of the SARFAESI Act is procedural in nature and that the procedure stipulated therein enables the secured creditor to take the assistance of Chief Metropolitan Magistrate or District Magistrate in taking possession of the secured assets. It was also held that Section 14 only empowers the authorities to assist the secured creditor in taking possession of the secured assets as per the procedure contemplated under Section 14, but does not clothe the District Magistrate with the power to adjudicate in respect of any dispute pertaining to any secured asset. Further, it has been held that proviso to Section 14 of the Act does not vest District Magistrate with the jurisdiction to adjudicate and decide any dispute regarding the secured assets. Similar view was taken by a Division Bench of Bombay High Court in International Asset Reconstruction Company Private Limited through its Authorized Representative....
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....rty. Standard Chartered Bank v. V.Noble Kumar and others was a case where an order passed by the learned Chief Judicial Magistrate at Chengalpattu under Section 14 of the SARFAESI Act was challenged. An Advocate Commissioner was appointed to take possession of the secured asset and was directed to handover the same to the secured creditor. Dealing with the various provisions of the SARFAESI Act, the Apex Court observed as under : 26. These provisions stipulate that a secured creditor who is seeking the intervention of the Magistrate under Section 14 is required to file an affidavit furnishing the information contemplated under various Sub- clauses (i) to (ix) of the proviso and obligates the Magistrate to pass suitable orders regarding taking of the possession of the secured assets only after being satisfied with the contents of the affidavits. 28. The satisfaction of the Magistrate contemplated under the second proviso to Section 14(1) necessarily requires the Magistrate to examine the factual correctness of the assertions made in such an affidavit but not the legal niceties of the transaction. It is only after recording of his satisfaction the Magistrate can pass appropriate....
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....te of the provision. In view of the above findings namely that the powers exercised by Chief Metropolitan Magistrate and District Magistrate are synonymous to each other and that they are not adjudicatory in nature, the question would be Whether there is any casus omissus if nomenclature Chief Metropolitan Magistrate used in Section 14 is made inclusive of Chief Judicial Magistrate ? In Padmasundara Rao v. State of Tamilnadu a constitutional Bench of Supreme Court held that a casus omissus cannot be supplied by the Court except in the case of clear necessity and when reason for it is found in the four corners of the statute itself In M.Pentaiah v. Muddala Veeramallappa a larger Bench of the Apex Court held as under : Where the language of a statute, in its ordinary meaning and grammatical construction, leads to a manifest contradiction of the apparent purpose of the enactment, or to some inconvenience or absurdity, hardship or injustice, presumably not intended, a construction may be put upon it which modifies the meaning of the words, and even the structure of the sentence... ... ... . Where the main object and intention of a statute are clear, it must not be reduced to a nul....