District Magistrate & Chief Judicial Magistrate Have Equal Jurisdiction To Decide Applications U/S 14 SARFAESI Act: Orissa High Court
The Orissa High Court has held that jurisdiction under Section 14 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ("SARFAESI Act") can be exercised by either of the two authorities namely Chief Judicial Magistrate ("CJM") and District Magistrate ("DM"). Therefore, both the authorities are equally competent to...
The Orissa High Court has held that jurisdiction under Section 14 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ("SARFAESI Act") can be exercised by either of the two authorities namely Chief Judicial Magistrate ("CJM") and District Magistrate ("DM").
Therefore, both the authorities are equally competent to exercise the jurisdiction. Section 14 provides for assistance to be rendered by Chief Metropolitan Magistrate ("CMM") or DM to secured creditor in taking possession of secured asset.
Refuting the contention of the respondents that there is no notification of the Government of India authorising CJM to exercise jurisdiction under Section 14, the Division Bench comprising of Justices Jaswant Singh and Sanjeeb Kumar Panigrahi observed,
"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, whereby 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 within the ambit of the provision."
Brief Factual Background:
The petitioner-secured creditor filed an application under Section 14 of the SARFAESI Act before the DM, Cuttack seeking official assistance for taking over actual physical possession of the secured asset-mortgaged residential property. Since the same was not decided within the stipulated time, the Petitioner approached the High Court by filing a writ petition which was disposed of directing the DM to decide the application within a period of six months. The DM decided the application on merits and rejected it.
The petitioner was then constrained to file a writ petition before the High Court, which directed the DM to decide the application, within the scope of Section 14 of the SARFAESI Act, and after giving opportunity to the parties concerned, within the statutory period. As the directions were not complied with, the petitioner filed a civil contempt petition in the High Court, which was pending till the day of hearing of this petition.
Subsequently, the petitioner filed a fresh application under Section 14 before the CJM, who rejected the application on the ground that a similar application was pending before the DM. Then, it withdrew its application pending before the DM and filed a fresh application under Section 14 before the CJM. However, it was again rejected, which led the petitioner to file the present petition.
Broad Issues for Consideration:
- Whether the present writ petition is maintainable in view of the remedy provided under Section 17 of the SARFAESI Act, 2002?
- Whether Chief Judicial Magistrate would have the jurisdiction to entertain an application under Section 14 of the SARFAESI Act, 2002?
- What is the scope of exercise of jurisdiction by the authorities concerned, while examining an application under Section 14 of the Securitisation Act, 2002?
- Relief to which the petitioner would be entitled to in the instant petition.
Contentions of the Petitioner:
As regards the issue of maintainability, the petitioner contends that the remedy under Section 17 before Debt Recovery Tribunal ("DRT") is only available to a person who is aggrieved of an action taken by the secured creditor under Section 13(4). In the present case, since there is no action by the secured creditor, rather the secured creditor itself is aggrieved of the order of the Magistrate, therefore application under Section 17 would not be maintainable before the DRT. It was further argued that writ petition is the only remedy as even the jurisdiction of civil court is barred under Section 34 of the Act.
Arguing on the second issue, it placed reliance upon Section 14 to establish that the jurisdiction to entertain an application is equally vested with the CJM as well as is with the DM. The legislature has not created any such distinction between the two authorities and hence, both the authorities are equally competent to entertain application of the secured creditor and to pass orders for providing assistance to the secured creditor in taking over of physical possession.
Contentions of the Respondents:
The respondents contented 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 by filing an application under Section 17 and consequently, without first availing such alternative statutory remedy under the Act, the present petition could not be maintained by the petitioner.
Further, they argued that once the DM is available which is entrusted with administrative jurisdiction, the secured creditor cannot maintain an application before the CJM. Moreover, the legislature never contemplated to provide for an overlapping jurisdiction with two authorities and therefore an application would not be maintainable before the CJM, in the case of availability of DM.
It was further contended that the reason why CMM finds mention in the provision is that it is only in those districts, where there is no District Magistrate, could the jurisdiction be treated to be vested with the CJM and not otherwise. He therefore supports the impugned order and prays for dismissal of the present petition.
Decision of the Court:
On Issue (i)
The Court while perusing Section 13(1) of the Act, held that it reflects the intention of the legislature to enable the creditor to enforce the charged securities without the intervention of the Court or tribunal. Further, the remedy under Section 17 of the Act is only available to a person aggrieved of an action initiated by the secured creditor. Remedy to the secured creditor to approach the Tribunal to lay challenge to an order passed by the Magistrate is "conspicuous by its absence". The scheme of the Act does not provide for a remedy to the secured creditor within the ambit and scope of Section 17, in absence of an impugned act of a secured creditor. It observed,
"In order to invoke the jurisdiction of the Tribunal and maintain an application before it, it is necessary that there ought to be an action of a secured creditor which is a subject matter of challenge before the DRT. The scope of relief which the Tribunal is intended to grant is provided for under Section 17(4) which also does not in any way provide for an order which the secured creditor is looking for in the present petition. The secured creditor therefore would not have a remedy to challenge an order of the Magistrate before the Tribunal in such circumstances."
It relied upon the judgments of the Punjab & Haryana High Court in Allahabad Bank v. District Magistrate, Ludhiana, 2021 (3) PLR 690 and Kotak Mahindra Bank v. Raj Paul Oswal, 2021 AIR (Punjab and Haryana) 118 to hold 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.
On Issue (ii)
For providing answer to the second issue, the Court relied on the law laid down by the Supreme Court in Authorised Officer, Indian Bank v. D. Visalakshi & Anr., AIR 2019 SC 4619, wherein it was held that:
"…there is nothing wrong in giving expansive meaning to the expression "CMM", as inclusive of CJM concerning non-metropolitan area, who is otherwise competent to discharge administrative as well as judicial functions as delineated in the Cr.P.C. on the same terms as CMM. That interpretation would make the provision more meaningful. Such interpretation does not militate against the legislative intent nor it would be a case of allowing an unworthy person or authority to undertake inquiry which is limited to matters specified in Section 14 of the 2002 Act… To sum up, we hold that the CJM is equally competent to deal with the application moved by the secured creditor under Section 14 of the 2002 Act."
On Issue (iii)
As regards the scope of exercise of jurisdiction of authorities under Section 14, the Court reiterated all the directions given by the Punjab & Haryana High Court in Allahabad Bank (supra) (in its Para 33), as the case squarely covered the issue. It thus mandated all the CJMs and DMs of the State of Odisha to act strictly within the scope and ambit of the said directions.
Resultantly, it set aside the order of the CJM, Cuttack and gave the petitioner liberty to file a fresh application either under the jurisdictional DM or CJM, who will decide the application in accordance with law.
It also directed the High Court Registry to circulate the order to all the District Magistrates and Chief Judicial Magistrates of the State of Odisha for information and compliance.
Case Title: Bajaj Finance Ltd v. M/s Ali Agency & Ors.
Case No.: W.P.(C) No. 11425 of 2021
Date of Judgment: 10th January 2022
Coram: Jaswant Singh & Sanjeeb Kumar Panigrahi, JJ.
Citation: 2022 LiveLaw (Ori) 16