Breaking : Chief Judicial Magistrates Competent To Entertain Applications U/s 14 SARFAESI Act: SC [Read Judgment]

In an important judgment, the Supreme Court has held that a Chief Judicial Magistrate is equally competent to deal with the application moved by the secured creditor under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI).

In this case viz. Authorized Officer, Indian Bank v D Visalakshi and other, the bench comprising Justice AM Khanwilkar and Justice Dinesh Maheshwari was considering the question whether the Chief Judicial Magistrate is competent to process the request of the secured creditor to take possession of the secured asset under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

Section 14 of the SARFAESI Act empowers the Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking possession of secured asset. The Section does not expressly refer to Chief Judicial Magistrate.

Relying on the SC judgment in Janardhan Vs. State of Maharashtra (1978) 2 SCC 465, which held that the term "Commissioner of Police" in Bombay Gambling Act will include "Assistant Commissioner of Police", the bench held that "Chief Metropolitan Magistrate" should include "Chief Judicial Magistrate"

"Applying the principle underlying this decision, it must follow that substitution of functionaries (CMM as CJM) qua the administrative and executive or so to say non­judicial functions discharged by them in light of the provisions of Cr.P.C., would not be inconsistent with Section 14 of the 2002 Act; nay, it would be a permissible approach in the matter of interpretation thereof and would further the legislative intent having regard to the subject and object of the enactment. That would be a meaningful, purposive and contextual construction of Section 14 of the 2002 Act, to include CJM as being competent to assist the secured creditor to take possession of the secured asset"

The Court said 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, the bench said.

Section 14 a remedial measure available to the secured creditor

Be it noted that Section 14 of the 2002 Act is not a provision dealing with the jurisdiction of the Court as such. It is a remedial measure available to the secured creditor, who intends to take assistance of the authorised officer for taking possession of the secured asset in furtherance of enforcement of security furnished by the borrower. The authorised officer essentially exercises administrative or executive functions, to provide assistance to the secured creditor in terms of State's coercive power to effectuate the underlying legislative intent of speeding the recovery of the outstanding dues receivable by the secured creditor. At best, the exercise of power by the authorised officer may partake the colour of quasi-judicial function, which can be discharged even by the Executive Magistrate. The authorised officer is not expected to adjudicate the contentious issues raised by the concerned parties but only verify the compliances referred to in the first proviso of Section 14; and being satisfied in that behalf, proceed to pass an order to facilitate taking over possession of the secured assets. 

Section 14 Not Inconsistent With CrPC Provision

Section 35 of SARFAESI Act provides that Act would override other laws. One of the issue considered in this case was whether the provisions of SARFAESI Act override the provisions of the Cr. P.C., whereunder the functions to be discharged by the CMM are similar to that of the CJM. In CrPC, the Court noted, the expressions "CMM and CJM" are used interchangeably in Cr.P.C. and are considered as synonymous to each other. It said:

Section 14, even if read literally, in no manner denotes that allocation of jurisdictions and powers to CMM and CJM under the Code of Criminal Procedure are modified by the 2002 Act. Thus understood, Section 14 of the 2002 Act, stricto sensu, cannot be construed as being inconsistent with the provisions of the Code of Criminal Procedure or vice-versa in that regard. If so, the stipulation in Section 35 of the 2002 Act will have no impact on the expansive construction of Section 14 of the 2002 Act. "

The Court also observed that there is force in the submission canvassed by the secured creditors (Banks), that Section 37 of the Act answers the issue when it provides that the provisions of the 2002 Act or the Rules made thereunder shall be in addition to the stated enactments or "any other law for the time being in force". The provisions of the 2002 Act are in addition to, and not in derogation of the Code, the bench added.

Resolved  Conflicting Views