Additional Chief Metropolitan Magistrate & Addl District Magistrate Can Exercise Section 14 SARFAESI Powers : Supreme Court Overrules 3 HC Judgments

The Supreme Court held that the District Magistrate, Chief Metropolitan Magistrate is not a persona designata for the purposes of Section 14 of the SARFAESI Act.

Thus, 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 bench comprising Justices MR Shah and BV Nagarathna observed while upholding the Bombay High Court judgment.

The court therefore overruled the contrary view taken in some judgments of the High Courts of Gujarat, Calcutta and Kerala.

The bench was dismissing an appeal against the Bombay High Court judgment which observed that the Additional Chief Metropolitan Magistrate ( "ACMM"), being invested with all the judicial powers of the Chief Metropolitan Magistrate, can be considered at par with the Chief Metropolitan Magistrate.

In appeal before the Apex Court, Advocate Purvish Jitendra Malkan relied on Hari Chand Aggarwal Vs. Batala Engineering Co. Ltd. and Ors.; (1969) 2 SCR 201 to contend that District Magistrate and Additional District Magistrate are the distinct authorities and the Additional District Magistrate is subordinate to the District Magistrate and therefore, the Additional District Magistrate being subordinate cannot exercise the powers of the District Magistrate. The counsel also relied on the judgment of (1) Gujarat High Court in Pushpa Devi B Jain W/o Bhawarlal M Jain Vs. Indian Overseas Bank in Special Civil Application No. 19102/2015 (2) Calcutta High Court in the case of Shri Chellaperumal & Anr. Vs. The Authorised Officer & Ors. in M.A. No. 26/2014 and (3) Kerala High Court in the case of Aseena Vs. Sub­Divisional Magistrate.

The State, through Advocate Sachin Patel, supported the impugned judgment contending that looking to the mandate under Section 14 of the SARFAESI Act to decide and dispose of the applications under Section 14 within a maximum period of 60 days and looking to the volume of 11 the work and applications pending with the District Magistrates or the Chief Metropolitan Magistrates and that they have also to look after and consider other duties including the administrative work and with a view to see that the ultimate object and purpose of providing the time lines in deciding the applications under Section 14 of the SARFAESI Act.

Thus the issue raised in this appeal was:

(1) Whether the Additional District Magistrate or Additional Chief Metropolitan Magistrate may exercise the powers under Section 14 of the SARFAESI Act

(2) 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, the powers exercisable by the District Magistrate (for short "DM") and the Chief Metropolitan Magistrate (for short "CMM") under Section 14 of the SARFAESI Act?

Section 14 powers exercised by the CMM/DM is a ministerial act

The bench first noticed that the Section 14 does not involve an adjudicatory process qua points raised by the borrower against the secured creditor taking possession of secured assets

However, for taking physical possession of the secured assets in terms of Section 14(1) of the SARFAESI Act, the secured creditor is obliged to approach the CMM/DM by way of a written application requesting for taking possession of the secured assets and documents relating thereto and for being forwarded to it (secured creditor) for further action. The statutory obligation enjoined upon the CMM/DM is to immediately move into action after receipt of a written application under Section 14(1) of the SARFAESI Act from the secured creditor for that purpose. As soon as such an application is received, the CMM/DM is expected to pass an 19 order after verification of compliance of all formalities by the secured creditor referred to in the proviso in Section 14(1) of the SARFAESI Act and after being satisfied in that regard, to take possession of the secured assets and documents relating thereto and to forward the same to the secured creditor at the earliest opportunity. As mandated by Section 14 of the SARFAESI Act, the CMM/DM has to act within the stipulated time limit and pass a suitable order for the purpose of taking possession of the secured assets within a period of 30 days from the date of application which can be extended for such further period but not exceeding in the aggregate, sixty days. Thus, the powers exercised by the CMM/DM is a ministerial act. He cannot brook delay. Time is of the essence. This is the spirit of the special enactment.

As observed and held by this Court in the case of NKGSB Cooperative Bank Ltd. (supra), the step taken by the CMM/DM while taking possession of the secured assets and documents relating thereto is a ministerial step. It could be taken by the CMM/DM himself/herself or through any officer subordinate to him/her, including the advocate commissioner who is considered as an officer of his/her 20 court. Section 14 does not oblige the CMM/DM to go personally and take possession of the secured assets and documents relating thereto. Thus, we reiterate that the step to be taken by the CMM/DM under Section 14 of the SARFAESI Act, is a ministerial step. While disposing of the application under Section 14 of the SARFAESI Act, no element of quasi­judicial function or application of mind would require. 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.

Section 14 Power vested is not by way of persona designata.

In view of the above, it was held that the power vested in the learned Chief Metropolitan Magistrate/learned District Magistrate is not by way of persona designata.

Thus, 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.

The next issue examined was whether, the Additional Chief Metropolitan Magistrate can be said to be subordinate to the Chief Metropolitan Magistrate.? In this regard, the following observations are made:

Additional Chief Metropolitan Magistrate cannot be said to be subordinate to the Chief Metropolitan Magistrate in exercise of judicial powers

it can be seen that any Metropolitan Magistrate can be appointed by the High Court to be the Chief Metropolitan Magistrate. The High Court may appoint any Metropolitan Magistrate to be an Additional Chief Metropolitan Magistrate, and such Magistrate shall have all or any of the powers of a Chief Metropolitan Magistrate under Cr.PC or under any other law for the time being in force as the High Court may direct. The Chief Metropolitan Magistrate and every Additional Chief 24 Metropolitan Magistrate shall be subordinate to the Sessions Judge; and every other Metropolitan Magistrate shall, subject to the general control of the Sessions Judge, be subordinate to the Chief Metropolitan Magistrate. Thus 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.

"Chief Metropolitan Magistrate" as appearing in Section 14 of the SARFAESI Act shall deem to mean and include Additional Chief Metropolitan Magistrate

 In view of the above discussion and as observed hereinabove when the powers to be exercised by the Additional Chief Metropolitan Magistrate are at par with the powers to be exercised by the Chief Metropolitan Magistrate [Section 25 17(2) of Cr.PC] and the Chief Metropolitan Magistrate and Additional Chief Metropolitan Magistrate shall be subordinate to the Sessions Judge (Section 19 of the Cr.PC) and the steps to be taken by the Chief Metropolitan Magistrate under Section 14 of the SARFAESI Act as observed hereinabove are ministerial in nature and does not involve any adjudicatory process and there is no element of any quasi ­judicial function, we see no reason to take a different view than the view taken by the Bombay High Court in the impugned judgment. We hold that the expression "Chief Metropolitan Magistrate" as appearing in Section 14 of the SARFAESI Act shall deem to mean and include Additional Chief Metropolitan Magistrate for the purposes of Section 14 of the SARFAESI Act.  Similarly, when the Additional District Magistrates are conferred with the powers to be exercised by the District Magistrates either by delegation and/or by special orders and the Additional District Magistrates are exercising the same powers which are being exercised by the District Magistrates, the same analogy can be applied, more  particularly, when the powers exercisable under Section 14 of the SARFAESI Act, are ministerial steps.

SARFAESI Litigation Increasing

While upholding the High Court judgment, the bench further observed:

It cannot be disputed and even judicial notice can be taken of the fact that the CMMs and/or even the DMs are required to perform so many other duties under different statutes. They have to perform many administrative duties also. District Magisters are in overall administrative control of their jurisdiction/district. Similarly, CMMs are also required to perform administrative duties and they have also to deal with the other cases/criminal trials and many trials under special statutes also. It cannot be disputed that the litigations under the SARFAESI Act and proceedings and/or applications under Section 14 of the SARFAESI Act are increasing. Even as noticed by the High Court in the impugned judgment and order, as on 09.08.2017, 926 cases were pending under Section 14 of the SARFAESI Act before only one CMM. Therefore, a number of applications under Section 14 are pending. It also cannot be disputed that the SARFAESI Act provides for expeditious disposal of the applications filed under Section 14 of the SARFAESI Act. As per, second proviso to Section 14, suitable orders for the purpose of taking possession of the secured assets are required to be passed within a maximum period of sixty days from the date of the application. Therefore, if the submission on behalf of the appellants that only the concerned CMM/DM alone would have jurisdiction to decide the applications under Section 14 of the SARFAESI Act is accepted, in that case, it will be practically impossible for the concerned CMM/DM to decide the application under Section 14 of the SARFAESI Act expeditiously and within the time stipulated under second proviso to Section 14 of the SARFAESI Act. If the interpretation which we propose that, the District Magistrate/Chief Metropolitan Magistrate under Section 14 of the SARFAESI Act includes the Additional District Magistrate/Additional Chief Metropolitan Magistrate, the same can be said to be a purposive interpretation to achieve the object and purpose of proceedings under the SARFAESI Act, more particularly when as observed hereinabove, the orders to be passed under Section 14 of the SARFAESI Act are ministerial steps and to assist the secured creditor in getting/obtaining the possession of the secured property. Thus, there is no element of exercise of adjudicatory powers under Section 14 of the SARFAESI Act

Case details

R.D. Jain and Co. vs Capital First Ltd. 2022 LiveLaw (SC) 634 | CA 175 OF 2022 | 27 July 2022 | Justices MR Shah and BV Nagarathna

Headnotes

Securitisation and Reconstruction of Financial Assets and Enforcement Security Interest Act, 2002 ; Section 14 - The District Magistrate, Chief Metropolitan Magistrate is not a persona designata for the purposes of Section 14 of the SARFAESI Act - Additional District Magistrate and Additional Chief Metropolitan Magistrate can exercise powers under Section 14. (Para 9-12)

Securitisation and Reconstruction of Financial Assets and Enforcement Security Interest Act, 2002 ; Section 14 - Step to be taken by the CMM/DM under Section 14 is a ministerial step. While disposing of the application under Section 14 of the SARFAESI Act, no element of quasi ­judicial function or application of mind would require -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. (Para 8)

Code of Criminal Procedure, 1973 ; Sections 11, 12, 15, 16, 17, 19 and 35-  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. (Para 10-10.1)

Securitisation and Reconstruction of Financial Assets and Enforcement Security Interest Act, 2002 ; Section 14 (1A) - it is open to the CMM/DM to appoint an advocate and authorise him/her to take possession of the secured assets and documents relating thereto and to forward the same to the secured creditor under Section 14(1A) of the SARFAESI Act - Referred to NKGSB Cooperative Bank Limited vs. Subir Chakravarty 2022 LiveLaw (SC) 212 (Para 6,.2)

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