Bombay in Writ Petition (L) 28480 of 2019. With Civil Appeal Nos.1638 v. Vijayakumar, Rahul Chitnis, Sachin Patil, Aaditya A. Pande, Geo Joseph, Ms. Shwetal & Ors.
Case at a glance
Provisions considered
- Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002
- Code of Criminal Procedure, 1973 ss. 12, 17, 55, 165, 284
- Constitution of India arts. 53, 154, 226, 227, 311, 311(1)
- Code of Civil Procedure, 1908 O. XXVI r. 17
- SARFAESI Act, 2002 s. 14
- Women and Girls Act, 1956
- Charitable Homes (Supervision and Control) Act, 1960
- Manipur Land Revenue and Land Reforms Act, 1960 s. 166
- Unlawful Activities (Prevention) Act, 1967 s. 43A
- Wild Life (Protection) Act, 1972 s. 5
- Delhi Police Act, 1978 ss. 64, 70
- Narcotic Drugs and Psychotropic Substances Act, 1985 s. 41
- Delhi Rent Act, 1995 s. 44
- Chemical Weapons Convention Act, 2000 s. 22
Key paragraphs
- Para 1111. Once again, another learned Single Judge of the High Court of Kerala in V.S. Sunitha28 reiterated the same view and held that the Magistrate rendering assistance to the secured creditor is competent to appoint a commissioner to take possession of the secured assets.
Judgment
From the Judgment and Order dated 06.11.2019 of the High Court of Judicature at Bombay in Writ Petition (L) 28480 of 2019. With Civil Appeal Nos.1638, 1639 and 1640 of 2022 and S.L.P. (Civil) No.12011 of 2020. Rana Mukherjee, Sr. Adv., Manish Shanker Srivastava, Ms. Kalpana, Ms. Pallavi Baghel, Abhishek Kumar Singh, Viraj Kadam, Soumya Dutta, Devendra Kumar Singh, Karunakar Mahalik, Manoranjan Mishra, Gouranga Biswal, B. Raghunath, Sriram P., Ms. N. C. Kavitha, Pawan Kr. Dabas, Ms. Prerna Robin, Ms. Muskaan Garg, Ms. Jessica Bhardwaj, Ms. Daisy Hannah, Ms. Kanika Sharma, Ms. Oindrilla Sen, M. L. Ganesh, K. V. Vijayakumar, Rahul Chitnis, Sachin Patil, Aaditya A. Pande, Geo Joseph, Ms. Shwetal Shepal, Advs. for the appearing parties. The Judgment of the Court was delivered by A. M. KHANWILKAR, J.
The seminal question involved in these cases is: whether it is open to the District Magistrate1 or the Chief Metropolitan Magistrate2 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 within the meaning of Section 14(1A) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 20023? 1 for short, “DM” 2 for short, “CMM” 3 for short, “2002 Act” A B C D E F G H 1182 SUPREME COURT REPORTS [2022] 1 S.C.R. A B C D E F G H
The High Court of Judicature at Bombay4 vide judgment and order dated 6.11.2019 in Writ Petition (L) No.28480 of 2019 opined that the advocate, not being a subordinate officer to the CMM or DM, such appointment would be illegal. Against this decision, four separate appeals5 have been filed by the concerned parties. On the other hand, the High Court of Judicature at Madras6 vide judgment and order dated 18.3.2020 in C.R.P. No.790 of 2020 has taken a contrary view while following earlier decision of the same High Court on the reasoning that the advocate is regarded as an officer of the court and, thus, subordinate to the CMM or the DM. Having so held, it allowed the civil revision petition filed by the secured creditor (Canara Bank). Against this decision, a special leave petition7 has been filed by the borrowers.
The High Courts of Kerala (in Muhammed Ashraf & Anr. vs. Union of India & Ors.8; The Federal Bank Ltd., Ernakulam vs. A.V. Punnus9; and V.S. Sunitha vs. Federal Bank Ltd.10), Madras (in S. Chandramohan & Anr. vs. The Chief Metropolitan Magistrate, Egmore, Chennai & Ors.11) and Delhi (in Rahul Chaudhary vs. Andhra Bank & Ors.12), have taken the same view as in the case of Canara Bank impugned in the special leave petition13 arising from the decision of the Madras High Court.
Additionally relying on the dictum in M/s. J. Marks Exim (India) Pvt. Ltd. vs. Punjab National Bank14 decided by the Division Bench of the Bombay High Court, it was urged that the coordinate Bench of the Bombay High Court had answered the issue under consideration in favour of the secured creditors and against the borrowers on the same lines as the view taken by other three High Courts, namely, High 4 for short, “Bombay High Court” 5 Civil Appeal No….. of 2022 @ SLP (Civil) No.30240 of 2019; Civil Appeal No….. of 2022 @ SLP (Civil) No.2055 of 2020; Civil Appeal No…..of 2022 @ SLP (Civil) No……of 2022 @ Diary No.17059 of 2020; and Civil Appeal No…..of 2022 @ SLP (Civil) No……of 2022 @ Diary No.23733 of 2020 6 for short, “Madras High Court” 7 SLP (Civil) No.12011 of 2020 8 AIR 2009 Kerala 14 9 AIR 2014 Kerala 7 10 2018 SCC OnLine Ker 12866 11 2014-5-L.W. 620: 2014 SCC OnLine Mad 7869 12 2020 SCC OnLine Del 284 13 see Footnote No.7 14 2017 SCC OnLine Bom 2246 NKGSB COOPERATIVE BANK LTD. v. SUBIR CHAKRAVARTY [A. M. KHANWILKAR, J.] 1183 Courts of Kerela, Madras and Delhi. However, in the judgment of the Bombay High Court of coordinate Bench impugned before this Court, it has been observed that the dictum in the said decision had not considered the precise question that has been dealt with in the impugned judgment.
Briefly stated, in each of the cases under consideration, the CMM/DM appointed an advocate purportedly in exercise of powers under Section 14(1A) of the 2002 Act. In the cases arising from the judgment of the Bombay High Court, the borrowers had urged before the High Court that the Additional Chief Metropolitan Magistrate15, 3rd Court, Esplanade, Mumbai on application filed by the secured creditor (Bank) under Section 14 of the 2002 Act passed an order dated 26.7.2019, appointing an advocate to take possession of the secured assets and documents relating thereto and to forward the same to the secured creditor. The order passed by the ACMM records that the Bank had advanced a loan in the sum of Rs.4.44 crore on 31.1.2015 to the borrowers, who had mortgaged Flat No.262, 26th Floor, Building No.02 with two basement car spaces in a building known as ‘Kalpataru Pinnacle’ in Goregaon (West), Mumbai.
Further, the borrowers had defaulted on 30.10.2017. Their account was declared Non-Performing Asset16. As a sequel, on 13.11.2017, a notice under Section 13(2) of the 2002 Act was issued to them and posted by Registered Post A.D. The docket was returned with ‘intimation posted’ meaning thereby, the noticees were not available at the given address. The order further records that the Bank served the notice upon the borrowers by publication on 31.12.2017 calling upon them to pay the outstanding dues within sixty days. However, loan amount remained unpaid. As a result, the secured creditor approached the ACMM to pass appropriate directions, on which application the stated order dated 26.7.2019 came to be passed appointing an advocate. The same was communicated to the borrowers by the advocate on 11.10.2019. That order was challenged before the Bombay High Court by the borrowers by way of writ petition17 under Article 226 of the Constitution of India, which has been decided by the High Court vide impugned judgment and order holding that Section 14(1A) of the 2002 Act does not permit the CMM/DM to authorise an advocate.
The language used in the provision is amply clear. Such delegation could be done only to an 15 for short, “ACMM” 16 for short, “NPA” 17 Writ Petition (L) No.28480 of 2019 A B C D E F G H 1184 SUPREME COURT REPORTS [2022] 1 S.C.R. A B C D E F G H officer subordinate and none else. The High Court rejected the argument that the overburdened CMM/DM had inadequate subordinate staff and it would be difficult, if not virtually impossible for the secured creditor to take possession of and realise the outstanding dues by disposing the secured asset. The High Court was not impressed with that argument and preferred to strictly construe the stated provision. The secured creditors have assailed this decision by way of appeals18 before this Court.
Reverting to the special leave petition19 arising from the decision of the Madras High Court. The Bank had given loan to the borrowers upon mortgage of their property. Despite the demand to clear the outstanding dues, the loan amount remained unpaid. Resultantly, the Bank classified the account as NPA followed by notice under Section 13(2) of the 2002 Act dated 21.7.2017 to the borrowers. Eventually, the Bank took symbolic possession of the property through its authorised officer after issuing possession notice. That was published in two leading newspapers. The borrowers challenged the notice issued to them under Section 13(4) of the 2002 Act. That challenge was unsuccessful. Whereafter, the Bank invoked action under Section 14 of the 2002 Act by filing application before the CMM for taking possession of the secured assets. The borrowers challenged the sale notice by filing application being S.A. No.59 of 2019.
No injunction was granted in favour of the borrowers and to restrain the Bank from proceeding with the sale of the secured property. Hence, the Bank pursued the application under Section 14 of the 2002 Act before the CMM, which came to be disposed of on 6.8.2019 by appointing an Advocate Commissioner to take possession of the secured property. Thereafter, the application filed by the borrowers, being S.A. No.59 of 2019, came to be dismissed. In the interregnum, the borrowers filed another application in S.A. No.399 of 2019, challenging the order dated 6.8.2019 passed by the CMM, appointing an Advocate Commissioner, in Crl. M.P. No.2995 of 2019. The Debts Recovery Tribunal II20, Chennai was pleased to allow S.A.No.399 of 2019, inter alia, holding that the procedure mandated under clauses (i) to (ix) of the proviso to Section 14(1) of the 2002 Act had not been complied with by the secured creditor (Bank) and in any case, the appointment of the 18 see Footnote No.5 19 see Footnote No.7 20 for short, “Tribunal” NKGSB COOPERATIVE BANK LTD. v.
SUBIR CHAKRAVARTY [A. M. KHANWILKAR, J.] 1185 Advocate Commissioner was illegal. The Tribunal allowed the challenge vide order dated 4.2.2020. That decision came to be assailed by the Bank before the Madras High Court by way of civil revision petition21 under Article 227 of the Constitution of India. The High Court noted two issues arising for its consideration, in paragraph 9 of the impugned judgment. The first issue was regarding the correctness of the conclusion recorded by the Tribunal on the plea of non-compliance of clauses (i) to (ix) of Section 14 of the 2002 Act. That came to be set aside being manifestly erroneous (see paragraphs 10 and 11 of the impugned judgment). However, on the second issue about power of the CMM/ DM to appoint an Advocate Commissioner, the High Court, amongst other, relied upon its earlier decision as well as of the High Courts of Delhi and Kerala, to conclude that the Tribunal committed manifest error, including not to take notice of the decision of the same High Court referred to in the impugned judgment.
In short, the Madras High Court accepted the argument of the secured creditor (Bank) that it was open to the CMM/DM to appoint an Advocate Commissioner for taking possession of the secured assets and documents relating thereto for being forwarded to the secured creditor in terms of Section 14(1A) of the 2002 Act. This decision has been challenged by the borrowers by way of a special leave petition22 before this Court.
We have heard Mr. Rana Mukherjee, learned senior counsel, Mr. Viraj Kadam, Mr. Manish Shanker Srivastava, Mr. Devendra Kumar Singh and Mr. M.L. Ganesh, learned counsel appearing for the Banks, Mr. B. Raghunath, learned counsel appearing for the borrowers and Mr. Rahul Chitnis, learned counsel appearing for the State of Maharashtra.
As aforesaid, the one and only question common to all these cases is: whether the CMM/DM can appoint an advocate in exercise of powers under Section 14(1A) of the 2002 Act? This issue arises because of the expression used in the said provision, “may authorise any officer subordinate to him”.
The earliest decision dealing with the issue under consideration is that of the High Court of Kerala in Muhammed Ashraf23 wherein the Division Bench of the High Court rejected the argument that 21 C.R.P. No.790 of 2020 22 see Footnote No.7 23 supra at Footnote No.8 A B C D E F G H 1186 SUPREME COURT REPORTS [2022] 1 S.C.R. A B C D E F G H mandate of Section 14 obliges the CMM/DM to go personally and take possession of the secured assets and documents relating thereto. It noted that Section 14(2) of the 2002 Act enabled the CMM/DM to pass order even to take Police assistance and use all necessary powers in taking possession of the secured assets. To buttress this view, reference has been made to the decision of this Court in Sakiri Vasu vs. State of Uttar Pradesh & Ors.24 wherein the Court noted that an express grant of statutory powers carries with it by necessary implication the authority to use all reasonable means to make such grant effective. In other words, the authority had implied powers to grant relief which is not expressly granted to it by the Act. On that logic, the Division Bench of the High Court of Kerala opined that it would be open to the Magistrate who has the power under Section 14 of the 2002 Act to take possession of the secured assets including to take assistance of Police including an Advocate Commissioner so as to facilitate the secured creditor to take over the secured assets. As a result, the Magistrate could also appoint a commissioner for identification of the secured assets and taking possession thereof. This decision has attained finality owing to the dismissal of S.L.P. (Civil) No.1671 of 2009 on 2.2.2009 by this Court. Notably, this decision was rendered before the amendment of Section 14 and in particular insertion of sub- Section (1A)25.
The aforementioned decision, however, had been followed by the learned Single Judge of the High Court of Kerala in the case of The Federal Bank Ltd., Ernakulam 26 which had arisen after the amendment of Section 14 of the 2002 Act and insertion of sub-Section (1A) therein. Despite insertion of sub-Section (1A), learned Single Judge following the judgment in Muhammed Ashraf27,answered the issue in the following words:
5. …It may however appear at first blush that such an Advocate Commissioner is not an officer subordinate to the District Magistrate or the Chief Judicial Magistrate. But a reference to Sections 12 and 17 of the Code of Criminal Procedure, 1973 24 (2008) 2 SCC 409 25 Inserted by Act 1 of 2013, sec.6(b) (w.e.f. 15.1.2013, vide S.O.171(E), dated 15.1.2013) 26 supra at Footnote No.9 27 supra at Footnote No.8 NKGSB COOPERATIVE BANK LTD. v. SUBIR CHAKRAVARTY [A. M. KHANWILKAR, J.] 1187 indicates that the term District Magistrate or Chief Metropolitan Magistrate denotes the court and not the officer in person. An Advocate Commissioner is certainly an officer subordinate to the court and the words employed in Section 14 (1A) of the SARFAESI Act are not to be understood as meaning an officer subordinate in service. Section 284 of the Code of Criminal Procedure, 1973 in fact empowers an Advocate Commissioner to record the examination of witnesses whose personal appearance in court is dispensed with. Similar provisions can be found in Order XXVI Rule 17 of the Code of Civil Procedure, 1908 enabling the Advocate Commissioner to record evidence of witnesses and Section 75 (g) thereof to perform any ministerial act even. Taking over possession of the secured asset and handing over the same to the creditor bank is nothing but a ministerial act of the Advocate Commissioner on behalf of the court. The Advocate Commissioner exercising such function under Section 14 (1A) of the SARFAESI Act is only discharging his duty as an officer subordinate to the court presided by the Magistrate. The contention of the borrower that the Advocate Commissioner is not an officer subordinate in service to the Chief Judicial Magistrate and hence incompetent is only to be rejected.
(emphasis supplied)
Once again, another learned Single Judge of the High Court of Kerala in V.S. Sunitha28 reiterated the same view and held that the Magistrate rendering assistance to the secured creditor is competent to appoint a commissioner to take possession of the secured assets.
This very issue had also arisen before the Madras High Court in S. Chandramohan29. The Division Bench of the Madras High Court after adverting to Section 14(1A) of the 2002 Act went on to observe as follows: “8. …. The same is an enabling provision conferring power on the Chief Metropolitan Magistrate or District Magistrate to authorise any 28 supra at Footnote No.10 29 supra at Footnote No.11 A B C D E F G H 1188 SUPREME COURT REPORTS [2022] 1 S.C.R. A B C D E F G H officer subordinate to him to take possession of the assets and documents relating thereto and forward the assets and documents to the secured creditors. 9. The Advocate Commissioners appointed by the learned Chief Metropolitan Magistrate is in tune with Section 14(1-A) of the SARFAESI Act, 2002. As per Section 14 of the Act, the secured creditors can approach the Chief Metropolitan Magistrate/District Magistrate to take possession of the assets and documents of the secured creditor.
The Chief Metropolitan Magistrate, instead of personally visiting the spot to take possession of assets and documents, can very well appoint the Advocate Commissioner to visit on his behalf, as in the case of issuing of commissions under the Civil Procedure Code, as it is not possible for the Chief Metropolitan Magistrate/District Magistrate to visit personally to take possession. 10. The amendment inserted by Act 1 of 2013 viz., Section 14(1- A) is permitting the Subordinate Officers to do the above said acts and nowhere prohibits the Chief Metropolitan Magistrate from authorising an Advocate Commissioner to go on his behalf for taking possession of assets and documents and forwarding the same to the secured creditor. The amendment gives discretion to the Chief Metropolitan Magistrate/District Magistrate either to authorise or take possession of such assets and document and the word used being ‘may’, it is not always necessary on the part of the Chief Metropolitan Magistrate to authorise any officer subordinate to him.
It is a well settled proposition of law that the observance of the word ‘may’ used in the statute is only directory, in the sense, non-compliance with those provisions will not render the proceedings invalid. Sometimes, the word ‘shall’ may also be directory and not mandatory. ….” It then adverted to the decisions of this Court in Dattatraya Moreshwar vs. The State of Bombay & Ors.30, Mahadev Govind Gharge & Ors. vs. Special Land Acquisition Officer, Upper Krishna Project, Jamkhandi, Karnataka31 and Sangram Singh vs. Election Tribunal, Kotah & Anr.32 on the principles of interpretation of statute and noted thus:
Precedent status how later indexed judgments have treated this case
No known negative treatment found in the Courts & Cases corpus.
Another 1 relationship is under human verification and not counted above.
This is a result about the indexed corpus, not a finding that the judgment remains good law. Coverage may be incomplete.
Later judgments that treat this case
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