CJM competent to process application of secured creditor to take possession of secured asset under SRFAESIA

CJM equally competent to process application of secured creditor to take possession of secured asset u/s 14 of the Securitisation & Reconstruction of Financial  Assets  and Enforcement of Security Interest Act (SRFAESIA) 2002 – Supreme Court

ABCAUS Case Law Citation:
ABCAUS 3154 (2019) (09) SC

Important case law relied upon by the parties:
Muhammed Ashraf and Anr. Vs. Union of India (UOI) and Others
Radhakrishnan, V.N. Vs. State of Kerala and Anr
IndusInd Bank Ltd. Vs. The  State of Maharashtra  
Arjun Urban Co­operative Bank Ltd. Vs. Chief Judicial Magistrate
Kaveri Marketing  Vs. The Saraswathi Co­op. Bank Ltd
Dinesh Kumar Agarwal Vs. State of West Bengal
Arockiyaraj  Vs. The Chief Judicial Magistrate
Shyam Sunder Rohra  Vs. IndusInd Bank
Deepak Aggarwal Vs. State of Uttarakhand and Others
Andhra Bank and Ors. Vs. Sri Dinesh Kumar Agarwal and Ors
M/s T.R. Jewellery and Another Vs. State Bank of India and Another
Abhishek Mishra Vs. State of U.P. and Others
Janardhan Vs. State of Maharashtra

The moot question to be decided by the Hon’ble Supreme Court was as to whether the Chief Judicial Magistrate ( “CJM”) 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 (“2002 Act”)?

On the said issue, different High Courts have given conflicting views. While the High Courts of Bombay, Calcutta, Madras, Madhya Pradesh and Uttarakhand have interpreted the said provision to mean that only the Chief Metropolitan Magistrate (“CMM”) in metropolitan areas and the District Magistrate ( “DM”) in non­metropolitan areas are competent to  deal  with  such request. On the other hand, the High Courts of Kerala, Karnataka, Allahabad and Andhra Pradesh have  taken a contrary view of the same provision, to mean that it does not debar or preclude the CJM in the non­metropolitan areas to exercise power under Section 14 of the 2002 Act.

The Hon’ble Supreme Court pointed out 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. 

The Hon’ble Supreme Court opined that at best, the exercise of power by the authorised officer may partake the colour of quasi­judicial 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. 

The Hon’ble Supreme Court stated that it is well established that no Civil Court can interdict the action initiated in respect of any matter, which a Debt Recovery Tribunal or Debt Recovery Appellate Tribunal is empowered by or under the 2002 Act, to determine and in  particular, in respect of any action taken or to be taken in pursuance of any power conferred by  or  under  the  2002  Act or under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. That has  been  ordained by Section 34 of the 2002 Act. 

The Hon’ble Supreme Court further pointed out that the construction of the provision of Section 35 of the 2002 Act  plainly indicates that the provisions  of the Act will override  any  other law for the time being in force. The question was: does the provisions of 2002 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. Further the expressions “CMM and CJM” are used interchangeably in Cr.P.C. and are  considered as synonymous to each other. 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 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. 

The Hon’ble Supreme Court opined that Section 37 of the 2002 Act predicates 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  Section 14 of the 2002 Act are in no way inconsistent with the provisions of Code of Criminal Procedure, it must then follow that the provisions of the 2002 Act are in  addition  to,  and not in derogation of the Code.

Relying on the judgment passed by the Court in the context of the Bombay  Prevention  of  Gambling Act, 1887, the Hon’ble Supreme Court opined 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.

CJM competent to process application of secured creditor to take possession of secured asset

Accordingly, the Hon’ble Supreme Court held that the CJM is equally competent to deal with the application moved by the secured creditor under Section 14 of the 2002 Act. 

The Hon’ble Supreme Court upheld and approved the   view   taken   by   the High Courts of Kerala, Karnataka, Allahabad and Andhra Pradesh and reversed the decisions of the High Courts of Bombay, Calcutta, Madras, Madhya Pradesh and Uttarakhand in that regard. 

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