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.
Download Full Judgment Click Here >>
- ICAI revised Guidance Note on Schedule III of Companies Act 2013 – January 2022 Edition
- CBDT exempts income of the National Skill Development Corporation u/s 10(46)
- ICAI notifies Dates of CA Exams May 2022
- RBI issues regulations for NBFCs under amended Factoring Regulation Act 2011
- ICAI bans eight CAs due to professional misconduct