The Kerala High Court has observed that while it may not be necessary to examine the correctness of the averments in the affidavit filed by a bank/financial institution in support of the application for the orders under Section 14 of the SARFAESI Act, the Magistrate must apply his mind to the averments in the application.

The Petition filed before the High Court challenged the order of the Debts Recovery Tribunal setting aside an order of the Chief Judicial Magistrate.

The Single Bench of Justice Gopinath P. explained, “It cannot be forgotten that the power under Section 14 of the SARFAESI Act involves drastic consequences and that is why the Parliament conferred the power to take action under Section 14 of the SARFAESI Act on high officials such as District Magistrate or the Chief Judicial Magistrate. While it may not be necessary to examine the correctness of the averments in the affidavit filed by a bank/financial institution in support of the application for orders under Section 14 of the SARFAESI Act, the Magistrate must clearly apply his mind to the averments in the application and determine as to whether procedure contemplated has been followed before passing an order under Section 14 of the SARFAESI Act.”

Senior Advocate K.K. Chandran Pillai represented the Petitioner while Advocate V. Philip Mathews represented the Respondent.

Factual Background

The first petitioner in the Original Petition (DRT) is a banking Company registered under the Companies Act and the second petitioner is one of the Authorized Officers of the petitioner Company under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The petitioners challenged the order of the Debts Recovery Tribunal-I, Ernakulam (Tribunal).

Through the impugned order, the Tribunal set aside an order of the Chief Judicial Magistrate on the ground that the said order was passed without due application of mind and in a printed format. The contention that the properties in question were agricultural lands was rejected by the Tribunal.

Arguments

It was the case of the Petitioner that the Chief Judicial Magistrate is not an Adjudicating Authority under the provisions of the SARFAESI Act. It was submitted that while exercising powers under Section 14 of the SARFAESI Act, the Chief Judicial Magistrate only exercises administrative power.

Reasoning

The Bench, at the outset, reiterated that while no adjudication is contemplated in a proceeding under Section 14 of the SARFAESI Act, the proceedings must reflect the application of mind. It explained that though the exercise of jurisdiction by the Magistrate under Section 14 of the SARFAESI Act does not involve any adjudication, the act of the Magistrate in passing orders in printed form by filling in necessary details in blank spaces cannot be justified under any circumstances.

The Bench observed, “It cannot be forgotten that the power under Section 14 of the SARFAESI Act involves drastic consequences and that is why the Parliament conferred the power to take action under Section 14 of the SARFAESI Act on high officials such as District Magistrate or the Chief Judicial Magistrate.”

The Bench also emphasized that the Magistrate must apply his mind to the averments in the application and determine as to whether the procedure contemplated has been followed before passing an order under Section 14 of the SARFAESI Act.

The Bench thus held that the Tribunal was justified in setting aside the order of the Chief Judicial Magistrate Court.

Dismissing the Petition, the Bench held, “…this will not prevent the petitioners from applying for or obtaining fresh orders under Section 14 of the SARFAESI Act from the competent Court. The Registry shall communicate a copy of this judgment to the Chief Judicial Magistrate who issued the order on M.C.No.929/2023. The practice of passing orders in the manner noticed in this judgment is strongly deprecated.”

Cause Title: The South Indian Bank Ltd. v. Jahfer M., Proprietor of M/S. City Aluminium, RKP (Neutral Citation: 2025:KER:24644)

Appearance:

Petitioner: Senior Advocate K.K. Chandran Pillai, Advocate P.A. Augustine

Respondent: Advocates V.Philip Mathews, Athulya Sebastian

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Kerala High CourtJustice Gopinath P

Tulip Kanth

Assistant Editor

Tulip Kanth is an Assistant Editor at Verdictum having over 5 years of experience in the field of legal journalism and editing. She extensively covers judgments of the Supreme Court, High Courts as well as Tribunals. She has previously worked with a legal publishing website where she oversaw the work of other editors and has also created updates on notifications of different Government Ministries. She holds an English Honours Degree from SGTB Khalsa College, Delhi University and has completed her LLB course with specialisation in Corporate Law from Amity University.