Madhya Pradesh HC Issues Guidelines To DMs/ADMs/CJMs For Deciding Applications U/S. 14 Of SARFAESI Act
The Madhya Pradesh High Court, Indore Bench has issued some guidelines and directions to be followed by District Magistrate (DM), Additional District Magistrate (ADM), and Chief Judicial Magistrate (CJM) while passing orders for deciding applications under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 [SARFAESI Act]
The Court was dealing with a writ petition filed by a company against the inaction of CJM, Khargone who was sitting tight over the application filed under Section 14 of the SARFAESI Act.
A Division Bench of Justice Sushrut Arvind Dharmadhikari and Justice Pranay Verma ordered, “The Chief Judicial Magistrate, Khargone is directed to decide the pending application of the petitioner as well as other pending applications in accordance with law keeping in view the statutory provisions as contained in Section 14 of the SARFAESI Act as well as in the light of the judgments mentioned above, within a period of 30 days from the date of receipt of certified copy of the order passed today.”
The Bench said that as has been already held by it as well as the Apex Court on number of occasions, the Chief Judicial Magistrate has to consider two aspects before passing an order under Section 14 of the SARFAESI Act:
(i) to determine whether secured assets fall within their territorial jurisdiction.
(ii) whether notice u/S 13(2) of the SARFAESI Act has been furnished.
“Therefore the action of the Chief Judicial Magistrate, Khargone is absolutely illegal and is not the requirement of law”, added the Court.
Advocate Rohit Saboo appeared for the petitioner while Government Advocate Bhuwan Gautam appeared for the respondent-State.
Brief Facts -
The petitioner was a banking company involved in the business of advancing housing loans to its customers. The company had filed an application under Section 14 of the SARFAESI Act before the Chief Judicial Magistrate, Khargone. The said CJM neither registered the application, nor took any steps to proceed in the matter and in contravention to the provisions of Section 14 of the SARFAESI Act, the CJM was listing the matter for arguments on registration. Being aggrieved, the company filed an application under the Right to Information Act, 2005 seeking status of all similar SARFAESI Act matters pending before the CJM, Khargone which was forwarded by the State Public Information Officer, Distt. and Sessions Court, Mandleshwar to the CJM who had issued the list of cases under Section 14 of SARFAESI ACT pending before the CJM, Khargone.
Hence, the petition was preferred by the company before the High Court. The counsel for the company submitted that the CJM, Khargone had failed to consider that the petitioner company was a secured creditor and the property in question was secured by way of mortgage. It was further submitted that the CJM exceeded its jurisdiction by listing the cases under Section 14 of SARFAESI Act for the purpose of arguments on registration.
The High Court after hearing the arguments of the counsel observed, “In the present petition, as per the information gathered by the petitioner by way of filing an application through the Right to Information Act,(Annexure P-5) at least around 17 cases are pending before the Chief Judicial Magistrate Distt. Khargone which are of similar nature and are pending for arguments on registration of application u/S 14 of the SARFAESI Act”
The Court further said that the scope and extent of jurisdiction vested in the DM/ADM/CJM as provided under Section 14 of SARFAESI Act is clear from a bare reading of Section 14 as well as from the catena of judgments passed by the Apex Cour such as, R.D. Jain & Company v. Capital First Limited & Others (2023) 1 SCC 675 and Kotak Mahindra Bank Limited v. Girnar Corrugators Pvt. & Ors. (2023) 3 SCC 210. It also said that 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 DM/ADM/CJM by way of a written application.
“The statutory obligation upon the DM/ADM/CJM is to immediately move into action by passing an 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. As per Section 14 of the SARFAESI Act, the DM/ADM/CJM 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 further extended for such further period but not exceeding to 60 days. The possession of the secured assets could be taken by the DM/ADM/CJM himself/herself or through any officer sub-ordinate to him/her. Thus, from the above, it is apparent that nature of power u/S 14 of SARFAESI Act vested in the DM/ADM/CJM is executory and ministerial and not adjudicatory”, held the Court.
The Court took note of the fact that every other day, it is dealing with number of cases where DM/ADM/CJM instead of complying with the provisions of Section 14 of SARFAESI Act, either exceed their jurisdiction by adjudicating the case or sitting tight over the matter, as in the case in hand. The Court said that the CJM, Khargone had travelled beyond the scope of the said provision, in as much as, that in place of deciding the application within the stipulated time which was filed in December, 2022, the application was kept pending for months together for arguments on registration of the case which was not warranted as per the provisions of Section 14.
“The Chief Judicial Magistrate attained the role of adjudicatory authority/ functus of icio. This Court as well as the Apex Court time and again reiterated that the role of DM/ADM/CJM is ministerial in nature so far as Section 14 of the SARFAESI Act is concerned and not that of adjudication. In number of cases, it is seen that the orders are being passed as per convenience of the Officer concerned without following the mandate of this Court as well as the Apex Court”, further noted the Court.
The Court, therefore, issued the following guidelines/directions –
(i) DM/ADM/CJM have to determine whether secured assets fall within their territorial jurisdiction.
(ii) whether notice u/S 13(2) of the SARFAESI Act has been furnished by the secured creditor and also whether the case of secured creditor falls under the any of the exceptions provided under Section 31 of the SARFAESI Act?
(iii) DM/ADM/CJM is not at all required to hear the application u/S 14 of the SARFAESI Act for the purpose of registration of the case.
(iv) DM/ADM/CJM acting under Section 14 of the SARFAESI Act is not required to give notice either to the borrower or to the 3rd party.
(v) The DM/ADM/CJM shall ensure that the secured creditor should file an affidavit declaring that the terms and conditions prescribed u/S 14(1) of the SARFAESI Act are satisfied.
(vi) DM/ADM/CJM should ensure that application filed u/S 14 of the SARFAESI Act shall be decided as expeditiously as possible, preferably within 45 days from the date of filing of such an application.
Accordingly, the High Court disposed of the petition.
Cause Title- Equitas Small Finance Bank Limited v. The State of Madhya Pradesh
