2025 (4) TMI 64 - HC - Indian Laws

Maintainability of Respondent/Bank s application under Section 14 of the SARFAESI Act - symbolic possession of the Respondent/Bank - compliance with the mandatory requirements under Section 13(2) of the SARFAESI Act before proceeding under Section 14 - HELD THAT - In the case of R. D. Jain and Company 2022 (7) TMI 1237 - SUPREME COURT the Hon ble Supreme Court held that the powers initiated by the DM/CMM under Section 14 of the SARFAESI Act is of ministerial nature and while disposing of application under Section 14 no element of quasi-judicial function or adjudication is attracted however the DM/CMM has to adjudicate and decide correctness of information given in application and nothing more. In the case in hand the Petitioners have not denied about service of notice dated 14.09.2022 issued by the Respondent/Bank under Section 13(2) of the SARFAESI Act. No doubt as per the Provisions of Section 14 the details of the transaction and secured assets are required to be submitted on affidavit. On perusal of the record it appears that Mr. Anilkumar Shrivastava the Authorized Officer of the Respondent/Bank submitted all transactions history between the Petitioners and the Respondent/Bank on verification which is based on the documentary evidence. The Respondent/Bank has also given detailed description of secured assets. The Petitioners have not disputed about description of secured assets. Therefore merely solemn affirmation/affidavit is not furnished with the application under Section 14 of the SARFAESI Act it may be called as a procedural defect which can be cured by filing additional affidavit. Since the Respondent/Bank complied with the provisions of Section 14 of the SARFAESI Act as per view taken by the Hon ble Apex Court as well as by this Court the notice is not required to be given to the borrower or the third party. Nonetheless the Petitioners are already served notice dated 14.09.2022 issued by the Respondent/Bank under Section 13(2) of the SARFAESI Act but neither the Petitioners replied the same nor they challenged the said notice before the competent authority. Further the Petitioners have concealed the fact of service notice on 15.09.2022. Therefore filing an application below Exh.21 is itself killing the time. There are no substance to disturb the findings of the learned Trial Court hence the Writ Petition is dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

• Whether the Respondent/Bank's application under Section 14 of the SARFAESI Act before the Chief Judicial Magistrate, Latur, was maintainable after a prior application was disposed of by the District Magistrate due to non-compliance with deficiencies.
• Whether the Respondent/Bank complied with the mandatory requirements under Section 13(2) of the SARFAESI Act before proceeding under Section 14.
• Whether the Petitioners were entitled to copies of the application, its affidavit, and the notice under Section 13(2) of the SARFAESI Act.
• Whether the procedural requirements under Section 14 of the SARFAESI Act, specifically the filing of an affidavit, were fulfilled by the Respondent/Bank.
• Whether the Chief Judicial Magistrate was required to provide notice to the Petitioners before passing an order under Section 14 of the SARFAESI Act.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Maintainability of the Application under Section 14

The legal framework under Section 14 of the SARFAESI Act allows a secured creditor to request the Chief Metropolitan Magistrate or District Magistrate to assist in taking possession of secured assets. The Court noted that the District Magistrate had previously disposed of an application due to non-compliance with deficiencies. However, the Act does not preclude the Respondent/Bank from approaching the Chief Judicial Magistrate subsequently. The Court reasoned that the lack of compliance with deficiencies does not bar a fresh application under Section 14 before another competent authority.

Issue 2: Compliance with Section 13(2) of the SARFAESI Act

Section 13(2) mandates that a notice be served to the borrower before any action is taken to enforce security interests. The Respondent/Bank had issued a notice on 14.09.2022, which was served on the Petitioners on 15.09.2022. The Petitioners did not challenge this notice nor reply to it. The Court found that the Respondent/Bank had complied with the requirements of Section 13(2), and the Petitioners' failure to contest the notice further validated the Bank's actions.

Issue 3: Entitlement to Copies of Application and Notice

The Petitioners sought copies of the application, its affidavit, and the notice under Section 13(2). The Court referred to precedents, including Trade Well & Anr. Vs. Indian Bank & Anr., which held that under Section 14, the Chief Judicial Magistrate is not required to give notice to the borrower or third parties. The Court concluded that the Petitioners were not entitled to the requested documents as the SARFAESI Act does not mandate such disclosure at the stage of proceedings under Section 14.

Issue 4: Procedural Requirements under Section 14

The Petitioners argued that the application under Section 14 was not supported by an affidavit as required. The Court acknowledged this procedural defect but deemed it curable through the submission of an additional affidavit. It emphasized that the absence of a solemn affirmation or affidavit does not invalidate the proceedings if the defect can be rectified.

Issue 5: Requirement of Notice by the Chief Judicial Magistrate

The Court reiterated the ministerial nature of the powers exercised under Section 14, as established in Balkrishna Rama Tarle Vs. Phoenix ARC Private Limited and R.D. Jain & Co. Vs. Capital First Ltd. The Chief Judicial Magistrate is not required to adjudicate disputes or provide notice to borrowers at this stage. The focus is solely on verifying jurisdiction and compliance with Section 13(2) notices.

3. SIGNIFICANT HOLDINGS

The Court held that the application under Section 14 of the SARFAESI Act by the Respondent/Bank was maintainable despite prior deficiencies noted by the District Magistrate. It emphasized the non-adjudicatory, ministerial role of the Chief Judicial Magistrate under Section 14, which does not require notice to the borrower.

The Court affirmed that the Respondent/Bank had complied with the necessary procedural requirements under Section 13(2), and the Petitioners' failure to contest the notice further supported the Bank's position.

Significant legal reasoning included the Court's reliance on precedents which clarified that Section 14 proceedings do not entail adjudication of borrower disputes or require borrower notification. The Court concluded that procedural defects, such as the absence of an affidavit, are not fatal and can be remedied.

Ultimately, the Court dismissed the Petitioners' writ petition, upholding the Chief Judicial Magistrate's order and discharging the rule.