2025 (6) TMI 1572 - HC - Indian Laws

Prayer for enforcement of guidelines given by the State Government vide Circular dated 10th April 2023 and to follow Guidelines particularly appointing an Advocate as Commissioner to execute the order passed u/s 14 of the SARFAESI Act 2002 - HELD THAT - The SARFAESI Act was enacted for the purpose that the banks and financial institution would be able to release long term assets manage problems of liquidity asset liability mismatches and improve recovery by exercising powers to take possession of securities sell them and reduce non performing assets by adopting measures for recovery or reconstruction. Section 14 of the SARFAESI Act directs the Chief Judicial Magistrate or District Magistrate to assist secured creditor in taking possession of the secured asset. The Supreme Court in NKGSB Co-operative Bank Limited Versus Subir Chakravarty 2022 (3) TMI 3 - SUPREME COURT had occasioned to consider the issue regarding appointment of advocate and authorise him/her to take possession of the secured asset within the meaning of Section 14 (1A) of the SARFAESI Act. After considering numerous provisions and judgments the Supreme Court held that the CMM/DM had power to appoint an advocate Court Commissioner for executing the orders passed under Section 14 of the SARFAESI Act. In the present proceedings the petitioner financial institution has come up with a case that the learned Chief Judicial Magistrate Pune is not extending the date of commission on the ground that the validity of the order which commanded the Court Commissioner to take and deliver the possession of the secured assets to the authorised officer of the petitioner is only to be done within 90 days and once this 90 days period is over the petitioner would have to obtain a fresh order by refiling a Section 14 application. It is also further the case of the petitioner that in all such matters where within 90 days the order could not be executed the learned Chief Judicial Magistrate Pune is directing parties to file a fresh application under section 14 - Once an order has been passed directing the Court Commissioner to take and deliver the possession of the secured asset to the authorised officer of the banks/financial institution within 90 days and if for some reason the said process of taking possession and handing over within 90 days could not be achieved a further extension of date of commission shall be made for which a fresh application under section 14 need not be filed by such banks/financial institution. Conclusion - The Chief Judicial Magistrate has all powers to extend the period of Writ of Commission to take and deliver possession of the secured assets. Application disposed off.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court are:

(a) Whether the Chief Judicial Magistrate (CJM), Pune, is legally justified in refusing to extend the validity of the Writ of Commission issued under Section 14 of the SARFAESI Act beyond 90 days, thereby requiring the secured creditor to re-file a fresh Section 14 application for possession of secured assets;

(b) Whether the appointment of an advocate as Court Commissioner to execute possession orders under Section 14 of the SARFAESI Act is valid and consistent with statutory provisions and judicial precedents;

(c) Whether the CJM's refusal to execute the order dated 28th February 2023 in a time-bound and expeditious manner amounts to dereliction of duty and is contrary to the legislative intent of the SARFAESI Act;

(d) The scope and nature of assistance the CJM is mandated to provide to secured creditors under Section 14 of the SARFAESI Act, including the use of force and police assistance;

(e) The applicability and binding effect of the Division Bench order dated 17th April 2023 in Writ Petition No. 15285 of 2022 (L&T Finance Limited versus State of Maharashtra) and the Supreme Court judgment in NKGSB Co-operative Bank Limited versus Subir Chakravarty regarding execution of Section 14 orders.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a): Validity and extension of Writ of Commission under Section 14 of SARFAESI Act

Relevant legal framework and precedents: Section 14 of the SARFAESI Act empowers the Chief Judicial Magistrate or District Magistrate to assist secured creditors in taking possession of secured assets. The statute does not prescribe any validity period for the order passed under Section 14. The Division Bench's order dated 17th April 2023 in L&T Finance Limited case and the Supreme Court's judgment in NKGSB Co-operative Bank Limited case are key precedents.

Court's interpretation and reasoning: The Court noted that the CJM, Pune, refused to extend the Writ of Commission beyond 90 days, asserting that the order's validity was limited to 90 days and requiring a fresh Section 14 application thereafter. The Court analyzed the statutory provisions and found no express limitation on the validity period of Section 14 orders. It held that the 90-day period fixed by the CJM was procedural and administrative, not a statutory deadline.

Key evidence and findings: The petitioner bank's submissions and the refusal of the CJM to extend the Writ of Commission despite the petitioner's repeated requests were material. The petitioner had complied with all formalities and had paid the Court Commissioner's fees.

Application of law to facts: The Court held that the CJM has inherent powers to extend the period of the Writ of Commission to enable the Court Commissioner to take and deliver possession of the secured assets. Requiring a fresh Section 14 application for extension would cause unnecessary delay and defeat the legislative intent of expeditious recovery.

Treatment of competing arguments: The State contended that the CJM's refusal was lawful as the 90-day period had expired and a fresh application was necessary. The Court rejected this, emphasizing the statutory scheme's purpose and the need for administrative flexibility.

Conclusion: The Court clarified that the CJM must extend the Writ of Commission period as necessary without insisting on re-filing, thereby facilitating timely execution of possession orders.

Issue (b): Appointment of advocate as Court Commissioner under Section 14(1A) SARFAESI Act

Relevant legal framework and precedents: Section 14(1A) allows the CJM/DM to appoint a Court Commissioner to assist in taking possession. The Supreme Court in NKGSB Co-operative Bank Limited versus Subir Chakravarty (2022) held that appointment of an advocate as Court Commissioner is valid and consistent with the statute.

Court's interpretation and reasoning: The Court relied on the Supreme Court's reasoning that the CJM/DM cannot personally attend to every possession due to logistical constraints, especially in commercial jurisdictions. An advocate, as an officer of the Court and subordinate to the CJM/DM, can be validly appointed to execute possession orders.

Key evidence and findings: The petitioner had appointed an advocate as Court Commissioner in accordance with the State Government guidelines and the Division Bench's directions in the L&T Finance Limited case.

Application of law to facts: The Court found the petitioner's appointment of an advocate Court Commissioner proper and consistent with the statutory mandate and judicial precedents.

Treatment of competing arguments: No direct opposition was raised against this appointment by the State; rather, the State's position was procedural regarding extension of the Writ of Commission.

Conclusion: The Court upheld the validity of appointing an advocate as Court Commissioner under Section 14(1A) SARFAESI Act.

Issue (c): Duty of the CJM to execute Section 14 orders expeditiously and consequences of failure

Relevant legal framework and precedents: The SARFAESI Act's objective is to facilitate speedy recovery of secured assets to improve liquidity and reduce NPAs. The Supreme Court in NKGSB emphasized that time is of the essence and the CJM/DM's role is ministerial and cannot brook delay.

Court's interpretation and reasoning: The Court observed that the CJM's refusal to extend the Writ of Commission and consequent delay in execution of the possession order frustrates the legislative purpose. Such refusal amounts to dereliction of duty and is contrary to the spirit of the SARFAESI Act.

Key evidence and findings: The petitioner's repeated requests and compliance contrasted with the CJM's non-cooperation.

Application of law to facts: The Court held that the CJM must act promptly to assist secured creditors and that failure to do so undermines the Act's objectives.

Treatment of competing arguments: The State's argument that a fresh application could be filed was rejected as it would cause avoidable delay.

Conclusion: The Court directed the CJM to execute Section 14 orders expeditiously, including granting necessary assistance.

Issue (d): Scope of assistance under Section 14 including use of force and police aid

Relevant legal framework and precedents: Section 14 empowers the CJM/DM to provide all assistance to secured creditors in taking possession, including breaking open locks and police assistance.

Court's interpretation and reasoning: The Court emphasized that the assistance includes use of force and police aid to overcome any hurdles in taking possession, reflecting the legislative intent to facilitate effective recovery.

Key evidence and findings: The petitioner sought directions for the CJM to provide such assistance.

Application of law to facts: The Court granted directions accordingly.

Treatment of competing arguments: No opposition was raised on this point.

Conclusion: The CJM is directed to provide all necessary assistance, including force and police aid, to secure possession.

Issue (e): Binding effect of Division Bench and Supreme Court rulings on execution of Section 14 orders

Relevant legal framework and precedents: The Division Bench order dated 17th April 2023 in L&T Finance Limited case and the Supreme Court judgment in NKGSB Co-operative Bank Limited case are authoritative on procedural and substantive aspects of Section 14 execution.

Court's interpretation and reasoning: The Court held that the CJM is bound to follow these directions and guidelines, including appointment of advocate Commissioners and expeditious execution.

Key evidence and findings: The petitioner had brought these orders to the CJM's notice, but the CJM refused to comply.

Application of law to facts: The Court enforced adherence to these precedents.

Treatment of competing arguments: The State did not dispute the binding nature but focused on procedural objections.

Conclusion: The CJM must comply with the Division Bench and Supreme Court directions to ensure proper execution of Section 14 orders.

3. SIGNIFICANT HOLDINGS

(i) "Once an order has been passed directing the Court Commissioner to take and deliver the possession of the secured asset to the authorised officer of the banks/financial institution within 90 days, and if for some reason the said process of taking possession and handing over within 90 days could not be achieved, a further extension of date of commission shall be made for which, a fresh application under section 14 need not be filed by such banks/financial institution. We hereby clarify that the Chief Judicial Magistrate, has all powers to extend the period of Writ of Commission to take and deliver possession of the secured assets."

(ii) The Supreme Court's observation in NKGSB Co-operative Bank Limited case that "an advocate is and must be regarded as an officer of the Court and subordinate to the CMM/DM for the purposes of Section 14 (1A) of the 2002 Act," and that "the statutory obligation enjoined upon the CMM/DM is to immediately move into action after receipt of a written application under Section 14(1) of the 2002 Act... Time is of the essence. This is the spirit of the special enactment."

(iii) The Court established that the CJM's refusal to extend the Writ of Commission and consequent delay in execution amounts to dereliction of duty and is contrary to the legislative intent of the SARFAESI Act.

(iv) The Court affirmed that the CJM must provide all necessary assistance including use of force and police aid to secured creditors for taking possession under Section 14.

(v) The Court mandated strict adherence by the CJM to the guidelines issued by the State Government and directions issued by the Division Bench and Supreme Court for expeditious and effective execution of Section 14 orders.

← Previous Next →