WHETHER THE DISTRICT MAGISTRATE CAN DELEGATE THEIR POWERS UNDER SECTION 14(1) OF SARFAESI ACT, 2002 TO AN ADDITIONAL COMMISSIONER OF POLICE?

[DR.MARIAPPAN GOVINDARAJAN]

In M/S DURGA TRAVELS THRU. PROPRIETOR PANKAJ SHARMA AND 3 OTHERS VERSUS DEBTS RECOVERY TRIBUNAL, LKO. AND 2 OTHERS - 2025 (5) TMI 999 - ALLAHABAD HIGH COURT, the petitioner No. 1 has taken a loan for purchasing school buses in 2015 from a bank.  The petitioners 2 to 4 are guarantors to the said loan.  Since the dues have not been paid the said loan was declared as Non-Performing Asset’ (‘NPA’ for short).  The Bank issued a notice on 29.10.2020 under Section 13(2) of the SARFAESI Act, 2002.  Soon the bank, respondent No.3 assigned its right to an Asset Reconstruction Company, the respondent No. 2 in this case.  An application was filed before the Additional District Magistrate, Gautambudh Nagar by the respondent No. 2 under Section 14 of the SARFAESI to take possession of the property.

The Additional District Magistrate, vide their order dated 21.04.2023 directed the respondent No.2 to take possession of the said property with the help of the police authorities.  It was also noticed in the said order that in case, there was any order passed by any court contrary to the said order, the order shall also come to an end.  The Magistrate also sent the said order to the Additional Commissioner of Police for taking effective steps for implementing the said order.  The order further insisted that the Bank and Police, before taking possession of the property, should give reasonable opportunity to the occupiers so as to enable them to shift their goods to some other place.  At that time of taking possession two independent witnesses and an officer appointed by the Police Commissioner shall also be present.

The petitioner challenged the said order by filing a Securitisation Application No. 360 of 2023.  In this case it was directed to give 15 days’ time before taking possession of the property.   In the meantime, the Debts Recovery Tribunal directed to avail the one-time settlement scheme offered by the petitioners.  Rs.27 lakhs was deposited by the petitioner.    A notice was issued on 05.12.2023 for taking physical possession of the property on 17.12.2023 by the respondent no.2. 

The petitioners contended that no notice as directed by the Debts Recovery Tribunal has not been served on the petitioners.  On 25.02.2025 the recovery agents of respondent No. 2 forcefully took over the possession of the property.  No Government official has been present at that time.  They broke open the main gate and placed torture on the petitioners.  The petitioners further contended that the manner of taking possession is neither sanctioned by law under Section 14 of the SARFAESI Act nor was it in consonance with the

directions given by the Debts Recovery Tribunal and thus clearly the rights of the petitioners under Article 300A of the Constitution of India stood violated.

The High Court called for a report from police authorities.  The Court also appointed a commissioner in view of the allegations that even the essentials such as medicines, books etc., were lying in lock and were not accessible to the petitioners.  The Commissioner has submitted his report to the Court.  In the report the detailed happenings in the course of taking over the premises were indicated.  The ground floor was taken over.  The second floor and the third floor were not taken since the children were studying the examinations.  The elders were given the medicines etc.

The respondent no. 2 contended that the petitioners as guarantors were liable to pay the outstanding loan amount.  The petitioner had earlier approached the Debts Recovery Tribunal by filing a securitisation appeal against the order passed under Section 14, as such, the present writ petition is not maintainable.  After the order was passed under Section 14, the respondent no.2 took the physical possession of the property with the assistance of the police officials as per the law.  The respondent no.2 is not a ‘State’ within the meaning of Article 12 of the Constitution of India and therefore, the writ should not lie against him.  the One Time Settlement was not acceptable in the form it was submitted.

Based on the submissions of the parties, the High Court considered the issue to be decided by it as to whether the writ petition would lie or not as argued by the Counsel for the respondent.  The High Court relied on judgments of Supreme Court.  It also analysed sections 14 which provides that Chief Metropolitan Magistrate or District Magistrate is to assist the secured creditors in taking possession of the secured assets.  The High Court also analysed the provisions of Section 14(1-A) of the Act.  The said section provides that the District Magistrate or the Chief Metropolitan Magistrate may authorise any officer subordinate to him, —

• to take possession of such assets and documents relating thereto; and
• to forward such assets and documents to the secured creditor.

The High Court observed that it is clear that Section 14 empowers the District Magistrate or the Chief Metropolitan Magistrate to take possession of the property concerned. Section 14(1-A) further empowers the District Magistrate or the Chief Metropolitan Magistrate to “authorized any Officer subordinate to him” to take possession of the said assets and thereafter to forward such assets to the secured creditor.  In this case, the Magistrate delegated its power to a police officer for taking the possession.  The High Court next considered the question as to whether the Additional Commissioner of Police is subordinate to the Additional District Magistrate.  There is no material on record by either of the parties to suggest or argue that the Additional Commissioner of Police, can be termed as an officer subordinate to the Additional District Magistrate.

The High Court observed that as per the pleadings, the possession of immovable property (mortgaged) was taken by an Officer who was delegated the authority by the Additional Commissioner of Police and the officer delegated by him are neither functionally subordinate to the Additional District Magistrate or can be termed as an officer of the court.   Further the properties of the petitioners, which are not hypothecated or mortgaged were taken away depriving the rights of the petitioners. 

The High Court held that the remedy under writ petition is available to the petitioners since the possession of the properties were taken contrary to the mandatory provisions.  Since there was a violation of the rights vested by virtue of Article 300A of the Constitution of India, which have been on the face of it not followed and thus a writ petition would lie.  The High Court further noticed the following-

• The directions of the Additional District Magistrate in its order dated 21.04.2023 were not complied, as no notice was ever served to the guarantors i.e. the petitioners no.2 and 4.
• The notice admittedly was served only on the petitioner no.1, thus, the intent of the order dated 21.04.2023 of giving prior notice so that the goods can be removed well in time, was also not observed.
• The directions given by the DRT in its order dated 12.05.2023 directing the ADM to issue at least 15 days prior notice before taking possession have also not observed in the present case.

In view of the above, the High Court held that clearly there is an infraction of the rights guaranteed under Article 300A of the Constitution of India, the manner of taking the possession is not in accordance with the mandate of Section 14 (1-A) of the SARFAESI Act and taking of possession of movable assets was without any authority of law.

The High Court next considered the contentions of the respondent No. 2 that since it is not a State, writ petition is not maintainable.  The High Court rejected the said argument.  The High Court held that in the present case, the possession of the immovable and the movable assets have been taken by the Government Authorities and thus a writ would lie.

The High Court allowed the writ petition.  The High Court further held that the respondent no.2 would be at liberty to take possession in accordance with law strictly in terms of the mandate of Section 14 (1-A) of the SARFAESI Act. The Additional District Magistrate shall ensure that the possession should be taken strictly in terms of the mandate of Section 14 (1-A) of the SARFAESI Act.