CJM's Power Under S.14 SARFAESI Act Is Ministerial, Not Adjudicatory; Cannot Entertain Borrower's Petition: Kerala High Court - 2025-10-14

CJM's Role Under SARFAESI Act is Ministerial, Not Adjudicatory: Kerala High Court

Kochi, India - The Kerala High Court, in a significant ruling, has reiterated that the role of a Chief Judicial Magistrate (CJM) under Section 14 of the SARFAESI Act is purely ministerial and does not involve any adjudicatory function. Justice Gopinath P. allowed a writ petition filed by The Federal Bank Limited, declaring that the CJM has no jurisdiction to entertain or adjudicate upon a petition filed by a borrower challenging the bank's recovery proceedings.

Case Background

The dispute originated from recovery proceedings initiated by The Federal Bank under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, against several borrowers. One of the borrowers (the 2nd respondent) had initially challenged these proceedings before the Debts Recovery Tribunal (DRT) and subsequently the High Court.

After failing to comply with a High Court directive to deposit Rs. 1 Crore, the borrower filed a petition before the Chief Judicial Magistrate Court, Kozhikode. The bank had approached the CJM under Section 14 of the Act, seeking assistance in taking possession of the secured asset. The borrower's petition sought to recall the Advocate Commissioner appointed by the CJM and dismiss the bank's application, raising issues about the validity of the security interest. The bank contended that the CJM could not entertain such a petition and approached the High Court for relief.

Arguments from Both Sides

The Petitioner (Federal Bank): Represented by Advocate Mohan Jacob George, the bank argued that the power of a Magistrate under Section 14 is well-settled by the Supreme Court and various High Courts. Citing landmark cases like Balkrishna Rama Tarle v. Phoenix ARC (P) Ltd. , the bank contended that the CJM's function is limited to verifying compliance with statutory requirements and assisting the secured creditor. It does not extend to adjudicating disputes between the borrower and the creditor, which is the exclusive domain of the Debts Recovery Tribunal under Section 17 of the Act.

The Respondent (Borrower): Counsel for the borrower, Smt. Gayathri Muraleedharan, argued that the CJM must not act mechanically. She submitted that the CJM has a duty to verify the correctness of the bank's affidavit, especially concerning the creation of a valid security interest. The borrower alleged that a restructuring agreement was executed without his consent, thereby invalidating the mortgage, and that the CJM was competent to examine this issue before providing assistance.

Court's Analysis and Reliance on Precedents

Justice Gopinath P. conducted a thorough review of established legal principles governing Section 14 of the SARFAESI Act. The judgment extensively quoted key Supreme Court decisions to underscore the limited scope of the Magistrate's inquiry.

The Court referred to R.D. Jain & Co. v. Capital First Ltd. , where the Supreme Court held: > “Section 14 does not involve an adjudicatory process qua points raised by the borrower against the secured creditor taking possession of secured assets.”

Similarly, citing Balkrishna Rama Tarle , the Court noted that the powers are "ministerial steps" and the Magistrate is not required to adjudicate disputes. The aggrieved party's remedy lies before the DRT under Section 17.

The High Court also relied on its own precedent in State Bank of India, TVM v. Chief Judicial Magistrate, Kollam , which explicitly states: > “The borrower cannot maintain any application under section 14 of the SARFAESI Act nor can the borrower invoke the jurisdiction of the authorised Magistrate under section 14 of the Act.”

Applying these principles, the Court found that the borrower's attempt to have the CJM adjudicate complex issues after failing to secure relief from the DRT and the High Court was clearly impermissible.

Final Decision and Implications

The High Court allowed the bank's writ petition and issued a clear declaration that the Chief Judicial Magistrate, Kozhikode, had no jurisdiction to adjudicate the issues raised in the borrower's petition. Consequently, the proceedings initiated by the borrower before the CJM were set aside, and the borrower's petition was dismissed.

This judgment reinforces a crucial aspect of the SARFAESI framework: the distinct roles of the Magistrate and the Debts Recovery Tribunal. It serves as a clear directive that the Section 14 process is designed for expeditious assistance to secured creditors and is not a forum for borrowers to re-litigate issues or stall recovery actions. The sole remedy for borrowers to challenge the legality of the creditor's actions remains an application under Section 17 before the DRT.