Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2022 Supreme(SC) 168

SUPREME COURT OF INDIA
(From the High Court of Judicature at Bombay)
A.M. KHANWILKAR, C.T. RAVIKUMAR, JJ.
NKGSB Cooperative Bank Limited – Appellant
Versus
Subir Chakravarty and Others – Respondents
Civil Appeal No. 1637 of 2022, S.L.P. (Civil) Nos. 30240 of 2019, 2055, 12011 of 2020, S.L.P. (Civil) No......of 2022, Diary Nos. 17059, 23733 of 2020
Decided On : 25-02-2022

Advocates appeared:
For the Petitioner(s):Mr. Viraj Kadam, Adv Mr. Soumya Dutta, AOR Mr. Devendra Kumar Singh, Adv. Mr. Karunakar Mahalik, AOR Mr. Gouranga Biswal, Adv. Mr. Manoranjan Mishra, Adv. Mr. B. Raghunath, Advocate Mr. Sriram P., Advocate on Record Ms. Kavitha M.C., Advocate Ms. Muskaan Garg, Advocate Ms. Prerna Robin, Advocate Mr. Sreenath S., Advocate Mr. Mukund P. Unni, Advocate Mr. Sriram P., AOR Ms. Daisy Hannah, AOR Mr. Manish Shanker Srivastava, Adv. Ms. Kalpana, Adv. Ms. Pallavi Baghel, Adv. Mr. Abhishek Kumar Singh, AOR
For the Respondent(s): Mr. M.L. Ganesh, Adv. Mr. K. V. Vijayakumar, AOR Mr. Rana Mukherjee, Sr. Adv. Ms. Daisy Hannah, AOR Ms. Kanika Sharma, Adv. Ms. Surabhi Guleria, Adv. Ms. Oindrila Sen, Adv. Mr. Rahul Chitnis, Adv. Mr. Sachin Patil, AOR. Mr. Aaditya A. Pande, Adv Mr. Geo Joseph, Adv. Ms. Shwetal Shepal, Adv.

IMPORTANT POINT
Possession of secured asset – It is open to District Magistrate or Chief Metropolitan Magistrate to appoint an Advocate and authorise him/her to take possession of secured assets and documents relating thereto and to forward the same to secured creditor within meaning of Section 14(1A) of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

Headnote:
(A) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 – Section 14(1A) – Security Interest (Enforcement) Rules, 2002 – Rule 8 – Possession of secured asset – Section 14 of 2002 Act predicates that if secured creditor intends to take possession of secured assets, must approach CMM/DM by way of an application, in writing, and on receipt of such request, CMM/DM must move into action in right earnest – After passing an order thereon, he/she (CMM/DM) must proceed to take possession of secured assets and documents relating thereto for being forwarded to secured creditor in terms of Section 14(1) read with Section 14(2) of 2002 Act – Section 14(2) is an enabling provision and permits CMM/DM to take such steps and use force, as may, in his opinion, be necessary – Possession of secured assets can be taken by secured creditor before confirmation of sale of secured assets as well as post-confirmation of sale. (Paras 23 and 26)
(B) Civil Procedure Code, 1908 – Order 26 Rule 9 – Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 – Section 14(1A) – Security Interest (Enforcement) Rules, 2002 – Rule 8 – Possession of secured asset – Advocate Commissioner is not a new concept – Advocates are appointed as Court Commissioner to perform diverse administrative and ministerial work as per provisions of Code of Civil Procedure and Code of Criminal Procedure – An advocate is an officer of court – An Advocate is a guardian of constitutional morality and justice equally with Judge – He has an important duty as that of a Judge – He bears responsibility towards society and is expected to act with utmost sincerity and commitment to cause of justice – He has a duty to court first – As an officer of court, he owes allegiance to a higher cause and cannot indulge in consciously misstating facts or for that matter conceal any material fact within his knowledge – There is no impediment for CMM/DM to engage services of an Advocate (an officer of court) only for taking possession of secured assets and documents relating thereto and to forward the same to secured creditor in furtherance of orders passed by CMM/DM under Section 14(1) of 2002 Act in that regard – There is intrinsic de jure functional subordinate relationship between CMM/DM and Advocate being an officer of court – Being an officer of court and appointed by CMM/DM, acts done by Advocate Commissioner would receive immunity under Section 14(3) of 2002 Act as an officer authorised by CMM/DM – Going by institutional faith or trust reposed on Advocates being officers of court, there must be presumption that if an Advocate is appointed as commissioner for execution of orders passed by CMM/DM under Section 14(1) of 2002 Act, that responsibility and duty will be discharged honestly and in accordance with rules of law. (Paras 36, 39 and 42)
Facts of the case:
Seminal question involved in these cases is: whether it is open to the District Magistrate or the Chief Metropolitan Magistrate to appoint an Advocate and authorise him/her to take possession of secured assets and documents relating thereto and to forward the same to the secured creditor within meaning of Section 14(1A) of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002?
Findings of Court:
Special leave petition filed by the borrowers against impugned judgment and order of the Madras High Court is delinked for being heard for admission on 4.3.2022, on the limited issue (first issue) regarding compliance or non-compliance of clauses (i) to (ix) of Section 14 of the 2002 Act in the fact situation of the present case.
Result : Appeals allowed.

Judgement Key Points

The Court emphasized that Section 14 of the relevant legislation is primarily a procedural provision that facilitates the secured creditor’s ability to take possession of secured assets. It clarified that the process under Section 14 is not an adjudicatory or judicial determination of the rights or points raised by the borrower. Instead, it is a ministerial and administrative step that involves the execution of the secured creditor’s request for possession, subject to certain procedural formalities (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!)

JUDGMENT :

A.M. KHANWILKAR, J.

1. The seminal question involved in these cases is: whether it is open to the District Magistrate¹ [for short “DM”] or the Chief Metropolitan Magistrate ² [for short “CMM”] to appoint an advocate and authorise him/her to take possession of the secured assets and documents relating thereto and to forward the same to the secured creditor within the meaning of Section 14(1A) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002? ³ [for short “2002 Act”].

2. The High Court of Judicature at Bombay⁴ [for short “Bombay High Court”] vide judgment and order dated 6.11.2019 in Writ Petition (L) No. 28480 of 2019 opined that the advocate, not being a subordinate officer to the CMM or DM, such appointment would be illegal. Against this decision, four separate appeals⁵ [Civil Appeal No.........of 2022, SLP (Civil) No. 30240 of 2019; Civil Appeal No.........of 2022, SLP (Civil) No. 2055 of 2020; Civil Appeal No.........of 2022, SLP (Civil) No.........of 2022, Diary No. 17059 of 2020 and Civil Appeal No.........of 2022, SLP (Civil) No.........of 2022, Diary No. 23733 of 2020] have been filed by the concerned parties. On the other hand, the High Court of Judicature at Madras⁶ [for short “Madras High Court”] vide judgment and order dated 18.3.2020 in C.R.P. No. 790 of 2020 has taken a contrary view while following earlier decision of the same High Court on the reasoning that the advocate is regarded as an officer of the court and, thus, subordinate to the CMM or the DM. Having so held, it allowed the civil revision petition filed by the secured creditor (Canara Bank). Against this decision, a special leave petition⁷ [SLP (Civil) No. 12011 of 2020] has been filed by the borrowers.

3. The High Courts of Kerala in Muhammed Ashraf and Another vs. Union of India and Others, AIR 2009 Kerala 14, The Federal Bank Ltd. vs. A.V. Punnus, AIR 2014 Kerala 7 and V.S. Sunitha vs. Federal Bank Ltd. 2018 SCC Online Kerala 12866, Madras in S. Chandramohan and Another vs. The Chief Metropolitan Magistrate, Egmore, Chennai and Others, 2014 (5) L.W. 620 : 2014 SCC Online Mad. 7869 and Delhi in Rahul Chaudhary vs. Andhra Bank and Others, 2020 SCC Online Del. 284 have taken the same view as in the case of Canara Bank impugned in the special leave petition (supra) arising from the decision of the Madras High Court.

4. Additionally relying on the dictum in M/s. J. Marks Exim (India) Pvt. Ltd. vs. Punjab National Bank, 2017 SCC Online Bom. 2246 decided by the Division Bench of the Bombay High Court, it was urged that the coordinate Bench of the Bombay High Court had answered the issue under consideration in favour of the secured creditors and against the borrowers on the same lines as the view taken by other three High Courts, namely, High Courts of Kerela, Madras and Delhi. However, in the judgment of the Bombay High Court of coordinate Bench impugned before this Court, it has been observed that the dictum in the said decision had not considered the precise question that has been dealt with in the impugned judgment.

5. Briefly stated, in each of the cases under consideration, the CMM/DM appointed an advocate purportedly in exercise of powers under Section 14(1A) of the 2002 Act. In the cases arising from the judgment of the Bombay High Court, the borrowers had urged before the High Court that the Additional Chief Metropolitan Magistrate⁸ [for short “ACMM”] 3rd Court, Esplanade, Mumbai on application filed by the secured creditor (Bank) under Section 14 of the 2002 Act passed an order dated 26.7.2019, appointing an advocate to take possession of the secured assets and documents relating thereto and to forward the same to the secured creditor. The order passed by the ACMM records that the Bank had advanced a loan in the sum of Rs. 4.44 crore on 31.1.2015 to the borrowers, who had mortgaged Flat No. 262, 26th Floor, Building No. 02 with two basement car spaces in a building known as ‘Kalpataru