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IN THE HIGH COURT OF CALCUTTA
Kesang Doma Bhutia, J.
Adams Marketing Pvt. Ltd. And Others - Appellant
Versus
State Bank Of India And Another - Respondent
C.O. No. 1828, 1829 of 2021, IA No. CAN 1, 2 of 2021
Decided On : 19-01-2022
SaRFaESI act - Recovery of Loan - Section 13(2), Section 14 - The court discussed the provisions of Section 13(2) and Section 14 of the SaRFaESI act, which deal with the enforcement of security interest and the procedure for taking possession of secured assets by the secured creditor. The court emphasized that the District Magistrate's role under Section 14 is non-adjudicatory and purely executionary, and the jurisdiction is limited to ascertaining whether the property is a secured asset. The court also highlighted that the District Magistrate is not required to put the defaulter borrower on notice before passing an order under Section 14, and such orders cannot be challenged in any court or before any authority.
Fact of the Case:
The financial institution extended a large loan to the borrowers, who defaulted on the payments and challenged the institution's efforts to recover the money. The borrowers objected to the notice issued under Section 13(2) of the SaRFaESI act and challenged the order passed by the District Magistrate under Section 14 of the act.
Finding of the Court:
The court found that the borrowers were aware of the steps taken by the secured creditor and had filed applications challenging the notices and orders. The court held that the District Magistrate's role under Section 14 is limited and non-adjudicatory, and the orders passed under this section cannot be challenged in any court or before any authority.
Issues: The issues involved the challenge to the notice under Section 13(2) and the order passed by the District Magistrate under Section 14 of the SaRFaESI act.
Ratio Decidendi: The court emphasized that the District Magistrate's role under Section 14 is purely executionary and non-adjudicatory, and the orders passed under this section cannot be challenged. The court also noted that the borrowers' applications were filed to protract the litigation and avoid liabilities.
Final Decision: The court dismissed the applications filed by the borrowers under article 227 of the Constitution, stating that the borrowers, who were aware of the creditor's actions, cannot challenge the steps taken by the District Magistrate under Section 14 of the act. The court also discharged any interim orders and made no order as to costs.
JUDGMENT
Kesang Doma Bhutia, J. - This case is an example of the plight/agony of a financial institution in realization of its own money from a defaulter borrower, to whom financial assistance was extended in crores of rupees to run their business since 2009 till 2017. The petitioners/the defaulter borrowers not only failed to pay the loan amount as per terms and conditions of the agreement but has been challenging each and every step that has been taken by a financial institution for recovery of its own money.
2. adams Marketing Private Limited and others have been accommodated different types of loan in corers of rupees during the period from 09.03.2009 till 2017 by the opposite party Bank. The borrower as a security have mortgaged their eight properties situated in the district of Howrah, three properties situated at Kharagpur in the District of West Medinipur and one property situated at Baranagar, in the District North 24 Parganas in favour of the Bank. The petitioners not only defaulted in payment of loan amount as per terms and conditions of the agreement but also made the bank to pay its income tax. Therefore, bank finding no other alternative classified the accounts of the borrowers as non-performing asset and issued notice under section 13 (2) of Securitisation and Reconstruction of Financial assets and Enforcement of Security Interest act, 2002( herein after referred as SaRFaESI act) demanding due sum of rupees 25.65 corer on 09.11.2016. It has been alleged objection was sent against such notice, but Bank did not bother to respond the same. The bank further issued fresh notice under Section 13 (2) SaRFaESI act, 2002 on 15.05.2017. The petitioners submitted their objection and reply was sent on 02.08.17. Then Bank took symbolic possession of those twelve secured assets on 12.10.2017 and made paper publication to that effect on 17.10.2017.
3. Challenging notice under Section 13(2) of theSaRFaESI act, 2002, the petitioners have filed S.a. No. 228 of 2017 u/s 17 of the SaRFaESI act, before DRT, Kolkata.
4. In the meantime in order to take possession of the secured assets the bank has made an application before the District Magistrate, Howrah under Section 14 of the SaRFaESI act, 2002 and District Magistrate passed an order to that effect on 02.08.2018.
5. Now, it is the case of the petitioners that the petitioners were never made aware of the proceeding under Section 14 of the SaRFaESI act, 2002 either by the Secured Creditor/Bank or by the District Magistrate by serving notice of the same. They have come to know about the order passed by the District Magistrate, Howrah on 02.08.2018 on 27.07.2021 when police personnel of Liluah Police Station went to take possession of the secured assets situated in Howrah.
6. Challenging the order passed by the District Magistrate Howrah under Section 14 of the SaRFaESI act, 2002 on 02.08.2018 the petitioners have filed an interim application being no. 1437 of 2021 in S.a. No. 228 of 2017. after hearing the petitioners learned DRT 1, Kolkata, dismissed the interim application on the ground being barred by limitation. Challenging the order dated 11.08. 2021 the petitioners have filed C.O. No. 1828 of 2021.
7. The petitioners have also filed a review application being I.a. interim application no. 1650 of 2021 before the learned tribunal for review of the order dated 11.08.2021 but such review application was also rejected on the ground of maintainability being barred by limitation on 1st September, 2021. Challenging such order the petitioner has filed C.O. No. 1829 of 2021. Therefore, both the CO. No. 1828 of 2021 and C.O. No. 1829 of 2021 are heard analogously.
8. It is admitted fact impugned orders passed by the DRT are appealable before the DRaT. However, the Hon'ble Supreme Court in a petition filed by the Bar Council of Madhya Pradesh, after transfer of Jurisdiction of DRT Jabalpur to DRT Lucknow due to huge unfilled vacancies in Tribunals and which of late have become dysfunctional and to
AI
The main legal point established in the judgment is that the District Magistrate's role under Section 14 of the SaRFaESI act is limited and non-adjudicatory, and the orders passed under this section ....
Possession of mortgaged property – Section 14 of SARFAESI Act, 2002 does not involve adjudicatory process qua points raised by borrower against secured creditor/bank taking possession of secured asse....
The District Magistrate's role under section 14 of the SARFAESI Act is ministerial and does not involve adjudication on the merits of the claim. The Magistrate's satisfaction with the information pro....
A borrower can contest possession under Section 14 of the SARFAESI Act only through appeal under Section 17 after possession is taken.
Remedy of appeal under Section 17(1) of the SARFAESI Act is not available to secured creditors against District Magistrate orders but only to aggrieved parties.
The Court clarified the jurisdiction of the Chief Judicial Magistrate under Section 14 of the SARFAESI Act, holding that both the District Magistrate and Chief Judicial Magistrate have the jurisdicti....
The District Magistrate is not required to grant an opportunity of hearing to the petitioners while examining applications filed by secured creditors under Section 14 of the SARFAESI Act, 2002. The p....
The District Magistrate's jurisdiction under Section 14 of the SARFAESI Act is limited to ascertaining whether the statements required by the secured creditor in its affidavit have been made. The Dis....
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