Back
2012 Supreme(Mad) 1929
HIGH COURT OF JUDICATURE AT MADRAS
P. JYOTHIMANI & M. DURAISWAMY, JJ.
K.R. Chandrasekaran & Others
Versus
Union of India Rep by the Secretary to Government Finance Department New Delhi & Others
W.P.Nos.950 of 2012, 30223 & 30184 of 2011, 104 and 105 of 2012, W.P.Nos.950 of 2012 & 30223 of 2011
Decided on : 17-04-2012
For the Appearing Parties:Mr. R. Veeramani, Mr. R. Singgaravelan, Mr. N. Ramesh, CGSC, Mr. Om Prakash, M/s. Ramalingam Associates Advocate, Mr. M.S. Krishnan, Sr. Counsel, for Mr. S. Pandurangan, R2, No appearance, Advocates.
Section 14 of the SARFAESI Act is a valid exercise of the Parliament's power under List I of Schedule VII of the Constitution of India, and the orders passed by the Chief Judicial Magistrates under Section 14 of the SARFAESI Act were valid, as they were passed after considering the relevant factors and after giving the petitioner an opportunity to be heard.
Headnote:
Writ petitions challenging the validity of Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) and orders passed by Chief Judicial Magistrates under Section 14 of the SARFAESI Act.
Fact of the Case:
The petitioner, a borrower, challenged the validity of Section 14 of the SARFAESI Act, arguing that it was unconstitutional and ultra vires. The petitioner also challenged the orders passed by Chief Judicial Magistrates under Section 14 of the SARFAESI Act, arguing that they were passed without proper application of mind and without considering the rights of the petitioner as a tenant.
Finding of the Court:
The Court upheld the validity of Section 14 of the SARFAESI Act, holding that it was a valid exercise of the Parliament's power under List I of Schedule VII of the Constitution of India. The Court also held that the orders passed by the Chief Judicial Magistrates under Section 14 of the SARFAESI Act were valid, as they were passed after considering the relevant factors and after giving the petitioner an opportunity to be heard.
Issues: 1. Whether Section 14 of the SARFAESI Act is unconstitutional and ultra vires. 2. Whether the orders passed by Chief Judicial Magistrates under Section 14 of the SARFAESI Act were passed without proper application of mind and without considering the rights of the petitioner as a tenant.
Ratio Decidendi: 1. The Court held that Section 14 of the SARFAESI Act is a valid exercise of the Parliament's power under List I of Schedule VII of the Constitution of India. The Court noted that the SARFAESI Act was enacted to provide a mechanism for the expeditious recovery of debts due to banks and financial institutions, and that Section 14 of the Act is a key provision in this regard. The Court also noted that Section 14 of the Act provides for safeguards to protect the rights of borrowers, such as the requirement that the Chief Judicial Magistrate must consider the relevant factors before passing an order under Section 14. 2. The Court held that the orders passed by the Chief Judicial Magistrates under Section 14 of the SARFAESI Act were valid, as they were passed after considering the relevant factors and after giving the petitioner an opportunity to be heard. The Court noted that the Chief Judicial Magistrates had considered the notice issued under Section 13(2) of the SARFAESI Act, the possession notice issued under Section 13(4) of the Act, and the evidence produced by the bank. The Court also noted that the petitioner had been given an opportunity to be heard before the orders were passed.
Final Decision: The Court dismissed all the writ petitions, upholding the validity of Section 14 of the SARFAESI Act and the orders passed by the Chief Judicial Magistrates under Section 14 of the SARFAESI Act.
Order:
P. JYOTHIMANI, J.
1. While W.P.No.950 of 2012 has been filed by the borrower against whom action has been taken as per the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for brevity, "the SARFAESI Act") for recovery – by giving demand notice under Section 13(2) of the SARFAESI Act; possession notice under Section 13(4) of the SARFAESI Act; and obtaining an order of assistance from the learned Chief Judicial Magistrate under Section 14 of the SARFAESI Act appointing an Advocate Commissioner to take possession with the help of the police, challenging the said Section 14 of the SARFAESI Act as ultra vires, the same borrower has filed W.P.No.30223 of 2011 challenging an order dated 16.8.2011 in Crl.M.P.No.946 of 2011 passed by the learned Chief Judicial Magistrate, Salem under Section 14 of the SARFAESI Act, as stated above, as one passed without application of mind and in violation of the principles of natural justice and, hence, arbitrary and illegal.
2. The petitioner in the said writ petitions (W.P.Nos.950 of 2012 and 30223 of 2011) has availed from the second respondent/bank, on 31.1.2005, a housing loan to the extent of Rs. 8,82,000/- and, on 23.7.2008, a cash credit loan to the extent of Rs. 20,00,000/-, in respect of which the outstanding as on 1.3.2011 under the cash credit loan facility was Rs. 21,58,531.40 and the housing loan outstanding as on 19.3.2011 was arrived at Rs. 7,28,644.42. As regards the recovery of the said amount, the second respondent/bank has issued a demand notice under Section 13(2) of the SARFAESI Act on 2.9.2009 and since the amount has not been paid, possession notice was issued under Section 13(4) of the SARFAESI Act on 5.4.2011 for the claim of Rs. 28,97,725.91. Thereafter, the second respondent/bank has approached the learned Chief Judicial Magistrate, Salem by filing Crl.M.P.No.946 of 2011 under Section 14 of the SARFAESI Act, in which the learned Chief Judicial Magistrate has passed the following order:
"The Authorized Officer Mr.N.Krishnan, of the petitioner has filed this petition under section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 for taking possession of assets mentioned in the Description of Property. Perused the records. Sworn statement of the Authorized Officer of the petitioner recorded. After gleaning the entire materials made available with the court and upon hearing the petitioner, the court is fully satisfied with a need to render necessary assistance to the secured creditor in taking over the secured assets. All the legal formalities have already been complied with scrupulously and accordingly this court is inclined to confer the relief sought for by the petitioner under section 14 of the SARFAESI Act 2002. Thus, the Inspector of Police, Soora Mangalam, P.S., is required to render all necessary assistance to the secured creditor (petitioner) in taking over possession of the secured assets described in the description of property."
3. W.P.Nos.30184 of 2011, 104 and 105 of 2012 have been filed by the petitioners who are stated to be tenants of various residential portions in respect of which the respective landlords have borrowed amounts from the bank or stood as guarantor to the third party/borrowers and the bank while enforcing their rights under the SARFAESI Act, after giving demand notice under Section 13(2) of the SARFAESI Act to the borrowers (or) guarantors, who have been made as second respondent in these writ petitions, followed by possession notice under Section 13(4) of the SARFAESI Act, have obtained an order of assistance from the learned Chief Judicial Magistrate concerned under Section 14 of the SARFAESI Act appointing an Advocate Commissioner to take possession.
4. In W.P.No.30184 of 2011, the second respondent, who is the owner of the property, is stated to have let out a residential portion to the writ pet
