Allowed

Assets Reconstruction Company (India) Private Limited v. Banga Lakshmi Ujala Business Private Limited

DRAT4 Sept 2024MISC APPEAL/12/2024

Case brief

AI extract

What is this about?

The DRAT allowed the appeal, setting aside the DRT order which had quashed the District Magistrate's decision to substitute an officer's name. The Court held that the DM was not functus officio and was within powers to replace a transferred officer to facilitate possession under the SARFAESI Act without requiring a fresh affidavit.

What did the court decide?

The impugned order dated 11.01.2024 passed by the DRT is set aside. IA 88 of 2024 and IA 3606 of 2023 stand dismissed. The Secured Creditor is at liberty to proceed in accordance with law.

Assets Reconstruction Company (India) Private Limited versus… — Banking and Recovery | DRAT (2024)

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Reportable/Non-Reportable

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Misc. Appeal No. 12 of 2024-DRAT-Kolkata

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IN THE DEBTS RECOVERY APPELLATE TRIBUNAL AT KOLKATA

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Misc. Appeal No. 12 of 2024

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(Arising out of S.A. 1002 of 2023 in DRT-III, Kolkata)

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THE HON’BLE MR. JUSTICE ANIL KUMAR SRIVASTAVA

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CHAIRPERSON

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Asset Reconstruction Company Private Limited, Chatterjee International Center, 6^th Floor, Room No. 4, 33A, Jawaharlal Nehru Road, Kolkata – 700 001;

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Authorized Officer, Asset Reconstruction Company Private Limited, Chatterjee International Center, 6^th Floor, Room No. 4, 33A, Jawaharlal Nehru Road, Kolkata – 700 001.

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… Appellants

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-Versus-

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Banga Lakshmi Ujala Business Private Limited, 98, Jadavpur Station Road, 2nd Floor, Kolkata- 700 032;

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Subhas Chandra Saha, 139, Ananda Pally, Jadavpur, Kolkata - 700 032;

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Provash Saha, 139, Ananda Pally, Jadavpur, Kolkata - 700 032;

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Eva Saha, 139, Ananda Pally, Jadavpur, Kolkata - 700 032;

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Swapnil Saha, 139, Ananda Pally, Jadavpur, Kolkata - 700 032;

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Ujjala Saha, 139, Ananda Pally, Jadavpur, Kolkata - 700 032;

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Sumita Saha, 139, Ananda Pally, Jadavpur, Kolkata - 700 032;

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Saraswati Saha, 139, Ananda Pally, Jadavpur, Kolkata - 700 032;

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Banga Lakshmi Ujjala Devi Family Trust, 139, Ananda Pally, Jadavpur, Kolkata - 700 032.

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… Respondents

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Counsel for Appellants	…	Mr. Abhishek Guha Ms. Shreyasi Sen
Counsel for Respondents	…	Mr. Ankit Chatterjee (Virtual)
JUDGMENT	:	4^thSeptember, 2024

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THE APPELLATE TRIBUNAL :

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Instant appeal has arisen against order dated 11.01.2024, passed by Learned DRT-IIII, Kolkata, in interim applications, I.A. 88 of

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Misc. Appeal No. 12 of 2024-DRAT-Kolkata 2024 and I.A. 3606 of 2023, in S.A. 1002 of 2022 (Banga Lakshmi Ujala Business Private Limited & Others -vs- Asset Reconstruction Company Private Limited) wherein the impugned orders dated 19.9.2023 and 27.12.2023, passed by the District Magistrate, South 24 Parganas, were set aside thereby the Appellant Bank was restrained from taking any positive steps in respect of the secured properties on the basis of the orders dated 19.9.2023 and 27.12.2023 passed by Learned District Magistrate North 24 Parganas.

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2. As per the pleadings of the parties, the facts of the matter are that one SARFAESI Application, S.A. 1002 of 2022 (Banga Lakshmi Ujala Business Private Limited & Others -vs- Asset Reconstruction Company Private Limited), under Section 17 of the SARFAESI Act (hereinafter referred to as the Act), was filed by the Respondents challenging the securitization action taken by the Secured Creditor, i.e., the Appellant herein.

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3. In the SARFAESI Application, Respondents filed two interim applications, I.A. 88 of 2024 and I.A. 3606 of 2023, for staying and quashing the orders dated 19.9.2023 and 27.12.2023 passed by the District Magistrate, South 24 Parganas. Learned DRT, vide order dated 11.01.2024, set aside both the orders passed by the District Magistrate. Feeling aggrieved by the impugned order, Appellants preferred the instant appeal.

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4. I have heard the Learned Counsel for the parties at length and perused the record.

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5. Learned Counsel for Appellant would submit that the impugned order passed by Learned DRT is against law. It is submitted that initially an order, under Section 14 of the Act, was passed by the Learned District Magistrate on 19.9.2023 wherein Sri Nilanjan Sinha, WBSC (Executive) was authorised to take physical possession of the secured assets. Thereafter, since Sri Nilanjan Sinha, WBSC (Executive) was transferred, Sri Prasun Kumar Dhara, WBSC (Exe) was appointed for taking over possession vide order dated 27.12.2023. After transfer

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Misc. Appeal No. 12 of 2024-DRAT-Kolkata

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of Sri Nilanjan Sinha, Mr. Prasun Kumar Dhara, WBSC (Executive), was appointed to take possession of the secured assets.

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6. It is submitted by the Learned Counsel for Appellant that the District Magistrate was well within his powers to pass the impugned order dated 27.12.2023. Learned District Magistrate was acting under the provisions of Section 14 of the Act for nominating another officer for taking physical possession as earlier officer appointed had been transferred.

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7. It is further submitted that there is no requirement of filing another supplementary affidavit before the District Magistrate for issuance of an order under Section 14 of the Act as already an affidavit was filed by the secured creditor.

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8. It is further submitted that the Learned District Magistrate is just to assist the secured creditor in taking physical possession of the secured assets. He cannot be an adjudicatory authority; rather he is simply carrying out a ministerial work.

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9. It is further submitted that the Learned District Magistrate, as far as the impugned order is concerned, was not ‘Functus officio’ as the name of the officer authorized to take possession was substituted as earlier officer was transferred. It is submitted that this is simply a mechanical work which did not require any exercise of judicial mind. Learned District Magistrate has powers to pass incidental orders to implement its order passed under Section 14 of the Act. It is further submitted that the powers under Section 14 of the Act are simply executory in nature.

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10. Per contra, Learned Counsel for Respondent would submit that the provisions of Section 14 (1) of the Act empowers the District Magistrate to take physical possession of the secured assets. Under the un-amended provisions, the District Magistrate has only to issue memo and himself proceed to take the physical possession of the property. There is no requirement of passing any orders in the pre-amended provisions of Section 14 of the Act.

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Misc. Appeal No. 12 of 2024-DRAT-Kolkata

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11. It was argued by the Learned Counsel for Respondent that for the first time, after the amendment of Section 14 (1) of the Act, a proviso is added requiring the secured creditor to file an affidavit of nine points and the District Magistrate was required to satisfy himself about the factual veracity of the affidavit. It is submitted by the Learned Counsel for Respondent that there was no amendment made in Section 14 (2) of the Act. Section 14 (2) of the Act does not include the word “order” in pre or post amendment scenario. Hence, District Magistrate has no power to pass fresh order by way of modification or alteration in the order to give an effect to the earlier order already passed. He becomes ‘functus officio’ as soon as orders, under Section 14 of the Act, are passed by him.

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12. It is further submitted that the District Magistrate has no power to pass fresh order in terms of Section 14 (1) of the Act unless and until statute provides for the same.

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13. It is further submitted that Section 14 (2) of the Act is independent of Section 14 (1) of the Act hence, Section 14 (2) of the Act in no way authorizes the District Magistrate to pass any fresh order or to modify its earlier orders. Reliance is also placed upon “No scitur a soclis”. It is submitted that when there are doubtful words, the meaning of a doubtful word, may be ascertained by reference to the meaning of the word associated with it. Accordingly, the word “step” used shall be interpreted in a manner that it does not empower the District Magistrate to pass a fresh order under Section 14 of the Act.

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14. We have to see as to whether the District Magistrate, by passing the impugned order, has exceeded its powers under Section 14 of the Act? Whether he becomes ‘Functus officio’ and has no power to substitute the name of the officer appointed to take the possession and the Police Station?

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15. At the very outset, it would be appropriate to quote the provisions of Section 14 of the Act:

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14. Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking possession of secured asset

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Misc. Appeal No. 12 of 2024-DRAT-Kolkata

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(1) Where the possession of any secured assets is required to be taken by the secured creditor or if any of the secured asset is required to be sold or transferred by the secured creditor under the provisions of this Act, the secured creditor may, for the purpose of taking possession or control of any such secured asset, request, in writing, the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction any such secured asset or other documents relating thereto may be situated or found, to take possession thereof, and the Chief Metropolitan Magistrate or, as the case may be, the District Magistrate shall, on such request being made to him-

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(a) take possession of such asset and documents relating thereto; and

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(b) forward such assets and documents to the secured creditor:

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Inserted by Act No. 1 of 2013 dated 3.1.2013 w.e.f. 15.1.2013

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[PROVIDED that any application by the secured creditor shall be accompanied by an affidavit duly affirmed by the authorised officer of the secured creditor, declaring that-

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(i) the aggregate amount of financial assistance granted and the total claim of the Bank as on the date of filing the application;

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(ii) the borrower has created security interest over various properties and that the Bank or Financial Institution is holding a valid and subsisting security interest over such properties and the claim of the Bank or Financial Institution is within the limitation period;

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(iii) the borrower has created security interest over various properties thing the details of properties referred to in sub-clause (i) above

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(iv) the borrower has committed default in repayment of the financial assistance granted aggregating the specified amount;

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(v) consequent upon such default in repayment of the financial assistance the account of the borrower has been classified as a non-performing asset

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(vi) affirming that the period of sixty days, notice as required by the provisions of sub-section (2) of section 13, demanding of the defaulted financial assistance has been served on the borrower;

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(vii) the objection or representation in reply to the notice received from the object has been considered by the secured creditor and reasons for non-acceptance of such objection or representation had been communicated to the borrower;

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(viii) the borrower has not made any repayment of the financial assistance in spite of the above notice and the Authorised Officer is, therefore, entitled to take possession of the secured assets under the provisions of sub-section (4) of section 13 read with section 14 of the principal Act:

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Misc. Appeal No. 12 of 2024-DRAT-Kolkata

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(ix) that the provisions of this Act and the rules made thereunder had been complied with:

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PROVIDED FURTHER that on receipt of the affidavit from the Authorised Officer, the District Magistrate or the Chief Metropolitan Magistrate, as the case may be, shall after satisfying the contents of the affidavit pass suitable orders for the purpose of taking possession of the secured assets [within a period of thirty days from the date of application) [PROVIDED [ALSO) that if no order is passed by the Chief Metropolitan Magistrate or District Magistrate within the said period of thirty days for reasons beyond his control, he may, after recording reasons in writing for the same, pass the order within such further period but not exceeding in aggregate sixty days:]

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PROVIDED ALSO that the requirement of filing affidavit stated in the first proviso shall not apply to proceeding pending before any District Magistrate or the Chief Metropolitan Magistrate, as the case may be, on the date of commencement of this Act.

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[(1A) The District Magistrate or the Chief Metropolitan Magistrate may authorise any officer subordinate to him,-

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(i) to take possession of such assets and documents relating thereto; and

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(ii) to forward such assets and documents to the secured creditor.]

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(2) For the purpose of securing compliance with the provisions of sub-section (1), the Chief Metropolitan Magistrate or the District Magistrate may take or cause to be taken such steps and use, or cause to be used, such force, as may, in his opinion, be necessary.”

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16. As far as the facts of the matter are concerned, simply the District Magistrate initially passed an order dated 19.9.2023 which

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reads as under:

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“Whereas Authorized Officer, ASSET RECONSTRUCTION COMPANY (INDIA) LTD, REGIONAL OFFICE AT KOLKATA. having Its office at CHATTERJEE INTERNATIONAL CENTRE, 33A, JAWAHARLAL NEHRU ROAD, 6TH FLOOR, ROOM NO. 4, KOLKATA - 700071., has filed up a petition U/S 14 of SARFAESI Act of 2002, seeking administrative assistance for taking physical possession on the secured assets/property of the borrower namely M/S BANGLALAKSHMI -UJALA BUSINESS PVT LTD. and the guarantors cum-directors namely Provash Saha, Subhas Chandra Saha and Subrata Saha (since deceased) and his alt legal heirs, 98, JADAVPUR STATION ROAD, P.S JADAVPUR, KOLKATA - 700032.

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And

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Whereas in the light of the above, the petition along with affidavits and other relevant documents submitted by the said Authorized Officer, ASSET RECONSTRUCTION COMPANY (INDIA) LTD seeking administrative assistance in terms of sec 14(1) of the SARFAESI Act of 2002, for taking over physical possession of the secured asset is/are seen and taken up for consideration.

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And

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Whereas from the documents and status report submitted by the Authorized Officer, it transpires that the secured creditor Granted a loan Rs. 2,08,00,000 (Rupees Two Crore Eight Lakh ) on 02-01-2006 to Borrawer namely M/S BANGLALAKSHMI UJJALA BUSINESS PVT LTD, 98 JADAVPUR STATION ROAD, P.S KOLKATA-700032 against the mortgaged property as follows:

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Misc. Appeal No. 12 of 2024-DRAT-Kolkata

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SCHEDULE OF PROPERTY.

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(1) ALL THAT PIECE AND PARCEL OF 1 SHOP ROOM MEASURING AN AREA OF 430 SQ. FT SUPER BUILT UP AREA NAMELY, BANGALAKSHMI STORES ALONG WITH FIXITURES, FITTINGS WITH COMMON RIGHT EASEMENT RIGHT AND PORPORFIONATE RIGHT OF THE LAND UNDERNEATH SITUATED AT THE MUNICIPAL PREMISES NO. 29, K.S ROY ROAD, PS Jadavpur, Kolkata 700 032 IN DAG NO. 1337, KHATIAN NO. 329 MOUZA JADAVPUR, KOLKATA - JADAVPUR, J.L NO. 35, RS NO. 33. TOUZI NO. 11, PARGANA KHASPUR WITHIN THE LIMITS OF KOLKATA MUNICIAL CORPORATION IN WARD NO. 102, WITH COMMMON RIGHT EASEMENT PIGHT AND THE PROPERTY SHOP ROOM (2) ALL THAT PIECE AND PARCEL OF 1 SHOP ROOM MEASURING AN AREA OF 430 SQ. FT SUPER BUILT UP AREA NAMELY BANGALAKSHMI STORES ALONG WITH FIXITURES, FITTINGS WITH COMMON RIGHT EASEMENT RIGHT AND PORPORTIONATE RIGHT OF THE LAND UNDERNEATH SITUATED AT THE MUNICIPAL PREMISES NO. 29, KS ROY ROAD, P.SJADAVPUR, KOLKATA - 700032 WITHIN THE LIMITS OF KM.C, SRO ALIPORE DIST SOUTH 24 PARGANAS

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(3) ALL THAT PIECE AND PARCEL OF SHOP NO. UNS 51 ON THE 1ST FLOOR OF THE UNNAYAN BUILDING HAVING AREA OF 300 SQ. FT MORE OR LESS SUPER BUILT UP AREA SITUATED IN PREMISES NO. 1050/1 SURVEY PARK, KOLKATA - 700075

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(4) ALL THAT PIECE AND PARCEL OF LEASEHOLD SHOP ROOM MEASURING 257 SQ FT MORE OR LESS UNDER THE NAME OF BANGALAKSHMI VARIETY STORES ALONG WITH FIXTURES FITING WITH COMMON RIGHT, EASEMENT RIGHT AND PORPORTIONATE RIGHT OF THE LAND UNDERNEATH SITUATED AT THEMUNICIPAL PREMISES NO. 298 K.S ROY ROAD ALSO LOCALLY KNOWN AS 98, DR KS ROY ROAD STATION ROAD AT PRESENT WITHIN THE LIMITS OF KOLKATA MUNICIPAL CORPORATION, SRP ALIPORE P.S JADAVPUR, DIST SOUTH 24 PARGANAS, (5) ALL THAT ENTIRE SECOND FLOOR MEASURING A SUPER BUILT UP AREA OF 1000 SQ. FL MORE OR LESS OF THE THREE STORIED BUILDING STTUATED AT MOUZA BADERAIPUR COMPRISED IN PLOT NO. 149/2 IN CS PLOT NO 678 (PART) PS-JADAVPUR, DIST-SOUTH 24 PARGANAS WITHIN THE LIMITES OF KOLKATA MUNICIPAL CORPORATION BEING PREMISED NO. 80/5Y BADERAIPUR ROAD ALSO KNOWN AS D/3 ANANDAPALLY COLONY, PS JADAVPUR KOLKATA-700032 UNDER WARD NO. 97 OF K.M.C.

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(6) ALL THAT ENTIRE GROUND FLOOR MEASURING A SUPER BUILT UP AREA OF 2000 SQ. FT MORFEOR LESS ICLUDING THE AREA OF MEZZENINE FLOOR ALONG WITH EASEMENT AND ALL OTHE COMMON RIGHTS, PRIVILEGES AND PROPORTIONATE SHARE OF LAND OF THE THREE STORIED BUILDING SITUATED AT MOUZA BADERAIPUR, COMPRISED IN PLOT NO. 149/2 IN CS PLOT NO. 678/(PART) PS-JADAVPUR, DIST-SOUTH 24 PARGANAS WITHIN THE LIMITS OF K.M.C BEING PREMISED NO. 80/5Y BADERAIPUR ROAD, ALSO KNOW AS D/3 ANANDAPALLY P.S - JADAVPUR, KOLKATA-700032 UNDER WARD NO. 97 OF K.M.C

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Whereas it transpires from the context that-

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The borrower has committed default in repayment of the financial assistance granted aggregating the specified amount and consequent to such default in repayment, the account of borrower was classified as NPA on 16-10-2010 due to non servicing of interest/installment,

And

Misc. Appeal No. 12 of 2024-DRAT-Kolkata

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Thousand Six Hundred And Sixty Nine) only and demand notice was received by the borrower on 10 Sep, 2022,

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And

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The Authorized Officer of the secured creditor not received any representation from the borrower in reply to demand notice U/S 13 (2) dated-09 Sep, 2022

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And

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The Secured creditor issued possession notice dated 29 Mar, 2023 U/S 13 (4) of SARFAESI Act of 2002 for taking possession on the secured assets of the borrower and also published the same in the daily news papers on 31 March, 2023,

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And

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Thus the Authorized Officer of the secured creditor observed all the formalities as laid down in the SARFAEST Act of 2002 for realization of the said outstanding amount from the secured debtor,

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And

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Whereas, the Secured Asset in within the jurisdiction of the District Magistrate, South 24 Parganas,

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And

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Whereas, the amount dues more than 20% of the Principal Advance and Security Interest is not created in any agricultural land,

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And

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Whereas, the secured creditor wants to reconstruct their financial asset(s) after handing over and taking over physical possession of secured asset/property as scheduled belonging to the borrower(s)/Co borrower(s)/Director(s)/Guarantor(s)/Partner(s)/Proprietor(s)/Corporate Guarantor(s)/Surety(les)as per law in force,

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And

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Whereas, for the purpose of taking possession of the secured asset(s) and documents, the secured creditor requested the District Magistrate, South 24 Parganas, U/S 14 of SARFAEST Act. Of 2002,

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And

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There is no stay order from any court of law, as submitted by the authorized officer in his affidavit,

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And

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The property is not under lessee and tenancy as per affidavit, deed(s), records or all other relevant documents, as submitted by the Authorized Officer in his affidavit,

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And

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Due to administrative works this possession order could not be issued within the stipulated time period from the date of application to this office and after careful consideration of the contents of the affidavit including the 9 clauses mentioned U/S 14(1)B of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and all other relevant documents which the Secure Creditor filed duly affirmed by the authorized officer of the ASSET RECONSTRUCTION COMPANY (INDIA) LTD having its office at CHATTERJEE INTERNATIONAL CENTRE, 33A, JAWAHARLAL NEHRU ROAD, 6TH FLOOR, ROOM NO. 4, KOLKATA-700071. (secured creditor) and being satisfied, it is hereby ordered as per amended section 14(1A) of the SARFAEST Act., Of 2002 that SRI NILANJAN SINHA, WBCS(EXE), DEPUTY MAGISTRATE AND DEPUTY COLLECTOR, SOUTH 24 PARGANAS, is hereby Authorized to take possession of such assets and. documents relating thereto and to forward such assets and documents to the secured creditor with police assistance,

¶112

And

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Whereas Authorized Officer, ASSET RECONSTRUCTION COMPANY (INDIA) LTD WISE intimate the date of possession of the secured assets to the COMMISSIONER OF. POLICE, KOLKATA as well as to the authorized Officer SRI NILANJAN SINHA WBCS(EXE) well in advance to take physical possession of the secured assets/ property of the secured creditor on behalf of the District Magistrate, South 24 Parganas and the Commissioner of Police, Kolkata will instruct the local police and station to provide police assistance for maintenance of Law & Order as and when

¶114

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Misc. Appeal No. 12 of 2024-DRAT-Kolkata

¶116

approached upon. The secured creditor will remain present at the time of taking over physical possession.

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Let Photostat copy of this order be made available upon compliance of the required formalities.”

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Subsequently, on 27.12.2023 another order was passed which reads

as under:

And

And

SCHEDULE OF PROPERTY.

Misc. Appeal No. 12 of 2024-DRAT-Kolkata

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STATION ROAD AT PRESENT WITHIN THE LIMITS OF KOLKATA MUNICIPAL CORPORATION, SRP ALIPORE P.S JADAVPUR, DIST SOUTH 24 PARGANAS,

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(5) ALL THAT ENTIRE SECOND FLOOR MEASURING A SUPER BUILT UP AREA OF 1000 SQ. FL MORE OR LESS OF THE THREE STORIED BUILDING STTUATED AT MOUZA BADERAIPUR COMPRISED IN PLOT NO. 149/2 IN CS PLOT NO 678 (PART) PS-JADAVPUR, DIST-SOUTH 24 PARGANAS WITHIN THE LIMITES OF KOLKATA MUNICIPAL CORPORATION BEING PREMISED NO. 80/5Y BADERAIPUR ROAD ALSO KNOWN AS D/3 ANANDAPALLY COLONY, PS JADAVPUR KOLKATA-700032 UNDER WARD NO. 97 OF K.M.C.

¶133

¶134

Whereas it transpires from the context that-

¶135

¶136

And

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Notice dated-09 Sep, 2022 U/S 13 (2) of SARFAEST Act. 2002 demanding payment for default amount was served to the defaulting borrower. The outstanding amount as mentioned in notice is Rs. 10,38,06,669 (Rupees Ten Crore Thirty Eight Lakh Six Thousand Six Hundred And Sixty Nine) only and demand notice was received by the borrower on 10 Sep, 2022,

¶138

And

¶139

The Authorized Officer of the secured creditor not received any representation from the borrower in reply to demand notice U/S 13 (2) dated-09 Sep, 2022

And

And

Thus the Authorized Officer of the secured creditor observed all the formalities as laid down in the SARFAEST Act of 2002 for realization of the said outstanding amount from the secured debtor,

¶144

And

¶145

Whereas, the Secured Asset in within the jurisdiction of the District Magistrate, South 24 Parganas,

¶146

And

¶147

Whereas, the amount dues more than 20% of the Principal Advance and Security Interest is not created in any agricultural land,

And

And

Whereas, for the purpose of taking possession of the secured asset(s) and documents, the secured creditor requested the District Magistrate, South 24 Parganas, U/S 14 of SARFAEST Act. Of 2002,

¶152

¶153

Misc. Appeal No. 12 of 2024-DRAT-Kolkata

¶154

And

¶155

There is no stay order from any court of law, as submitted by the authorized officer in his affidavit,

¶156

And

¶157

The property is not under lessee and tenancy as per affidavit, deed(s), records or all other relevant documents, as submitted by the Authorized Officer in his affidavit,

¶158

And

¶159

Due to administrative works this possession order could not be issued within the stipulated time period from the date of application to this office and after careful consideration of the contents of the affidavit including the 9 clauses mentioned U/S 14(1)B of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and all other relevant documents which the Secure Creditor filed duly affirmed by the authorized officer of the ASSET RECONSTRUCTION COMPANY (INDIA) LTD having its office at CHATTERJEE INTERNATIONAL CENTRE, 33A, JAWAHARLAL NEHRU ROAD, 6TH FLOOR, ROOM NO. 4, KOLKATA-700071. (secured creditor) and being satisfied, it is hereby ordered as per amended section 14(1A) of the SARFAEST Act., Of 2002 that SrI Prasun Kumar Dhara, WBCS(EXE), DEPUTY MAGISTRATE AND DEPUTY COLLECTOR, SOUTH 24 PARGANAS, is hereby Authorized to take possession of such assets and. documents relating thereto and to forward such assets and documents to the secured creditor with police assistance,

¶160

And

¶161

Whereas Authorized Officer, ASSET RECONSTRUCTION COMPANY (INDIA) LTD WISE intimate the date of possession of the secured assets to the COMMISSIONER OF. POLICE, KOLKATA as well as to the authorized Officer Sri Prasun Kumar Dhara, WBCS(EXE) well in advance to take physical possession of the secured assets/ property of the secured creditor on behalf of the District Magistrate, South 24 Parganas and the Commissioner of Police, Kolkata will instruct the local police and station to provide police assistance for maintenance of Law & Order as and when approached upon. The secured creditor will remain present at the time of taking over physical possession.

¶162

This order is issued with reference to earlier order issued vide Memo No. 2238/SARFAESI dated 19.9.2023 for change of Magistrate.

¶163

Let Photostat copy of this order be made available upon compliance of the required formalities.”

¶164

17. A bare perusal of the two orders would reflect that in the earlier order one Shri Nilanjan Sinha, WBCS, (Executive) was authorized to take possession with the help of the police while in the subsequent order the name of the authorised officer was changed as Shri Prasun Kumar Dhara, WBCS (Executive). Subsequent order was passed with reference to the Office Memo No. 2238/SARFAESI which is the same number by which the earlier order dated 19.9.2023 was forwarded to the concerned authorities. Reason for the change of the name of the officer was that earlier officer, authorized by the District Magistrate, namely, Shri Nilanjan Sinha, WBCS, (Executive) was transferred, hence it was necessary to authorize another officer for taking over possession.

¶165

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Misc. Appeal No. 12 of 2024-DRAT-Kolkata

¶167

18. Whole controversy arises on this count as to whether the District Magistrate was empowered to change the name of the Officer? Whether the District Magistrate became ‘functus officio’ even where only the name of the officer is changed? Whether the District Magistrate was required to pass an order under the un-amended provisions of Section14 of the Act? Whether a fresh nine point affidavit is required under the proviso of Section 14 of the Act should have been filed by the secured creditor?

¶168

19. It was held by the Hon’ble Apex Court in Kotak Mahindra Bank Limited -vs- A. Balakrishnan & Another [(2022) 9 SCC 186] and Saregama Indian Limited -vs- Next Radio Limited & Others [(2022) 1 SCC 701] that when the language of a statutory provision is plain and unambiguous, it is not permissible by the Courts to add or subtract word to constitute or write something into it which is not there. It cannot re-write or recast legislation.

¶169

20. Now we have to see as to what is the object of the Act as legislated by the Legislature. In R.D. Jain And Company -vsCapital First Limited & Others [(2023) 1 SCC 675] Hon’ble Apex Court has held that the under lying purpose of the SARFAESI Act, 2002 is to empower the Financial Institutions in India to have some similar powers enjoyed by their counterpart, namely international banks in other countries. One such feature is to empower the Financial Institutions to take possession of the securities and sell them. It was further held that Section 14 of the SARFAESI Act, 2002 predicates that if the secured creditor intends to take possession of the secured assets it must approach the Chief Metropolitan Magistrate or the District Magistrate by way of an application in writing an on receipt of such request, the Chief Metropolitan Magistrate or the District Magistrate must move into action in right earnest. After passing of an order thereon, Chief Metropolitan Magistrate or the District Magistrate must proceed to take possession of the secured assets and documents relating thereto for being forwarded to the secured creditor in terms of

¶170

¶171

Misc. Appeal No. 12 of 2024-DRAT-Kolkata Section 14 (1) read with Section 14 (2) of the Act. Section 14 (2) of the Act is Appellant Bank enabling Section and permits the Chief Metropolitan Magistrate or the District Magistrate to take such steps and use force, as may be, in his own opinion, be necessary.

¶172

21. Much emphasis has been laid upon the application of Section 14 (1) and 14 (2) of the Act. It is submitted that prior to amendment of Section 14, there was no provision to pass any order by the District Magistrate for taking possession of the secured assets but post amendment, the secured creditor was required to file nine point affidavit and the District Magistrate was required to satisfy himself about the factual context of the affidavit. It is further submitted that no fresh order requires to be passed by the District Magistrate rather; Legislature never intended that the District Magistrate can pass a fresh order on the basis of an affidavit already submitted by the secured creditor. District Magistrate has not been vested with the power to pass fresh order once he has passed an order under Section 14 (1) of the Act.

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22. Role of the District Magistrate is simply to assist the secured creditor in taking over possession of the secured assets. Another argument is advanced that once an order is passed by the District Magistrate he becomes ‘functus officio’. As far as powers of the District Magistrate are concerned, in Balkrishna Rama Tarle -vsPhoenix ARC Private Limited & Others [(2023) 1 SCC 662] the

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Hon’ble Apex Court has placed reliance upon its own judgment in R.D. Jain (supra) wherein it was held that:

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“18. Now so far as the powers exercisable by DM and CMM under Section 14 of the SARFAESI Act are concerned, Statement of Objects and Reasons for which the SARFAESI Act has been enacted reads as under:

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The financial sector has been one of the key drivers in India's efforts to achieve success in rapidly developing its economy. While the banking industry in India is progressively complying with the international prudential norms and accounting practices there are certain areas in which the banking and financial sector do not have a level playing field as compared to other participants in the financial markets in the world. There is no legal provision for facilitating securitisation of financial assets of banks and financial institutions.

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Misc. Appeal No. 12 of 2024-DRAT-Kolkata

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Further, unlike international banks, the banks and financial institutions in India do not have power to take possession of securities and sell them. Our existing legal framework relating to commercial transactions has not kept pace with the changing commercial practices and financial sector reforms. This has resulted in slow pace of recovery of defaulting loans and mounting levels of non-performing assets of banks and financial institutions. Narasimham Committee I and II and Andhyarujina Committee constituted by the Central Government for the purpose of examining banking sector reforms have considered the need for changes in the legal system in respect of these areas. These Committees, inter alia, have suggested enactment of a new legislation for securitisation and empowering banks and financial institutions to take possession of the securities and to sell them without the intervention of the court. Acting on these suggestions, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Ordinance, 2002 was promulgated on 21-6-2002 to regulate securitisation and reconstruction of financial assets and enforcement of security interest and for matters connected therewith or incidental thereto. The provisions of the Ordinance would enable banks and financial institutions to realise long-term assets, manage problem of liquidity, asset liability mismatches and improve recovery by exercising powers to take possession of securities, sell them and reduce non-performing assets by adopting measures for recovery or reconstruction.'

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19. Thus, the underlying purpose of the SARFAESI Act is to empower the financial institutions in India to have similar powers as enjoyed by their counterparts, namely, international banks in other countries. One such feature is to empower the financial institutions to take possession of securities and sell them. The same has been translated into provisions falling under Chapter III of the SARFAESI Act. Section 13 deals with enforcement of security interest. Subsection (4) thereof envisages that in the event a default is committed by the borrower in discharging his liability in full within the period specified in sub-section (2), the secured creditor may take recourse to one or more of the measures provided in sub-section (4). One of the measures is to take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset. That, they could do through their "authorised officer" as defined in Rule 2(a) of the Security Interest (Enforcement) Rules, 2002.

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20. After taking over possession of the secured assets, further steps to lease, assign or sell the same could also be taken by the secured creditor However, Section 14 of the SARFAESI Act predicates that if the secured Creditor intends to take possession of the secured assets, it must approach the CMM/DM by way of an application in writing, and on receipt of such request, the CMM/DM must move into action in right earnest. After passing an order thereon, he/she (CMM/DM) must proceed to take possession of the secured assets and documents relating thereto for being forwarded to the secured creditor in terms of Section 14(1) read with Section 14(2) of& the SARFAESI Act. As noted earlier, Section 14(2) is an enabling provision and

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Misc. Appeal No. 12 of 2024-DRAT-Kolkata permits the CMM/DM to take such steps and use force, as may, in his opinion, be necessary.

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21. At this stage, it is required to be noted that along with insertion of sub-section (1-A), a proviso has also been inserted in subsection (1) of Section 14 of the SARFAESI Act whereby the secured creditor is now c required to comply with certain conditions and to disclose that by way of an application accompanied by affidavit duly affirmed by its authorised officer in that regard. Sub-section (1-A) is in the nature of an explanatory provision and it merely restates the implicit power of the CMM/DM in taking services of any officer subordinate to him. As observed and held by this Court in NKGSB Coop. Bank, the insertion of sub-section (1-A) is not d to invest a new power for the first time in the CMM/DM as such.

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22. Thus, considering the scheme of the SARFAESI Act, it is explicit and crystal clear that possession of the secured assets can be taken by the secured creditor before confirmation of sale of the secured assets as well as post-confirmation of sale. For taking possession of the secured assets, it e could be done by the "authorised officer" of the Bank as noted in Rule 8 of the Security Interest (Enforcement) Rules, 2002.

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23. However, for taking physical possession of the secured assets in terms of Section 14(1) of the SARFAESI Act, the secured creditor is obliged to approach the CMM/DM by way of a written application requesting for taking possession of the secured assets and documents relating thereto and for being forwarded to it (secured creditor) for further action. The statutory obligation enjoined upon the CMM/DM is to immediately move into action after receipt of a written application under Section 14(1) of the SARFAESI Act from the secured creditor for that purpose. As soon as such an application is received, the CMM/DM is expected to pass an order after verification of compliance of all formalities by the secured creditor 9 referred to in the proviso in Section 14(1) of the SARFAESI Act and after being satisfied in that regard, to take possession of the secured assets and documents relating thereto and to forward the same to the secured creditor at the earliest opportunity.

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24. As mandated by Section 14 of the SARFAESI Act, the CMM/DM has to act within the stipulated time-limit and pass a suitable order for the purpose of taking possession of the secured assets within a period of 30 days from the date of application which can be extended for such further period but not exceeding in the aggregate, sixty days. Thus, the powers exercised by the CMM/DM is a ministerial act. He cannot brook delay. Time is of the essence. This is the spirit of the special enactment.

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25. As observed and held by this Court in NKGSB Coop. Bank, the step taken by the CMM/DM while taking possession of the secured assets and documents relating thereto is a ministerial step. It could be taken by the CMM/DM himself/herself or through any officer subordinate to him/her, including the Advocate Commissioner who is considered as an officer of his/her court. Section 14 does not oblige the CMM/DM to go personally and take possession of the secured assets and documents relating thereto. Thus, we reiterate that the step to be taken by the CMM/DM under Section 14 of the SARFAESI

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Misc. Appeal No. 12 of 2024-DRAT-Kolkata Act, is a ministerial step. While disposing of the application under Section 14 of the SARFAESI Act, no element of quasi- judicial function or application of mind would require. The Magistrate has to adjudicate and decide the correctness of the information given in the application and nothing more. Therefore, Section 14 does not involve an adjudicatory process qua points raised by the borrower against the secured creditor taking possession of secured assets.

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26. Thus, in view of the scheme of the SARFAESI Act, more particularly, Section 14 of the SARFAESI Act and the nature of the powers to be exercised by the learned Chief Metropolitan Magistrate/learned District Magistrate, the High Court in the impugned judgment and order has rightly observed and held that the power vested in the learned Chief Metropolitan Magistrate/learned District Magistrate is not by way of persona designata."

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23. In WPA 8006 of 2023 (State Bank of India -vs- State of West Bengal), Hon’ble Calcutta High Court held that:

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“ Section 14 (2) of the Act undoubtedly refers back to Section 14 (1) of the Act and provides that for the purpose of securing compliance with the provisions of sub-section (1) of Section 14 of the Act, the Chief Metropolitan Magistrate or the District Magistrate may take or cause to be taken such steps and use or cause to be used such force as may be in his opinion be necessary.”

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24. In that case initially order under Section 14 of the Act was passed by the Chief Judicial Magistrate on 12.12.2014 thereafter on 21.9.2021 he passed another order directing removal of the padlock for giving physical possession to the Appellant. It was submitted that Chief Judicial Magistrate becomes ‘functus officio’. Hon’ble High Court posed a question whether the Chief Metropolitan Magistrate acted de hors the jurisdiction, being functus officio? Even while passing the order dated 21.9.2021, wherein padlock was broken for giving physical possession to the Bank subject to the conditions that no lawful tenant or lessee in physical possession should be evicted. Hon’ble High Court held that the order, passed in the year 2014, was under Section 14 (1) of the Act whereas the order passed in September, 21, 2021 was in furtherance of the same in order to implement the same effectively within the contemplation of sub-section (2) of Section 14 of the Act. Hence, it could not be said that Chief Metropolitan Magistrate

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Misc. Appeal No. 12 of 2024-DRAT-Kolkata was ‘functus officio’ at the juncture of passing the order dated 21.9.2021.

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25. In the present case also the District Magistrate passed the impugned order dated 28.11.2023 simply changing the name of the officer authorized to take possession as the earlier officer has been transferred. This cannot, in any manner, be held to be an order which was passed by the District Magistrate exceeding his jurisdiction or without jurisdiction. If this analogy is accepted that even on a transfer of an officer, name of the office cannot be substituted by the District Magistrate then practically it would make the provision and object of Section 14 of the SARFAESI Act redundant. We can take judicial notice of the fact that transfer of a public servant is an incidence of service. An officer, authorized by the District Magistrate to take possession, is authorized in its official capacity. If that officer is being substituted or changed, which, if not made permissible, will result in great injustice. The object of the Act would be frustrated. Hence, merely by changing the name of the officer cannot be treated, in any way, that the District Magistrate was ‘functus officio’. It would be against the legislative intent that the officer, nominated by the District Magistrate to take the possession, is transfered and the District Magistrate cannot substitute the name of another officer for the purpose. This would be against the legislative intent of legislating the enactment. Provisions of Section 14 of the Act have to be read as they stand in the statute, as has been held by the Hon’ble Apex Court in the matters of Kotak Mahindra Bank Limited ( Supra) and Saregama India Limited (Supra).

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26. In Diamond Entertainment Technologies -vs- Religare Finvest Limited (W.P. (C) 17417 of 2022 and C.M. Application No. 55452 of 2022), Hon’ble Delhi High Court has held that there is no requirement of filing fresh affidavit. In the said case, the order was already passed on 6.12.2021. But because of certain proceedings taken up by the Bank, the same could not be implemented. No error could be found in the approach of the Respondents in filing the

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Misc. Appeal No. 12 of 2024-DRAT-Kolkata application for extension of the order dated 6.12.2021. It was held that if such a recourse is held to be not maintainable, the purpose of SARFAESI Act would again be defeated, as on one or other pretext, the Borrower would endeavour to linger of the proceedings to ensure that the possession is not taken within the stipulated time so that the entire proceedings will have to be taken afresh; consequently, delaying the recovery proceedings.

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27. In W.P.A. 28568 of 2023 (Tata Capital Financial Services Limited -vs- The State of West Bengal& Others) it was held that District Magistrate becomes ‘functus officio’ once he disposes of the application under Section 14 of the Act. There cannot be any two opinions about the law laid down by the Hon’ble High Court. But the facts of the present case are little different. While in the above case, the District Magistrate, after passing the order dated 31^st March, 2022, stayed its own order vide order dated 23^rd August, 2022. Hence, the Hon’ble High Court has held that the order is without jurisdiction. However, in the present case, the District Magistrate has simply changed the name of the officer who was authorised to take over possession on the ground that earlier authorized officer has been transferred. This act of the District Magistrate is not an act which was done by him against the settled principles of law.

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28. In Thahira -vs- Federal Bank (2016 SCC OnLine Ker 40048) the facts of the case are that possession of the secured assets were handed over to the secured creditor and the security guard was deputed but the Borrowers, on the basis of an interim order, forcibly entered into the property. Thereafter, the Bank moved an application for re-opening of the padlock before the Chief Metropolitan Magistrate, which was refused.

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29. In Thahira -vs- Federal Bank, (supra) Hon’ble Kerala High Court held that it was open for the Magistrate to take note of the factual circumstances involved in the matter and to pass appropriate orders to ensure that the statutory rights of the Bank is protected.

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Misc. Appeal No. 12 of 2024-DRAT-Kolkata 30. A Division Bench of Hon’ble Madhya Pradesh High Court in Writ Petition N. 5864 of 2022 Smt. Mishri Bai -vs- Shubh Laxmi Mahila Cooperative Bank Limited (2022 SCC OnLine MP 5883) decided on 5^th July, 2022 held that:

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“9. In the present case, respondent No.1 approached respondent No.2 and obtained the order under Section 14 of the SARFAESI Act. After the aforesaid order, respondent No.3 took possession of the secured assets and handed them over to respondent No.1/Bank. Thereafter, some settlement arrived between the bank and the petitioners on 01.02.2020 and the petitioners issued post-dated cheques to respondent No.1/Bank and on such conditions respondent No.1/Bank has released the property in favour of the petitioners. The cheques given by the petitioners have been returned unpaid, therefore, again the loan account became NPA and outstanding debt was restored. The petitioners have violated the terms and conditions of the settlement, thus the Manager of respondent No.1/Bank has requested Tehsildar to initiate proceedings for taking over the possession of the secured assets in which we do not find any illegality.

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“11. The petitioners are not challenging the validity of the order dated 20.09.2019 passed by the District Magistrate u/s 14 of the SARFAESI Act. The said order is still valid as the same has neither been reviewed, cancelled by the same authority or set aside by the Higher Court/ Tribunal, therefore, the said order still exists in the eye of law and compliance of the said order, the Tehsildar may take action for taking possession of the property till the dues of the bank are not cleared and accounts are closed. The assets of the petitioners are still secured and the same has not been released by clearing the debt.”

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It was held by the Hon’ble High Court that the secured creditor is not required to approach again and again before the District Magistrate or DRT for recovery of the amount once the order has been passed under Section 14 of the Act. Until and unless the entire outstanding amount is recovered, the order remains valid.

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31. However, the facts of the present case are on a much better footing wherein simply the name of the Authorised Officer, who was to take over possession of the secured assets, was substituted by the District Magistrate. Hence, it could not be said that the District Magistrate had exceeded its jurisdiction in substituting the name of the officer.

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32. Reliance is also placed upon a judgment of the Hon’ble Andhra Pradesh High Court in Maruthi Minerals Private Limited -vsUnion of India (AIR 2021 AP 81) wherein, while referring to the

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Misc. Appeal No. 12 of 2024-DRAT-Kolkata

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powers of Section 21 of the General Causes Act, it was held that the provisions would not apply to an authority exercising judicial/quasi judicial function under the statute. The District Magistrate, while exercising the powers under Section 14 of the Act, was not performing administrative or executive functions save the limited verification of compliance of proviso to Section 14 (1) of the Act prior to issuance of warrant of possession.

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33. In the aforesaid case after the proceedings were closed, subsequently the District Magistrate had taken the report of the Commissioner on record wherein the Hon’ble High Court held that it was well within the jurisdiction of the concerned District Magistrate.

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34. Relying upon Section 21 of the General Causes Act, wherein power to pass an order includes the power to amend, vary or rescind the orders so issued. Hence, the Chief Metropolitan Magistrate or the District Magistrate is still within its powers to simply change the name of the officer authorized to take over possession, which is done in exercise of powers under Section 14 (2) of the Act.

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35. Reliance is also placed upon a judgment of the Hon’ble Apex Court in State Bank of India & Others -vs- S,N, Goyal [(2008) 8 SCC 92] wherein it was held that once an authority exercising quasi judicial power takes a final decision it could not review its decision unless the relevant statute or rules permit such review. The Hon’ble Apex Court further held that at what stage an authority becomes ‘functus officio’ in regard to an order made by him. In P. Ramanatha Aiyar’s Advanced Law Lexicon (3^rd Edn., Vol.2, pp. 194647) illustrative definition of the term “functus officio” is given – “Thus a judge, when he has decided a question brought before him, is functus officio, and cannot review his own decision”

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36. In Black’s Law Dictionary (6^th Edn., p.673) gives its meaning as follows :

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“Having fulfilled the function, discharged the office, or accomplished the purpose, and therefore of no further force or authority.”

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Misc. Appeal No. 12 of 2024-DRAT-Kolkata

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The facts of the present case are entirely different wherein the Learned District Magistrate, firstly, was not performing a judicial or quasi judicial function; secondly, simply the name of the Authorised Officer to take over possession is changed due to the reason of transfer of the earlier Authorised Officer. Hence, in the facts of the present case, law as relied upon is not applicable.

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37. In Shriram Housing Finance Limited -vs- State of Haryana & Others (CWP-31871-2019) decided on 11.3.2022 by Hon’ble Punjab And Haryana High Court, the District Magistrate, after passing of the order, recalled its own order wherein it was held that the District Magistrate had no power to recall its own order passed under Section 14 of the Act. But in the facts of the present case, as narrated above, this case law is also not applicable in the present case.

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38. In Gujarat Industrial Co-Op. Bank Limited -vs- District Magistrate (Special Civil Application No. 9710 of 2009) decided by Hon’ble Gujarat High Court the Learned District Magistrate passed an order under Section 14 of the Act. Thereafter, on the application of the Borrowers disputing the fact whether a particular property formed part of the secured interest or not, Learned District Magistrate stayed his own order. Hon’ble High Court held that the District Magistrate is not entitled to stay his own order. He cannot re-open a concluded issue. However, the said judgment is not applicable to the facts of the present case.

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39. In India Shelter Finance Corporation -vs- State of Madhya Pradesh (Writ Petition No. 21960 of 2022) decided on 15.12.2022 BY Hon’ble Madhya Pradesh High Court an application under Section 14 of the Act was filed before the Additional District Magistrate which was decided by final order dated 25.5.2022. Thereafter one of the Respondents preferred an application before the same authority which was entertained by the impugned order dated 14.6.2022 and the operation of the previous order dated 25.5.2022 was stayed. It was held by the Hon’ble High Court that after passing of the final order

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Misc. Appeal No. 12 of 2024-DRAT-Kolkata

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under Section 14 of the Act, the District Magistrate becomes ‘functus officio’ and cannot stay its own order. However, the case law is not applicable to the facts of the present case, as narrated above.

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40. Hence, on the basis of the discussion made above, in the present case, I am of the considered view that the Learned District Magistrate was well within his jurisdiction and power to change the name of the Authorised Officer to takeover possession and handover the same to the secured creditor. There is no illegality or perversity in passing the order.

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41. Learned Counsel for Respondent submits that after passing of the order under Section 14 of the Act one of the properties was sold which fact was not considered by the District Magistrate. Initially an order under Section 14 of the Act was passed by the Learned District Magistrate to takeover possession and handover the same to the secured creditor. That order was passed by the District Magistrate after considering the nine point affidavit, as required under the law. All the issues were duly considered by the Learned Magistrate. That order was not challenged and attained finality.

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42. As far as the question of sale of any property is concerned, in the nine point affidavit, filed by the secured creditor before the District Magistrate at the time of passing of the initial order under Section 14 of the Act all the ingredients, as required under the law, were fulfilled. The District Magistrate, after satisfying himself about the factual aspect of the affidavit, passed the order under Section 14 of the Act. Any development took place after passing of the order, other than substituting the name of the Authorised Officer to takeover possession, need not and should not have been considered by the District Magistrate.

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43. On the basis of the discussion made above, I am of the considered opinion that the learned District Magistrate acted within his jurisdiction. All the actions taken by him are in accordance with law. No illegality is committed by the Learned District Magistrate in passing

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Misc. Appeal No. 12 of 2024-DRAT-Kolkata the orders dated 19.9.2023 and 27.9.2023. Learned DRT has erred in passing the impugned order. Impugned order suffers from material irregularity and illegality which is perverse in nature. Accordingly, appeal deserves to be allowed and impugned order is deserves to be set aside. Appeal deserves to be allowed.

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O R D E R

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Appeal is allowed. The impugned order dated 11.01.2024, passed by Learned DRT-IIII, Kolkata, in S.A. 1002 of 2022 (Banga Lakshmi Ujala Business Private Limited & Others -vs- Asset Reconstruction Company Private Limited), is set aside. Consequently I.A. 88 of 2024 and I.A. 3606 of 2023 stands dismissed. Secured Creditor would be at liberty to proceed in accordance with law.

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No order as to costs.

¶237

Copy of the order be supplied to Appellant and the Respondents and a copy be also forwarded to the concerned DRT.

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File be consigned to Record room.

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Order signed, dated and pronounced in open Court.

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(Anil Kumar Srivastava,J) Chairperson

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Dated: 4^th September, 2024 08/ac