Dismissed

Aditya Birla Finance Limited v. City Oil Pvt. Ltd.

DRAT15 Jan 2024MISC APPEAL/13/2023

Case brief

AI extract

What is this about?

In this appeal, the Debts Recovery Appellate Tribunal upheld the district court's order setting aside a Chief Judicial Magistrate's decision granting possession to a financial institution. The Tribunal held that the Magistrate failed to record satisfaction regarding the rejection of the borrower's representations under s. 13(3A) of the SARFAESI Act, as mandated by s. 14.

What did the court decide?

The appeal was dismissed. The impugned order dated 27.06.2023 confirming possession order by the Chief Judicial Magistrate was confirmed.

Aditya Birla Finance Limited versus City Oil Pvt. Ltd. — Banking and Recovery | DRAT (2024)

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IN THE DEBTS RECOVERY APPELLATE TRIBUNAL AT KOLKATA

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Misc. Appeal No. 13 of 2023

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(Arising out of I.A. 714 of 2023 in SA 109 of 2023 DRT-1 Kolkata)

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THE HON’BLE MR. JUSTICE ANIL KUMAR SRIVASTAVA CHAIRPERSON

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15.01.2024

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Aditya Birla Finance Ltd. Having its registered office at Indian Rayon Compound Veraval, Gujarat – 362 266.

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The Authorised Officer, Aditya Birla Finance Ltd. Having its office at Room No. 401, 4^th floor, 24, Camac Square, Kolkata – 700 016.

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… Appellants

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-Vs-

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City Oil Pvt Ltd. Having its office at Room No. M7, Jobakusum Building, 34, C.R. Avenue, Kolkata – 700012, also at 10, Uttar Arupara, 1^st Bye lane, GIP Colony, P.S. Jagacha, Howrah – 711112, also at Howrah Amta Road, LR Dag Nos. 770, 771, 772, 774 and 775, JL No. 50, Mouza – Kantlia, PO Nibra, PS Domjur, Makardah – 1, Howrah – 711409 and also JL No. 4, LR Plot Dag No.5, Khatian No. 1243, Mouza – Santragachi, PS Jagacha, Howrah – 711112.

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Goutam Bera, residing at Room No. M7, Jobakusum Building, 34, C.R. Avenue, Kolkata – 700012, also at 10, Uttar Arupara, 1^st Bye lane, GIP Colony, P.S. Jagacha, Howrah – 711112, also at Howrah Amta Road, LR Dag Nos. 770, 771, 772, 774 and 775, JL No. 50, Mouza – Kantlia, PO Nibra, PS Domjur, Makardah – 1, Howrah – 711409 and also JL No. 4, LR Plot Dag No.5, Khatian No. 1243, Mouza – Santragachi, PS Jagacha, Howrah – 711112.

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Sri Arindam Bera residing at Room No. M7, Jobakusum Building, 34, C.R. Avenue, Kolkata – 700012, also at 10, Uttar Arupara, 1^st Bye lane, GIP Colony, P.S. Jagacha, Howrah – 711112, also at Howrah Amta Road, LR Dag Nos. 770, 771, 772, 774 and 775, JL No. 50, Mouza – Kantlia, PO Nibra, PS Domjur, Makardah – 1, Howrah – 711409 and also JL No. 4, LR Plot Dag No.5, Khatian No. 1243, Mouza –

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Santragachi, PS Jagacha, Howrah – 711112.

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Sonali Bera residing at Room No. M7, Jobakusum Building, 34, C.R. Avenue, Kolkata – 700012, also at 10, Uttar Arupara, 1^st Bye lane, GIP Colony, P.S. Jagacha, Howrah – 711112, also at Howrah Amta Road, LR Dag Nos. 770, 771, 772, 774 and 775, JL No. 50, Mouza – Kantlia, PO Nibra, PS Domjur, Makardah – 1, Howrah – 711409 and also JL No. 4, LR Plot Dag No.5, Khatian No. 1243, Mouza – Santragachi, PS Jagacha, Howrah – 711112.

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… Respondents

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For the appellants : Mr. Nimish Mishra, ld. Advocate

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Mr. Debjit Mukherjee,, ld. Advocate Ms. Ranjabati Ray, ld. Adv.

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For the respondents: Mr. Souritra Ganguly, ld. Advocate Mr. Samit Bhanja, ld. Advocate

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THE APPELLATE TRIBUNAL :

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Instant miscellaneous appeal has arisen against the order dated 27.06.2023 passed by learned DRT-I Kolkata in S.A. No. 109 of 2023 (City Oil Pvt. Ltd. & Anr. Vs. Aditya Birla Finance Ltd. & Ors.) allowing I.A. No. 714 of 2023.

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I have heard learned counsel for the parties and perused the records.

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As far as facts of the case are concerned an application u/s 14 of the SARFAESI Act, 2002 (hereinafter referred to as ‘Act’) was moved by the respondent before the learned Chief Judicial Magistrate (CJM), Howrah which was allowed on 15.12.2022. S.A. No. 109 of 2023 u/s 17 of the Act was filed by the respondent before the learned DRT challenging the order passed by the Chief Judicial Magistrate, Howrah u/s 14 of the Act along

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with other reliefs. I.A. 714 of 2023 was also filed challenging the order of the Chief Judicial Magistrate, Howrah dated 15.12.2022 which was allowed by the learned DRT by passing the impugned order wherein it was held that learned Chief Judicial Magistrate, Howrah has not considered the issue that representation u/s 13(3A) of the Act was moved by the respondent herein which was rejected by the appellant financial institution. It is a mandatory provision u/s 14 of the Act to consider the same and satisfaction is to be recorded by the learned Chief Judicial Magistrate, Howrah in the order passed u/s 14 of the Act, but the same was not complied with. Accordingly, the order of the learned Chief Judicial Magistrate, Howrah passed u/s 14 of the Act of 2002 was set aside.

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Feeling aggrieved by the impugned order appellant preferred the appeal. Learned counsel for the appellant vehemently argued that learned DRT erred in passing the impugned order to the effect that compliance of the provision of Section 14 of the Act was not duly made by the appellant financial institution as well as learned Chief Judicial Magistrate, Howrah. It is further submitted that it was imperative on the part of Chief Judicial Magistrate, Howrah to record his satisfaction under second proviso to subsection (1) of Section 14 of the Act rather he is required to record that he is satisfied that compliance of the provision as envisaged u/s 14 of the Act of 2002 has been made. Learned counsel has placed reliance upon the judgement of Standard Chartered

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Bank Vs. V. Noble Kumar & Ors. [(2013) 9 SCC 620] as well as Indian Bank Vs S. K. Jeevanandam [(2017) 14 SCC 329] ; R. D. Jain & Co. Vs. Capital First Ltd. & Ors. [(2023) 1 SCC 675]; Balkrishna Rama Tarle Vs. Phoenix ARC Pvt. Ltd & Anr. [(2023) 1 SCC 662].

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Per contra, learned counsel for the respondent vehemently argued that there cannot be any dispute that action of the Chief Judicial Magistrate u/s 14 of the Act is a ministerial act. It is further submitted that there cannot be any dispute that learned Chief Judicial Magistrate, Howrah was not required to enter into the merits of the case while passing the order u/s 14 of the Act. However, learned counsel for the respondent submits that District Magistrate or Chief Judicial Magistrate is obliged to record its satisfaction about the compliance of the Nine points as envisaged u/s 14 of the Act. Learned counsel also placed reliance upon the judgement of V. Nobel Kumar (supra). Further, reliance is placed upon the case of Balkrishna Rama Tarle (supra) as well as Krishna Builders & Developers & Anr. Vs. Shriram Housing Finance Ltd. & Anr. [2019 SCC OnLine Cal 342] and Sri Jawar Singh Vs. The United Bank of India & Ors. [2015 SCC OnLine Cal 7446].

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On the strength of the case laws learned counsel for the respondents further submits that representation u/s 13(3A) of the Act was moved by the respondent. As per the appellant the same was considered and rejected. It is submitted that learned Chief

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Judicial Magistrate was required to record his satisfaction on the issue that representation u/s 13(3A) of the Act was filed by the respondent which was considered and rejected by the appellant financial institution. But no satisfaction was recorded in the order passed u/s 14 of the Act by the Chief Judicial Magistrate. Learned counsel for the respondent submits that since it is a mandatory provision and was not complied by the learned Chief Judicial Magistrate, accordingly, learned DRT has rightly set aside the order passed by the learned Chief Judicial Magistrate, Howrah.

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Before entering into the merit of the impugned order I find it appropriate to quote the order passed by the learned Chief Judicial Magistrate, Howrah on 15.12.2022.

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“Order dated 15.12.2023 – Today is fixed for hearing and for further order.

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In compliance of the order dated 19.10.2022 the appellant has filed an affidavit affirming that the property in question there is no stay order and or any injunction is in operation and also free from any encumbrance/tenancy/occupancy etc. The record is taken up for passing final order pursuance to hearing the applicant / party. It appears that an application has been filed by Aditya Birla Finance Ltd. By its authorised officer, Arunava Ghosh, having its branch office at room no. 401, 4^th floor, Camac Square, 24, Camac Street, Kolkata – 700016.

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The gist of the facts is that in course of availing financial assistance by way of securing or mortgaging the immovable house property were given to the respondent at their requests in twelve (12) occasions during the period from 12/09/2017 to 24/11/2021 (the details mentioned in the petition). To secure the said loan the borrower created equitable mortgage in respect of some immovable property in six (6) different schedules, the details mentioned in the petition, out of which five (5) schedule mentioned properties are lying within the jurisdiction of this court. The respondents defaulted in satisfying the loan amount. The said loan became due and unpaid and was classified as NPA on 17/05/2022. The applicant issued a notice on 17/06.2022 upon the respondent u/s 13(2) of the SARFAESI Act requesting to meet up the outstanding amount of Rs.18,47,44,181/- (Ruees eighteen core forty-seven lakh forty thousand one hundred eight one) only. Along with sanctioned bank guarantee amount of Rs.1,90,72,000/- (Rupees one crore ninety lakh seventy-two thousand only) and TDS of Rs. 43,51,696.60 (Rupees forty-three lakh fifty-one thousand six hundred ninety-six and sixty paise only) within the stipulated sixty days. The notice was duly served upon the respondent. The applicant also took recourse to Sec. 13(4) of the Act, but yielded no fruitful result. Iti s pertinent to mention herein that while taking loan amount the respondent deposited the original title deeds of the properties being the secured assets in favour of the applicant as per agreement execur3ed between the parties.

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From the document filed by the applicant it appears that the scheduled properties have been given in equitable mortgage by the respondent before the applicant and they took the loan amount from the applicant and thereafter they defaulted and could not repay the loan amount as above.

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The applicant has filed the documents to take physical possession of the secured assets as mentioned in the scheduled of the petition to satisfy their dues. From the documents so filed it appears that the lender duly placed the scheduled properties in

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mortgage by furnishing the original title deed. Later an affidavit had been field by the applicant stating that there is no stay order or injunction issued in respect of any proceeding pending before any court of law in respect of the property.

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The process u/s 13(4) of the said act having failed to yield the desired relief , hence, considering the fact that the secured assets (i.e. the scheduled property no. (II) to (V) mentioned in the petition) are situated within the jurisdiction of this court, I find it fit to pass an order as prayed for in favour of the applicant for taking physical possession of the secured asset (i.e. the scheduled property no II to VI mentioned in the Petition) under Sec. 14 of the act as mentioned in the schedule of the application.

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Accordingly, it is

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ORDERED

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That the petitioner / applicant is permitted to take physical possession of the immovable properties of the respondent which are lying within the jurisdiction of this court as described in schedule of the application. i.e. property no. II to VI as mentioned below :

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Property No. II –

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That all the piece and parcel of land comprise in Mouza KATLIA JL No. 50, measuring about 0.33 Satak in Dag No. 770, Khatian No. 158, measuring about 0.11 Satak in Dag No. 771, Khatian No. 921 measuring about 0.04 Satak in Dag No. 772, Khatian No. 929 measuring about 0.03 Satak Land in Dag No. 774, Khatian No. 592 measuring about 0.14 Satak Land in Dag No. 755, Khatian No. 593, totalling an area admeasuring 0.65 Satak of land lying and situated within the local limits of P.S. Domjur, Dist. Howrah.

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Proerty No. III

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That all the piece and parcel of land measuring more or less five Kottah comprised in Mouza Santragachi vill. , revisional settlement , JL no. 4, RESA No. 2001, Touzi no. 783, Khatian no. 1048, Dag No. 1(Prt.), LR Khatian no. 1243, LR Dag No. 5(Prt) along with one tile shed room standing thereon lying situat4ed within the local limited of PS Jagacha Dist. Howrah.

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Proeprty no. IV

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That all the piece and parcel of land measuring more or less 3 Satak comprised in Mouza Santragachi Vill , revisional settlement JL No. 4, RESA No. 2001, Touzi No. 783 Khatian No. 1036 Dag No. 13 lhying and situated within the local limited of PS Jagacha , Disrft Howrah.

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Property V

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That all the piece and parcel of Danga land measuring more or less 7 Satak comprised in Mouza Katlia JL No. 50, CS Khatian No. 463, CS No. 773, LR Khatian no. 173, LR Dag No. 800 lying and situated within the local limits of PS Domjur, Dist Horwah.

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Property no VI

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That all the piece and parcel of land measuring more or less 5 Kottahs 06 Chattak 18 Sq.ft. comprised in Mouza Katlia JL No. 50 Lr Khatian no. 1348, 1384, 1378, 4, 1151 and 607, CS Dag No. 766(P) LR Dag No. 790 (P) lying and situated within the local limits of PS Domjur, Dist Howrah.

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The Head Clerk CJM Court Howrah is directed to take physical possession of the scheduled property and after taking the same will be handed over to the authorised officer of the applicant creditor executing proper receipt as per law.

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If the scheduled property is under lock and key, the petitioner may break open the same on certain terms and conditions :

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The petitioner/applicant to remain pr3esent within property identity proof, authorisation paper and connected documents at the time of executing the order for the purpose of identification of the property in dispute.

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The padlock-lock and key of the flat / premises /godown/ office unit in question as mentioned in the application will be broken in the presence of authorised officer of Aditya Birla Finance Ltd. Or his competent representatives and police.

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A person of the locality may be present during breaking the padlock.

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The Aditya Birla Finance ltd. Authority will prepare an inventory list in respect of the articles lying inside the premises compound concerned.

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After completion of the inventory a list will be handed over to the head clerk CJM Court Howrah, the opposite party and a copy of the list is also to be submitted before the court.

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The Head Clerk CJM Court, Howrah is at liberty to take the help of respective I/C of Domjur / Jagacha PS if he faces any obstruction and to submit a compliance report.

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The applicant is to bear the stipulated cost of providing force by the Police. Let a copy of this order be supplied to the Head Clerk for compliance. Let the original documents be returned.

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Fix 30.12.2023 for compliance report by Head Clerk.

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CJM, Howrah SD/-

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Learned DRT has recorded a categorical finding to the effect that learned Chief Judicial Magistrate, Howrah has not recorded in the order that borrower has made any representation which was considered and rejected. Although, learned DRT has accepted and approved the order passed by learned Chief Judicial Magistrate to the extent that points as enumerated in the judgement of V. Nobel Kumar (supra) were considered by the learned Chief Judicial Magistrate, but point no. vii were not considered by him.

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It was held by the Hon’ble Apex Court in Chandra Kishore Jha Vs. Mahavir Prasad & Ors. [(1999) 8 SCC 266] that “It is a well-settled salutary principle that if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner and in no other manner.” This judgement was followed in a recent case by the Hon’ble Apex Court in Union of India & Ors. Vs. Mahendra Singh [2022 SCC OnLine SC 909].

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It would be apposite to quote Para 24 and 25 of the judgement of Hon’ble Apex Court in the case of V. Nobel Kumar (Supra) it reads as under :

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“24. An analysis of the 9 sub-clauses of the proviso which deal with the information that is required to be furnished in the affidavit filed by the secured creditor indicates in substance that

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(i) there was a loan transaction under which a borrower is liable to repay the loan amount with interest,

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(ii) there is a security interest created in a secured asset belonging to the borrower,

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(iii) that the borrower committed default in the repayment,

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(iv) that a notice contemplated under section 13(2) was in fact issued,

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(v) in spite of such a notice, the borrower did not make the repayment,

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(vi) the objections of the borrower had in fact been considered and rejected,

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(vii) the reasons for such rejection had been communicated to the borrower etc.

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The satisfaction of the Magistrate contemplated under the second proviso to section 14(1) necessarily requires the Magistrate to examine the factual correctness of the assertions made in such an affidavit but not the legal niceties of the transaction. It is only after recording of his satisfaction the Magistrate can pass appropriate orders regarding taking of possession of the secured asset.”

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A bare reading of the judgement will show that the satisfaction of the Magistrate on all the nine points envisaged in Section 14 of the Act required to be examined the factual correctness of the assertion made in the affidavit, but not legal niceties of transaction. After recording satisfaction, the Magistrate can pass appropriate order.

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In the case of S. K. Jeevanandam (supra) Hon’ble Apex Court held that requirement of recording satisfaction that the affidavit discloses the essential facts stipulated by the provision of Section 14 of the Act has come in only after insertion of the proviso in the year 2013. Further view was taken that learned Magistrate at the stage of exercising jurisdiction u/s 14 of the Act was not specifically required to record any satisfaction on record the existence of any particular fact.

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In the case of R.D.Jain (supra) it was held that steps to be taken by the DM/CMM u/s 14 of the Act is a ministerial step while disposing of the application u/s 14 of the Act, no element of quasi-judicial function or adjudication is attracted. DM/CMM has to adjudicate and decide the correctness of information given in the application and nothing more. Therefore, Section 14 of the Act does not involve an adjudicatory process qua points raised by borrower against secured creditor taking possession of secured

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asset. Judgement of R.D.Jain (supra) was reiterated by the Hon’ble Apex Court in Balkrishna Rama Tarle (supra) wherein it was held that Section 14 of the Act does not involve any adjudicatory process qua points raised by the borrower against the secured creditor taking possession of the secured assets. One of the requirements of Section 14 of the Act is to reflect his satisfaction and it is the duty cast upon the DM/CMM to assist the secured creditor in obtaining possession of the secured assets, CMM/DM is not required to adjudicate the dispute between borrower and secured creditor and/or between any other third party and secured with respect to secured assets.

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A perusal of the order passed by learned CJM reveals that learned CJM has passed a detailed order wherein the ingredients of nine points as enumerated in the first proviso to Section 14 of the Act were discussed except Point (vii) as enumerated in the case of V. Nobel Kumar (supra). For the sake of convenience Paragraphs 24 and 25 are again reproduced for the cost of repetition.

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“24. An analysis of the nine sub-clauses of the proviso which deal with the information that is required to be furnished in the affidavit filed by the secured creditor indicates in substance that :

24.1 - …………….

24.2 - …………….

24.3 - …………….

24.4 - …………….

24.5 - …………….

24.6 – (vi) the objections of the borrower had in fact been considered and rejected.

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24.7 – (vii) the reasons for such rejection had been communicated to the borrower, etc.

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The satisfaction of the Magistrate contemplated under the second proviso to Section 14(1) of the Act necessarily requires the Magistrate to examine the factual correctness of the assertions made in such an affidavit but not the legal niceties of the transaction. It is only after

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recording of his satisfaction the Magistrate can pass appropriate orders regarding taking of possession of the secured asset.”

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In the order passed by the learned CJM I do not find any satisfaction on the compliance of aforesaid point. No doubt DM/CJM is not required to put verbatim copy of all the nine points, but at the same time order must reflect that he is satisfied about the compliance of the provisions of Section 14 of the Act. When the CJM had considered the nine points separately then it was required for him to also deal with the issue of representation as well as result thereof, which was not done. As regards satisfaction, it is not reflected even in a single sentence in the order of the learned CJM. In the absence of such reflection and/or satisfaction, the order passed u/s 14 of the Act is vitiated ex facie. Although no detail discussion on all the nine points envisaged in Section 14 of the Act is required under the law, but the Magistrate is duty bound to record his satisfaction.

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On the basis of the discussions made above I am of the considered opinion that learned DRT has taken a correct view to the effect that there is no reflection in the order passed by learned CJM that the borrower’s representation was considered and rejected. Accordingly, I do not find any illegality or irregularity in the impugned order. Appeal is liable to be dismissed.

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O R D E R

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Appeal is dismissed. Impugned order dated 27.06.2023 is confirmed. No order as to costs.

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File be consigned to record room.

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Copy of the order be supplied to the appellant and the respondent and a copy be also forwarded to the concerned DRT as well as uploaded in the Tribunal’s website.

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Order dictated, signed and pronounced by me in the open Court on this the 15^th day of January, 2024.

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(Anil Kumar Srivastava,J) Chairperson

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Dated: 15 January, 2024 /pkb

Aditya Birla Finance Limited v. City Oil Pvt. Ltd.

Case brief

What is this about?

What did the court decide?

Aditya Birla Finance Limited v. City Oil Pvt. Ltd.

Case brief

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