Allowed

Union Bank of India v. Ms Gk Communication and Ors.

DRAT16 Apr 2025MISC APPEAL/19/2024

Case brief

AI extract

What is this about?

The DRAT allowed the bank appellant's appeal against the DRT order quashing a District Magistrate's order. The Tribunal held the Magistrate acted within jurisdiction to substitute a transferred officer's name for physical possession of secured assets under Section 14 of the SARFAESI Act, finding no excess of power functus officio, and no fresh affidavit required.

What did the court decide?

Impugned order of the DRT dated 27.02.2024 setting aside the District Magistrate's order is set aside. Bank permitted to proceed in accordance with law.

Union Bank of India versus Ms Gk Communication and Ors. — Banking and Recovery | DRAT (2025)

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Reportable/Non-Reportable

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Misc. Appeal No. 19 of 2024-DRAT-Kolkata

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IN THE DEBTS RECOVERY APPELLATE TRIBUNAL AT KOLKATA

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Misc. Appeal No. 19 of 2024

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(Arising out of I.A. 566 of 2024 in S.A. 102 of 2021 in DRT-III, Kolkata)

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HON’BLE MR. JUSTICE ANIL KUMAR SRIVASTAVA CHAIRPERSON

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Union Bank of India, a body corporate constituted under the Banking Companies (Acquisitions and Transfer of Undertakings) Act, 1970, having its Head Office at "Union Bank Bhavan", 239, Vidhan Bhavan Marg, Mumbai - 400 021 and carrying on banking business, inter alia, at its Branch Office at 14/1B, Ezra Street, Kolkata - 700 001, known as "Asset Recovery Branch, Kolkata".

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… Appellant

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-Versus-

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M/s. G. K. Communication, a sole proprietorship firm having its office at 122A, Karl Marx Sarani, Kiddepore, Kolkata - 700 023;

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Sarfaraz Ahmed, son of Abdul Latif, Sole Proprietor of M/s. G.K. Communication, residing at 1-95/B, Rameswarpur Road, Garden Reach, Kolkata - 700 024;

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Abdul Latif, son of late Golam Nabi, residing at 1-95/B, Rameswarpur Road, Garden Reach, Kolkata - 700 024;

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Mrs. Farha Naz, wife of Sarfaraz Ahmed, residing at 1-95/B, Rameswarpur Road, Garden Reach, Kolkata - 700 024.

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… Respondents

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Counsel for Appellants	…	Ms. Poetry Dutta Ms. Suparna Biswas
Counsel for Respondents	…	Ms. Priyakshi Banerjee
JUDGMENT	:	16^thApril, 2025

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THE APPELLATE TRIBUNAL :

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1. This appeal (Misc. Appeal No. 19 of 2024) was decided and allowed vide judgment and order dated 30^th August, 2024. WPA 27110 of 2024 was filed by the Respondents before the Hon’ble Calcutta High Court which was decided on 12.11.2024. In the judgment of the Hon’ble High Court it was ordered that :

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Misc. Appeal No. 19 of 2024-DRAT-Kolkata

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“ 12. The appellate forum will only revisit the issue of service of notice of appeal upon the writ petitioners. If it appears that the writ petitioners were duly served, but they deliberately chose not to appear at the appellate stage, then the judgment passed by the Tribunal shall hold good.

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13. If it is found that proper notice was not served upon the petitioners, then it will be open for the appellate authority to revisit the whole issue of the appeal all over again.

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16. It is made clear that this Court has not entered into the merits of the appeal at all. If the petitioners fail to overcome the issue of notice before the Appellate Tribunal, then it will be open for the petitioners to agitate the other points in the impugned judgment before the competent forum in accordance with law, if so advised.”

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Thereafter matter on service of notice was considered wherein it was observed that notices were served upon the Respondents No. 2 and 3. Respondent No. 2 is the sole proprietor, hence service upon Respondent No. 1 is also deemed to be sufficient. However, in the interest of justice, in compliance of the order of the Hon’ble High Court opportunity was granted to the Respondents to appear and argue the matter. Learned Counsel for Respondent as well as Appellant argued the matter.

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2. Instant appeal is preferred against order dated 27^th February, 2024, passed by Learned DRT-III, Kolkata, in S.A. 102 of 2021 (M/s. G. K. Communication -vs- Union Bank of India) whereby Learned DRT restrained the Appellant Bank from proceeding further in respect of the secured assets on the basis of the impugned order dated 4.1.2024 passed by Learned District Magistrate, South 24 Parganas.

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3. Feeling aggrieved by the order, dated 4.1.2024, Appellant Bank preferred the instant appeal.

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4. Heard the Learned Counsel for the parties and perused the record.

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Misc. Appeal No. 19 of 2024-DRAT-Kolkata 5. As per the pleadings of the parties the facts of the matter are that Respondent No. 1 is a proprietorship concern and Respondent No. 2 is the proprietor of the same. Respondents No. 3 and 4 were Guarantors of the Respondents No. 1 and 2. Erstwhile Andhra Bank (now merged in the Union Bank of India) granted a loan of Rs.1.44 crore to the Respondents wherein the Respondents No. 3 and 4 have created equitable mortgage in favour of the Bank by depositing Title Deeds. Account became irregular and was classified as N.P.A. Notice under Section 13 (2) of the SARFAESI Act, 2002 (hereinafter referred to as the Act) dated 3.12.2018, demanding an amount of Rs.1,49,13,651.39p was issued. Thereafter, notice under Section 13 (4) of the Act dated 27.2.2019 was also sent to the Respondents which was duly served. Appellant Bank proceeded under the SARFAESI Act, 2002. An attempt was made by the Respondents for One Time Settlement which too could not be fructified. Thereafter, Appellant obtained an order under Section 14 of the Act from District Magistrate, South 24 Parganas on 18.11.2020. I.A. 842 of 2023, challenging the order of the District Magistrate, was filed by the Respondents which was dismissed on 18.5.2023 by the Learned DRT. Since possession could not be obtained and the then Authorised Executive Magistrate, Mr. Kaushik Pal, was transferred, thus, vide order dated 4.1.2024, District Magistrate, South 24 Parganas authorized one Shri Prasun Kumar Dhara WBCS (Executive) to take physical possession. I.A. 566 of 2024 was filed by the Respondents

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Misc. Appeal No. 19 of 2024-DRAT-Kolkata challenging the order dated 4.1.2024 which was disposed of by the impugned order.

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6. Initially an order dated 12.11.2020 was passed by the Learned District Magistrate, 24 Parganas (South) under Section 14 of the Act. It was challenged by filing I.A. 842 of 2023 in S.A. 102 of 2021. I.A. 842 of 2023 was dismissed by the Learned DRT vide order dated 18.5.2023. Initially the District Magistrate authorized Sri Kaushik Paul, WBSC (Executive) to take possession of the secured assets vide order dated 12.11.2020. Thereafter, since Mr. Kaushik Paul was transferred, Sri Subrata Palit, WBSC (Exe) was appointed for taking over possession on 7.9.2022. After transfer of Mr. Subrata Palit, Mr. Prasun Kumar Dhara, WBSC (Executive), was appointed to take possession of the secured assets vide order dated 4.01.2024.

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7. 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 12.11.2020 since the name of the Officer, authorized to take possession, Sri Kaushik Paul, WBSC (Executive), South 24 Parganas was to be replaced by Sri Prasun Kumar Dhara, WBSC (Executive) South 24 Parganas, order dated 04.01.2024 was passed.

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8. Learned Counsel for Respondent would submit that the Learned District Magistrate becomes functus officio after passing of the order under Section 14 of the Act. Further it is submitted that Learned District Magistrate over-reached

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Misc. Appeal No. 19 of 2024-DRAT-Kolkata his powers by passing consecutive orders which is not the intent of Section 14 of the Act. Learned District Magistrate has not considered the affidavit in accordance with law.

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9. It is submitted by the Learned Counsel for Respondent that the District Magistrate was well within his powers to pass the impugned order. 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 has been transferred. 10. 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. 11. 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. 12. 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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Misc. Appeal No. 19 of 2024-DRAT-Kolkata 13. 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?

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14. District Magistrate initially passed an order on

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12.11.2020 which is as under:

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“Whereas Authorized Officer, Andhra Bank, Kidderpore, having its office at 117A, Karl Marx Sarani, Kolkata – 700 023 has filed up a petition under Section 14 of SARFAESI Act of 2002, seeking administrative assistance for taking physical possession on the secured assets/property of the proprietor namely Sarfaraz Ahmed and Guarantors namely Farha Naz and Abdul Latif of the borrower namely M/s. G.K. Communicatiuon, Prop. Sarfaraz Ahmed, 122A, Karl Marx Sarani, Khidderpore, Kolkata – 700 023.

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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, Andhra Bank seeking administrative assistance in terms of sec 14(1) of the SARFAES! 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. 1,44,00,000 (Rupees one crore forty four lac) only on 19.05.2018 to Borrower namely M/s. G.K. Communicatiuon, Prop. Sarfaraz Ahmed, 122A, Karl Marx Sarani, Khidderpore, Kolkata – 700 023 against the mortgaged property as follows:

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Schedule of property

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(1) Equitable mortgage of land and building constructed on approx, 4248 sq.ft. situated at Mouza garden Reach Road, Old Sheet No. 109, New Sheet No. 104, Touzi No.. 1068, Khaian No. 105, Dag No. 215 & 216 within Kolkata Municipality Corporation Ward No. 135 Holding No. 1-95/8 Rameshwarpur Road, P.S. Garden Reach, Dist. South 24 Parganas PIN – 700 024 In the name of Abdul Latif (2) EM of land and building constructed on approx, 3300 sq.ft. situated at Mouza Garden Reach Road, Sheet No. 104, New Sheet No. 109 Τouzi No. 1068, Khatian No. 105 Dag No. 212-217, within Kolkata Municipality Corporation Ward No. 135, Holding No. 1-95/1 Rameshwarpur Road, Dist. South 24 Parganas PIN – 700 024 in the name of Sarfaraz Ahmed and Farha Naz.

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Whereas it transpires from the context that-

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Misc. Appeal No. 19 of 2024-DRAT-Kolkata

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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 29.11.2018 due to non servicing of interest/Installment,

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And

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Notice dated 3^rd December, 2018 under Section 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. 1,49,13,651.39 (Rupees one crore forty nine lac thirteen thousand six hundred fifty one and paise thirty nine) only and demand notice was received on behalf of the guarantor on 10^th December, 2018.

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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 under Section 13 (2) dated – 3^rd December, 2018.

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And

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The Secured creditor issued possession notice dated 27^th February, 2019 under Section 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 1^st March, 2019,

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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 SARFAESI 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 belonging to the borrower(s)/Co-borrower(s)/Director(s)/ Guarantor(s)/Partner(s)/Proprietor(s)/Corporate Guarantor(s)/ Surety(ies)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, under Section 14 of SARFAESI 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 under Section 14(1)B of the Securitization and Reconstruction of Financial Assets and Enforcement

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Misc. Appeal No. 19 of 2024-DRAT-Kolkata of Security Interest Act, 2002 and all other relevant documents which the Secure Creditor filed duly affirmed by the authorized officer of the Andhra Bank, having its office at 117A, Karl Marx Sarani, Kolkata – 700 023 (secured creditor) and being satisfied, it is hereby ordered as per amended section 14(1A) of the SARFAESI Act of 2002 that Sri Kaushik Paul WBCS (Exe.), 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, And Whereas Authorized Officer, Indian Bank will intimate the date of possession of the secured assets to the Commissioner of Police, Kolkata as well as to the authorized Officer Sri Kaushik Paul, 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 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.

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

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15. Thereafter District Magistrate passed another order on

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07.9.2022 which is as under:

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“ Dated: 07.09.2022

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The Authorized Officer, Union Bank of India, 14/18, Ezra Street, Kolkata -700 001.

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Sub: Appointment of Representative of District Magistrate for taking physical Possession of Properties under SARFAESI Act. 2002.

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With reference to the above mentioned subject, this is to inform you that a Possession Order under SARFAESI Act, 2002 was issued vide this Office Memo No. 1075/SARFAESI Dated 18.11.2020 In connection with borrower M/s. G. K. Communication, 122A, Karl Marx Sarani, Khidderpur, Kolkata 700 023. Sri Kausik Paul, WBCS(Exe) was appointed as representative of District Magistrate to take physical possession of the assets as mentioned in the said order. Later on Sri Paul has been transferred from office.

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Now, Sri Subrata Palit, WBCS (Exe.), is hereby appointed as representative of the District Magistrate for taking physical possession of the assets as stated in the said possession order.

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All concerned are being informed accordingly.

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Sd/-

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District Magistrate

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Memo No.752/1(4)/SARFAESI Dated: 07.09.2022

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Misc. Appeal No. 19 of 2024-DRAT-Kolkata

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Copy forwarded for Information and taking necessary action to:-

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1. The Commissioner of Police, Kolkata with a request to provide Police assistance for taking physical possession of the secured assets.

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2. Sri Subrata Palit, WBCS(Exe), South 24-Parganas with a request to comply with the said order.

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3. The Officer-In-Charge, Garden Reach Police Station, Kolkata.

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4. M/s. G. K. Communication, 122A, Karl Marx Saranl, Khidderpur, Kolkata - 700 023.”

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16. Thereafter District Magistrate passed another order on

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04.01.2024 which is as under:

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“04 January, 2024

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Whereas Authorized Officer, Union Bank of India [E-Andhra Bank), Kidderpore, having its office at 117A Karl Marx Sarani, Kolkata – 700 023, has led 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 Proprietor namely Sarfara Ahmed and Guarantors namely Farha Naz & Abdul Latif of borrower namely M/s. GK Communication Prop: Sarfaraz Ahmed, 122A, Karl Marx Sarani, Kidderpore, Kolkata -700 023.

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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, Union Bank of India [E-Andhra Bank)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 Fs. 1,44,00,000 (Rupees One Crore Forty Four Lakhs) on 19.05.2018 to Borrower namely M/s. GK Communication (Prop: Sarfaraz Ahmed), 122A, Karl Marx Sarani, Kidderpore, Kolkata -700 023 against the mortgaged property as follows: SCHEDULE OF PROPERTY

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(1) Em of Land Building constructed on approx 4248 sq.ft. situated at Mouza, Garden Reach Road, Old Sheet No. 109 New Sheet No. 104, Touzi No. 1060, Khatian No. 105 Dag No. 215 & 216 within Kolkata Municipality Corporation Ward No. 135 Holding No. 1-95/B Rameswarpur Road, P.S- Garden Reach, District South 24 Parganas, P.I.N. – 700 024 in the name of Abdul Latif (2) Em of Land Building constructed on approx 3300 sq.ft. situated at Mouza, Garden Reach Road, Sheet No. 104, New Sheet No. 109 Touzi No.1068, Khatian No. 105 Dag No. 212-217 within Kolkata Municipality Corporation Ward No. 135 Holding No. 1-95/1 Rameswarpur Road, District South 24 Parganas, P.I.N. – 700 024 in the name of Sarfaraj Ahmed and Farha Naz.

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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 or borrower was classified as NPA on 29-11-2016 due to non servicing of Interest/installment,

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Misc. Appeal No. 19 of 2024-DRAT-Kolkata

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Notice dated 03 December, 2018 under Section 13 (2) of SARFAESI Act. 2002 demanding payment for default amount was served to the defaulting borrower. The outstanding amount as mentioned in notice is Rs. 1,49,13,651.39 (Rupees One crore Forty Nine Lakhs Thirteen Thousands Six Hundred And Fifty One & Thirty nine paise) only and demand notice was received by on behalf of the guarantor in 10 December, 2018.

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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 under Section 13 (2) dated-03 Dec, 2018

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And

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The Secured creditor Issued possession notice dated 27 February, 2019 under Section 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 01 March, 2019.

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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 SARFAESI 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,

And

And

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 insane 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 work, this order could not be issued within specified 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 under Section 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 Union Bank of India [E-Andhra Bank) having its office at 117A Karl Marx Sarani, Kolkata – 700 023 (secured creditor) and being satisfied, it is hereby ordered as per amended section 14(1A) of the SARFAESI Act. of 2002

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Misc. Appeal No. 19 of 2024-DRAT-Kolkata

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that Sri Prasun Kumar Dhara, WBCS (EXE), is hereby authorized in place of Sri Kausik Paul, WBCS (Exe) who has been transferred from office, to take possession of such assets and documents relating thereto and to forward such assets and documents to the secured creditor with police assistance,

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And

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Whereas Authorized Officer, Union Bank of India [E-Andhra Bank) will 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 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.

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This order is issued with reference to earlier Memo No. 1752/SARFAESI Dated 07.09.2022 for change of Magistrate. Let Photostat copy of this order be made available upon compliance of the required formalities.

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Sd/District Magistrate South 24 Parganas”

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17. A bare perusal of orders dated 7.9.2022 and 4.1.2024 would reflect that in the earlier order one Sri Kaushik Paul, WBCS, (Executive) was authorized to take possession with the help of the police. On transfer of Sri Paul, Sri Subrata Palit, WBCS (Executive) was appointed to takeover possession. Thereafter, in the subsequent order the name of the Authorised Officer was changed as Sri Prasun Kumar Dhara, WBCS (Executive). Subsequent order was passed with reference to the Office Memo No. 1752/ASARFAESI dated 07.09.2022 which is the same number by which the earlier order dated 12.11.2020 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, Sri Kaushik Paul, WBCS,

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Misc. Appeal No. 19 of 2024-DRAT-Kolkata

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(Executive) was transferred hence it was necessary to authorize another officer for taking over possession.

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18. 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 unamended 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?

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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-

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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.

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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

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-vs- Capital 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

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Misc. Appeal No. 19 of 2024-DRAT-Kolkata them. It was further held that Section 14 of the SARFAESI Act, 2002 predicts 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 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.

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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

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Misc. Appeal No. 19 of 2024-DRAT-Kolkata 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 -vs- Phoenix ARC Private Limited & Others [(2023) 1 SCC 662] the 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. 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

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Misc. Appeal No. 19 of 2024-DRAT-Kolkata

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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 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

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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 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 the present case 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

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Misc. Appeal No. 19 of 2024-DRAT-Kolkata 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 transferred 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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24. 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.

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Misc. Appeal No. 19 of 2024-DRAT-Kolkata 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 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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25. In W.P.A. 28568 of 2023 (Tata Capital Financial Services Limited -vs- The State of West Bengal & Others) and submits 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

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Misc. Appeal No. 19 of 2024-DRAT-Kolkata District Magistrate is not an act which was done by him against the settled principles of law.

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26. In Thahira -vs- Federal Bank (2016 SCC OnLine Ker 40048) 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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27. A Division Bench of Hon’ble Madhya Pradesh High Court in Writ Petition N. 5864 of 2022 Smt. Mishri Bai -vsShubh 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.

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Misc. Appeal No. 19 of 2024-DRAT-Kolkata Until and unless the entire outstanding amount is recovered, the order remains valid.

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28. 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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29. Reliance is also placed upon a judgment of the Hon’ble Andhra Pradesh High Court in Maruthi Minerals Private Limited -vs- Union of India (AIR 2021 AP 81) wherein, while referring to the 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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30. 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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31. 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

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Misc. Appeal No. 19 of 2024-DRAT-Kolkata 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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32. 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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33. 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. Learned DRT has erred in passing the impugned order. Impugned order suffers from material illegality which is liable 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 27^th February, 2024, passed by Learned DRT-III, Kolkata, in S.A. 102 of 2021 (M/s. G. K. Communication -vs- Union Bank of India), is set aside. Bank would be at liberty to proceed in accordance with law.

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No order as to costs.

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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 and pronounced in open Court.

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