Partly allowed

T.John Bose v. State Bank of India

Madras HC6 Mar 2014CRL RC/1455/2013

Case brief

AI extract

What is this about?

The High Court held that a Chief Judicial Magistrate lacks jurisdiction to pass possession orders under Section 14 of the SARFAESI Act in non-metropolitan areas, thereby setting aside such an order. However, restoration of possession was barred due to subsequent sale of the property.

What did the court decide?

The order dated 12.11.2013 by the Chief Judicial Magistrate was set aside; restoration of possession was dismissed as the property was sold to a third party.

T.John Bose Vs State Bank of India — Property and Title | Madras HC (2014)

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IN THE HIGH COURT OF JUDICATURE AT MADRAS

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DATED: 06.03.2014

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CORAM:

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THE HON'BLE Ms.JUSTICE K.B.K.VASUKI

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Crl.R.C.No.1455 of 2013

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and M.P.No.1 of 2013

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1.T.John Bose 2.D.Suganthi Bose .. Petitioners Vs. State Bank of India Udhagamandalam Branch rep. by Authorised Officer Chief Manager K.M.Madhaiyan .. Respondent

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Criminal Revision is filed under Section 397 r/w 401 of the Code of Criminal Procedure, to call for the entire records in pursuance of the order dated 12.11.2013 made in Crl.M.P.No.1025/2013 on the file of the Chief Judicial Magistrate of Nilgiris at Udhagamandalam and to set aside the same and to restore the physical possession of the property viz., residential building and guest house building which situates and includes 80 cents of land in R.S.No.1098/Part comprised in R.S.Nos.618/3 & 671/3, New S.No.1098 and 1099/1, situated at Ketti Village, Ketti Panchayat, Coonoor within the limits of Coonoor Sub Registration District and Registration District of Nilgiris to the petitioners herein.

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For Petitioners : Mr.K.Rajasekaran For Respondent : Mr.P.D.Aadikesavalu

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O R D E R

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Heard both sides.

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2.The present Criminal revision is filed against the order of the Chief Judicial Magistrate, Nilgiris at Udhagamandalam, in and under which, the physical possession of the property more fully described in the petition, belonging to the petitioners was ordered to be taken over.

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3.The petitioners herein are the borrowers, who availed loan facilities from the respondent bank for floriculture business. The petitioners, for due repayment of the amount borrowed, mortgaged their agricultural land situated in Ketti Village, Ootacamund

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District. However, the borrowers became defaulters. As a result, the property belonging to the borrowers was brought for sale by way of public auction. In pursuance of the same, proceedings were initiated before the Debt Recovery Tribunal, Coimbatore. The petitioners have also approached this court by way of writ petitions at various stages. Ultimately, possession notice dated 6.2.2013 was issued and the same was followed by an order dated 12.11.2013 passed by the Chief Judicial Magistrate for taking possession of the property and the possession was, in pursuance of the order passed by the Chief Judicial Magistrate, taken over on 18.11.2013, which is under challenge in this revision.

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4.The impugned order was challenged before this Court by the petitioners on two grounds: (i) According to Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter shortly referred to as 'SARFAESI Act'), either the Chief Metropolitan Magistrate or District Magistrate alone has power to pass order under Section 14 of the Act for taking possession of the secured assets and the Chief Judicial Magistrate has no jurisdiction to pass one such order, as such the order is void ab initio and non est in law. (ii)The authority concerned ought to have, before ordering physical possession of the property, satisfied about the necessity for taking physical possession of the property.

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5.The learned counsel for the petitioners has in support of his contention against jurisdiction of the Chief Judicial Magistrate to pass one such order under Section 14 of the Act, cited the full bench decision of this Court reported in 2013 (5) CTC 225 (K.Arockiyaraj v. the Chief Judicial Magistrate, Srivilliputhur, Virudhunagar District and others). A reference was made before the full bench regarding jurisdiction of the Chief Judicial Magistrate to pass one such order under Section 14 of the Act in non metropolitan areas. Initially, WP (MD) No.7155/2012 was heard by the Division Bench, which after taking note of conflicting decisions rendered by this Court in Indian Overseas Bank v. Sree Aravindh Steels Ltd, 2009 (1) CTC 341: 2009(1) MLJ (Crl) 416, the Aurangabad Bench of Bombay High Court reported in Induslnd Bank Ltd v. State of Maharashtra, 2008 (110) Bom.LR 2880 : CDJ 2008 BHC 520 and Bombay High Court in the decision reported in Arjun Urban Co-operative Bank Ltd., Solapur v. C.J.M., Solapur, 2009 (2) DRTC 431 (Bom), thought fit to refer the matter to larger bench. The full bench, after duly appreciating the submissions made on both sides and after referring to various judgments of various High courts cited on both sides and after referring to the jurisdiction, powers and functions of Chief Metropolitan Magistrate, District Magistrate and Chief Judicial Magistrate, expressed its view in para 35 of the judgment that Section 14 does not contemplate the secured creditors to approach the Chief Judicial Magistrates for assistance to secure their assets and the Secured creditors can approach the Chief Metropolitan Magistrate in Metropolitan areas and in non Metropolitan areas, the secured creditors has to approach the District Magistrate

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and not the Chief Judicial Magistrate and accordingly answered the reference. While doing so, the full bench has held that the decision of the Division Bench of this court reported in Indian Overseas Bank v. Sree Aravindh Steels Ltd 2009 (1) CTC 341, has not laid down the correct proposition of law and overruled the same. By answering so the reference made before them, the full bench directed the writ petitions to be posted before the appropriate bench.

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6.Applying the view of the full bench to the facts of the present case, wherein, the Chief Judicial Magistrate, Nilgiris at Udhagamandalam has no jurisdiction to pass any order for taking over possession under section 14 of the SARFAESI Act and the order impugned herein is, as rightly argued by the learned counsel for the petitioners, contrary to law without jurisdiction and is perse illegal, void ab initio and non est in law. On this score alone, the impugned order dated 12.11.2013 is liable to be set aside.

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7.At this juncture, the learned counsel for the respondent bank by relying on the decision of the Hon'ble Supreme Court reported in MANU/SC/0874/2013 (Standard Chartered Bank v. V.Noble Kumar and others) has challenged the maintainability of this criminal revision. It is contended before this court that the 'appeal' under Section 17 is available to the borrower against any measure taken under Section 13(4) and as taking possession of the secured asset is only one of the measures that can be taken by the secured creditor, the borrower is entitled to prefer an appeal under Section 17 after the possession of the secured asset is handed over to the secured creditor. This Court has no quarrel with the principle laid down by the Hon'ble Apex Court in the decision cited above. However, the same is not applicable to the facts of the present case for the simple reason that what is challenged herein is the propriety and jurisdiction of the Chief Judicial Magistrate to pass one such order under Section 14 of the Act. In view of the same, the objection raised against maintainability of the present criminal revision is not accepted by this Court. However, the finding rendered by this court to the effect that the order passed by the Chief Judicial Magistrate, Nilgiris at Udhagamandalam is without jurisdiction, will not automatically render the petitioners to be entitled for further relief of restoration of possession.

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8.During the pendency this criminal revision, the secured creditor approached the District Collector for obtaining the order for taking over the possession and the District Collector passed one such order and the same was challenged by way of W.P.No.32778/2013. The Division Bench of this Court by order dated 28.2.2014 dismissed the writ petition. While doing so, it is held that the District Collector is the competent authority to pass orders to take over possession of secured asset and hand over the same to the first respondent bank under the relevant provisions of SARFAESI Act. It may be true that the Division Bench observed therein that in non Metropolitan areas, the Chief Judicial Magistrate has no jurisdiction

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to pass orders under Section 14 and the Chief Metropolitan Magistrate or the District Magistrate, within whose jurisdiction any such secured asset is situated, have jurisdiction to pass order to take possession of secured assets. Though the first petitioner herein, who is the sole petitioner in the writ petition, has challenged the order passed by the District Collector dated 26.11.2013 mainly on the ground that the same was obtained by suppressing the pendency of criminal proceedings, such objection raised by the petitioner was negatived and the impugned order of the District Collector was confirmed and the writ petition was accordingly dismissed by the Division Bench. After taking over the possession of the property, the property was brought for sale and sold to third party.

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9.In view of such subsequent development, the petitioners are though entitled to get part of the relief, are dis-entitled to get later part of the relief sought for herein.

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10.In the result, the criminal revision is partly allowed by setting aside the order dated 12.11.2013 made in Crl.M.P.No.1025 of 2013 on the file of the Chief Judicial Magistrate, Nilgiris at Udhagamandalam and the criminal revision is partly dismissed in respect of other relief. Consequently, connected miscellaneous petition is closed.

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Sd/Assistant Registrar(CO) 02.05.14 /True Copy/ Sub. Assistant Registrar rk To 1. The Chief Judicial Magistrate, Nilgiris at Udhagamandalam.

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