The Division Bench of Justice Atul Sreedharan and Justice Rajesh Sekhri in a petition against the order of the CJM under Section 14 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 [“the SARFAESI Act”] observed that the principles of natural justice cannot be read into Section 14 of the SARFAESI Act.
In the case at hand, the Petitioner-Company had secured a loan aggregating to Rs. 1,70,00,000/- lacs (Rupees One Crore Seventy Lacs Only), in addition to a car loan facility of Rs. 2.94 lacs and a credit card facility of Rs. 5.00 lacs from the Respondent-J&K Bank. However, after the petitioner failed to maintain the loan account as per the agreed terms and conditions, it was classified as a Non-Performing Asset, and accordingly a notice under Section 13(2) of the SAFAESI Act came to be issued by the Bank, followed by an Application under Section 14 of the Act before the Chief Judicial Magistrate. The CJM vide order dated 26.04.2024 directed the Tehsildar concerned to take possession of the secured assets and Tehsildar issued notice to the petitioner on 18.05.2024.
The Petitioner, in an earlier petition before the High Court challenged the notice under Section 13(2) of the SARFAESI Act issued by the Respondent-Bank, the order of CJM dated 26.04.2024 as well as the notice of Tehsildar dated 18.05.2024. The High Court in the earlier petition had directed the Respondent Bank not to take any coercive measures against the Petitioner subject to deposition of an amount of Rs. 20 lacs within two weeks, and thereafter by virtue of a subsequent order had directed that if the aforesaid deposition was not made by the petitioner, the interim direction shall stand vacated and if made a similar amount be deposited again by the next date and if not done so, the interim protection shall stand vacated, meaning thereby, the Petitioner was directed to deposit a total of Rs. 40 lacs for the interim protection to continue.
The Petitioner’s case was that though he had deposited an amount of Rs. 17 lacs with the Respondent-Bank, however, the Bank refused to accept the remaining amount and CJM, Srinagar vide impugned order dated 26.04.2024 disposed of the application preferred by the respondent under Section 14 of the SARFAESI Act and the impugned possession notice came to be issued by the Tehsildar whereby Petitioner has been asked to remove the necessary belongings within 15 days from the date of issuance of notice and handover possession of the property to theRespondent-Bank.
The main ground of challenge urged by the Petitioner was that impugned order under Section 14 of the SARFAESI Act as well as the possession notice came to be passed without affording an opportunity of being heard to the Petitioner.
The Court while referring to Section 14 of the SARFAESI Act observed that Section 14 of the SARFAESI Act merely empowers the Chief Metropolitan Magistrate or District Magistrate to facilitate the secured creditor to take possession of the secured assets and documents. The role of the Magistrate in such cases is that of a facilitator only. The Court further observed “If an application is made by the secured creditor for possession of secured assets under Section 14, the Magistrate is only vested with the power to embark upon an inquiry to verify the information provided in the application and facilitate the possession of secured assets. The inquiry envisaged under Section 14 is not intended to adjudicate on the rights of the parties or the legality or otherwise of the transaction.”
Further, while noting that the function of the Magistrate under Section 14 is purely ministerial in nature, the Court held that Magistrate is not obliged to give the borrower an opportunity of being heard, even if he appears of his own. It was observed, “The Scheme of the SARFAESI Act does not remotely suggest compliance with natural justice at the stage of Section 14 and the intervention of a judicial or quasi-judicial body is deferred till the possession of secured assets is taken.”
Thus, the Court declared the primary ground urged by the Petitioner that it has not been provided an opportunity of being heard by the Magistrate and the Tehsildar as misconceived, and while considering rest of the grounds, the Court held that there is no illegality or impropriety in the impugned orders, and thus, dismissed the Petition.
