HC Andhra Pradesh (18.02.2022) in Mangalagiri Textile Mills & Anr. Vs. State Bank of India, & Anr. (Writ Petition No. 30161 of 2021) held that;
We would, thus, hold and direct that the CMMs shall, when passing orders under Section 14 of the Act, mandate a reasonable time-limit for taking over possession of the secured asset in question.
This, to our mind, appropriately secures the interests of all concerned parties. Needless to state, it will be open to the bank or financial institution to approach the CMM for extension of time, if need be.
Once the time specified in the warrant (Under section 14 of SARFAESI) has elapsed, possession of the property in question cannot be taken over, under the same warrant.
Excerpts of the order;
Heard Mr. T. Lakshmi Narayana, learned counsel for the petitioners and Mr. Satyanarayana Moorthy, learned counsel for the respondents – State Bank of India (hereinafter referred to as the „SBI‟).
# 2. By the instant writ petition, the petitioners assail the action(s) taken by the SBI under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the „Act‟) alleging violation of the procedure prescribed therein as well as non-conformity with The Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as the „Rules‟).
# 3. The factual matrix may first be adverted to. The petitioners obtained loan from the SBI. The account having become a Non-Performing Asset (hereinafter referred to as „NPA‟), the petitioners applied for One-Time Settlement (hereinafter referred to as „OTS‟), whereunder the total amount to be paid was Rs.10,36,25,840.82. The application money of Rs.52,00,000/- was paid and SBI also issued sanction letter dated 23.11.2020. Though as per the terms of OTS, the first instalment to be paid was Rs.1.04 crores by 23.12.2020, the petitioners paid only Rs.32,00,000/- on 23.12.2020. As a consequence, SBI issued letter dated 29.12.2020 informing cancellation of OTS and asking the petitioners to deposit the entire Bank dues with interest at contracted rate. The request of the petitioners by letter dated 03.01.2021 for extension of time for payment of balance amount of first instalment of Rs.72,00,000/- was rejected by the SBI vide letter dated 21.01.2021. The same is pending challenge in W.P.No.2512 of 2021, before this Court. As the petitioners had defaulted, the SBI, prior to sanctioning OTS, on 27.02.2019 had already moved before the Chief Metropolitan Magistrate (hereinafter referred to as the „CMM‟), Guntur, in Crl.M.P. No.201 of 2019, under Section 14 of the Act for taking physical possession of the secured asset/property, in which the following order was made on 28.12.2020:
“The petition is filed under Section 14(1) of the SARFAESI Act to appoint an Advocate Commissioner to take possession of the petition schedule property and to deliver the possession to the petitioner bank.
Heard and perused the record.
It seems that the petitioner bank followed the procedure contemplated under the Act to proceed against the mortgaged property for realization of loan amount due to the petitioner bank. Therefore, the petition has to be allowed.
In the result, the petition is allowed. Sri K. Veera Bhaskar, Sri P. Koteswara Rao, Sri/Smt. V. Sreelatha, Sri/Smt. J. Rama Lakshmi, Advocates are appointed as Commissioners to take possession of the petition schedule property and to deliver the possession to the petitioner bank. Their fee are fixed at Rs.10,000/- each payable by the petitioner bank. The Commissioner shall issue notice to both parties and advocates on record before execution of warrant. Commissioner is at liberty to break open the schedule for execution of warrant with aid of police when ever required. Warrant returnable with Report by 15.02.2021.
Warrant shall be issued on payment of commissioner fee and process on or before on 04.01.2021”‟
# 4. On 04.01.2021, the matter was adjourned, for payment of Commissioner fee and process, to 05.01.2021, on which date it was recorded as under:
“Process memo and fee receipt of Commissioner are filed. Hence, issue warrant along with Police Aid to the Advocate-Commissioner. Placed before Officer as and when report is filed”‟
# 5. Thereafter, on 17.12.2021, the Advocate Commissioners took possession of the property.
# 6. Learned counsel for the petitioners submitted that the order passed by the CMM was beyond 60 days of filing of the application under Section 14 of the Act, which is impermissible in view of Section 14 of the Act. It was further contended that even thereafter, as per order dated 28.12.2020 of the CMM, the warrant was to be executed latest by 15.02.2021, which was the returnable date fixed. He submitted that „return‟ in Black‟s Law Dictionary has been defined as „A court officer‟s bringing back of an instrument to the court that issued it‟. Thus, learned counsel submitted that without the CMM extending the validity of the warrant, the same lost its force and was incapable of being executed and
the same having been done is patently illegal and requires interference by this Court.
# 7. Per contra, learned counsel for the SBI opposed the petitioners‟ submissions and urged for dismissal of the petition. His first objection was that the Advocate Commissioners have not been made party. He submitted that the delay in execution of the warrant was due to the petitioners filing a number of cases. Learned counsel submitted that the period of 60 days was directory, as held by the Hon‟ble Supreme Court in C Bright v District Collector, (2021) 2 SCC 392.
# 8. Based on the rival contentions to which learned counsel confined their submissions, three important questions arise for consideration and determination:
(a) Whether the instant writ petition ought to be entertained?
(b) Whether the time-limit under Section 14 of the Act of 30 days to pass an order, extendable in aggregate to 60 days, is mandatory or directory?
(c) Whether, once the time specified in the warrant had elapsed, could possession of the property in question still be taken over, under the same warrant?
# 13. In State Bar Council of Madhya Pradesh v Union of India, Petition for Special Leave to Appeal (C) 10911/2021, vide Order dated 16.12.2021, the Hon‟ble Supreme Court directed as follows:
“With a view to resolve the problem being faced by the parties, for the time being and purely as a stop-gap arrangement, we request the concerned High Court(s) to entertain the matters falling within jurisdiction of DRTs and DRATs under Article 226 of the Constitution of India, till further orders.
We make it clear that once the Tribunal(s) is/are constituted, the matters can be relegated to the Tribunals by the High Court(s).”
# 15. The aforesaid discussion sums up the law. Ordinarily, we must defer to the procedure under the Act. However, Article 226 is, in no manner, effaced by the Act, being an integral part of the basic structure of the Constitution, and still, recourse thereto can be had by an aggrieved party.
# 18. In this backdrop, we are inclined to entertain this writ petition for more reasons than one. First, the facts compel us to do so. Second, it is no longer res integra that even in the face of an available alternative efficacious remedy, a writ petition is maintainable, subject to judicial discretion. Third, the Order dated 16.12.2021 passed by a Bench of three Hon‟ble Judges in State Bar Council of Madhya Pradesh (supra) supports us. As such, we answer Question (a) in the affirmative.
# 20. In terms of C Bright (supra), Question (b) is answered holding that the time limit stipulated in Section 14 of the Act is directory and not mandatory. The conclusion of the Hon‟ble 3-Judge Bench in C Bright (supra) would cover Chief Metropolitan Magistrates as well.
# 21. As such, the petitioners‟ contention that the CMM ought not to have passed the order dated 28.12.2020 on SBI‟s application filed on 27.02.2019 under Section 14 of the Act is negatived. In this view, the CMM‟s order dated 28.12.2020 does not suffer from any illegality, and cannot be faulted with.
# 23. A succinct exposition on Section 14 of the Act can be found in Standard Chartered Bank v V Noble Kumar, (2013) 9 SCC 620 and Authorised Officer, Indian Bank v D Vishalakshi, (2019) 20 SCC 47. However, as the recourse to Section 14 by SBI is not in controversy herein, the need to dwell thereupon is obviated.
# 24. Learned counsel for SBI has vehemently relied on the judgement by a learned Single Judge of the Delhi High Court in Housing Development Finance Corporation Ltd. v Rakesh Kumar, 2021 SCC OnLine Del 5209, to contend that there is no requirement for the CMM to fix a time limit for taking possession of the secured asset in exercise of power under Section 14 of the Act. He, therefore, urges us that no interference is called for in the present matter. He would canvass that as no time-limit was required to be fixed, taking over of possession after expiry of the time in the warrant would not render the taking over illegal.
# 28. An incongruous position cannot be countenanced where the authority conferred power under Section 14 of the Act is required to exercise that within a maximum period of sixty days, or at the very least, as a result of C Bright (supra), endeavour so to do, but the actual taking over of physical possession, to be done through a person appointed by the Chief Metropolitan Magistrate/District Magistrate, would be at such person‟s will. This is not the intent of the Act.
# 33. The same principle would hold the field. We would, thus, hold and direct that the CMMs shall, when passing orders under Section 14 of the Act, mandate a reasonable time-limit for taking over possession of the secured asset in question. This, to our mind, appropriately secures the interests of all concerned parties. Needless to state, it will be open to the bank or financial institution to approach the CMM for extension of time, if need be.
# 34. In the present case, the learned CMM, in fact, adopted the correct approach in law by fixing a date by which the warrant was to be executed. Further, the time-limit is in the interest of the secured creditor, as the Advocate Commissioner would also be bound to act within the stipulated time-frame. As already observed, the CMM can be re-approached for extension of time, if required.
# 35. Therefore, Question (c) is answered thus - once the time specified in the warrant has elapsed, possession of the property in question cannot be taken over, under the same warrant.
# 38. The order to take possession was issued by the learned CMM on 28.12.2020 fixing the returnable date as 15.02.2021. However, without any prayer/application being made before the learned CMM by the SBI and the CMM also not having extended time or the life of the warrant, the same was still acted upon and executed by the Advocate Commissioner on 17.12.2021, by which physical possession of the asset in question has been taken over.
# 39. At the cost of repetition, the Court would note that the order passed by the CMM was a judicial order and conferred upon the Advocate Commissioner authority to take over physical possession. Thus, the Advocate Commissioner could not have exceeded jurisdiction beyond the time specifically stipulated by the Court. It is true that the CMM‟s order of 05.01.2021 records that the matter be placed before the Officer as and when report is filed. But the same has to be read harmoniously and contextually juxtaposed with the earlier orders dated 28.12.2020 and 04.01.2021 passed by the CMM.
# 41. Thus, we have no hesitation to hold that the action of the Advocate Commissioner in taking over physical possession of the asset on 17.12.2021, purportedly in terms of the order dated 28.12.2020 passed in Crl.M.P. No.201 of 2020 by the learned CMM cannot be sustained as it was clearly devoid of the authority of law and, accordingly, is declared illegal.
# 46. Moreover, in Rajesh Kumar v State of Bihar, (2013) 4 SCC 690, particularly at Paragraphs 14-16, it has been held that the power to mould relief is well-recognised and is available to a Writ Court to render complete justice.
# 47. We have noticed an injustice and a violation of law. We, thus, proceed to fashion out the appropriate relief, despite no formal application for the same being made via pleadings. However, in the course of arguments, learned counsel for the petitioner did urge us to pass an order that would subserve justice.
# 50. Therefore, we direct that status quo ante as on 16.12.2021 be restored forthwith. Necessary consequences in law shall entail. The SBI is at liberty to approach the CMM concerned seeking an appropriate order to extend time for taking possession of the secured asset within four weeks from today. The learned CMM shall proceed further in accordance with law, after giving both parties an opportunity of hearing. All questions of fact and law in this regard, and the rights and contentions thereto of both sides, remain open for consideration by the learned CMM, and we have not expressed any opinion, either way, thereon. This order, however, shall not result in any recoveries being made from the Advocate Commissioners of any fees paid in terms of the CMM‟s order.
# 51. The Registry shall circulate a copy of this Judgement to all Chief Metropolitan Magistrates/Chief Judicial Magistrates and District Magistrates in the State of Andhra Pradesh, for ensuring that while passing order under Section 14 of the Act, a reasonable time is fixed for the person authorised to execute/carry out/implement/give effect to such order by actual taking over and delivery of physical possession of the properties covered under such order and further, to obviate any ambiguity or chance of transgression, such time shall also be incorporated in the consequential warrant/authorisation issued to such authorised person.
# 52. We note that an objection was raised on behalf of the SBI that the Advocate Commissioner concerned ought to have been made a party in the instant proceeding. Such stand was adopted in the counter-affidavit. This, in the considered opinion of the Court is not required since, in the present case, this Court is not considering the reasons and/or the justification for the Advocate Commissioner having executed/given effect to the order authorising him to take over physical possession of the property in question, much beyond the time fixed/granted by the CMM to do so. As has been held by us, the order under Section 14 of the Act loses its force/effect, in law, upon expiry of the returnable date, as fixed by the CMM, unless extended. Thus, for the instant adjudication, the Advocate Commissioner is not a party required to be heard. Moreover, the Advocate Commissioner, being conferred only the power, limited, of taking over physical possession by the CMM under Section 14 of the Act, has no vested right of being heard with regard to the validity/life thereof.
# 53. Ergo, this writ petition is disposed of in the afore-stated terms. Pending application(s), if any, do not survive for consideration and, accordingly, stand consigned to records. In these facts and circumstances, there shall be no order as to costs.
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