AI Structured Summary
Not yet generated for this judgment
Judgment
Dr. D.Y. Chandrachud, J.—In these proceedings, the petitioner, which is an Asset Reconstruction Company, registered u/s 3 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, has impugned the validity of an order passed by the Sub Divisional Magistrate at Solapur on 16 July, 2010 dismissing an application u/s 14.
The petitioner issued a notice u/s 13(2) to the third and fourth respondents on 15 July, 2009. The third respondent had taken a loan from the ICICI Bank for purchasing a house. The loan was secured by a mortgage of the immovable property in question, situate at Solapur. The Bank is stated to have assigned the debts and liabilities of the third and fourth respondents to the petitioner. Accordingly, by its notice dated 15 July, 2009, issued u/s 13(2), the petitioner called upon the third and fourth respondents to pay an amount of Rs. 5.41 lakhs on 21 December, 2009. The petitioner informed the third and fourth respondents that it would take possession of the secured asset. The authorised officer sought to take possession on 4 January, 2010, but according to the petitioner, the third and fourth respondents declined to hand over possession. On 15 February, 2010, an application was filed before the second respondent, the Sub Divisional Magistrate at Solapur, for an order u/s 14. The second respondent dismissed the application by his impugned order dated 16 July, 2011. The second respondent has observed that (i) The petitioner had not furnished a reply to the objection raised by the third and Fourth respondents to the notice u/s 13(2) in breach of the provisions of section 13(3A); (ii) The panchanama drawn at the stage of taking a measure u/s 13(4) appears to be doubtful; and (iii) The notice had not been published in the newspapers as required. Accordingly, the second respondent rejected the application holding that considering the legal and factual position, the petitioner had failed to follow the proper procedure laid down under the Act.
Counsel appearing on behalf of the petitioner submitted that the second respondent has transgressed the limits of his jurisdiction while passing an order u/s 14. Counsel submitted that by virtue of the judgment of a Division Bench of this Court in Trade Well v. Indian Bank, 2007 (2) Mh.L.J. (Cri) 412 : 2007 Bom.C.R. (Cri) 783, the District Magistrate while exercising powers u/s 14 is required to decide only two issues namely: (i) Whether the immovable property falls within his jurisdiction; and (ii) Whether a notice of demand u/s 13(2) has been served on the borrower. In the present case, it was urged that admittedly the property is situated at Solapur within the jurisdiction of the second respondent. Moreover, it has been admitted that the notice u/s 13(2) was served on the third and fourth respondents.
On the other hand, Counsel appearing on behalf of the third and fourth respondents sought to rely upon the judgment of a Learned Single Judge of the Karnataka High Court in Vijaya Bank v. Shameem Transport, (2007) 137 Comp Cas 428 Karnataka and supported the reasoning contained in the impugned order.
The parameters of the jurisdiction that is exercised by the District Magistrate u/s 14 has been explained in a judgment of the Division Bench of this Court in Trade Well (supra). The Division Bench has observed that while passing an order u/s 14, the District Magistrate has to consider only two aspects. He has to first determine whether the secured asset falls within his territorial jurisdiction. Secondly, the District Magistrate has to determine whether the notice u/s 13(2) has been furnished. The Division Bench held that no adjudication is contemplated at that stage. The principles which have been enunciated in the judgment of the Division Bench are inter alia as follows :
The bank or financial institution shall, before making an application u/s 14 of the NPA Act, verify and confirm that notice u/s 13(2) of the NPA Act is given and that the secured asset falls within the jurisdiction of CMM/DM before whom application u/s 14 is made. The bank and financial institution shall also consider before approaching CMM/DM for an order u/s 14 of the NPA Act, whether section 31 of the NPA Act excludes the application of sections 13 and 14 thereof to the case on hand.
CMM/DM acting u/s 14 of the NPA Act is not required to give notice either to the borrower or to the 3rd party.
He has to only verify from the bank or financial institution whether notice u/s 13(2) of the NPA Act is given or not and whether the secured assets fall within his jurisdiction. There is no adjudication of any kind at that stage.
It is only if the above conditions are not fulfilled that the CMM/DM can refuse to pass an order u/s 14 of the NPA Act by recording that the above conditions are not fulfilled. If these two conditions are fulfilled, he cannot refuse to pass an order u/s 14.
Remedy provided u/s 17 of the NPA Act is available to the borrower as well as the third party.
Remedy provided u/s 17 is an efficacious alternative remedy available to the third party as well as to the borrower where all grievances can be raised.
The impugned order of the second respondent has clearly transgressed the limitations on his jurisdiction. The second respondent has virtually entered upon an adjudication by coming to the conclusion that the procedure under the Act has not been complied with. The objection of the third and fourth respondents to the adoption of a measure u/s 13(4), has to be addressed before the DRT u/s 17 of the Act. Those objections cannot be either urged before the District Magistrate or be adjudicated at the stage when the Bank or financial institution seeks an order u/s 14. u/s 14, it has been provided that the District Magistrate, within whose jurisdiction the secured asset is situated, can be moved where possession of the asset is required to be taken by the secured creditor or if any of the secured assets is required to be sold or transferred by the secured creditor under the Act. The order of the District Magistrate u/s 14 is in aid of the measure that the secured creditor seeks to take u/s 13(4) by taking over possession of the secured asset. As a matter of fact, as was held by the Division Bench in Trade Well, even a notice to the borrower is not contemplated at that stage. The remedy of the borrower is u/s 17, once the measure has been taken u/s 13(4). The judgment of the Learned Single Judge of the Karnataka High Court in Vijaya Bank case, in fact, also adopts a position in law consistent with what has been stated in the judgment of this Court in Trade Well. In any event, the second respondent was duty bound to act in accordance with the law laid down by this Court, which is binding upon him. In failing to do so and in virtually entering upon the merits of the entitlement of the petitioner, the second respondent has exceeded his jurisdiction. There is absolutely no dispute about the position that a notice u/s 13(2) was served on the third and fourth respondents and that the secured asset is within the jurisdiction of the second respondent. Once these two facts were established, the second respondent could not have refused to pass an order u/s 14.
The Learned AGP has placed on the record of the Court, two letters addressed to the second respondent on 18 November, 2010 and 17 January, 2011 by the office of the Government Pleader requesting him to furnish instructions to File an affidavit in reply in these proceedings. No reply has been filed by the second respondent despite adequate communication to that effect by the office of the Government Pleader.
For these reasons, we allow the Petition by setting aside the impugned order of the Sub Divisional Magistrate at Solapur dated 16 July, 2010 in Application No. 4 of 2010. We direct that the second respondent shall, within a period of one week from the date on which an authenticated copy of this judgment is produced before him, pass an order u/s 14 and thereupon take steps forthwith to effectuate compliance with the order. The second respondent shall take necessary steps under sub-section (2) of section 14 for effectuating compliance.
The Petition is disposed of in the aforesaid terms. No order as to costs.