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Judgment
Akil Kureshi, J.—The Petitioner Bombay Mercantile Co-operative Bank Ltd.(''the bank'' for short) has filed these petitions challenging two separate orders both dated 22.3.2010 passed by learned Chief Metropolitan Magistrate, Ahmedabad below exh.1 in Criminal Misc. Application No. 101/2009 and Criminal Misc. Application No. 102/2009.
Since facts are similar, they may be noted as stated in Special Civil Application No. 9623/2010.
2.1. The Petitioner bank had provided overdraft facility to M/s. Western Enterprise, a partnership firm by hypothecating its stock-in-trade and by creating equitable mortgage on 14.3.1989 of the properties of the partners and guarantors and in particular, office No. 3 situated on the third floor of Spectrum Commercial Centre No. 1, Kalupur Ward No. III, Ahmedabad. It is the case of the bank that said borrowers did not repay the bank''s dues. The bank therefore, filed Lavad Case No. 449/1992 before the Board of Nominees Court. The Board of Nominees Court by judgement dated 18.3.1999 decreed the suit of the bank. On the basis of the said decree, District Registrar, Cooperative Societies also issued certificate for execution of the decree. Thereupon Special Recovery Officer of the Petitioner bank issued demand notice to the borrowers and mortgagors. Property in question was also attached on 1.12.2004. However, so far no auction has taken place in terms of provision of Bombay Land Revenue Code. It is also the case of the bank that Respondent No. 3 had also written letter to the bank admitting the dues and permitting the bank to sale the mortgaged property. On 16.9.2003, the bank issued notice u/s 13(2) of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as ''the Securitisation Act''). According to the bank, such notice was duly served on all the borrowers including the guarant Ors. Since no amount was paid for long, the bank issued possession notice u/s 13(4) of the Securitisation Act on 8.6.2009. Said notice was affixed on the property by drawing panchnama.
2.2. The Petitioner bank required police assistance for taking over the physical possession of the property in question. The bank therefore, applied to the Magistrate by filing Criminal Misc. Application No. 101/2009 for the said purpose. On the said application, learned Magistrate passed his impugned order dated 22.3.2010 by which he rejected the prayer of the bank mainly on two grounds. Firstly, learned Magistrate was of the opinion that the Petitioner bank is not the only creditor. There are amounts outstanding due and payable to the Municipal Corporation towards different taxes of the mortgaged property. While passing order u/s 14 of the Securitisation Act, Court also has to consider such outstanding dues of the Corporation. Second ground for rejection of the application of bank was that notice u/s 13(2) of the Securitisation Act was issued on 24.9.2003 whereas application u/s 14 was filed on 12.8.2009. After lapse of considerable time, as per the learned Magistrate, in view of the decision of the Single Judge of this Court rendered in case of Parekh Platinum v. Industrial Finance Corporation of India dated 20.10.2008 passed in Special Civil Application No. 9945/2008, it was not open for the bank to take further steps under the Securitisation Act.
Counsel for the Petitioner bank contended that learned Magistrate committed error in both counts. Relying on the decision of Learned Single Judge in case of Bank of India Vs. Pankaj Dilipbhai Hemnani and Others, , he contended that powers of Magistrate u/s 14 of the Act are limited and issues on merits of the claim could not have been examined by him. He further pointed out that decision of Learned Single Judge in case of Parekh Platinum(supra) was overruled by Division Bench of this Court in case of Industrial Finance Corporation of India v. Parekh Platinum Ltd. and Ors. reported in 2009 (3) GLH 426.
On the other hand, counsel for Respondent No. 4 Ahmedabad Municipal Corporation contended that huge amounts of taxes over the property are not paid by the owner. If the Petitioner bank is allowed to auction sale the property for recovery of dues, dues of Municipal Corporation would remain unpaid.
Having thus heard learned advocates appearing for the parties, we are of the opinion that learned Magistrate committed serious error in rejecting the application of the Petitioner bank.
In case of Bank of India(supra), this Court has already held that Magistrate while considering the application of a secured creditor u/s 14 of the Securitisation Act has limited powers. It was held as follows:
Hence, the Authority who is called upon to act u/s 14 of the Securitisation Act can only assist, nay, is bound to assist the secured creditor in taking possession of the secured asset. Any dispute between the parties regarding the secured asset raised before the Authority cannot be gone into by the Authority; the Authority has to relegate the aggrieved person to seek statutory remedy under the Securitisation Act after taking possession and handing over to the secured creditor. The Authority cannot be permitted to read anything beyond this is Section 14 of the Securitisation Act.
6.1. In the decision in case of Union Bank of India v. Chief Metropolitan Magistrate & 1 dated 6.7.2010 passed in Special Civil Application No. 6753/2010, Division Bench of this Court considered a case where the Magistrate had rejected an application of the secured creditor u/s 14 of the Securitisation Act on certain grounds including the ground that if the property is not mortgaged by the borrower, bank is not entitled to initiate proceedings for sale of such property by taking help of the Court u/s 14 of the Securitisation Act. In that background Division Bench in the said judgement held and observed as follows:
As the Chief Metropolitan Magistrate and the District Magistrate u/s 14 is not empowered to decide the question of legality and propriety of any of the actions taken by the secured creditor u/s 13(4), which can be assailed u/s 17 of the Act by the aggrieved person, under Sub-section (3) of Section 14, the act of the Chief Metropolitan Magistrate or District Magistrate done in pursuance of the said Section cannot be called in question in any Court or before any authority. From the aforesaid provisions of law and observations made by us, it will be evident that Chief Metropolitan Magistrate or District Magistrate while bound to assist the secured creditor in taking possession of the secured asset and to take possession of the documents relating thereto and forward such assets and documents to the secured creditor, he is not empowered to decide the question of genuinety or propriety of such document including the documents signed or agreed between the borrower and the secured creditor.
6.2 In the decision in case of Bharatbhai Ramniklal Sata, Prop. of Satyajeet Trading Company v. Collector & District Magistrate & 1, dated 3/2/2010 passed in Letters Patent Appeal No. 2172/2009 and connected appeal, Division Bench of this Court was examining the case where appeal of the borrower u/s 17 of the Act challenging the order of the Magistrate granting police assistance u/s 14 of the Securitisation Act to the secured creditor i.e. the bank was opposed by the bank on the ground that same is not maintainable as the bank has not taken any measures u/s 13(4) of the Securitisation Act. Such contention was accepted by the Debt Recovery Tribunal observing that it was difficult to hold that the order of the District Magistrate passed u/s 14 of the Securitisation Act is the measure u/s 13(4) of the Act. In this background, the Division Bench relying on the decision of the Apex Court in case of Transcore Vs. Union of India (UOI) and Another, held and observed as under:
From the aforesaid provisions of law and the decision of the Supreme Court, it will be clear that for taking possession, one of the measures for recovery of secured debts under Sub-section (4) to Section 13 of the Act includes the measures taken by secured creditor u/s 14 and therefore, if any order is passed u/s 14, though it cannot be challenged before any Court of law in view of Sub-section (3) to Section 14, but one can raise the legality and propriety of such measures of taking possession u/s 17, if such measure is against the Securitisation Act or Rules framed thereunder.
From the above it can be seen that with limitation of powers, the Magistrate had u/s 14 of the Securitisation Act, it was not open for him to take into account rival claims and to come to the conclusion that since tax dues of the Corporation of the property were also outstanding, application of the bank u/s 14 of the Securitisation Act was required to be rejected. If at all, Municipal Corporation should have been left to avail its legal remedies. It was not open to the learned Magistrate to adjudicate on such rival claims particularly, the Municipal Corporation did not claim to be a secured creditor as no security interest was created in its favour.
With respect to question of delay in seeking such assistance u/s 14 of the Act also learned Magistrate committed an error. Firstly, decision of the Learned Single Judge in case of Parekh Platinum(supra) came to be considered by the Division Bench in case of Industrial Finance Corporation of India(supra). It was held that though secured creditor has to take recourse to measures u/s 13(4) of the Securitisation Act within reasonable time, what is the reasonable time depends upon the facts and circumstances of each case. It was further held that in case secured creditor has shown indulgence to the borrower by giving reasonable time that would not mean that entire proceedings initiated u/s 13(2) of the Securitisation Act would lapse. Secondly in the present case, case of the bank was that after issuance of notice u/s 13(2) of the Securitisation Act, the borrowers had promised the bank to repay the dues, due to which the bank had not taken any immediate steps u/s 13(4) of the Securitisation Act. In any case, whether the bank had reasonable explanation for taking delayed action u/s 13(4) of the Act was not a question to which the learned Magistrate could have gone into and turned down the request of the bank for police assistance u/s 14 of the Act.
Facts are common in both petitions. They are, therefore, not separately discussed from the connected petition of the bank.
Looked from any angle, orders dated 22.3.2010 impugned in these petitions of learned Magistrate cannot be sustained. Same are therefore, set aside. Learned Magistrate shall pass appropriate orders granting police assistance to the bank u/s 14 of the Act as prayed for.
It is however, clarified that it will be open for Respondent No. 4 Corporation to take such steps as may be available under the law to protect its interest in view of unpaid tax dues over the property in question.
With above observations and directions, the petitions are disposed of.