SARFAESI Act - Petition filed under Article 227 of the Constitution - Maintainability [CASE LAW]

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Section 14 - Insofar as the non mentioning of some of the items of the properties in the affidavit filed under Section 14 (1) is concerned, it is evident that only five items of properties were situated within the jurisdiction of the learned Magistrate. The clear wording in Section 14 would show that the assistance can be sought by the secured creditor of any of the secured asset. Furthermore, the orders impugned would reveal that the learned Magistrate was aware of the averment in the affidavit that the secured creditor was intending to proceed against only five items of properties as against the 11 items mentioned in Section 13 (2) notice. Thus, there is no suppression or misstatement as contended by the petitioner.


IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT THE HONOURABLE MR. JUSTICE RAJA VIJAYARAGHAVAN V
THURSDAY, THE 27TH DAY OF JUNE 2019 / 6TH ASHADHA, 1941
O.P. (Crl.) Nos. 283 & 285 OF 2019
K.O. Anto v. State of Kerala
(AGAINST THE ORDER DATED 4.6.2019 PASSED BY THE HON’BLE ADDL. CHIEF JUDICIAL MAGISTRATE (MPS/MLAS) COURT, ERNAKULAM IN M.C.NO.214/2019)
ADVOCATES FOR PETITIONER / 3RD RESPONDENT: BY ADV. SRI.P.V.GEORGE (PUTHIYIDAM)
ADVOCATES FOR RESPONDENTS / STATE & PETITIONER: BY ADVS. SRI.K.K.CHANDRAN PILLAI (SR.) SHRI.MICKY THOMAS SMT.NAMITHA NAMBIAR SMT.S.AMBILY SRI.SAJI THOMAS
OTHER PRESENT: SRI. RAMESH CHAND PUBLIC PROSECUTOR
J U D G M E N T
Challenge in these petitions is directed against the orders passed by the learned Additional Chief Judicial Magistrate in M.C.Nos.214 of 2019 and 67 of 2019. By the impugned orders, the learned Chief Judicial Magistrate rejected the challenge raised by the petitioners with regard to the maintainability of the application filed by the 2nd respondent herein, the South Indian Bank Ltd., under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (‘SARFAESI Act’ for the sake of brevity). The petitioners have also challenged the sustainability of the consequential order passed on the same date by the learned Magistrate as per which, an Advocate Commissioner was appointed to take delivery of the secured assets. As identical questions are raised in both these petitions, they are taken up and disposed of together.
2. Briefly stated, the facts, material for adjudication of the present petitions, may be stated thus:
The South Indian Bank Ltd., the 2nd respondent herein, advanced Over Drafts Against Property (ODAP) in the account of M/s.Kallarackal Maharani Gold Super Market, which is represented by the 1st petitioner in both these cases in his capacity as the proprietor on execution of loan documents and security agreements. The said concern were also extended Loan Against Property (LAP) in the year 2017. In the year 2015, the Bank extended ODAP facility in the account of M/s.Kallarakal jewellers, a partnership firm of which the 1st petitioner is a partner. The borrowers committed default and this led to the issuance of a notice under section 13 (2) of the SARFAESI Act. The total amount sought to be realized is more than Rs.40 Crores as is evident from the notices issued under Section 13(2) of the Act. After complying with the procedure, since the borrowers failed to discharge their liability in full within the period stipulated, the secured creditor took recourse to Section 14 of the Act and filed an application before the Additional Chief Judicial Magistrate seeking assistance in taking possession of the secured asset.
3. On receiving information about the filing of the petition, the petitioners herein entered appearance before the learned Magistrate and filed a detailed objection. It was contended that the application under Section 14 was not maintainable. According to the petitioners, the application was not signed by the competent person authorized under the Act. It was further contended that the affidavit filed in support of the application did not contain the requisite details as mandated under the proviso to Section 14(1) of the SARFAESI Act. It was also asserted that the property against which the assistance was sought was not a secured asset. Another contention raised by the petitioners was that the notice to the respondents under Section 13 (2) of the Act had not been served on all the parties and the failure to comply with Rule 3 of the Security Interest (Enforcement) Rules, 2002 is fatal.
4. It appears that the Chief Manager, who was also the authorised officer, filed an additional affidavit in MC No.67 of 2019 reiterating that the requirements have been fulfilled in letter and spirit.
5. The learned Magistrate considered the affidavit and the objections raised and came to the conclusion that the contentions raised by the petitioners were meritless. Holding that alternate remedies are available to the petitioners under Section 17(1) of the Act, the challenge raised as to maintainability was repelled. As a consequence, separate orders were passed on the same day itself appointing a Commissioner Advocate to take delivery of the secured asset.
6. The above orders are under challenge.
7. Sri. P.V.George, the learned counsel appearing for the petitioners, strenuously urged that the learned Chief Judicial Magistrate has committed a jurisdictional error in entertaining the application in as much as the statute clearly says that only the Chief Metropolitan Magistrate or District Magistrate is entitled to Act under Section 14 of the Act. He would contend that the above question has garnered the attention of the Hon'ble Supreme Court and in some cases proceedings have been stayed. At any rate, the Additional Chief judicial Magistrate will have no jurisdiction to entertain an application, contends the learned counsel. The learned counsel would further contend that the affidavit sworn to by the authorised officer of the secured creditor would not satisfy the mandate under Section 14(1) of the SARFAESI Act. The learned counsel would profusely refer to the decisions of the Apex Court in Standard Chartered Bank v. Noble Kumar and others [(2013) 9 SCC 620] to bring home his point that the satisfaction of the Magistrate contemplated under the 2nd proviso to Section 14 (1) necessarily requires the Magistrate to examine the factual correctness of the assertions made in such an affidavit. He would contend that only after recording of the satisfaction, the learned Magistrate can pass appropriate orders regarding taking of possession of the secured asset. According to the learned counsel, the amendment was brought in the year 2013 to provide safeguards to the interest of the borrower and the Courts are not expected to water down the provisions to the detriment of the borrower.
8. Sri. P.V.George would then target his attention to the affidavit filed under Section 14 and the notice issued under Section 13(2) of the Act. He would point out that though in the notice under Section 13(2) issued by the secured creditor as many as eleven items of secured assets are made mention of, in the affidavit filed in support of the application under Section 14, only 5 items of properties are mentioned. This would clearly violate the mandate under clauses (ii) & (iii) of the proviso to Section 14 of the Act. The learned counsel would also refer to Rule 3 of the Security Interest (Enforcement) Rules, 2002 and would contend that there is total non-compliance as notice to some of the respondents has not been served. Unless notice was effected by affixure or by publishing in the newspaper, it cannot be said that sufficient notice has been served, contends the learned counsel.
9. Per Contra, Sri K.K.Chandran Pillai, the learned Senior counsel, as instructed by Sri.K.K.John, who appeared for the secured creditor, contended that the SARFAESI Act is a complete code by itself, which was enacted for expeditious recovery of dues arising out of loans granted by financial institutions. According to the learned Senior Counsel, the remedy of appeal by the aggrieved under Section 17 before the Debt Recovery Tribunal is provided under the Act followed by a right to appeal before the Appellate Tribunal under Section 18. By placing reliance on the decisions of the Apex Court in Authorised Officer, SBT and Another v. Mathew K.C., United Bank of India v. Satyawati Tandon and others [(2010) 8 SCC 110], and General Manager, Sri Siddeshwara Cooperative Bank Limited and another v. Ikbal and others [(2013) 10 SCC 83], it is submitted that the Hon’ble Supreme Court had categorically laid down that the High Courts in exercise of powers under Article 226 or 227 should not entertain a petition in the ordinary course and in view of the adequate alternate statutory remedies available to the borrower. He would also contend that the process under Section 14 of the Act is non-adjudicatory and administrative in nature and all that the Magistrate is expected to do is to ascertain whether the nine aspects referred to in the 1st proviso of Section 14 (1) of the Act are covered by the declaration furnished in the affidavit filed by the authorised officer of the secured creditor. According to the learned Senior counsel, the Magistrate is not expected to make any enquiry into the truth of the contents of the affidavit or the legal niceties and the Magistrate is not even called upon to issue any notice to any person, who is likely to be affected by any order passed or action taken under such provision. The learned Senior counsel would also refer to Section 17 of the SARFAESI Act and it is submitted that if the Debts Recovery Tribunal after examining the facts come to a conclusion that the action taken by the secured creditor is not in accordance with the provisions of the Act and Rules, then it can require restoration of possession of the property and pass such orders that it may consider appropriate and necessary. To counter the submission of the learned counsel appearing for the petitioner that the Chief judicial Magistrate or the additional Chief judicial Magistrate has no jurisdiction, the learned Senior counsel has referred to the decisions of this Court in Shiyas v. Union of India [2019 (1) KLT 967] and that in Pouly @ Thressia and Another v. Union of India and Others [2019 (1) KHC 75] and it is argued that the very same contentions were raised and the same was repelled. Insofar as the non-mentioning of certain secured assets in the application filed under Section 14 is concerned, he would contend that only five items of properties were within the jurisdiction of the learned Magistrate and Section 14 of the Act would enable the secured creditor to seek assistance for taking possession of “any of the secured asset”. Notices were issued to the firm as well as the proprietary concern and those notices were returned as the establishment was closed by the petitioner. There is no violation to Rule 3 of the Security Interest (Enforcement) Rules, contends the learned Senior counsel.
10. I have anxiously considered the submissions advanced by both sides and perused the records.
11. The first contention advanced by Sri P.V. George relates to the jurisdictional competence of the Additional Chief Judicial Magistrate to entertain an application under Section 14 of the Act. A Division Bench of this Court in Muhammed Ashraf and Another v. Union of India and Others [2008 (3) KHC 935], had occasion to hold that the powers of the Chief Judicial Magistrates in non metropolitan areas and the Chief Metropolitan Magistrate in metropolitan area are one and the same. The same view was taken in Radhakrishnan v. N.V.State of Kerala [2008 (4) KHC 989] as well. Furthermore, the question whether the additional Chief Judicial Magistrate could have entertained the application was raised before a learned Single Judge of this Court in Shiyas (supra) and the said question has been emphatically decided against the petitioner. I respectfully concur with the view taken by the learned single Judge.
12. I am also not impressed with the contention advanced by the learned counsel concerning the non-service of the notice to some of the respondents. The secured creditor in its affidavit has reiterated that notice under Section 13(2) was served on the individuals and when it was attempted to be served on the concerns. which have also been arrayed as a party, the same could not be served as the establishments were closed. In that view of the matter, the said contention has no legs to stand. Insofar as the non mentioning of some of the items of the properties in the affidavit filed under Section 14 (1) is concerned, it is evident that only five items of properties were situated within the jurisdiction of the learned Magistrate. The clear wording in Section 14 would show that the assistance can be sought by the secured creditor of any of the secured asset. Furthermore, the orders impugned would reveal that the learned Magistrate was aware of the averment in the affidavit that the secured creditor was intending to proceed against only five items of properties as against the 11 items mentioned in Section 13 (2) notice. Thus, there is no suppression or misstatement as contended by the petitioner.
13. There is yet another matter. The question whether, the petition filed under Article 227 of the Constitution when they have an alternate remedy has been held against the petitioner by the Hon’ble Supreme Court as well as this Court.
14. In Roshan Narayanan v. Authorized officer, Central Bank of India and Another [2017 (3) KHC 617], it was held by a learned Single Judge that each of the measures commencing with the issuance of any notice under Rule 8 (2), including the stages of approaching the Magistrate, obtaining an order from him, issuance of a notice by the Advocate Commissioner, and culminating with the taking of actual physical possession of the secured asset would give rise to a cause of action to approach the DRT through an application under Section 17 of the SARFAESI Act.
15. In Kanaiyalal Lalchand Sachdev and others v. State of Maharashtra and others [(2011) 2 SCC 782], the very same question was considered and it was answered thus by the Hon’ble Supreme Court.
“21. In our opinion, therefore, the High Court rightly dismissed the petition on the ground that an efficacious remedy was available to the appellants under S.17 of the Act. It is well - settled that ordinarily relief under Art.226/227 of the Constitution of India is not available if an efficacious alternative remedy is available to any aggrieved person. (See: Sadhana Lodh V. National Insurance Co. Ltd. and Another 2003 (3) SCC 524; Surya Dev Rai V. Ram Chander Rai and Others 2003 (6) SCC 675; State Bank of India V. Allied Chemical Laboratories and Another 2006 (9) SCC 252). In City and Industrial Development Corporation V. Dosu Aardeshir Bhiwandiwala and Others 2009 (1) SCC 168, this Court had observed that: 
"The Court while exercising its jurisdiction under Art.226 is duty - bound to consider whether: 
(a) adjudication of writ petition involves any complex and disputed questions of facts and whether they can be satisfactorily resolved; 
(b) the petition reveals all material facts; 
(c) the petitioner has any alternative or effective remedy for the resolution of the dispute; 
(d) person invoking the jurisdiction is guilty of unexplained delay and laches; 
(e) ex facie barred by any laws of limitation; 
(f) grant of relief is against public policy or barred by any valid law; and host of other factors." 
22. In the instant case, apart from the fact that admittedly certain disputed questions of fact viz. non - receipt of notice under S.13(2) of the Act, non - communication of the order of the Chief Judicial Magistrate etc. are involved, an efficacious statutory remedy of appeal under S.17 of the Act was available to the appellants, who ultimately availed of the same. Therefore, having regard to the facts obtaining in the case, the High Court was fully justified in declining to exercise its jurisdiction under Art.226 and Art.227 of the Constitution.”
16. In GM, Sri Siddeshwara Co-operative Bank Ltd. and Others v. Ikbal and Ors. [(2013) 10 SCC 83], the Apex Court had occasion to hold that against the action of a Bank under Section 13(4) of the SARFAESI Act, the borrower had a remedy of appeal to the Debt Recovery Tribunal under Section 17. It was further held that Section 17 being an efficacious remedy, the writ petition filed by the borrower under Article 226 of the Constitution of India ought not have been entertained. Paragraph Nos. 27 to 31 of the judgment lays down the principle.
“27. There is one more aspect in the matter which has troubled us. Against the action of the Bank Under Section 13(4) of the SARFAESI Act, the borrower had a remedy of appeal to the Debts Recovery Tribunal (DRT) Under Section 17. The remedy provided Under Section 17 is an efficacious remedy. The borrower did not avail of that remedy and further remedies from that order and instead directly approached the High Court in extraordinary jurisdiction under Article 226 of the Constitution of India.
28. The learned Single Judge brushed aside the argument of alternative remedy by holding as follows: 16. As regards alternate remedy submitted by the learned Counsel for Respondents II to IV, in the decision cited supra, the Supreme Court has held that the rule of exhaustion of alternate remedy is a rule of discretion and not a rule of compulsion. The court has to assign reasons for entertaining writ petition without exhausting alternate remedy. The Petitioner has been victimized by fraudulent acts of Respondents III and IV. The III Respondent had misused his official position and Petitioner has been deprived of his property in the manner not known to law. There is violation of Article 21 of the Constitution of India. The Petitioner has been deprived of his shelter. The right to livelihood is an integral facet of the right to life under Article 21 of the Constitution, Narendra Kumar v. State of Haryana [(1994) 4 SCC 460]. Therefore, the submission of learned Counsel for Respondents II to IV that Petitioner should have availed alternate remedy cannot be accepted.
29. The learned Division Bench in this regard observed thus:
14. Though the Petitioner could agitate these matters in an appeal filed Under Section 17 of the Act, it is settled law that when a Constitutional right of an individual is affected by statutory authorities by trampling upon the mandatory requirements of law, this Court cannot be a silent spectator. It becomes not only a right, but the duty of this Court to interfere and strike at these illegal activities and uphold the Constitutional right of a citizen of this country. Therefore, the learned Single Judge rightly interfered with these illegal acts of statutory authorities in its jurisdiction under Article 226 and it cannot be found fault with.
30. In Satyawati Tondon United Bank of India v. Satyawati Tondon and Ors. [(2010) 8 SCC 110], the Court was concerned with an argument of alternative remedy provided Under Section 17 of SARFAESI Act. Dealing with this argument, the Court had observed that where an effective remedy was available to the aggrieved person, the High Court must insist that before availing the remedy under Article 226 the alternative remedies available to him under the relevant statute are exhausted. In paragraphs 43, 44 and 45 (pg. No. 123) of the Report, the Court stated as follows:
43. Unfortunately, the High Court overlooked the settled law that the High Court will ordinarily not entertain a petition under Article 226 of the Constitution if an effective remedy is available to the aggrieved person and that this rule applies with greater rigour in matters involving recovery of taxes, cess, fees, other types of public money and the dues of banks and other financial institutions. In our view, while dealing with the petitions involving challenge to the action taken for recovery of the public dues, etc. the High Court must keep in mind that the legislations enacted by Parliament and State Legislatures for recovery of such dues are a code unto themselves inasmuch as they not only contain comprehensive procedure for recovery of the dues but also envisage constitution of quasi-judicial bodies for redressal of the grievance of any aggrieved person. Therefore, in all such cases, the High Court must insist that before availing remedy under Article 226 of the Constitution, a person must exhaust the remedies available under the relevant statute.
44. While expressing the aforesaid view, we are conscious that the powers conferred upon the High Court under Article 226 of the Constitution to issue to any person or authority, including in appropriate cases, any Government, directions, orders or writs including the five prerogative writs for the enforcement of any of the rights conferred by Part III or for any other purpose are very wide and there is no express limitation on exercise of that power but, at the same time, we cannot be oblivious of the rules of selfimposed restraint evolved by this Court, which every High Court is bound to keep in view while exercising power under Article 226 of the Constitution.
45. It is true that the rule of exhaustion of alternative remedy is a rule of discretion and not one of compulsion, but it is difficult to fathom any reason why the High Court should entertain a petition filed under Article 226 of the Constitution and pass interim order ignoring the fact that the Petitioner can avail effective alternative remedy by filing application, appeal, revision, etc. and the particular legislation contains a detailed mechanism for redressal of his grievance.
31. No doubt an alternative remedy is not an absolute bar to the exercise of extraordinary jurisdiction under Article 226 but by now it is well settled that where a statute provides efficacious and adequate remedy, the High Court will do well in not entertaining a petition under Article 226. On misplaced considerations, statutory procedures cannot be allowed to be circumvented.”
17. In Mathew K.C. (supra), referring to the earlier decision in Punjab National Bank v. O.C.Krishnan and Ors. [(2001) 6 SCC 569], it was held with reference to the DRT Act that the said Act has been enacted with a view to provide a special procedure for recovery of debts due to the banks and the financial institutions. There is a hierarchy of appeal provided in the Act, and this fast-track procedure cannot be allowed to be derailed either by taking recourse to proceedings under Articles 226 and 227 of the Constitution or by filing a civil suit, which is expressly barred. Even though a provision under an Act cannot expressly oust the jurisdiction of the court under Articles 226 and 227 of the Constitution, nevertheless, when there is an alternative remedy available, judicial prudence demands that the Court refrains from exercising its jurisdiction under the said constitutional provisions. It was held that the High Court should not have entertained the petition under Article 227 of the Constitution and should have directed the respondent to take recourse to the appeal mechanism provided by the Act.
18. Having considered the entire facts on the touchstone of the provisions of the statute and the binding precedents, I am of the considered view that the orders passed by the learned Magistrate do not suffer from any perversity or jurisdictional error warranting interference by this Court in exercise of its supervisory powers under Article 227 of the Constitution of India. These petitions will stand dismissed.
19. However, in view of the fervent submission of the learned counsel, the proceedings before the learned Magistrate shall be kept in abeyance for a period of seven days to enable the petitioners to approach the statutory Tribunal. It is also made clear that any expression of opinion for the purpose of deciding this original petition shall not be regarded as an expression on merits of the case and the Tribunal shall consider the issue untrammelled by any of the observations made above.

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