Housing Development Finance Corporation Ltd. v. Government of Kerala represented by the Chief Secretary to the Government, Secretariat, Thiruvananthapuram, and Shaji U.K.

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE V.CHITAMBARESH FRIDAY, THE 5TH DAY OF JULY 2013/14TH ASHADHA, 1935 ## WP(C).No. 16628 of 2013 (C) ---------------------------AGAINST THE ORDER/JUDGMENT IN CMP 4106/2013 of CHIEF JUDICIAL MAGISTRATE, THRISSUR PETITIONER(S): ------------------ HOUSING DEVELOPMENT FINANCE CORPORATION LTD. (HDFC LTD. IN SHORT) RAMON HOUSE 169 BACK BAY RECLAMATION, MUMBAI-400 020 REPRESENTED BY A.S.SACHIN ASSISTANT MANAGER(LEGAL), WORKING AT HDFC HOUSE 3RD FLOOR, RAVIPURAM JUNCTION, M.G.ROAD KOCHI 682 015. BY ADV. SRI.C.P.SAJI RESPONDENT(S): ---------------------------- 1. GOVERNMENT OF KERALA REPRESENTED BY THE CHIEF SECRETARY TO THE GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM 695 001. 2. SHAJI.U.K, AGED 34 YEARS S/O.KOCHU MOHAMMED, UPPATT HOUSE, THANISSERY PO KAIPPAMANGALAM, THRISSUR 680 681. R1 BY ADV. SRI. NIKHIL SHANKER (AMICUS CURIAE) R BY GOVERNMENT PLEADER SRI.P.V.ELIAS THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 05-07-2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ## WP(C).No. 16628 of 2013 (C) ---------------------------- ## APPENDIX ## PETITIONER(S)' EXHIBITS ---------------------------- EXHIBIT P1 TRUE COPY OF THE HOME LOAN AGREEMENT DATED 16/6/2011 EXECUTED BETWEEN PETITIONER THE BORROWER - EXHIBIT P2 TRUE COPY OF THE DEMAND NOTICE DATED 5/2/2013 ISSUED BY THE PETITIONER TO THE BORROWER - EXHIBIT P3 TRUE COPY OF THE JUDGMENT DATED 27/3/2013 IN WPC NO.8462/2013 DATED 27/3/2013 OF THE HON'BLE HIGH COURT OF KERALA, ERNAKULAM. - EXHIBIT P4 TRUE COPY OF THE CMP NO.4106/2013 EXCLUDING THE ANNEXURES DATED 9/5/2012 FILED BY THE PETITIONER BEFORE THE HON'BLE CHIEF JUDICIAL MAGISTRATE, THRISSUR. EXHIBIT P5 TRUE PHOTOSTAT COPY OF THE PROCEEDINGS IN EXHIBNIT P4 PETITION BEFORE MAGISTRATE COURT, THRISSUR RESPONDENT(S)' EXHIBITS ------------------------------ NIL. //TRUE COPY// P.S. TO JUDGE. ## **C.R.** ## **V.CHITAMBARESH, J.** ------------------------------- ## **W.P (C) No.16628 of 2013** ------------------------------- **Dated this the 5[th] day of July, 2013** ## **J U D G M E N T** Is the Chief Metropolitan Magistrate or the District Magistrate ('the Magistrate' for short) totally forbidden from issuing notice to the borrower on request made by the secured creditor in terms of Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ('the SARFAESI Act' for short) ? 2. The Housing Development Finance Corporation Ltd. ('HDFC' for short) put in Ext.P4 request in Crl.M.P.No.4106/2003 on the file of the court of the Chief Judicial Magistrate, Thrissur. The request was made in terms of Section 14 of the SARFAESI Act to take possession of the secured asset which is a residential house occupied by the second respondent borrower and his family. The Magistrate in the course of proceedings passed Ext.P5 order directing issue of notice to the borrower preparatory to the passing of final order and the same is impugned in this writ petition. Ext.P5 order reads as follows:- W.P (C) No.16628/2013 2 “9.5.2013 : Issue notice to respondent and call on 30.5.2013.” The HDFC contends that the Magistrate egregiously erred in issuing notice to the borrower on a request put in by the secured creditor for taking possession of the secured asset since no adjudicatory process is involved. The HDFC highlights the fact that the borrower did not choose to file any objection to Ext.P2 notice of demand issued in terms of Section 13(2) of the SARFAESI Act. The HDFC adds that the borrower did not also avail the instalment facility granted to regularise the housing loan in Ext.P3 judgment in W.P (C) No.8462/2013 on the file of this Court filed earlier. The plea of the HDFC in essence is that issuance of notice to the borrower is an unnecessary and impermissible exercise which would only tend to delay the act of taking possession of the secured asset as requested. 3. I did not deem it fit to issue notice to the borrower in this writ petition for fear of protraction of proceedings even though I heard Mr.C.P.Saji, Advocate on behalf of the HDFC and Mr.Nikhil Shanker, Advocate as Amicus curiae at length. 4. Section 14 of the SARFAESI Act has been amended W.P (C) No.16628/2013 3 by the Enforcement of Security Interest and Recovery of Debt Laws (Amendment) Act, 2012 which has come into force on 15.1.2013 by gazette publication. The amended Section 14 of the SARFAESI Act reads as follows:- **“14. Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking possession of secured asset** - (1) Where the possession of any secured asset is required to be taken by the secured creditor or if any of the secured asset is required to be sold or transferred by the secured creditor under the provisions of this Act, the secured creditor may, for the purpose of taking possession or control of any such secured asset, request, in writing, the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction any such secured asset or other documents relating thereto may be situated or found to take possession thereof, and the Chief Metropolitan Magistrate or, as the case may be, the District Magistrate shall, on such request being made to him - - (a) take possession of such asset and documents relating thereto; and - (b) forward such assets and documents to the secured creditor. Provided that any application by the secured creditor shall be accompanied by an affidavit duly affirmed by the authorised officer of the secured creditor, W.P (C) No.16628/2013 4 declaring that - - (i) the aggregate amount of financial assistance granted and the total claim of the Bank as on the date of filing the application; - (ii) the borrower has created security interest over various properties and that the Bank of Financial Institution is holding a valid and subsisting security interest over such properties and the claim of the Bank or Financial Institution is within the limitation period; - (iii) the borrower has created security interest over various properties giving the details of properties referred to in sub-clause (ii) above; - (iv) the borrower has committed default in repayment of the financial assistance granted aggregating the specified amount; (v) consequent upon such default in repayment of the financial assistance the account of the borrower has been classified as a nonperforming asset; (vi) affirming that the period of sixty days notice as required by the provisions of sub-section (2) of section 13, demanding payment of the defaulted financial assistance has been served on the borrower; (vii) the objection or representation in reply to the notice received from the borrower has been W.P (C) No.16628/2013 5 considered by the secured creditor and reasons for non-acceptance of such objection or representation had been communicated to the borrower; - (viii) the borrower has not made any repayment of the financial assistance in spite of the above notice and the Authorised Officer is, therefore, entitled to take possession of the secured assets under the provisions of sub-section (4) of section 13 read with section 14 of the principal Act; - (ix) that the provisions of this Act and the rules made thereunder had been complied with: Provided further that on receipt of the affidavit from the Authorised Officer, the District Magistrate or the Chief Metropolitan Magistrate, as the case may be, shall after satisfying the contents of the affidavit pass suitable orders for the purpose of taking possession of the secured assets: Provided also that the requirement of filing affidavit stated in the first proviso shall not apply to proceedings pending before any District Magistrate or the Chief Metropolitan Magistrate, as the case may be, on the date of commencement of this Act. (1A) The District Magistrate of the Chief Metropolitan may authorise any officer subordinate to him,- - (i) to take possession of such assets and documents W.P (C) No.16628/2013 6 relating thereto; and - (ii) to forward such assets and documents to the secured creditor. (2) For the purpose of securing compliance with the provisions of sub-section (1), the Chief Metropolitan Magistrate of the District Magistrate may take or cause to be taken such steps and use, or cause to be used, such force, as may, in his opinion, be necessary. (3) No act of the Chief Metropolitan Magistrate or the District Magistrate or any officer authorised by the Chief Metropolitan Magistrate or the District Magistrate done in pursuance of this section shall be called in question in any court or before any authority.” (emphasis supplied) 5. The requirement of an affidavit duly affirmed by the authorised officer of the secured creditor accompanying the application or request has become mandatory after the amendment to Section 14 of the SARFAESI Act. The affidavit should declare the financial assistance granted and the total claim of the secured creditor as on date in addition to the details of the valid and subsisting security interest over the property. The affidavit of the secured creditor should further declare the extent of the default committed by the borrower in the repayment and the consequent classification of his account as a W.P (C) No.16628/2013 7 non-performing asset. The affidavit should affirm the expiry of sixty days after the service of the notice of demand for repayment on the borrower under Section 13(2) of the SARFAESI Act. The objection if any received and the reason for its non acceptance and as to whether the same was communicated to be borrower should be divulged in the affidavit. The entitlement of the secured creditor to take possession of the secured assets on account of the non-repayment of the financial assistance by the borrower despite notice should also be revealed in the affidavit. 6. The first proviso to Section 14 (1) of the SARFAESI Act mandates that the Magistrate should be satisfied about the contents of the affidavit before suitable orders are passed for the purpose of taking possession of the secured assets. The Magistrate in arriving at the subjective satisfaction will be well within his powers to seek clarification from the secured creditor or even issue notice to the borrower for verification of facts. The satisfaction of the contents of the affidavit need not be blindly arrived at and the necessity of the Magistrate to pass 'suitable orders' imply an application of his mind. Similarly the W.P (C) No.16628/2013 8 Magistrate may take or cause to be taken such steps and use or cause to be used such force as may in his opinion be necessary under Section 14(2) of the SARFAESI Act. The Magistrate may think it wise to notify the borrower or the occupant of the secured asset before the use of necessary force for dispossession particularly in regard to a dwelling house. It is all within the opinion of the Magistrate to issue notice to the borrower on a request put in by the secured creditor in terms of the amended provisions of Section 14 of the SARFAESI Act. 7. It is one thing to say that the borrower is not entitled to any notice under Section 14 of the SARFAESI Act and yet another thing to say that the Magistrate cannot at all issue notice to the borrower under any circumstances. I am conscious of the decisions of this Court in **C.R.Sindhu v. State of Kerala and others** [(2008) 2 KLT 736] and **Mohammed Ashraf and Another v. Union of India and others** [(2008) 4 KLT 1]. But all those decisions following **Transcore v. Union of India and others** [AIR 2007 SC 712] were rendered much before the amendment to Section 14 of the SARFAESI Act. The same would at best indicate that the borrower has no right for insistence of W.P (C) No.16628/2013 9 notice to him on request made by the secured creditor under Section 14 of the SARFAESI Act since no adjudicatory process is involved. But the decisions do not anywhere lay down the law that the hands of the Magistrate are tied and that no notice could be issued to the borrower under any circumstance what so ever on request made under Section 14 of the SARFAESI Act. 8. I should caution that no adjudication is warranted under Section 14 of the SARFAESI Act and the notice if at all any to the borrower is only for the purpose of arriving at the satisfaction or opinion by the Magistrate. The satisfaction has to be arrived at as per the first proviso to Section 14(1) and the opinion has to be formed as per Section 14(2) of the SARFAESI Act by the Magistrate. Such satisfaction or opinion can be arrived at even without notice to the borrower and it is for the Magistrate to take such steps as are necessary in the circumstances of the case. The proceedings under Section 14 of the SARFAESI Act are not intended to be procrastinated and it is the duty of the Magistrate to take possession of the secured assets and forward the same to the secured creditor. No contentious issues shall be adjudicated in the proceedings W.P (C) No.16628/2013 10 leaving it open to the borrower to voice his grievance under Section 17 of the SARFAESI Act before the Debts Recovery Tribunal. 9. Ext.P5 order of the Magistrate in the instant case issuing notice to the borrower on a request by the secured creditor in terms of Section 14 of the SARFAESI Act calls for no interference. Ext.P4 request by the secured creditor has been filed only on 9.5.2013 long after Section 14 of the SARFAESI Act was amended on 15.1.2013 and Ext.P5 order passed preparatory to the final order is not liable to be set at naught. I however direct the Chief Judicial Magistrate, Thrissur to pass suitable final orders on Ext.P4 petition within a period of one month from the date of receipt of a copy of this judgment. The Writ Petition is disposed of. No costs. ## **V.CHITAMBARESH, Judge.** nj.