Rishi Purushothaman v. The Federal Bank Ltd. and Others

# IN THE HIGH COURT OF KERALA AT ERNAKULAM ## PRESENT THE HONOURABLE MR. JUSTICE DAMA SESHADRI NAIDU TUESDAY,THE 27TH DAY OF NOVEMBER 2018/6TH AGRAHAYANA, 1940 ## WP(C).No. 25608 of 2018 ## PETITIONER/S: RISHI PURUSHOTHAMAN AGED 31 YEARS, S/O.PURUSHOTHAMAN, BODHI,KANDACHIRA, PERINADU P.O, KOLLAM-691 601. BY ADVS. SRI.C.V.MANUVILSAN SMT.K.VIDYA SMT.SREELEKSHMI SANALKUMAR SRI.VINODE V. LUKA ## RESPONDENT/S: - 1 THE FEDERAL BANK LTD. REPRESENTED BY ITS MANAGING DIRECTOR,P.B.NO.103, FEDERAL TOWERS, ALUVA,ERNAKULAM -683101. - 2 FEDERAL BANK LTD. ASSET RECOVERY BRANCH, 4TH FLOOR, FEDERAL TOWERS,STATUTE, THIRUVANANTHAPURAM-695 001. - 3 AUTHORISED OFFICER FEDERAL BANK LTD. ASSET RECOVERY BRANCH, 4TH FLOOR, FEDERAL TOWERS,STATUTE, THIRUVANANTHAPURAM-695 001. - 4 THE BRANCH MANAGER THE FEDERAL BANK LTD, KOLLAM BRANCH,RAVI'S ARCADE, NEAR IRON BRIDGE,KOLLAM -691 013. WPC No.25608 of 2018 2 5 ADV. ANAS N. ADVOCATE COMMISSIONER, MEVARATHU HOUSE,MEVARAM, THATTAMALA P.O, KOLLAM-691020. BY ADVS. SRI.A.ANTONY SMT.LEELAMMA ANTONY THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 27.11.2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ## JUDGMENT ## **Introduction:** On a borrower’s default, the bank begins recovery proceedings. It invokes Section 14 of the SARFAESI Act and approaches the jurisdictional Magistrate, to take possession of the secured asset. Then, before divesting the borrower of his possession, should the Magistrate notify him? ## **Facts:** 2. Rishi Purushothaman, the petitioner, as the proprietor of a business concern, has an overdraft facility for Rs.1 crore with the Federal Bank Ltd. As it turned out, Purushothaman defaulted on the repayment; he cites “unexpected economic stagnation”. Then, the respondent Bank began recovery proceedings. First, it issued a notice under Section 13(2) of the SARFAESI Act (“the Act”). And later, WPC No.25608 of 2018 3 besides taking symbolic possession under Section 13(4) of the Act, it invoked Section 14 and applied to the jurisdictional Chief Judicial Magistrate (CJM), to take physical possession of the secured asset. Pending those proceedings, the petitioner has filed this writ petition. **Submissions:** ## **Petitioner’s:** 3. To begin with, on the maintainability of the writ petition, Sri C.V. Manuvilsan, the petitioner's counsel, has tried to mount a spirited defence of the petitioner's stand: the writ petition is eminently maintainable. He contends that the Chief Judicial Magistrate has not put the petitioner on notice in the pending proceedings under Section 14 of the Act. Sri Manuvilsan fairly submits that there are many judgments from this Court—one from me, too—to hold that in Section 14 proceedings, the law does not mandate notice to the debtor. 4. Indeed, Sri Manuvilsan has made strenuous efforts to distinguish all those judgments: _C.R. Sindhu v. State of Kerala_[1] , _Sosamma Abraham v. Chief Manager, State Bank of Travancore_[2] , and _Catholic Syrian Bank Ltd., Thrissur v. M/s. Orma Marble World,_ > 1 2007 (4) KHC 944 2 2008 (2) KHC 291 WPC No.25608 of 2018 4 _Thalore._[3] According to him, in _C.R. Sindhu_ this Court dealt with a Criminal Miscellaneous Case. Because Section 14 expressly bars all judicial proceedings against steps under Section 14, this Court in _C.R. Sindhu_ has, he continues, rightly held that the writ petition is not maintainable. He nevertheless submits that right to writ remedy cannot be treated as an ordinary statutory remedy. 5. Referring to the next judgment, that is _Sosamma Abraham_ , Sri Manuvilsan contends that the case arose out of a Criminal Revision Petition and that also suffered the same fate, as did _C.R. Sindhu_ . In short, they both are judicial proceedings within the sweep of Section 14 and have no protective cover of Article 226 of the Constitution of India. 6. About _Orma Marble World_ , this Court's recent judgment, Sri Manuvilsan strenuously contends that it differs on facts. According to him, there the parties have a consensual arrangement about how the Bank could take possession of the secured asset if there were to be any default. The Bank thus exercised its right of taking possession, based only on that consensual arrangement. 7. Sri Manuvilsan has also drawn my attention to a judgment of 3 2018 (3) KHC 813 WPC No.25608 of 2018 5 the Karnataka High Court in _Remo Software Pvt. Ltd., (M/s.) Bangalore v. HDB Financial Services Ltd., Ahmedabad_[4] to drive home his specific contention that even in the proceedings under Section 14, prior notice is mandatory. 8. Placing specific emphasis on the principles of natural justice, Sri Manuvilsan has submitted that whatever be the nature of proceedings—even in administrative proceedings—notice is the _sine qua non_ . In other words, the requirement of serving a prior notice on the affected person is not an empty formality. On natural justice, he has relied on _Canara Bank v. Debasis Das_[5] . 9. On the issue whether the Chief Judicial Magistrate undertakes any adjudication, Sri Manuvilsan refers to _Sanjivkumar Surajprakash Aggarwal v. State Bank of India_[6] . There he refers to an expression the Supreme Court used when it remanded the matter: that the Chief Judicial Magistrate must adjudicate the issue afresh. So, for Sri Manuvilsan, Section 14 leads to adjudication and adjudication, thus, needs notice. Finally, he has drawn my attention to _Mamleshwar Prasad v. Kanahaiya Lal_[7] . This case, he asserts, holds that a judgment > 4 2017 KHC 5315 5 AIR 2003 SC 2041 6 2016 (14) SCC 532 7 AIR 1975 SC 907 WPC No.25608 of 2018 6 ignoring any statutory provision cannot be treated as a precedent. 10. In the end, Sri Manuvilsan has urged this Court to allow the writ petition: to nullify the pending proceedings before the Chief Judicial Magistrate because the entire procedure adopted by the Chief Judicial Magistrate falls foul of the principles of natural justice. ## **Respondent’s:** 11. On the other hand, Sri A.Antony, the counsel for the respondent Bank, contends that as admitted by the petitioner's counsel, this Court has, time and time again, held that the notice is not mandatory under Section 14. According to him, the very Statute dispenses with such requirement, as interpreted by this Court. He has also drawn my attention to the amended Section 14 of the Act to contend that only when the dispossession takes place, can the aggrieved person approach the Tribunal, ventilating his grievance. In short, there is an efficacious alternative remedy for the petitioner, and the petitioner should invoke it—invoke it only after the proceedings before the learned CJM conclude, resulting in his dispossession. So he urges this Court to dismiss the writ petition. 12. Heard Sri C. V. Manuvilsan, the petitioner’s counsel, and Sri WPC No.25608 of 2018 7 A.Antony, the respondent Bank’s counsel, besides perusing the record. **Discussion:** 13. Granted, Rules of natural justice are not codified canons. But through ages, at different stages, the judicious minds have advanced, articulated, and affirmed that sure mark of civilisation, in whatever spear, is the fairness—fairness in thought, fairness in deed, fairness even in adjudication. Procedurally, this fairness in the judicial sphere has accumulated a few precepts, and they have come to be called the Principles of Natural Justice. ## **What are the Principles of Natural Justice?** 14. The judicial precedents are a legion. Inexorably, the principles of natural justice have reached the precedential pinnacle. As a result, they have attained the status of fundamental rights—almost— and have to be invariably read into every statute unless there is a specific exclusion of their application. 15. In _Sahara India (Firm) (1) v. CIT_[8] , the contention was that even in an administrative order, if it is prejudicial, the elementary principles of natural justice and fair play have to be applied. As a result, an opportunity of hearing must be afforded—at least a “bare 8 (2008) 14 SCC 151 WPC No.25608 of 2018 8 modicum of natural justice has to be observed.” In that context, _Sahara India_ observes that Rules of “natural justice” are not embodied rules. The phrase “natural justice” is also not capable of a precise definition. The underlying principle of natural justice, evolved under the common law, is to check arbitrary exercise of power by the State or its functionaries. The principle thus implies a duty to act fairly. Positively put, it is to secure justice or, put negatively, to prevent a miscarriage of justice. These rules can operate only in areas not covered by any law validly made. They do not supplant the law but supplement it. Then, _Sahara India_ quotes with approval its earlier observations in _Swadeshi Cotton Mills v. Union of India_[9] _._ 16. _Swadeshi Cotton Mills_ lucidly explains the meaning and scope of the concept of “natural justice”. Referring to several decisions, it observes that rules of natural justice are not embodied rules; they are a means to an end and not an end in themselves. So _Swadeshi Cotton Mills_ acknowledges the difficulty of cataloging those principles exhaustively. But there are two fundamental maxims of . natural justice: (i) _audi alteram partem_ and (ii) _nemo judex in re sua_ 9 (1981) 1 SCC 664 WPC No.25608 of 2018 9 The _audi alteram partem_ rule has many facets; two of them are these: (a) notice of the case to be met; and (b) opportunity to explain. These rules cannot be sacrificed at the altar of administrative convenience or expediency. 17. Further goes the observation in _Swadeshi Cotton Mills_ that the general principle—as distinguished from an absolute rule of uniform application—seems that where a statute does not, in terms, exclude this rule of prior hearing but contemplates a post-decisional hearing, amounting to a full review of the original order on merits, then such a statute would be construed as excluding the _audi alteram partem_ rule at the pre-decisional stage. Then it pertinently observes under what circumstances the hearing assumes importance: “[c]onversely if the statute conferring the power is silent with regard to the giving of a pre-decisional hearing to the person affected and the administrative decision taken by the authority _involves civil consequences of a grave nature, and no full review or appeal on merits against that decision is provided, courts will be extremely reluctant to construe such a statute as excluding the duty of affording even a minimal hearing_ , shorn of all its formal trappings and dilatory features at the pre-decisional stage, unless, viewed pragmatically, it would paralyse the administrative process or frustrate the need for utmost promptitude. In short, this rule of fair play must not be jettisoned save in very exceptional circumstances where compulsive necessity so demands. The court must make every effort to salvage this cardinal rule to the maximum extent possible, with WPC No.25608 of 2018 10 situational modifications. But, the core of it must, however, remain, namely, that the person affected must have reasonable opportunity of being heard and the hearing must be a genuine hearing and not an empty public relations exercise.” (Italics supplied) 18. We may, with profit, refer to M.P. Jain & S. N. Jain’s _The Principles of Administrative Law_[10] _._ It enumerates the instances when the principles of natural justice play no role: (a) legislative functions; (b) price fixation; (c) numerous cases; (d) statute expressly providing for hearing in one situation but remaining silent in the other situation; (e) prompt action; (f) failure causing no prejudice; (g) express exclusion by statute; (h) effective post-decisional hearing. 19. When natural justice is to apply, the Court may still characterize a function as quasi-judicial, though the predominant trend now is to apply natural justice, without labelling the function as quasijudicial or administrative. _Maneka Gandhi v. Union of India_[11] _,_ the author's note, has discussed the conceptual basis of natural justice elaborately. Natural justice is “fair play in action”; so it must apply to both _quasi_ -judicial and administrative functions. That accepted, the distinction between the two, if any, loses significance. In other words, > 10 Revised by Amita Dhanda, 7[th] Ed., LexisNexis. 11 1978 AIR 597 WPC No.25608 of 2018 11 it is unnecessary to label every action: Judicial, _quasi_ -judicial, administrative. 20. The learned authors, then, observe that in England also, “label-consciousness” or “word-worship” has become a less conspicuous feature of Administrative Law. The notion of “fairness” in preference to the rules of natural justice has gained general acceptance there too. The authors also pose unto themselves a battery of questions: If “labelling” is unnecessary from the perspective of natural justice, can it be wiped out from the Indian Administrative Law? Does avoidance of “labelling" make the task of the administrative authorities, or of Courts, easier in determining when the principles of natural justice are to be applied? And where should the “fairness”, with all its vagueness be followed? Further, does “labelling” serve any purpose from the viewpoint of procedural fairness in a particular situation? In other words, is it a good policy to give up identification of a function as _quasi_ -judicial altogether? 21. To answer these questions, the learned authors observe that in - India, there is still no escape from identifying a function as _quasi_ judicial for several purposes. Of these purposes, categorisation of the WPC No.25608 of 2018 12 proceedings before the Constitutional Courts is prominent. So long as the artificial distinction exists between an error of jurisdiction, error of law, and error of law apparent on the face of the record, the labelling of an administrative function cannot be avoided. Indeed, for example, faced with statutory silence, an administrative authority does not have - to give reasons, but a _quasi_ -judicial body must. Similarly, a _quasi_ judicial body cannot review its own decision, but an “administrative” body can. 22. Then, a significant question comes to the fore: by eliminating the functional labelling or identification, does the judicial task become easier? First, we must agree that natural justice has conceptual - constraints. Unless an official act is labelled as judicial or _quasi_ judicial, the principles of natural justice cannot be invoked. But “fairness”, as a judicial concept, has a better reach. In this context, the learned authors note that the phrase “fairness” is vague and its contours are unclear. According to them, all these determinations require a delicate balancing of conflicting values and involve a policy approach, too. 23. If “natural justice” is vague and flexible, the concept of WPC No.25608 of 2018 13 “fairness” is still more so. There is a danger that the universal adoption of the notion of fairness may dilute the rules of natural justice even in those situations in which otherwise natural justice would have applied. After all this catechism, the authors’ conclude thus: the elimination of “labelling” and introduction of the elusive concept of “fairness” has not made the Courts’ task or the administrators’ any easier than before. But, over time, the rigidity of the principles has become stifling, forcing a shift—ever so subtle—in the judicial thinking. The Courts have introduced a dichotomy into their application: whether the compliance is mandatory or directory. 24. In other words, a person may get affected, or is prejudiced because the authorities have disregarded the principles of natural justice; for example, by not giving prior notice. Then the burden, I may note, is on the person who complains of the prejudice, to prove that he suffered adverse consequences. 25. First hesitantly, but later with some amount of certainty, the theory of useless formality has come to govern certain infractions of the principles, especially on a fair hearing. For, by then, the ivarable application of natural justice across the board, under all WPC No.25608 of 2018 14 circumstances, has come to have a stifling hold in the judicial and administrative arenas. 26. In _M.C. Mehta v. Union of India_ ,[12] M. Jagannatha Rao, J., speaking for a Division Bench of the Supreme Court, after surveying the theory of `useless formality' in its entire gamut, has held that on the admitted or indisputable facts, if only one conclusion is possible and permissible, the Court need not issue a writ just because there is violation of the principles of natural justice. His Lordship went on to observe that even where the facts are not at all admitted or beyond dispute, there is considerable unanimity that the courts can, in the exercise of their "discretion", refuse _certiorari_ , prohibition, _mandamus,_ or injunction even though natural justice is not followed. 27. _M. C. Mehta_ tellingly observes, after quoting the previous precedents, that “even in relation to statutory provisions requiring notice, a distinction is to be made between cases where the provision is intended for the individual benefit and where a provision is intended to protect the public interest. In the former case, it can be waived while in the case of the latter, it cannot be waived." 28. Thus, incrementally, the courts have recognized the areas of 12 (1999) 6 SCC 237 WPC No.25608 of 2018 15 exception, where the principles of natural justice have little role to play: - (i) Exclusion in case of emergency (ii) Express statutory exclusion (iii) Where disclosure would be prejudicial to public interests (iv) Where a prompt action is needed (v) Where it is impracticable to hold hearing or appeal (vi) Exclusion in case of purely administrative matters (vii) Where no right of a person is infringed (viii) The procedural defect would have made no difference to the outcome (ix) Exclusion on the ground of ‘no-fault’ decision maker. ## **The Third Dimension: Ministerial** 29. The entire discourse on the principles of natural justice in the sphere of adjudication confines itself to the two nebulously demarcated fields: judicial and _quasi_ -judicial acts on the one hand, and the administrative act on the other. First, we must acknowledge that there is an amorphous, hazy—if any—line of separation between administrative acts and judicial acts, quasi-judicial included. That WPC No.25608 of 2018 16 distinction remaining indeterminate, we may think of a third dimension: ministerial functions of a judicial or quasi-judicial body. It has engaged, I reckon, neither the academic nor adjudicatory attention, yet. 30. Unlike the administrative and quasi-judicial functions, certain functions can be termed ministerial. A "ministerial act", as defined in P. Ramanatha Aiyer's _The Law Lexicon_[13] , is an act “a person performs in a given state of facts, in a prescribed manner, in obedience to the mandate of a legal authority, without regard to, or the exercise of, his own judgment upon the propriety of the act done”. The same _Lexicon_ also defines it as an official action performed as “a certain and specific duty arising from designated facts.” I stress “designated facts.” _Black's Law Dictionary_[14] _,_ too, defines a "ministerial act" as an "act performed without the independent exercise of discretion or judgment." 31. “Ministerial” in the context of justice dispensation is no pejorative term to be despised. _The Law Lexicon_ also regards it as a synonym to “administrative,” as does _Burton’s Legal Thesaurus._[15] In 13 Lexis Nexis, 4[th] Ed. 14 9th Ed. 15 Mc Graw Hill Eduction, Ed., 2013, p. 17 WPC No.25608 of 2018 17 fact, _Burton’s_ also regards a ministerial act as an adjuvant act. And it provides the shades of meaning this “adjuvant” carries: accessory, aiding, ancillary, assistant, _assisting_ , auxiliary, cooperative, helpful, helping, _ministerial_ , obliging, serving, subservient, subsidiary. 32. Indeed, with copious references to the lexical exegesis of an elusive judicial concept—ministerial act—I do acknowledge the expository limitations of dictionary definitions. For as Judge Learned Hand would have it, “it is one of the surest indexes of a mature and developed jurisprudence not to make a fortress out of the dictionary.” ## **Under Section 14, Does CJM Discharge Magisterial or Ministerial Functions?** 33. But I reckon Section 14 of the SARFAESI Act does designate the CJM’s action as an adjuvant—assisting, cooperating, or helping—administrative act. Ministerial Act. Let us examine the provision: Section 14 - Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking possession of secured asset: - (1) Where the possession of any secured assets 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 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_ WPC No.25608 of 2018 18 _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, declaring that-- (i) . . . to (ix) . . . 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 [_ sic, satisfied of] _the contents of the affidavit_ pass suitable orders for the purpose of taking possession of the secured assets [within a period of thirty days from the date of application]: [Provided further that if no order is passed by the Chief Metropolitan Magistrate or District Magistrate within the said period of thirty days for reasons beyond his control, he may, after recording reasons in writing for the same, pass the order within such further period but not exceeding in aggregate sixty days.] Provided also that the requirement of filing affidavit stated in the first proviso shall not apply to proceeding 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 or the Chief Metropolitan Magistrate may authorise any officer subordinate to him,--_ WPC No.25608 of 2018 19 _(i) to take possession of such assets and documents 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 [any officer authorised by the Chief Metropolitan Magistrate or District Magistrate] done in pursuance of this section shall be called in question in any court or before any authority._ (italics supplied) 34. Section 14 unambiguously requires the CJM _to assist_ a secured creditor in its taking possession of the secured asset. “Assist” is an expression that is hardly employed in the adjudicatory arena. So we can hold that CJM performs no judicial—not even _quasi_ -judicial —functions under Section 14. Then, comes the alternative assertion: he must be discharging administrative functions. But an administrator is not an automaton; he does enjoy an element of discretion— freedom at the joints, so to say. Here, under Section 14 of the Act, does the CJM have any discretion vested in him? WPC No.25608 of 2018 20 35. True, the secured creditor must file an affidavit and that must satisfy certain conditions, as enumerated in Section 14 (1) (b) (i) to (ix). That affidavit filed, what does the CJM do? The CJM must satisfy himself that the affidavit answers Section 14 (1) (b) (i) to (ix). What the affidavit should contain, the section has specified. So the CJM will tick off the affidavit to ensure that it contains what Section 14 has enlisted. Neither an element of adjudication nor an element of discretion presents itself in this exercise of ticking off. **The Scrivener’s Slips:** 36. Section 14 says that the CJM “after satisfying the contents of the affidavit” shall pass suitable orders. It is not the CJM that satisfies the affidavit; it is the affidavit that satisfies the CJM. The provision could have been felicitous had it read: Provided further that on receipt of the affidavit from the Authorised Officer, the District Magistrate, or the Chief Metropolitan Magistrate shall satisfy himself of the affidavit contents and order taking possession of the secured assets within thirty days from the date of application. 37. The second slip concerns the time frame: thirty days. The provisions reads: “[P]ass suitable orders for the purpose of taking WPC No.25608 of 2018 21 possession of the secured assets within a period of thirty days from the date of application.” This fragment of a sentence has two parts— passing orders and taking possession. On the semantic principle of proximity, “taking possession” is more proximate to “thirty days.” Similarly, on the interpretative index of the last antecedent, “thirty days” has “taking possession” as its last antecedent. So literally, under Section 14 the “taking possession” must be completed in thirty days. 38. To avoid this ambiguity, that part of provision may have read: “[P]ass suitable orders in thirty days from the date of application, for taking possession of the secured assets.” I must say it is only one way of recasting the sentence; there are many more. Of course, the following proviso clears the air. It allows the CJM to pass orders beyond thirty days, but in sixty days maximum. Indeed, prolixity and ambiguity are the avoidable vices of legislative drafting. The rest of the common-law world has woken up to this menace. Countries like the USA, the UK, and Australia have been redrafting their legislations in plain language: simple and straight, with no syntactic curlicues. It is time India, too, did that. WPC No.25608 of 2018 22 39. Illustratively, the provision could have read in plain language: Section 14 - Chief Metropolitan Magistrate (CJM) or District Magistrate (DM) to assist secured creditor in taking possession of secured asset: (1) Under this Act, if a secured creditor wants to take possession of, sell, or transfer a secured asset, in writing it may request the CJM or the DM to take possession of the asset. Then, the CJM or the DM shall take possession of the asset and related documents, and forward them to the secured creditor. But the secured creditor, through its authorised officer, must file an affidavit before the CJM or the DM, declaring that— (i) . . . to (ix) . . . After receiving the written request and the affidavit, in thirty days the CJM or the DM will satisfy himself of the affidavit contents and, then, order possession of the secured asset. For justifiable reasons recorded, if the CJM or the DM cannot order possession in thirty days, he must do so within the next thirty days. Nevertheless, the condition of the secured creditor’s filing the affidavit does not apply to the proceedings pending when the Act commenced. (1A) The CJM or the DM may delegate his power to take possession of the secured assets and the related documents, and to forward them to the secured creditor. (2) to comply with sub-section (1), the CJM or the DM may take or order all steps and use force, if necessary. (3) No act of the CJM or the DM or his authorised officer under this WPC No.25608 of 2018 23 section shall be questioned before any court or authority. ## **Ministerial or Magisterial—Discussion Resumed:** 40. The CJM can delegate his powers of taking possession of the secured asset. To “comply” with the statutory mandate, the CJM must take all steps necessary and can use force as well. The CJM’s action under Section 14 cannot be question before any authority or a court of law. Dispossessed, the debtor gets his cause of action; that is how the Supreme Court has held in _Standard Chartered Bank v. V. Noble Kumar_[16] . It observes that under Section 14, a secured creditor “who desires to seek the assistance of the State's coercive power for obtaining possession of the secured asset” must request in writing the CJM or the DM to take possession of the secured asset. The language of Section 14 originally enacted purportedly, according to _Noble Kumar_ , obliged the Magistrate to take possession of the secured asset and documents, if any, with no further scrutiny. 41. Then, _Noble Kumar_ takes note of the Bombay High Court’s decision in _Trade Well v Indian Bank_[17] : CMM/DM acting under Section 14 of the NPA Act does not have to give notice either to the > 16 (2013) 9 SCC 620 17 2007 Crl.LJ 2544 WPC No.25608 of 2018 24 borrower or to the third party. According to _Noble Kumar_ , because of _Trade Well_ , as followed by other High Court, the Parliament inserted a proviso to Sections 14(1) and 14 (1A). As we have seen, proviso to Section 14 (1) sets out the conditions the secured creditor’s affidavit should fulfill. And Section 14 (1A) allows the CMM/DM to delegate his power of taking possession and transmitting the property and documents to the secured creditor. 42. _Noble Kumar_ , to my mind, regarded the newly inserted proviso to Section 14 (1) and Section 14 (1A) as a hedge against the drastic dispensation of notice to the debtor. It is apposite to extract its observation: 23. [t]hese amendments are made to provide safeguards to the interest of the borrower. These provisions stipulate that a secured creditor who is seeking the intervention of the Magistrate under Section 14 is required to file an affidavit furnishing the information contemplated under various sub-clauses ( _i_ ) to ( _ix_ ) of the proviso and obligates the Magistrate to pass suitable orders regarding taking of the possession of the secured assets _only after being satisfied_ with the contents of the affidavits. (italics original) 43. About the jurisdictional scope of the CJM, _Noble Kumar_ also observes that the satisfaction of the Magistrate contemplated under the second proviso to Section 14(1) necessarily requires the WPC No.25608 of 2018 25 Magistrate to examine the factual correctness of the assertions in the affidavit, “but not the legal niceties of the transaction.” About the secured creditor’s invoking Section 14, _Noble Kumar_ observes that it is not mandatory for the secured creditor to attempt taking possession on his own before approaching the Magistrate under Section 14. Such “construction of the provision would deprive the borrower of a remedy under Section 17 is rooted in a misconception of the scope of Section 17.” 44. Eventually, _Noble Kumar_ speaks of the options the secured creditor has. We will focus on the third option, as the other two may not be relevant here. It says that once the secured creditor approaches the Magistrate concerned under Section 14, he will scrutinise the application and authorise a subordinate officer to take possession. Then _Noble Kumar’s_ observes: 36.3. ( _iii_ ) The third situation will be one where the secured creditor approaches the Magistrate concerned directly under Section 14 of the Act. The Magistrate will thereafter scrutinise the application as provided in Section 14, and then if satisfied, authorise a subordinate officer to take possession of the assets and documents and forward them to the secured creditor as under clause 36.2.( _ii_ ) above. 45. First, _Noble Kumar_ holds that the proviso to Section 14 (1) and Section 14 (1A) have been inserted in the face of Bombay High WPC No.25608 of 2018 26 Court’s _Trade Well_ . And _Trade Well_ , as we know, has held that notice to the debtor under Section 14 is unnecessary. According to _Noble Kumar_ , these amendments safeguard the borrower’s interest. That is, I must say, the safe guard counterbalances the lack of prior notice. And in para 36.3 of the judgment, as extracted above, _Noble Kumar_ summarises the procedure under Section 14; any reference to “notice” is strikingly absent. 46. In _Orma Marble_ , this Court has considered its own judgment in _C. R. Sindhu_ , besides the Bombay High Court’s _Trade Well_ . It has held that while dealing with the secured creditor's written request under Section 14 of the Securitisation Act, the CJM has no statutory obligation to notify the borrower. Dispensation with the notice offends no law—not even the principles of natural justice. Though Mr. Manuvilsan has diligently tried to distinguish _Trade Well, C. R. Sindhu, Sosamma Abraham,_ and _Orma Marble,_ I am afraid the distinguishing features, if any, are superficial, and they do not dislodge the case holding. 47. In _Remo Software Pvt. Ltd.,_ the Karnataka High Court has sounded a different note. Or has it? There, the petitioners are the WPC No.25608 of 2018 27 tenants of the borrowers. The Court has held that despite the previous notices issued under Section 13(2) of the SARFAESI Act or the later measures taken by the secured creditor under Section 13(4) of the Act, the Magistrate under Section 14 of the SARFAESI Act, 2002, “is bound to issue Notice to the concerned borrower and the tenants or other occupants of the property, if it is brought to his notice that the Secured Asset or Building in question is a tenanted premises.” 48. Indeed, _Remo Software Pvt. Ltd.,_ mandates notice if the secured asset is a tenanted premises. This judicial assertion, I reckon, is in tune with the Supreme Court’s judgment in _Vishal N. Kalsaria v Bank of India_ : a secured creditor cannot arbitrarily evict a tenant by using the SARFAESI Act, as that would amount to stultifying the statutory rights of protection given to the tenant. 49. In _Sanjivkumar Surajprakash Aggarwal_ , the dispute is whether the tenancy created in the appellant’s favour is a sham one. There was no adjudication on this question. In that context, the Supreme Court has observed that the Chief Judicial Magistrate can adjudicate on that aspect, under Section 14 of the SARFAESI Act. So the petitioner insists that the Supreme Court’s using the expression WPC No.25608 of 2018 28 “adjudication” convert the proceedings under Section 14 judicial. First, the adjudication is about tenancy; next, the mere expression “adjudicate” in the judgment does not impart precedential value to the case, without any discussion on the very issue: whether the proceedings under Section 14 are judicial, quasi-judicial, administrative, or anything else. It is trite to observe ratio or holding of a case depends on the facts pleaded, the issue raised, and the reasoning given, though the conclusion hardly matters. Mere words do not matter. 50. In _Debasis Das_ , a bank employee faced disciplinary proceedings. In that context, the Supreme Court has observed that legal formulations cannot be divorced from the fact situation of the case. In a given case, post-decisional hearing can obliterate the procedural deficiency of a pre-decisional hearing. On the principles of natural justice, _Debasis Das_ observes that the adherence to principles of natural justice as recognized by all civilized States is of supreme importance when a _quasi-_ judicial body embarks on determining disputes between the parties, or any administrative action involving civil consequences is in issue. This oft-held WPC No.25608 of 2018 29 proposition admits of no contradiction. But the question is, are the proceedings under Section 14 _quasi_ -judicial or even administrative? I reckon they are neither. ## **Conclusion:** So I hold that the Chief Judicial Magistrate is not “duty bound” to hear the borrower under Section 14 of the Act. Thus, the writ petition stands dismissed. No order on costs. **Sd/-** ## **DAMA SESHADRI NAIDU** **JUDGE** ## **APPENDIX** **PETITIONER'S/S EXHIBITS:** ## **EXHIBIT P1** **TRUE PHOTOCOPY OF THE POSSESSION NOTICE VID ENO.TVMG/NPA1264/TKD/ 2017, DATED 10.07.2017 ISSUED BY THE 2ND RESPONDENT UNDER SECTION 13(8) OF THE SARFAESI ACT.** **EXHIBIT P2 TRUE PHOTOCOPY OF THE 2ND POSSESSION NOTICE VIDE NO.TVMG/NPA 12641TKD/7171/2017 DATED 03.11.2017 ISSUED BY THE 2ND RESPONDENT UNDER SECTION 13(8) OF THE SARFAESI ACT.** **EXHIBIT P3 TRUE PHOTOCOPY OF THE NOTICE FOR SALE OF IMMOVABLE PROPERTY VIDE NO.TVMG/NPA 1264/TKD/7326/2017, DATED 16.11.2017 ISSUED BY THE 2ND RESPONDENT.** **EXHIBIT P4 TRUE PHOTOCOPY OF THE NOTICE SENT BY THE 5TH RESPONDENT DATED 10.04.2018** Css/