Date of judgement:
10th February, 2022
Bench:
V. KAMESWAR RAO, J
Parties:
Plaintiffs – Jahan Singh
Defendants – Tribal Cooperative Marketing Development Federation of India Ltd Trifed and Anr
SUBJECT
An appeal was filed before the Apex Court against the order of the Madras High Court upholding the appointment of an advocate by the CDM to secure the possession of the mortgaged property under Section 14(1A) of the SARFESI Act. The Madras High Court judgement was contrary to the Bombay High Court judgment while the Delhi and Kerala High Court had given judgments similar to that of the Madras High Court.
OVERVIEW
- The borrowers had mortgaged some property to obtain the loan from the Bank. However, the borrowers failed to pay the outstanding dues and resultantly the Bank declared the account to be Non-Performing Asset and took symbolic possession of the mortgaged property.
- Thereafter, the Bank invoked action under Section 14 of the Act and the CMM appointed an advocate to secure possession of the concerned property.
- This decision of CMM was unsuccessfully challenged before the Madras High Court.
- An appeal against the Madras High Court order was filed before the Supreme Court.
RELEVANT PROVISIONS
Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act
- Section 14 (1A): Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking possession of secured asset.
ISSUES RAISED
- Whether the Chief Metropolitan Magistrate/District Magistrate can appoint an advocate and authorise him to take control of the secured assets and papers deliver it to the secured creditor in accordance with Section 14(1A) of Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2003?
JUDGMENT ANALYSIS
- The Supreme Court noted that the Bombay High Court had held that such an appointment would be illegal. On the other hand, the Madras, Kerala and Delhi High Court had held such appointments to be legal.
- The phrase “any officer subordinate to him” has been used in certain Articles of the Constitution as well as in several State and Central Legislations. However, the phrase has to be interpreted in light of the legislative intent.
- After referring to several judgments, the Court came to the conclusion that the test of administrative subordination or statutory subordination could not be applied in the present case and hence only the test of functional subordination could be applied.
- The Supreme Court held that a Magistrate, being a Court's officer, is subordinate to the DM/CMM.
- Hence, the advocate can be authorised by the Magistrate to assist him in the execution of an order passed u/s 14(1A).
CONCLUSION
The Court in this case held that "there is intrinsic de jure functional subordinate relationship between the CMM/DM and the advocate being an officer of the court". Thus, the Court, in this landmark judgement, settled the contradictions that existed among the various High Court judgments.
