The Bombay High Court, Nagpur Bench, has dismissed a criminal application seeking to quash orders permitting a bank to take possession of mortgaged properties under the SARFAESI Act, holding that an Additional Chief Judicial Magistrate (ACJM) is competent to exercise judicial powers under Section 14 of the Act. The court held that the borrowers must pursue remedies before the Debt Recovery Tribunal (DRT).
The case arose when the applicants, a proprietorship firm and its proprietor, had availed multiple credit facilities from Indian Bank, including term loans, emergency credit lines, and a cash credit facility. After the borrowers defaulted, the loan account was classified as a Non-Performing Asset (NPA) and the bank issued a demand notice under Section 13(2) of the SARFAESI Act. When the dues remained unpaid, the bank moved an application under Section 14 before the ACJM, seeking assistance in taking possession of secured assets. The magistrate allowed the application and appointed a court commissioner to take possession of the properties. The borrowers’ revision challenge was also rejected, prompting them to approach the High Court under inherent powers.
Before the High Court, the applicants argued that the ACJM lacked jurisdiction to pass orders under Section 14 of the SARFAESI Act because the High Court had not specifically conferred powers of the Chief Judicial Magistrate on Additional Chief Judicial Magistrates through notification. The bank opposed the petition, contending that the ACJM enjoys the same judicial powers as the Chief Judicial Magistrate, and the borrowers had an alternate statutory remedy before the DRT.
Rejecting the applicants’ contention, Justice Urmila Joshi-Phalke held that under Section 10(2) of the Bharatiya Nagarik Suraksha Sanhita, 2023 (formerly Section 12(2) CrPC), an Additional Chief Judicial Magistrate possesses the judicial powers of the Chief Judicial Magistrate. The Court observed that the High Court’s notification appointing Joint Civil Judges and Judicial Magistrates First Class as Additional Chief Judicial Magistrates effectively conferred such powers.
The Court clarified that while administrative functions of the Chief Judicial Magistrate may require specific directions of the High Court, judicial powers stand on a different footing. It held that:
“Thus, it is no more res integra that as far as judicial powers are concerned, the Additional Chief Judicial Magistrate is not subordinate to the Chief Metropolitan Magistrate.”
Consequently, the Court found that the contention that the ACJM was incompetent to deal with an application under Section 14 of the SARFAESI Act was unsustainable.
The High Court also emphasised that the SARFAESI Act itself provides an effective statutory remedy. Referring to Indian Overseas Bank and anr vs. M/s. Ashok Saw, AIR 2009 SC 2420, the Court noted that the Act is a self-contained code and borrowers aggrieved by actions under Section 13(4) or Section 14 must approach the Debt Recovery Tribunal. The judgment reiterates that:
“SARFAESI Act itself contemplates an efficacious remedy for the borrower or the any person affected by an action under Section 13(4) of the SARFAESI Act by providing for an appeal before the DRT.”
Holding that the applicants had an alternate remedy and the magistrate’s order was not without jurisdiction, the Court dismissed the application and refused to stay the possession proceedings.
Appearances
Shri S.M.Pande, Counsel for Applicants. Shri A.M.Kadukar, APP for the NA No.1/State. Shri Karan Sachdev, Counsel for NA No.2. Shri D.A.Sonwane, Counsel for NA No.3. Ms Sunita Paul, Counsel for NA No.4
