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Wednesday, July 6, 2016

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 = Since there was a petition under sec.14 , pending simultaneously filing Crl.M.P. is not maintainable as there was an interim orders = there was resistance to delivery of possession, the petitioner company lodged a FIR against the Director of the second respondent company under Sections 323 and 447 IPC. Simultaneously, it filed Crl.M.P.No.904 of 2015 before the learned Chief Metropolitan Magistrate, Hyderabad, taking recourse to Section 14 of the Act of 2002, which enables a secured creditor to avail the assistance of the Chief Metropolitan Magistrate/District Magistrate concerned to take possession of the secured asset. The learned Chief Metropolitan Magistrate, Hyderabad, thereupon passed order dated 15.04.2015 appointing an Advocate-Commissioner, the seventh respondent, and directed him to assist the petitioner company in taking possession of the secured asset. While so, the second respondent company filed Crl.M.P.No.1250 of 2015 in Crl.M.P.No.904 of 2015 seeking dismissal of the application filed by the petitioner company under Section 14 of the Act of 2002. Thereupon, the learned Chief Metropolitan Magistrate, Hyderabad, passed order dated 13.05.2015 restraining the seventh respondent from proceeding further till examination of the application. Hence, this writ petition.= We are informed that S.A.No.71 of 2013 has already been preferred by the second respondent company before the Debts Recovery Tribunal, Hyderabad, and that it is pending consideration. This being the lawful and proper remedy for the second respondent company, its parallel attempt to thwart the order dated 15.04.2015 by practically seeking review thereof cannot be countenanced. It is therefore left open to the second respondent company to pursue its lawful remedies in accordance with law. We reiterate that we have not ventured into the merits of the contentions raised by the second respondent company vis--vis the order dated 15.04.2015 and all such issues are left open. The writ petition is accordingly allowed setting aside the order dated 13.05.2015 passed by the learned Chief Metropolitan Magistrate, Hyderabad, in Crl.M.P.No.1250 of 2015 in Crl.M.P.No.904 of 2015. We further hold that the said criminal miscellaneous petition is not maintainable in terms of Section 14 of the Act of 2002 and the learned Chief Metropolitan Magistrate, Hyderabad, is directed to take steps accordingly. The learned Chief Metropolitan Magistrate, Hyderabad, is also directed to take necessary consequential steps pursuant to the order dated 15.04.2015 passed in Crl.M.P.No.904 of 2015, subject to orders, if any, in S.A.No.71 of 2013.

THE HONBLE SRI JUSTICE SANJAY KUMAR AND THE HONBLE DR.JUSTICE B.SIVA SANKARA RAO          

WRIT PETITION NO.25645 OF 2015    

24-06-2016

M/s. Phoenix Arc Private LimitedPetitioner.. Petitioner

The Court of the Honble Chief Metropolitan Magistrate, Metropolitan  Criminal
Courts, Red Hills, Hyderabad and othersRespondents  

Counsel for petitioner: Sri P. Sri Ram
                                               
Counsel for respondent No.1:  --
Counsel for respondent No.2:  Sri B.Srinivasa Reddy
Counsel for respondent Nos.3 to 6 :  --
Counsel for respondent No.7:  Sri M. Hamsa Raj

<Gist:

>Head Note:    


? CASES REFERRED:    

1.  (2013) 9 SCC 620
2.  2016 (2) ALT 226 (F.B.)
3.  (2012) 7 SCC 200
4.  (2016) 3 SCC 762
5.  (2012) 7 SCC 200

THE HONBLE SRI JUSTICE SANJAY KUMAR        
AND
THE HONBLE DR.JUSTICE B.SIVA SANKARA RAO          

WRIT PETITION NO.25645 OF 2015    

O R D E R
(Per Honble Sri Justice Sanjay Kumar)
       

      The petitioner is a securitisation and reconstruction company
registered under Section 3 of the Securitisation and Reconstruction
of Financial Assets and Enforcement of Security Interest Act, 2002
(for brevity, the Act of 2002). It is a secured creditor as defined
under Section 2(zd) thereof. By way of this writ petition, it challenges
the order dated 13.05.2015 passed by the learned Chief Metropolitan
Magistrate, Hyderabad, in Crl.M.P.No.1250 of 2015 in Crl.M.P.No.904
of 2015. A consequential direction is sought to the Advocate-
Commissioner appointed by the learned Chief Metropolitan
Magistrate, Hyderabad, to execute the warrant of possession.
      The petitioner company acquired a financial asset, being the
loan given by the Central Bank of India to the second respondent
company, under Assignment Agreement dated 28.03.2014. Even  
before acquisition of this financial asset by the petitioner company,
the Central Bank of India had classified the loan account of the
second respondent company as a non-performing asset and issued it
demand notice dated 20.08.2013 under Section 13(2) of the Act of
2002. The outstanding dues mentioned therein aggregated to
Rs.37,84,33,827/-. The objections raised in response thereto, under
Section 13(3A) of the Act of 2002, were considered by the Central
Bank of India and rejected under reply dated 21.10.2013.
      After acquisition of this financial asset, the petitioner company
initiated further measures for enforcement of the security interest
created by the second respondent company in relation thereto. This
security interest was the land admeasuring 6020 square yards and
the buildings thereon along with plant and machinery situated at
Sarojini Devi Road, Secunderabad. Proceedings under Section 13(4)
of the Act of 2002 were initiated by issuance of a possession notice
on 09.12.2014 under Rule 8(1) of the Security Interest (Enforcement)
Rules, 2002. However, as there was resistance to delivery of
possession, the petitioner company lodged a FIR against the Director
of the second respondent company under Sections 323 and 447 IPC.  
Simultaneously, it filed Crl.M.P.No.904 of 2015 before the learned
Chief Metropolitan Magistrate, Hyderabad, taking recourse to Section
14 of the Act of 2002, which enables a secured creditor to avail the
assistance of the Chief Metropolitan Magistrate/District Magistrate
concerned to take possession of the secured asset. The learned Chief
Metropolitan Magistrate, Hyderabad, thereupon passed order dated
15.04.2015 appointing an Advocate-Commissioner, the seventh  
respondent, and directed him to assist the petitioner company in
taking possession of the secured asset.
      While so, the second respondent company filed
Crl.M.P.No.1250 of 2015 in Crl.M.P.No.904 of 2015 seeking dismissal
of the application filed by the petitioner company under Section 14 of
the Act of 2002. Thereupon, the learned Chief Metropolitan
Magistrate, Hyderabad, passed order dated 13.05.2015 restraining
the seventh respondent from proceeding further till examination of
the application. Hence, this writ petition.
      Heard Sri P. Sriraghuram, learned senior counsel representing
Sri P.Sri Ram, learned counsel for the petitioner company, Sri Gopal
Rao Amancherla, learned counsel representing Sri B.Sreenivasa
Reddy, learned counsel for the second respondent company, and Sri
M.Hamsa Raj, learned counsel for the seventh respondent.
      The question raised before us is whether the Chief Metropolitan
Magistrate, Hyderabad, has jurisdiction under Section 14 of the Act
of 2002 to examine the objections raised by the second respondent
company in its application, Crl.M.P.No.1250 of 2015. Though Sri
Gopal Rao Amancherla, learned counsel, would strive to raise various
contentions as regards the alleged failure on the part of the petitioner
company in taking steps under the Act of 2002, we are of the opinion
that without addressing the preliminary issue as to maintainability of
Crl.M.P.No.1250 of 2015, the second respondent company cannot   
expect this Court to examine on merits the contentions urged by it in
Crl.M.P.No.1250 of 2015.
      Primarily, the scope of the power of a Chief Metropolitan
Magistrate/District Magistrate under Section 14 of the Act of 2002
falls for determination.
      Section 14(1) of the Act of 2002 broadly provides to the effect
that where the possession of a secured asset is required to be taken
by a secured creditor or if a secured asset is required to be sold or
transferred by a secured creditor, such secured creditor may, for the
purpose of taking possession or control of such asset, request, in
writing, the Chief Metropolitan Magistrate or the District Magistrate
within whose jurisdiction such secured asset is situated to take
possession thereof and the Chief Metropolitan Magistrate or the
District Magistrate shall, on such request being made to him, take
possession of and forward such asset to the secured creditor.  The
first proviso thereto states that any application by the secured
creditor in this regard shall be accompanied by an affidavit, duly
affirmed by the authorized officer of the secured creditor, and such
affidavit shall be in conformity with the declarations stipulated under
Clauses (i) to (ix) thereunder.  The second proviso to Section 14 states
that on receipt of such an affidavit from the authorized officer, the
Chief Metropolitan Magistrate or the District 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
asset.  Section 14(1A) empowers the Chief Metropolitan Magistrate or
District Magistrate to authorize any officer subordinate to him to take
possession and forward such asset to the secured creditor.  Sub-
section (2) of Section 14 empowers the Chief Metropolitan Magistrate
or District Magistrate to take or cause to be taken such steps and use
or cause to be used such force, as may, in his opinion, be necessary,
for securing compliance with the provisions of Section 14(1).
      The scope and nature of the jurisdiction of a Chief Metropolitan
Magistrate/District Magistrate under Section 14 of the Act of 2002
fell for consideration before the Supreme Court in STANDARD
CHARTERED BANK V/s. V.NOBLE KUMAR .  The Supreme Court           
observed therein that the satisfaction of the Magistrate contemplated
under the second proviso to Section 14(1) necessarily requires the
Magistrate to examine the factual correctness of the assertions made
in such an affidavit but not the legal niceties of the transaction.
Again, in HARSHAD GOVARDHAN SONDAGAR V/s.           
INTERNATIONAL ASSETS RECONSTRUCTION CO. LTD. , the           
Supreme Court had occasion to deal with the scope of the power
exercised by a Chief Metropolitan Magistrate/District Magistrate
under Section 14 of the Act of 2002 and observed that when a
secured creditor seeks assistance to take possession of a secured
asset thereunder and a lessee of a mortgagor/borrower is in actual
possession, the secured creditor must state so in the affidavit filed
along with the application under Section 14 of the Act of 2002 and
also as to which class the lease in question falls under, that is, as to
whether it was created before the mortgage, or, after the mortgage
but before issuance of the demand notice under Section 13(2) of the
Act of 2002, or lastly, if it was created after issuance of the demand
notice under Section 13(2) of the Act of 2002. Once this aspect is
brought out in the affidavit filed by the secured creditor, the Supreme
Court held that the Magistrate would have to give notice and
opportunity of hearing to the lessee in possession of the secured
asset, falling under either the first class or the second class of leases
but not the last class, along with the secured creditor, in consistency
with the principles of natural justice, and then take a decision. If the
Magistrate is satisfied that there is a valid lease created before the
mortgage or prior to receipt of the notice under Section 13(2) of the
Act of 2002, he cannot pass an order for delivering possession of the
secured asset. In such cases, when the lessee makes out a case that 
his lease falls under either of the first two classes of leases specified
above, the actual possession cannot be delivered to the secured
creditor until the lease is validly determined in accordance with law.
      Relying on the aforestated judgments of the Supreme Court, a
Full Bench of this Court in T.R.JEWELLERY V/s. STATE BANK OF    
INDIA, VEDAYAPALEM BRANCH, NELLORE  held that a Magistrate        
is empowered under Section 14 of the Act of 2002 to authorize a
subordinate official to take possession of the asset after examining
the factual correctness of the assertions made in the affidavit and
therefore, it could be said without any shadow of doubt that the
assistance taken under this provision is only procedural in nature
and no adjudication is involved.  The Full Bench observed that use of
the word order in Section 14 is only a reference to an administrative
order made for taking possession of the secured asset if all other
conditions are fulfilled.  The Full Bench confirmed that the power
exercised by the Chief Metropolitan Magistrate or District Magistrate
was synonymous and that it was not adjudicatory in nature.
      It may be noticed that in VISHAL N.KALSARIA V/s. BANK OF
INDIA , clarifying the law laid down in HARSHAD GOVARDHAN  
SONDAGAR2, the Supreme Court stated that even if no registered  
lease deed exists, then such tenants who are required to prove that
they have been in occupation of the premises as tenants may be
permitted to produce such evidence in proceedings under Section 14
of the Act of 2002 before the Chief Metropolitan Magistrate/District
Magistrate. This decision was rendered in relation to protected
tenants under the Maharashtra Rent Control Act, 1999. The
applicability of the ratio of this judgment in the States of Telangana
and Andhra Pradesh is however open to question in the light of the
amendment effected in the year 1999 to the Registration Act, 1908, in
so far as it applies to the erstwhile combined State of Andhra
Pradesh, making lease deeds in respect of leases even for a period of
less than one year compulsorily registrable under Section 17 thereof.
Significantly, there is no such requirement in Maharashtra.
      In any event, the aforestated case law makes it crystal clear
that the Chief Metropolitan Magistrate/District Magistrate, in
exercise of power under Section 14 of the Act of 2002, is only
required to undertake a factual examination of the entitlement of a
secured creditor to take possession in terms of Section 14(1)(b)(viii),
by ascertaining the factum of actual possession. Beyond determining
this fact on the basis of a hearing and the documents placed on
record, the Chief Metropolitan Magistrate/District Magistrate is not
empowered to undertake any sort of adjudicatory process.
      This being the settled legal position, the Chief Metropolitan
Magistrate, Hyderabad, was only empowered to examine the
assertions made in the affidavit filed by the petitioner company and
upon being satisfied therewith, to the extent indicated in the
aforestated decisions, pass an appropriate order. This exercise
already culminated in the order dated 15.04.2015. Being an
administrative functionary in the scheme of Section 14 of the Act of
2002, the Chief Metropolitan Magistrate, Hyderabad, had no power of
reviewing the order dated 15.04.2015, as no such power is conferred
upon him under the Act of 2002.  Well settled is the legal proposition
that unless the power of review is specifically conferred by the statute
itself, an administrative authority acting in furtherance of the power
conferred by such statute cannot assume unto itself such power of
review (See HARYANA STATE INDUSTRIAL DEVELOPMENT          
CORPORATION LIMITED V/s. MAWASI ). In the event an erroneous    
order is passed by a Chief Metropolitan Magistrate/District
Magistrate in exercise of the administrative power conferred by
Section 14 of the Act of 2002, the borrowers remedy against the
same, as pointed out in STANDARD CHARTERED BANK1, is by way      
of an application under Section 17 of the Act of 2002 to the Debts
Recovery Tribunal concerned. The Chief Metropolitan Magistrate,
Hyderabad, therefore had no right to keep further proceedings
pursuant to the order dated 15.04.2015 in abeyance while seeking to
exercise the power of review upon the application in Crl.M.P.No.1250
of 2015 filed by the second respondent company.
      We are informed that S.A.No.71 of 2013 has already been
preferred by the second respondent company before the Debts 
Recovery Tribunal, Hyderabad, and that it is pending consideration.
This being the lawful and proper remedy for the second respondent
company, its parallel attempt to thwart the order dated 15.04.2015
by practically seeking review thereof cannot be countenanced. It is
therefore left open to the second respondent company to pursue its
lawful remedies in accordance with law. We reiterate that we have not
ventured into the merits of the contentions raised by the second
respondent company vis--vis the order dated 15.04.2015 and all
such issues are left open.
      The writ petition is accordingly allowed setting aside the order
dated 13.05.2015 passed by the learned Chief Metropolitan
Magistrate, Hyderabad, in Crl.M.P.No.1250 of 2015 in Crl.M.P.No.904
of 2015. We further hold that the said criminal miscellaneous petition
is not maintainable in terms of Section 14 of the Act of 2002 and the
learned Chief Metropolitan Magistrate, Hyderabad, is directed to take
steps accordingly. The learned Chief Metropolitan Magistrate,
Hyderabad, is also directed to take necessary consequential steps
pursuant to the order dated 15.04.2015 passed in Crl.M.P.No.904 of
2015, subject to orders, if any, in S.A.No.71 of 2013. Pending
miscellaneous petitions shall stand closed in the light of this final
order.  No order as to costs.
______________________  
SANJAY KUMAR, J  
_______________________________    
DR.B.SIVA SANKARA RAO, J    
24th JUNE, 2016

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