Shipra Hotels

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Page 1 Monday, September 11, 2023

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2022 SCC OnLine All 801 : (2023) 156 ALR 375 : (2023) 158 RD
714 : (2023) 244 AIC (Sum 8) 4
In the High Court of Allahabad

(BEFORE SUNITA AGARWAL AND VIPIN CHANDRA DIXIT, JJ.)
Writ - C No. - 22594 of 2022

Shipra Hotels Limited and Another … Petitioners;
Versus
State of U.P. and Others … Respondents.
With
WRIT - C No. - 19555 of 2022
Yatindra Singh … Petitioner;
Versus
With
Writ - C No. - 25346 of 2022
Santosh Kumar and Another … Petitioners;
Versus
With
Writ - C No. - 27814 of 2022
Prem Chand Bharti and Others … Petitioners;
Versus
With
Writ - C No. - 28176 of 2022
Shree Agencies … Petitioner;
Versus
Writ - C No. - 22594 of 2022, WRIT - C No. - 19555 of 2022, Writ -
C No. - 25346 of 2022, Writ - C No. - 27814 of 2022 and Writ - C
No. - 28176 of 2022
Decided on November 25, 2022, [Reserved on 26.9.2022]
Advocates who appeared in this case:
Counsel for Petitioner : - Komal Mehrotra, Aditya Sharma,
Mohammad Khalid
Counsel for Respondent : - C.S.C., Raghav Dwivedi, Veerendra
Kumar Shukla Connected along with
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Counsel for Petitioner : - Indever Pandey

Counsel for Respondent : - CSC
Counsel for Petitioner : - Rishikesh Tripathi
Counsel for Respondent : - C.S.C.
Counsel for Petitioner : - Utkarsh Singh, Praneet Kumar Srivastava
Counsel for Respondent : - C.S.C.
Counsel for Petitioner : - Shambhavi Nandan, Nikhil Kumar Mishra
Counsel for Respondent : - CSC, Sanjay Kumar Gupta
ORDER
1. Heard Sri Amit Saxena learned Senior Counsel assisted by Sri
Komal Mehrotra learned counsel for the petitioners, Sri Manish Goyal
learned Additional Advocate General assisted by Sri Apoorva Hajela
learned Standing Counsel for the State-respondents, Sri Anurag
Khanna learned Senior Counsel assisted by Sri Veerendra Kumar Shukla
learned counsel for the respondent No. 3 and Sri Navin Sinha learned
Senior Counsel assisted by Sri Raghav Dwivedi learned counsel for
respondent No. 4. Ms. Rekha Singh learned Advocate holding brief of
Sri Sanjay Kumar Gupta appeared for the respondent bank. Sri Utkarsh
Singh learned counsel for the petitioner in Writ-C No. 27814 of 2022
has adopted the arguments of Sri Amit Saxena learned Senior Counsel
on the issue of providing opportunity of hearing at the stage of the
decision by CMM/DM under Section 14 of the SARFAESI Act’ 2002.
Learned counsels for the petitioners in other connected writ petitions
have also adopted the arguments of the learned Senior Counsels for the
petitioners.
2. The common dispute raised in all the connected writ petitions is
about the validity of the order passed under Section 14 of the
Securitisation and Reconstruction of Financial Assets and Enforcement
of Securities Interest Act, 2002 (hereinafter referred to as “SARFAESI
Act, 2002”) by the authorized officer namely the Additional District
Magistrate (Finance & Revenue), Ghaziabad, Meerut Commissionerate
and the Additional District Magistrate (Finance & Revenue), Varanasi,
on the ground that no notice or opportunity of hearing has been
granted to the petitioners herein who are the borrowers and, thus, the
orders impugned suffer from violation of principles of natural justice.
Hence, they have been heard together and are being decided by this
common judgment.
3. In Writ-C No. 22594 of 2022 (Shipra Hotels Limited v. State of
U.P.), an issue with regard to the jurisdiction of the Additional District
Magistrate (F.&R.), Ghaziabad has also been raised to pass such order
beyond the period of 60 days prescribed in the 3rd proviso to sub-
section (1) of Section 14 of the SARFAESI Act, 2002.
4. The main prayer of the petitioners, thus, is that a declaration that
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natural justice as implied mandatory requirement, should be read into

Section 14 of the SARFAESI Act, be made by this Court.
5. It is argued by Sri Amit Saxena learned Senior Advocate assisted
by Sri Komal Mehrotra learned counsel for the petitioners in the leading
writ petition that it is well known principle of law that if a statute does
not exclude compliance with the principles of natural justice either
expressly or by necessarily implication, compliance with natural justice
has to be read into the statute. The fundamental principles of natural
justice, including audi altrum paltrum have been insisted by the Courts
to bring procedural fairness into a decision and infraction thereof has
lead to quashing of such decisions.
6. It is argued that the applicability of principles of natural justice is
not dependent upon any statutory provision. The principle has to be
mandatorily applied irrespective of the fact as to whether there is any
such statutory provision or not.
7. Reliance is placed on the decision of the Apex Court in Dharampal
Satyapal Limited v. Deputy Commissioner of Central Excise, Gauhati1
to assert that where a statute authorises interference with properties or
other rights and is silent on the question of hearing, the Courts would
apply rule of universal application founded on plainest principles of
natural justice. [Reference De Smith (Judicial Review of Administrative
Action (1980), at page 161)]
8. It is argued that the fundamental principle of administrative law
in Wade [Administrative Law (1977), at page 395] emphasizes that
principles of natural justice operate as implied mandatory
requirements, non-observance of which invalidates the exercise of
power.
9. In A.K. Kraipak v. Union of India2, it was held that the rules of
natural justice operate in areas not covered by any law. They do not
supplant the law of the land but supplement it. They are not embodied
rules and their aim is to secure justice or to prevent miscarriage of
justice.
10. It was held in Managing Director, ECIL, Hyderabad v. B.
Karunakar3 that the subject of natural justice is to be made applicable
to administrative proceedings also especially when it is not easy to
draw the line that demarcates administrative enquiry from quasi-
judicial ones. An unjust decision in an administrative inquiry may have
a more far reaching effect than a decision in a quasi-judicial inquiry.
11. Based on the said principles, it was vehemently argued by the
learned Senior Counsels for the petitioners that by virtue of sub-section
(3) of Section 14, finality has been attached to the order of the Chief
Metropolitan Magistrate (CMM)/District Magistrate (DM)/Autorised
Officer. No other forum has been provided under the SARFAESI Act,
2002 to challenge the order under Section 14 and the only remedy is to
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approach the Writ Court.

12. It is contended that since an order of CMM/DM under Section 14
for taking possession would visit a borrower with civil consequences, no
such order can be made without complying with natural justice. It is
further argued that as per the first proviso to sub-section (1) of Section
14, the application under sub-section (1) moved by the secured
creditor is to accompany by an affidavit duly affirmed by the authorized
officer of the secured creditor which require declaration as per clauses
(i) to (ix) of the said proviso. Meaning thereby, for maintaining an
application under Section 14(1) of the Act, 2002, the secured
creditor/bank is required to make out a case for initiation of action
under Section 14. The factual disclosure made by the secured creditor
in the affidavit accompanying the application would be the basis for
application of mind by the Authorized Officer namely CMM/DM to record
a satisfaction as to whether the proceedings under Section 14 of the
Act, 2002 is to be drawn or not. The factual statements made in the
affidavit of the secured creditor can be rebutted by the borrower, only
when notice and opportunity is provided to him. It is argued that in
order to verify the correctness of the statement made by the authorized
officer of the secured creditor, it is necessary to grant opportunity of
hearing to the borrower. The satisfaction to be recorded by the CMM/DM
to the contents of the affidavit though is subjective but the information
provided to the said Authority must be correct so as to initiate coercive
measure of dispossession of the borrower from the secured asset.
13. It is argued that wherever coercive measures are taken under
any statute by administrative/quasi-judicial authorities, principles of
natural justice have to be followed.
14. Reliance is placed on the decision of the Division Bench of this
Court in Kumkum Tentiwal v. State of U.P.4 to submit that no exparte
satisfaction can be recorded by the CMM/DM on the affidavit of the
secured creditor when he files an application for taking possession by
use of force. The Division Bench therein has held that it is essential that
principles of natural justice are followed even while exercising the
powers under Section 14 which include the right to be heard. It has
taken note of the fact that sub-section (2) of Section 14 authorises the
District Magistrate to “take or caused to be taken such steps and use or
caused to be used such force as matter, in his opinion, be necessary”.
It is held therein that the import of the said power is that the District
Magistrate can use coercive measures for taking the possession, the
right of the occupier to resist or object to the use of force or to point
out any deficiency in the affidavit that has been filed by the secured
creditor, can be exercised only when a notice is given and an
opportunity of hearing is afforded to such person, who may be in
occupation. The objection with regard to the maintainability of the writ
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petition on the plea of remedy of filing application under Section 17 of

the SARFAESI Act, 2002 has been turned down therein holding that it
cannot be said that an appeal lies against an order passed under
Section 14 of the SARFAESI Act or that the necessity of hearing can be
dispensed with under Section 14 by the District Magistrate. It was held
therein that from the scheme of the Act, it is implicit that the procedure
of Sections 13(2) and 13(4) is mandatorily to be followed before
initiating action under Section 14 of the Act. The borrower on initiation
of action under Section 14 of the Act, may at times plead that he was
not provided any opportunity of hearing as envisaged under Section 13
(2) of the Act entitling him to pay the dues within 60 days and,
therefore, the action under Section 14 is illegal and misconceived. From
this point of view as well, notice or opportunity of hearing is necessary
to the borrower or guarantor although it may be as a formality at times,
before initiating action under Section 14 of the Act.
15. It is argued that the said principle was laid down by the Division
Bench in Kumkum Tentiwal (supra) taking note of the law laid down by
the Apex Court in Harsh Govardhan Sondagar v. International Assets
Reconstruction Company Ltd.5. In the said case, in paragraph “28’,
while analyzing the scope of Section 14, it was clearly observed that
when an application is filed, the Chief Metropolitan Magistrate or the
District Magistrate will have to give a notice and opportunity of hearing
to the persons claiming to be the lessee as well as to the secured
creditor, consistent with the principles of natural justice, and then take
a decision. If the CMM/DM is satisfied that there is a valid lease created
before the mortgage or there is a valid lease created after the mortgage
in accordance with the requirements of Section 65A of the Transfer of
Property Act and that the lease has not been determined in accordance
with the provisions of Section 111 of the Transfer of Property Act, he
cannot pass an order for delivering possession of the secured asset to
the secured creditor.
16. It was further noted by the Division Bench that the Apex Court
therein while dealing with the remedies available to the aggrieved party
against any action/order passed under Section 14 of the SARFAESI Act
has held that the SARFAESI Act, 2002 attaches finality to the decision
of the Chief Metropolitan Magistrate or the District Magistrate and this
decision cannot be challenged before any court or any authority and, as
such, the remedy lies to the aggrieved party to challenge the said
decision before the High Court under Articles 226 and 227 of the
Constitution of India where the High Court can examine the decision of
the CMM/DM, as the case may be, in accordance with the settled
principles of law.
17. It was argued that relying upon the said decision, various
Division Benches of this Court from time to time have disposed of the
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writ petitions filed by the borrowers relegating them to approach the

Chief Metropolitan Magistrate/District Magistrate with the direction to
grant opportunity of hearing. The decisions in Kaushambi Paper Mills
Pvt. Ltd. v. Additional District Magistrate6 dated 31.8.2020 and Smt.
Shakeela Begum v. State of U.P.7 dated 9.8.2021 have been placed
before us. A judgment and order dated 4.11.2020 passed by a Division
Bench of this Court in Zainul Abdin v. Bank of Baroda8 has further been
placed before us to point out that doubting the correctness of the
Division Bench judgment in Kumkum Tentiwal (supra) to provide notice
and opportunity of hearing to the borrower, the question has been
referred for reconsideration by a Full Bench.
18. It is, thus, argued that as on date, the judgment in Kumkum
Tentiwal (supra) is holding the field and is to be applied in the facts
and circumstances of the present case.
19. In rebuttal, Sri Manish Goyal learned Additional Advocate
General for the State respondents, Sri Naveen Sinha and Sri Anurag
Khanna learned Senior Counsels appearing for the private respondents,
at the outset, submitted that the judgment and order dated 31.8.2020
in Writ-C No. 12699 of 2022 passed by this Court has been subjected
to challenge before the Apex Court in Special Leave to Appeal (C) No.
3687 of 2021 wherein the operation of the said judgment has been
stayed vide an interim order dated 19.7.2021 passed therein.
20. As regards the law laid down by the Division Bench in Kumkum
Tentiwal (supra), it is argued by the learned Senior Counsels appearing
for the respondents that the said judgment proceeds on wrong
appreciation of the legal provisions pertaining to the proceeding under
Section 14 of the SARFAESI Act, 2002.
21. The contention is that the scheme of the Act and the decision of
the Apex Court in Harsh Govardhan Sondagar (supra) has been
misappreciated in arriving at the conclusion drawn by the Division
Bench of this Court. Various decisions of the Supreme Court pertaining
to the field and the statutory provisions of SARFAESI Act, 2002 have
been ignored while arriving at the conclusion therein and hence the
said decision may not be followed, being per incuriam.
22. Learned Senior Counsels for the respondents have insisted that
the matter be heard on merits to deal with the arguments of the
learned Senior Counsel for the petitioners instead of keeping it pending
in view of the reference made by another Division Bench doubting
correctness of the decision in Kumkum Tentiwal (supra). As the
pendency of the reference does not restrain this Court in dealing with
the question of law.
23. To support his arguments, Sri Manish Goyal learned Additional
Advocate General has taken us to the scheme of the SARFAESI Act,
2002, the Enforcement of Security Interest and Recovery of Debts Laws
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and Miscellaneous Provisions (Amendment) Bill, 2016 whereby

amendment in the Securitisation and Reconstruction of Financial Assets
and Enforcement of Securities Interest Act, 2002 have been brought to
place the statement of objects and reasons for bringing the said
enactment. It is placed before us that the statement of objects and
reasons of the aforesaid Bill No. 144 of 2016 records that the SARFAESI
Act, 2002 and the Recovery of Debts and Bankruptcy Act, 1993 were
enacted for expeditious recovery of loans of banks and financial
institutions. Though the Recovery of Debts and Bankruptcy Act, 1993
provided for a period 180 days for disposal of recovery applications, the
cases were pending for many years due to various adjournments and
prolonged hearing. In order to facilitate expeditious disposal of recovery
applications, it had been decided to amend the said Acts. The
amendments in the SARFAESI Act, 2002 were proposed to suit
changing credit landscape and to augment ease of doing business
which inter alia include “specific timeline for taking possession of
secured assets”. The time period of 30 days within which the CMM/DM
is required to dispose of the applications filed by the secured creditor
has been inserted by Act No. 44 of 2016 w.e.f. 1.9.2016. Third proviso
to sub-section (1) of Section 14 of the SARFAESI Act has also been
added to make it incumbent upon the CMM/DM to give reasoning in
writing for delay in disposal of the application of the secured creditor
within the period of 30 days prescribed in the Second proviso to pass
orders under Section 14.
24. It is then argued that the entire scheme of the SARFAESI Act,
2002 is to be seen to examine as to how and where Section 14 has
been placed by the legislature and to see whether any Grievance
Redressal Scheme is in place to challenge the coercive action taken to
secure possession. It is submitted that Chapter III under the scheme of
SARFAESI Act, 2002 is for “Enforcement of Security Interest” which
includes Section 17, the remedy, for the application before DRT by an
aggrieved person including borrower. Section 18, in the same chapter,
provides for appeal to the appellate tribunal by a person aggrieved by
the order of the Tribunal under Section 17. Section 19 of the Act, 2002
contained in Chapter III further safeguards the borrower against
dispossession from the secured asset by the secured creditor, except in
accordance with the provisions of the Act, 2002 and Rules made
thereunder. It provides for the right of the borrower or any other
aggrieved person to receive such compensation and cost as may be
determined, in the proceedings before the Tribunal under Sections 17
or appeal under Section 18, if the possession of secured assets by the
secured creditor is not in accordance with the provisions of the Act and
rules made thereunder and also seek direction to the secured creditors
to return such secured assets.
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25. It is argued by Sri Manish Goyal learned Additional Advocate

General that Section 13(2) provides for 60 days time to the borrower to
discharge his full liabilities and, in case, he is aggrieved by the notice
or the details given in the notice under sub-section (2) of Section 13,
he may make representation or raise objection by invoking provisions of
sub-section (3A) of Section 13. In case such objection/representation is
filed by the borrower, it becomes incumbent upon the secured creditor
to consider the same and communicate its decision, the reasons for non
-acceptance of the representation/objection. The decision on the said
representation/objection has not been made justiciable, i.e. it cannot
be challenged by taking recourse to Section 17 of the Act, 2002 for the
reason that the borrower has right to challenge the notice issued at the
next step, i.e. under sub-section (4) of Section 13, whereunder the
secured creditor may take recourse to the measures provided therein to
recover his secured debts, in case, the borrowers fails to discharge his
liability within the period specified in sub-section (2) of Section 13. It
is placed before us that the application under 17 under Chapter III
before the Tribunal is maintainable at this stage that means if the
representation/objection(s) of the borrower under sub-section (3A) of
Section 13 is/are not accepted and the secured creditor proceeds to
take any of the measures to secure his/its debt by issuing notice under
sub-section (4) of Section 13, the borrower has a right to challenge the
action of the secured creditor. The contention is that the Grievance
Redressal Forum is provided at every stage of the proceeding, when a
notice under sub-section (2) of Section 13 is issued to the borrower
calling upon him to make payment of outstanding dues and further
when the secured creditor decides to take coercive measure to recover
its secured debt by issuing notice under sub-section (4) of Section 13.
26. One of the measures provided in sub-section (4) of Section 13 to
recover the secured debts is to take possession of the secured asset of
the borrower including the right to transfer by way of lease, assignment
or sale for realising the secured asset. The stage of Section 14 reaches
only 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 the
Act, for the purpose of taking possession or control of any such secured
asset, i.e. for taking physical possession or control of the secured asset.
The contention is that Section 14 is extension of the measures provided
in sub-section (4) of Section 13 to the secured creditor to recover his
secured debt. The CMM/DM/Authorized Officer under Section 14 is only
an extended hand of the secured creditor to help the secured creditor in
taking physical possession of the secured asset being administrative
authorities. Clauses (a) and (b) of sub-section (1) of Section 14 make it
clear that the Authorized Officer/CMM/DM while invoking its jurisdiction
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is required to take possession of such asset and forward it to the

secured creditor. The measure taken under Section 14 of the Act, 2002
though adversarial in nature, but there is no occasion for a contest by
the borrower to the application moved by the secured creditor to take
possession of the secured asset as no adjudicatory proceeding is to be
conducted by the Authorized Officer/CMM/DM.
27. As regards the declaration by the Authorized Officer of the
secured creditor in the affidavit accompanying application under
Section 14, it is argued that the information provided in the affidavit
are required to facilitate the Authorized Officer/CMM/DM to record its
satisfaction that the stage of recovery of physical possession of the
secured asset has reached and the secured creditor is entitled to take
possession by taking recourse under Section 14. The “satisfaction” to
be recorded by the Authorized Officer/CMM/DM “to the contents of the
affidavit” before passing a suitable order to take possession of the
secured asset as per the second proviso to sub-section (1) of Section
14 of the Act, 2002 is a subjective satisfaction. The act of the
Authorized Officer/CMM/DM in passing the order under Section 14 is
only a ministerial act and as no adjudicatory process is involved in the
said act, the principles of administrative law of natural justice for
providing opportunity of hearing cannot be read into as implied
mandatory requirement.
28. Reliance is placed on the decision of the Bombay High Court in
CA. Manisha Mehta v. Board of Directors9 to assert that Section 14
cannot stand independent of Section 13(4) as explained by the Apex
Court in Standard Chartered Bank v. V. Noble Kumar10.
29. It was held in V. Noble Kumar (supra) that since the borrower
has no right of hearing when the secured creditor takes possession
under Section 13(4), no hearing can be demanded by a borrower when
by his action in resisting possession being gained over by the
authorized officer of the secured creditor or refusing to deliver
possession on his own, he compels such officer to seek assistance of
the Authorized Officers under Section 14. The right to approach the
tribunal is conferred on a borrower in terms of Section 17, post
possession, whether it is symbolic possession under Section 13(4) or
physical possession under Section 14 of the Act, 2002. The scheme of
SARFAESI Act’ 2002, thus, does not admit of any requirement of
complying with natural justice by putting the borrower on notice while
an application under Section 14 is under consideration. In view of the
efficacious mechanism under the Act being in place, the borrower
cannot seek a right of hearing at an intermediary stage.
30. Reliance is further placed on the decision of the Bombay High
Court in Trade Well, a Proprietorship Firm, Mumbai v. Indian Bank11,
the judgment of the Division Bench of this Court in Anuradha Singh v.
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Chief Metropolitan Magistrate Kanpur Nagar12, a decision of the learned

Single Judge of this Court in Shakuntala Devi Jan Kalyan Samiti
through Secretary v. State of U.P.13, the judgments of the Apex Court
in Mardia Chemicals Ltd. v. U.O.I.14; Kanhaiyalal Lalchand Sachdev v.
State of Maharashtra15; NKGSB Cooperative Bank Limited v. Subir
Chakravarty16 and the judgment and order dated 27th July, 2022 in
R.D. Jain and Co. v. Capital First Ltd.17 as also the decision of the
Bombay High Court in Phoenix ARC Private Limited v. the State of
Maharashtra18 to buttress the above submissions.
31. The meaning of “Ministerial Act” in “Advanced Law Lexicon” has
been placed before us to assert that while doing a ministerial act, a
government official is dictated by law and has no power to form his own
judgment or exercise discretion.
32. In essence, it is argued by Sri Manish Goyal learned Additional
Advocate General that at the stage of the proceedings under Section 14
of the SARFAESI Act, 2002, as there is no independent consideration
and the Authorized Officer/CMM/DM has to act without application of its
own independent mind, merely on the information provided by the
secured creditor/bank, the requirement of following principles of natural
justice, cannot be read into the said provision. Moreover, effective
remedy is available to the borrower to challenge the action initiated by
the secured creditor even prior to the stage of Section 14, the borrower
cannot be granted another opportunity under the scheme of the Act in
view of the object and purpose of the enactment, i.e. the SARFAESI
Act, 2002.
33. Sri Naveen Sinha learned Senior Advocate for the respondent no.
4 has adopted the arguments of Sri Manish Goyal learned Additional
Advocate General.
34. In addition to the above contentions, it was argued by the
learned Senior Counsel that the order passed under Section 14 of the
SARFAESI Act, 2002 is only a ministerial act. No adjudicatory process
qua points or issue is involved and, as such, there is no question of
independent application of mind by the Authorized Officer/CMM/DM.
There is no dichotomy between symbolic and physical possession taken
under Section 13(4) and Section 14 of the Act, 2002. Rule 8 of the
Security Interest (Enforcement) Rules, 2002 (In short as “the Rules,
2002”) provides for affixation of possession notice on the outer door or
at such conspicuous place of the property, whereby the Authorized
Officer take or cause to take possession. With the affixation of the
possession notice as per sub-rule (1) of Rule 8 and publication thereof
in accordance with sub-rule (2) in two daily newspapers and the service
through electronic mode as per sub-rule (2A), the possession of the
secured asset stood transferred in favour of the secured creditor. The
question remains, thus, of taking actual physical possession of the
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secured asset, in case, the borrower does not part with his possession
despite receipt of the notice.
35. Further contention of the learned Senior Counsel for the
petitioners is about the delay in passing the order under Section 14,
beyond the time limit of 60 days provided under the Act.
36. It is argued that the Authorized Officer/CMM/DM has no
jurisdiction to pass order beyond the period of 60 days, as mandated in
the third proviso to Section 14. The proviso states that the officer
concerned has to record reasons in writing, in case, it fails to pass order
within the period of 30 days from the date of application prescribed in
the Second proviso. The order passed, in the instant case, is beyond
the period of 60 days and hence suffers from the vice of jurisdiction.
37. In rebuttal, the reliance is placed on the decision of the Apex
Court in C. Bright v. District Collector19 by the learned Senior Counsel
for the respondent to assert that the District Magistrate does not
become functus officio, if it is unable to take possession within the time
limit, which is prescribed to instill a confidence in creditors that the
District Magistrate will make an attempt to deliver possession as well as
to impose a duty on the District Magistrate to make an earnest effort to
comply with the mandate of the statute to deliver the possession within
30 days and for reasons to be recorded within 60 days.
38. It was argued that it was held by the Apex Court that the
remedy under Section 14 of the Act is not rendered redundant if the
District Magistrate is unable to handover the possession. The District
Magistrate will still be enjoined upon the duty to facilitate delivery of
possession at the earliest.
39. Sri Anurag Khanna learned Senior Advocate appearing for the
respondent no. 3 in Writ-C No. 22594 of 2022 while adopting the
arguments of Sri Manish Goyal learned Additional Advocate General on
the scheme of the Act raises an objection with regard to the
maintainability on the ground that a writ petition against a private
financial institution against the proposed action/actions under the
SARFAESI Act, 2002 cannot be maintained.
40. Reliance is placed on the decision of the Apex Court in Phoenix
ARC Private Limited v. Vishwa Bharati Vidya Mandir20.
41. Having heard learned counsel for the parties and perused the
record, in light of the arguments made by the learned counsels for the
parties, the main issue which arises for our examination is as to
“whether a borrower is entitled to notice and opportunity of hearing in
the proceeding under Section 14 of the SARFAESI Act, 2022”.
42. This Court is also required to answer the contentions of the
learned Senior Counsel for the petitioners based on the decision of the
Division Bench in Kumkum Tentiwal (supra) which has answered the
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issued in favour of the borrower and that the issue has been referred to
the Full Bench by another Division Bench doubting the correctness of
Kumkum Tentiwal (supra).
43. To answer the above issues, we are required to go through the
legislative scheme of the SARFAESI Act, 2002. The SARFAESI Act’
2002 has been enacted to enable banks and financial institution to
secure recovery by exercising powers to take possession of the
securities, sell them and reduce non-performing assets by adopting
measures for recovery or reconstruction, without the intervention of the
Court. Section 34 bars the jurisdiction of the Civil Court to entertain
any suit or proceeding in respect to any matter which the Tribunal
constituted under the Act is empowered to determine.
44. The validity of the SARFAESI Act, 2002 has been upheld by the
Apex Court in Mardia Chemicals Ltd. (supra). A question was framed by
the Apex Court therein as to whether the provisions as contained in
Sections 13 and 17 of the Act provide adequate and efficacious
mechanism to consider and decide the objection/dispute raised by a
borrower against the recovery, particularly in view of bar to approach
the Civil Court under Section 34 of the Act.
45. While answering the said question, the forums or remedies
available to the borrower to ventilate his grievances under the Act have
been considered and it was noted therein:—
(i) The purpose of serving a notice upon the borrower under sub-
section (2) of Section 13 is that a reply may be submitted by the
borrower explaining the reasons as to why measures may or may
not be taken under sub-section (4) and Section 13 in case of non-
compliance of notice within 60 days.
(ii) The creditor must apply his mind to the objection raised in reply
to such notice and an internal mechanism is to be evolved to
consider such objections raised in reply to the notice.
(iii) Meaningful consideration of the objection raised by the borrower
is mandated before proceeding to take drastic measures under
sub-section (4) of Section 13.
(iv) The bank and financial institution are required to communicate
to the borrower of the reasons for not accepting the objections or
points raised in reply to the notice served upon them before
proceeding to take measures under subsection (4) of Section 13.
(v) The communication of reasons is for the purpose of knowledge of
the borrower as he has right to know as to why his objections
have not been accepted by the secured creditor who intends to
start hard steps of taking over possession/management/business
of secured asset without intervention of the Court under Section
13(4) of the Act.
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(vi) The next safeguard available to a borrower within the framework

of the Act is to approach the Debt Recovery Tribunal under
Section 17 of the Act. Such a right accrues only after measures
are taken under sub-section (4) of Section 13 of the Act.
46. The arguments that the borrower is entitled to be heard before a
notice under sub-section (2) of Section 13 is issued failing which there
is denial of the principles of natural justice, was turned down, stating
therein that the issuance of a notice to the debtor by the creditor does
not attract the application of the principles of natural justice. It is
always open to tell the debtor what he supposed to repay. No hearing
can be demanded from the creditor at this stage. But the secured
creditor must bear in mind that the reply of the borrower to the notice
under Section 13(2) of the Act has been considered applying mind to it,
before stringent measures, a process of recovery is initiated. The
reasons, however, brief they may be, for not accepting the objection, if
raised in the reply, must be communicated to the borrower. The
requirement of pre-deposit of 75% of the demand at the initial
proceeding as per sub-section (2) of Section 17 has been held ultra
vires of Article 14 of the Constitution of India with the observation that
the said requirement at the initial proceeding sounds unreasonable and
oppressive and cannot be said to be a reasonable condition at the first
instance itself before start of adjudication of the dispute.
47. In Transcore v. Union of India21, the question was considered
whether recourse to take possession of the secured assets of the
borrower in terms of Section 13(4) of the SARFAESI Act (referred as
the NPA Act therein) comprehends the power to take actual possession
of the immovable property?
48. While answering the same, it was held that there is no
dichotomy under the Act between symbolic and physical possession.
Section 13(4) of the NPA Act proceeds on the basis that the borrower,
who is under liability, has failed to discharge his liability within the
period prescribed under Section 13(2), which enables the secured
creditor to take recourse to one or more of the measures namely taking
possession of the secured assets including the right to transfer by way
of lease, assignment or sale for realising the secured asset. The
mechanism for taking possession has been provided under Rule 8 of the
2002 Rules framed under the NPA Act. Section 14 of the NPA Act
provides for taking possession of the secured asset through the District
Magistrate. Section 17(3) states that if the DRT after examining the
facts and circumstances of the case comes to the conclusion that any of
the measures referred to in sub-section (4) of Section 13 taken by the
secured creditor are not in accordance with the provisions of the Act
and the Rules thereunder, it may by order declare that the recourse
taken to anyone or more measures is invalid and consequently, restore
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possession to the borrower and can also restore management of the

business of the borrower. Therefore, the scheme of Section 13(4) read
with Section 17(3) shows that if the borrower is dispossessed, not in
accordance with the provisions of the Act, then the DRT is entitled to
put the clock back by restoring the status quo ante.
49. It was observed therein that for the fact that the NPA Act
provides for recovery of possession by non-adjudicatory process, it
would be erroneous to say that the rights of borrower shall be defeated
without adjudication.
50. In Standard Chartered Bank (supra), the challenge was to the
legality of the order passed by the Chief Judicial Magistrate in the
proceedings under Section 14 of the SARFAESI Act to take possession
of the secured asset and to hand over the same to the secured creditor.
51. It was argued that a secured creditor before invoking the
authority of the Magistrate under Section 14 must necessarily make an
attempt to take possession of the secured asset. Only when the creditor
faces resistance to such an attempt the creditor could resort to the
procedure under Section 14 of the Act. It was further urged that
Section 17 of the Act provides remedy only against the measure taken
by the creditor under Section 13(4) of the Act and the said remedy is
not available against an action taken by the Magistrate under Section
14 of the Act. Therefore, permitting the secured creditor to invoke
Section 14 without first resorting to the procedure under Section 13(4)
would deprive the owner of the secured asset an opportunity of filing
application under Section 17 to have his grievances adjudicated. It was
also argued that even a Magistrate exercising power under Section 14
of the Act is required to follow the procedure contemplated under Rule
8 of the Security Interest (Enforcement) Rules’ 2002 though the rule
does not expressly say so. Failure to comply with the requirement of
Rule 8, in that case, would vitiate the order of the Magistrate.
52. Turning down the above contentions, the decision of the Bombay
High Court in Trade Well, a Proprietorship Firm, Mumbai v. Indian Bank
(supra) was noted therein in Para “22’ as under:—
“22. However, the Bombay High Court in Trade Well v. Indian
Bank opined:
“2…..CMM/DM acting under Section 14 of the NPA Act is not
required to give notice either to the borrower or to the third party.
3. He has to only verify from the bank or financial institution
whether notice under Section 13(2) of the NPA Act is given or not
and whether the secured assets fall within his jurisdiction. There
is no adjudication of any kind at this stage.
4. It is only if the above conditions are not fulfilled that the
CMM/DM can refuse to pass an order under Section 14 of the NPA
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Act by recording that the above conditions are not fulfilled. If

these two conditions are fulfilled, he cannot refuse to pass an
order under Section 14.”
In Para “24’, the Apex Court has taken note of the amendment
brought in Section 14 by Act No. 1 of 2013 w.e.f. 15.1.2013, to
insert the first proviso to sub-section (1) of that Section, the
requirement of affidavit of the authorised officer of the secured
creditor, Para “24’ to Para “24.7’ are to be extracted hereinunder:—
“24. An analysis of the nine sub-clauses of the proviso which
deal with the information that is required to be furnished in the
affidavit filed by the secured creditor indicates in substance that:
24.1. (i) there was a loan transaction under which a
borrower is liable to repay the loan amount with interest,
24.2. (ii) there is a security interest created in a secured
asset belonging to the borrower,
24.3. (iii) that the borrower committed default in the
repayment,
24.4. (iv) that a notice contemplated under Section 13(2)
was in fact issued,
24.5. (v) in spite of such a notice, the borrower did not
make the repayment.
24.6. (vi) the objections of the borrower had in fact been
considered and rejected,
24.7. (vii) the reasons for such rejection had been
communicated to the borrower, etc.”
It was concluded in paras “25’, “27’ as under:—
“25. 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. It is only after recording of his satisfaction the
Magistrate can pass appropriate orders regarding taking of
possession of the secured asset.
27. The “appeal” under Section 17 is available to the borrower
against any measure taken under section 13(4). Taking
possession of the secured asset is only one of the measures that
can be taken by the secured creditor. Depending upon the nature
of the secured asset and the terms and conditions of the security
agreement, measures other than taking the possession of the
secured asset are possible under section 13(4). Alienating the
asset either by lease or sale etc. and appointing a person to
manage the secured asset are some of those possible measures.
On the other hand, section 14 authorises the Magistrate only to
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take possession of the property and forward the asset along with
the connected documents to the borrower (sic the secured
creditor). Therefore, the borrower is always entitled to prefer an
“appeal” under section 17 after the possession of the secured
asset is handed over to the secured creditor. Section 13(4)(a)
declares that the secured creditor may take possession of the
secured assets. It does not specify whether such a possession is
to be obtained directly by the secured creditor or by resorting to
the procedure under section 14. We are of the opinion that by
whatever manner the secured creditor obtains possession either
through the process contemplated under section 14 or without
resorting to such a process obtaining of the possession of a
secured asset is always a measure against which a remedy under
section 17 is available.”
It was noted therein that there will be three methods for the
secured creditor to take possession of the secured asset. (i) The first
method would be where the secured creditor gives the requisite
notice under Rule 8(1) and where he does not meet with any
resistance. In that case, the authorised officer will proceed to take
steps as stipulated under Rule 8(2) onwards to take possession and,
thereafter, for sale of the secured asset to realise the amounts that
are claimed by the secured creditor. (ii) The second situation will
arise where the secured creditor met with resistance from the
borrower after the notice under Rule 8(1) is given. In that case, he
will take recourse to the mechanism provided under Section 14 of
the Act, viz. making application to the Magistrate. The Magistrate will
scrutinize the application and then if satisfied, appoint an officer
subordinate to him as provided under Section 14(1)(A) to take
possession of the asset and documents. (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, scrutinize 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.
[Reference paragraphs “36.1’ to “36.3’ of the decision].
In Para “37’, the law laid down in Mardia Chemicals Ltd. (supra)
has been noted to state therein as under:—
“37. In this connection, it is material to refer to the judgment
in Mardia Chemicals (supra) wherein the Court was concerned
with the legality and validity of the SARFAESI Act. The Court held
the Act to be valid except Section 17(2) thereof as it then stood.
In paragraphs 59, 62 and 76 of the judgment the Court in terms
held that in remedy under Section 17 of the Act was essentially
like filing a suit in a Civil Court though it was called an Appeal. It
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is also relevant to note that in the ultimate conclusions in

paragraph 80 of the judgment this Court held in sub-para (2)
thereof as follows:—
“80.(2). As already discussed earlier, on measures having
been taken under sub-section (4) of Section 13 and before the
date of sale/auction of the property it would be open for the
borrower to file an appeal (petition) under Section 17 of the Act
before the Debts Recovery Tribunal.”
The grievance of the respondent that it will be left with no remedy
is, therefore, misplaced. As held by a bench of three Judges in
Mardia Chemicals (supra), it would be open to the borrower to file an
appeal under Section 17 any time after the measures are taken
under Section 13 (4) and before the date of sale/auction of the
property. The same would apply if the secured creditor resorts to
Section 14 and takes possession of the property with the help of the
officer appointed by the Magistrate”
53. It was, thus, held that the borrower is not remediless, inasmuch
as, it would be open to the borrower to file an “application’ under
Section 17 any time after the measures are taken under Section 13(4)
and even before the sale/auction of the property. The same would apply
as well if the secured creditor resorts to Section 14 and takes
possession of the property with the help of the officer appointed by the
Magistrate.
54. Coming to the legislative scheme, Chapter III under the heading
“Enforcement of Security Interest” contains the provisions under
Sections 13 to 19 of the Act, 2002. The Act provides for steps to be
taken for Enforcement of Security Interest created in favour of any
secured creditor, without the intervention of the Court or Tribunal.
Before taken stringent measures, the secured creditor is obliged to give
notice to the borrower, consider his objection and given reasons not to
accept the same, if raised in the reply. Sub-section (4) of Section 13
and Section 14 provide as to how stringent measure of taking
possession of the secured asset would be taken to ensure recovery of
secured debt. Sections 17 & 18 provide remedy to the borrower against
the action of the secured creditor at both stages, sub-section (4) of
Section 13 and Section 14 at the post possession stage. However, at
the time of challenge to the action taken under Section 14, the
challenge to the notice under sub-section (4) of Section 13 is
necessary. And further the challenge to the action under Section 14,
i.e. the act of taking over physical possession of the secured asset can
be sustained by the tribunal only after the borrower is dispossessed.
Section 19, however, safeguards the interest of the borrower in case of
any illegal act of dispossession from his property/secured asset by
empowering the tribunal, both the Debt Recovery Tribunal or the
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Appellate Tribunal, to restore the possession of such secured asset if it

has held that the possession of the secured creditor is not in
accordance with the Act and the rules made thereunder. The borrower
or any other aggrieved persons is also entitled to the payment of such
compensation and cost for such illegal action of the secured creditor, as
determined by the Tribunal.
55. Having regard to the scheme of the SARFAESI Act’ 2002, as
explained by the Apex Court in Mardia Chemicals Ltd. (supra),
Transcore (supra) and Standard Chartered Bank v. V. Noble Kumar
(supra), it is to be noted that the object of the SARFAESI Act is to
facilitate quick recovery of secured debts without the intervention of the
Court. The statement of objects and reasons of the bill bringing
amendment in Section 14 by Act No. 14 of 2016 providing specific time
line for taking possession of the secured asset is further in aid of the
principle laid down by the Apex Court that the measures taken by the
secured creditor at the stage of Sections 13(4) and 14 is without
judicial/quasi judicial intervention, till such time, the possession of the
secured asset is taken by the secured creditor after serving requisite
notice and responding to the objections/representations, if any, prayed
by the borrower under Section 13(3A) of the Act. Explanation to sub-
section (1) further clarify that any decision on the representation of the
borrower shall not entitle him to file application under Section 17 of the
Act. The secured creditor is not required to give any notice or
opportunity to the borrower at the stage of Section 13(4) when it
proceeds to take recourse to one or more of the measures provided in
sub-section (4) to recover its secured debts. Section 14 of the
SARFAESI Act is an extension of the measures taken by the secured
creditor to take possession of the secured asset of the borrower, on the
resistance of the borrower. It would be legal fallacy, if it is said that
though the secured creditor is not liable to give hearing to the borrower
at the stage of Section 13(4) of the Act but if on resistance put forth by
the borrower in getting physical possession of the secured asset, the
secured creditor if approach the Magistrate to seek help/assistance, the
borrower who is resisting possession being taken by the Authorized
Officer of the secured creditor or does not on his own surrender
possession, would be entitled to the opportunity of hearing. The
borrower has right to approach the Tribunal in terms of Section 17 to
challenge any of the measures taken by the secured creditor referred to
in sub-section (4) of Section 13, which include the measure taken
under Section 14 of the Act by seeking assistance of the District
Magistrate/Chief Metropolitan Magistrate. The right to approach the
Tribunal is conferred upon the borrower only post possession.
56. As held by the Apex Court in Transcore's case (supra), there is
no dichotomy between symbolic possession taken under sub-section
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(4) of Section 13 and physical possession by force taken with the

assistance of the District Magistrate/Chief Metropolitan Magistrate
under Section 14 of the SARFAESI Act.
57. Insofar as the right of the borrower to challenge the
steps/measures taken by the secured creditor, the Apex Court in R.D.
Jain and Co. (supra) while dealing with the provisions of Section 14 of
the SARFAESI Act has observed that the powers of the Chief
Metropolitan Magistrate under Section 14 of the SARFAESI Act is purely
executionary in nature and has no element of quasi-judicial function or
application of mind and he cannot brook delay. Time is of the essence.
The statutory obligation enjoined upon the CMM/DM is to immediately
move into action after receipt of a written application under Section 14
(1) of the SARFAESI Act from the secured creditor. The CMM/DM is
expected to pass an order after verification of compliance of all
formalities by the secured creditor referred to in the proviso in Section
14(1) of the SARFAESI Act, and after being satisfied in that regard, to
take possession of the secured asset and documents relating thereto
and to forward the same to the secured creditor at the earliest
opportunity.
58. Same view has been taken by the Apex Court in NKGSB
Cooperative Bank Limited (supra), which has been relied in the decision
of R.D. Jain and Co. (supra).
59. Relevant paragraph “39’ of the said decision is noted as under:—
“39. As regards the procedure for taking possession of the secured
assets, it can be discerned from Section 13 read with Section 14 of
the 2002 Act. Section 13(4) permits the secured creditor to take
recourse to one or more of the specified measures; and to enable the
secured creditor to do so even at the stage of pre-confirmation of
sale; in terms of Section 14, the CMM/DM has power in that regard
albeit after passing order on a written application given by the
secured creditor for that purpose. Once the order is passed, the
statutory obligation cast upon the CMM/DM stands discharged to that
extent. The next follow-up step is of taking possession of the secured
assets and documents relating thereto. The same is ministerial step.
…xxxxxxxxxxxxxxx…..”
60. In Kanhaiyalal Lalchand Sachdev (supra), the Apex Court while
answering the question as to whether the DRT would have jurisdiction
to consider and adjudicate post Secction 13(4) events or whether its
scope in terms of Section 17 of the Act will be confined to the stage
contemplated under Section 13(4) of the Act, has held that:—
“22. We are in respectful agreement with the above enunciation of
law on the point. It is manifest that an action under Section 14 of
the Act constitutes an action taken after the stage of Section 13(4),
and therefore, the same would fall within the ambit of Section 17(1)
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of the Act. Thus, the Act itself contemplates an efficacious remedy

for the borrower or any person affected by an action under Section
13(4) of the Act, by providing for an appeal before the DRT.”
61. The Bombay High Court in Trade Well, a Proprietorship Firm,
Mumbai (supra) has faced with the issue as to whether the Chief
Judicial Magistrate or the District Magistrate, as the case may be, is
required to give notice to the borrower or any person who may be in
possession of secured asset and give him a hearing.
62. Taking note of the decision of the Apex Court in Transcore's case
(supra), it was held therein that adjudication of rival claims is absent at
that stage, there is no question of dealing with rival claims and giving a
reasoned judgment as regards the merits of the case. In any event, if a
party has any grievance as regards the contents of that order, his
remedy would be to voice them in the application under section 17
before the DRT after measures under section 13(4) are taken. At the
time of passing order under Section 14 of the NPA Act, CMM/DM will
have to consider only two aspects. (i) He must find out whether the
secured asset falls within his territorial jurisdiction and; (ii) whether
notice under Section 13(2) of SARFAESI Act is given or not. No
adjudication of any kind is contemplated at that stage.
63. Same view has been taken by the Bombay High Court in CA.
Manisha Mehta (supra), wherein it was noted that:—
“8. Pertinently, Section 14 of the SARFAESI Act was amended
twice, once in 2013 and then again in 2016. If it were the intention
of the legislature to extend opportunity of hearing to a borrower
before the District Magistrate/Chief Metropolitan Magistrate, as the
case may be, it was free to do so. Advisedly, the legislature did not
do so, for, it would have militated against the scheme of the
SARFAESI Act and more particularly Section 13 thereof. It is implicit
in the scheme of the SARFAESI Act that natural justice, only to a
limited extent, is available and not beyond what is expressly
provided. There seems to be little merit in the argument advanced
by Mr. Nedumpara and we hold that the language of Section 14 is
too clear and unambiguous, and does not admit of any requirement
of complying with natural justice by putting the borrower on notice
while an application thereunder is under consideration.”
64. A Division Bench of this Court in Anuradha Singh (supra) has
dealt with the issue in the following manner:—
“9. ……xxxxxxxxx…..We do not find any statutory provisions for
providing an opportunity to the borrower at the stage of passing of
an order under Section 14 of the Act nor any decision either of this
Court or the Apex Court has been pointed out that may enable us to
read such principles of administrative law in to the statutory
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provisions of Section 14 of the Act. Consequently the said argument

does not hold water.”
65. Learned Single Judge of this Court in Shakuntala Devi Jan
Kalyan Samiti through Secretary (supra) has noted the Division Bench
judgments in Anuradha Singh (supra) as also Kumkum Tentiwal
(supra) and taking note of the decisions of the Apex Court in Mardia
Chemicals Ltd. (supra) and Standard Chartered Bank v. V. Noble Kumar
(supra), it has observed that:—
“34. This Court taking into account the judgments rendered by
three Division Benches of this Court, as referred to hereinabove, and
the observations of the Supreme Court in the case of Mardia
Chemicals Ltd. (supra), is of the opinion that nothing can be read
into the language of Section 14 of the Act, which has not been
provided specifically therein by the Parliament.
After the judgment was rendered in Mardia Chemicals Ltd.
(supra), the Act was amended and the provisions for pre-deposit of
75% was done away with for approaching the Tribunal.
35. Since in the statute itself there is no provision for giving
opportunity of hearing in an action under Section 14 of the Act, this
Court cannot provide such opportunity of hearing to the writ
petitioner. It is settled position in law that the Court ought to decide
matters on the basis of law as it exists and declare the same instead
on the basis of what law should be.”
66. In light of the above discussion, in the legislative scheme of the
Act, 2002, Section 14 is placed in Chapter III in such a manner that
the proceedings undertaken by the CMM/DM for the purpose of taking
possession or control of any secured asset, is in the nature of execution
proceeding, in furtherance of the measures taken by the secured
creditor to recover his secured debt under Section 13(4) of the Act. The
enabling provision is Section 13(4) whereunder the secured creditor
has been conferred power to take possession of the secured assets of
the borrower including the right to transfer by way of lease, assignment
or sale for realizing the secured asset. In case, the actual physical
possession of an immovable property, which is secured asset, is not
handed over by the borrower to the secured creditor on his own on
initiation of measures under Section 13(4), or the Authorised Officer of
the secured creditor met with resistance from the borrower when he
proceed to take steps as stipulated under Rule 8(2) onwards to take
possession after the notice, the bank (who is secured creditor) may
make a request in writing to the CMM/DM, within whose jurisdiction the
secured asset is situated, to take possession thereof and forward such
asset to the secured creditor. The borrower has a remedy to challenge
the measures taken by the secured creditor including the order passed
under Section 14 of the SARFAESI Act, 2002 before the Debt Recovery
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Tribunal post-possession. As no enquiry either in the nature of judicial

or quasi-judicial proceeding is to be conducted at this stage, and as
held by the Apex Court the proceedings before the CMM/DM under
Section 14 of the Act is ministerial in nature, we hold that no
opportunity of hearing is required to be given to the borrower at this
stage.
67. We are now required to go through the Division Bench judgment
of this Court in Kumkum Tentiwal (supra) relied by the learned
counsels for the petitioners, wherein a contrary view has been taken.
68. While dealing with the question as to whether a borrower is
entitled to right of hearing prior to any order having been passed by the
District Magistrate while exercising power under Section 14, the Bench
has observed that the secured creditor is bound to file an affidavit
giving declaration as required in Section 14. On the said affidavit being
filed by the secured creditor, the CMM/DM is to satisfy itself about the
contents of the affidavit to pass a suitable order for the purpose of
taking possession of the secured asset. It was, thus, observed that
from the plain reading of the said provision, it is inconceivable as to
how the District Magistrate can record a satisfaction ex-parte with
regard to the averments to be made in the affidavit filed by the secured
creditor along with the application making request for taking possession
by use of force. Taking note of sub-section (2) of Section 14, it was
observed that the said provision authorises the District Magistrate to
take such steps or use such force as in his opinion be necessary. The
import of the said power is that the District Magistrate can use coercive
measure for taking the possession. The right of the occupier whether it
is the borrower or otherwise to resist or object to use of force or to point
out any deficiencies in the affidavit that has been filed by the secured
creditor, can be exercised only where the notice is given to the person
who is sought to be dispossessed and an opportunity of hearing is
afforded to such person, who may be in occupation.
69. With the above reasonings, it was held that it is essential that
principle of natural justice are followed, even while exercising the
powers under Section 14 which include the right to be heard. Before
initiation of proceeding under Section 14, it is essential that the
procedure of Sections 13(2) and 13(4) is followed and the borrower
may at times plead that he was not given opportunity of hearing as
envisaged under Section 13(2) to payment of the dues within 60 days
and, therefore, the action under Section 14 is illegal. The notice or
opportunity of hearing, thus, is also necessary to the borrower or
guarantor, as the case may be.
70. The Division Bench in Kumkum Tentiwal (supra) has further
referred to the decision of the Apex Court in Harsh Govardhan Sondagar
(supra) which was related to the right of the lessee of the secured asset
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to be heard in the proceeding under Section 14 of the SARFAESI Act

and taken note of the observations therein that the statutory provisions
attaching finality to the decision of an Authority excluding the power of
any other Authority or Court, to examine such a decision will not be a
bar for the High Court or the Supreme Court to exercise jurisdiction
vested by the Constitution because a statutory provision cannot take
away a power vested by the Constitution. It was, thus, observed in
Kumkum Tentiwal (supra) that the Apex Court while analyzing the
provisions of Section 14 has held therein that only recourse available
against an order passed under Section 14 of the SARFAESI Act is under
Articles 226 and 227 of the Constitution of India.
71. As regards the observance of principles of natural justice, it was
observed that the Apex Court in a catena of decisions have held that
principles of natural justice are engrained and have to be read into
every statute even if not specifically provided for. The statute may not
contain a provision for prior hearing. But what is important to be noted
is that the applicability of principles of natural justice is not dependent
upon any statutory provision. The principle has to be mandatorily
applied irrespective of the fact as to whether there is any statutory
provision or not.
72. Taking note of the various decisions of the Apex Court, it was
observed therein that it is well settled that principles of natural justice
are integral part of Article 14. No decision prejudicial to a party should
be taken without affording an opportunity or supplying the material
which is the basis for the decision. It was, thus, concluded that Section
14 on bare perusal does not provide for any opportunity of hearing.
However, the order passed under Section 14 being a coercive measure
for taking possession, the officer is bound to observe the principles of
natural justice while passing the order under Section 14 of the
SARFAESI Act.
73. It was further noted in Kumkum Tentiwal (supra) that the Apex
Court in the case of Dharampal Satyapal Limited (supra) has held that
the Authority exercising power cannot even take a ground to the effect
that no useful purpose would be served in hearing the affected parties
prior to passing of the order.
74. With due regards to the Hon'ble Judges holding the Bench, we
find that the decision in Kumkum Tentiwal (supra) is in ignorance of
the scheme of the SARFAESI Act, 2002, the construction of Chapter III
of the Act which provides for “Enforcement of Security Interest”. It has
misread the decision of the Apex Court in Harsh Govardhan Sondagar
(supra) in holding that only recourse available against the order passed
under Section 14 of the SARFAESI Act is under Articles 226 and 227 of
the Constitution of India.
75. The availability of the statutory remedy to the borrower under
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Section 17 of the SARFAESI Act, 2002, contained in Chapter III against

the order under Section 14 cannot be disputed. The Division Bench in
the case of Kumkum Tentiwal (supra) did not consider the law
propounded by the Apex Court in Standard Chartered Bank v. V. Noble
Kumar that Section 14 cannot stand independent of Section 13(4) and
if a borrower has no right of hearing when the secured creditor takes
possession under Section 13(4), no hearing can be demanded by him
when he succeeds in resisting possession being taken over by the
Authorized Officer of the secured creditor or does not on his own
surrender possession and thus, compels the secured creditor to seek
assistance of the CMM/DM under Section 14. The right of a borrower to
approach the Tribunal in terms of Section 17, as a post possession
right, recognised in Standard Chartered Bank v. V. Noble Kumar
(supra) as per the legislative scheme has been completely ignored.
76. As noted above, under the scheme of the Act, it is implicit that
the observance of principles of natural justice is at the stage of Section
13(3A), i.e. before the secured creditor proceeds to initiate coercive
measure against the borrower under Section 13(4) of the Act. Once the
borrower is granted opportunity at the stage prior to initiation of the
coercive measures after calling upon him to pay the dues of the secured
creditor, no further opportunity is to be given either at the stage of
Section 13(4) or Section 14.
77. As regards the opportunity to be granted to the borrower to
object the assertion in the affidavit accompanying application moved by
the secured creditor in view of the proviso to sub-section (1) of Section
14, we may consider that the information as required under the said
provision is needed for transmission to the officer passing order under
Section 14 of the Act, 2002, to enable him to record his satisfaction
that the secured creditor has taken necessary steps before making
request to seek physical possession by force and there was a refusal or
inaction on the part of the borrower to handover physical possession.
The satisfaction recorded is subjective and not based on any objective
criteria. No enquiry in the nature of judicial or quasi-judicial proceeding
is required to be conducted by the CMM/DM who is authorized to take
possession of the secured asset and forward such asset to the secured
creditor, in terms of sub-section (1)(a)&(b) of Section 14.
78. At this stage, the observations of the Apex Court in V. Noble
Kumar (supra) about the scope of enquiry by the Magistrate as per the
second proviso to sub-section (1) of Section 14 of the Act, in Para “25’
noted above are reiterated.
79. The finality attached to the order of CMM/DM in using force to
take physical possession of the secured asset under sub-section (2) of
Section 14 has no bearing on the right of the borrower to challenge the
measures taken by the secured creditor by initiation of the proceedings
-----------------------------------------------------------------------------------------------------------------------------------------------------------
under Section 13(4) of the SARFAESI Act, 2002, to take possession of

the secured asset in order to recover his secured debt.
80. The object and purpose of SARFAESI Act, 2002 to enable the
secured creditor to secure recovery by exercising powers to take
possession of the securities, sell them and reduce Non-performing
assets by adopting measures for recovery or reconstruction, without the
intervention of the Court, has not been considered by the Division
Bench in Kumkum Tentiwal (supra). Further Amendments brought in
Section 14 by Act No. 16 of 2016 providing specific timeline for taking
possession of the secured asset have not been taken note of.
81. The decision in Mardia Chemicals Ltd. (supra) about the
safeguards available to borrower within the framework of SARFAESI Act
to approach the Debt Recovery Tribunal under Section 17 of the Act has
been ignored. The observations of the Division Bench in Kumkum
Tentiwal (supra) that no other remedy is available against the order
under Section 14 of the SARFAESI Act within the scheme of the Act is
in ignorance of the statutory scheme under Chapter III for
“Enforcement of Security Interest”. It is implicit under the said chapter
that if a party has any grievance as regards the contents of the order
under Section 14, his remedy would be to voice them in the application
under Section 17 before the Debt Recovery Tribunal.
82. Having noted the above, we are required to consider as to
whether the Division Bench judgment in the Kumkum Tentiwal (supra)
would operate as a binding precedent and has to be followed to
maintain uniformity and consistency, which is the core of judicial
discipline and in case of the contrary opinion, reference to the Larger
Bench has to be made.
83. It is held in State of U.P. v. Synthetics and Chemicals Ltd.22
that a decision is binding not because of its conclusion but in regard to
its ratio and the principles, laid down therein. Any declaration or
conclusion arrived without application of mind or preceded without any
reason cannot be deemed to be a declaration of law or authority of a
general nature binding as a precedent. Restraint in dissenting or
overruling is for sake of stability and uniformity but rigidity beyond
reasonable limits is inimical to the growth of law.
84. It was held in Hyder Consulting (UK) Limited v. Governor, State
of Orissa through Chief Engineer23 that a prior decision of a Court on
identical facts and law binds the Court on the same points of law in a
later case. However, in exceptional circumstances, where owing to
obvious inadvertence or oversight, a judgment fails to notice a plain
statutory provision or obligatory authority running counter to the
reasoning and result reached, the principle of per incuriam may apply.
[Reference was also made to the decision in Fuerst Day Lawson Ltd. v.
Jindal Exports Ltd.24 therein].
-----------------------------------------------------------------------------------------------------------------------------------------------------------
85. The latin expression “per incuriam” literally means “through

inadvertence’. A decision can be said to be given per incuriam when the
Court of record has acted in ignorance of the relevant law declared on a
given subject matter.
86. As observed in State of U.P. v. Synthetics and Chemicals Ltd.
(supra) that:—
“40. Incuria’ literally means ‘carelessness’. In practice per
incurium appears to mean per ignoratium.’ English Courts have
developed this principle in relaxation of the rule of stare decisis. The
‘quotable in law’ is avoided and ignored if it is rendered, ‘in
ignoratium of a statute or other binding authority’.”
87. Reference may also be made to the observation in paragraph
“42’ in A. R. Antulay v. R. S. Nayak25 as under:—
“42. …..xxxxxxx… “Per incuriam” are those decisions given in
ignorance or forgetfulness of some inconsistent statutory provision or
of some authority binding on the Court concerned, so that in such
cases some part of the decision or some step in the reasoning on
which it is based, is found, on that account to be demonstrably
wrong. See Morelle v. Wakeling, (1955) 1 All ER 708, 718F. ……
xxxxxxx…..”
88. For the above discussion, the Division Bench judgment in
Kumkum Tentiwal (supra) is held per incuriam.
89. The reference made to the Larger Bench by another Division
Bench doubting the correctness of the said judgment in Zainul Abdin
(supra), therefore, does not detain us in any manner.
90. At the cost of repetition, it may be noted at this juncture, that in
a recent decision dated 27th July, 2022 in R.D. Jain and Co. (supra),
the Apex Court has considered that the powers of the Chief
Metropolitan Magistrate under Section 14 of the SARFAESI Act is purely
executionary in nature having no element of quasi-judicial functions
and the power exercised by CMM/DM is a Ministerial Act. As per the
dictionary meaning of “Ministerial Act”, an authority performing
“Ministerial Act” has no liberty to exercise of his own judgment. The
enquiry under Section 14 by the CMM/DM is restricted to only two
aspects; (i) whether the secured asset falls within his territorial
jurisdiction, and (ii) whether notice under Section 13(2) of the Act,
2002 is given or not. No adjudication of any kind is contemplated at
that stage. The legal niceties of the transaction is not to be examined
by the Magistrate to examine the factual correctness of the assertions
made in the affidavit, filed in accordance with the first proviso to sub-
section (1) of Section 14 to record his satisfaction to pass appropriate
order for taking of possession of the secured asset.
91. In view of the above discussion, it is held that the CMM/DM
-----------------------------------------------------------------------------------------------------------------------------------------------------------
acting under Section 14 of the SARFAESI Act, 2002 is not required to

give notice to the borrower at the stage of the decision or passing order
as no hearing can be demanded by the borrower at this stage.
However, it is clarified that the order passed by such Magistrate has to
be duly served upon the borrower before taking any steps for his
forcible dispossession by such steps or use of force, as may be
necessary in the opinion of the Magistrate, and the date fixed for such
forcible action shall be duly intimated to such borrower in advance
giving him sufficient time to remove his belongings, or to make
alternative arrangement.
92. Lastly, for the ancillary issue raised by the learned Senior
Counsel for the petitioners about the delay in passing the order under
Section 14 beyond 60 days being fatal, suffice is to note the decision of
the Apex Court in C. Bright v. District Collector (supra) wherein it is
held that the District Magistrate does not become functus officio, if he
is unable to take possession within the time limit. The remedy under
Section 14 of the Act is not redundant if the District Magistrate could
not adhere to the timeline provided therein.
93. The challenge to the orders impugned by the competent
Authorities passed under Section 14 of the SARFAESI Act, 2002, on the
plea of violation of principles of natural justice, therefore, is liable to be
turned down.
94. Accordingly, all the connected writ petitions are dismissed being
devoid of merits.
———
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SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.

Page 1 Monday, September 11, 2023

In the High Court of Allahabad

Writ - C No. - 22594 of 2022

Counsel for Petitioner : - Indever Pandey

natural justice as implied mandatory requirement, should be read into

approach the Writ Court.

petition on the plea of remedy of filing application under Section 17 of

writ petitions filed by the borrowers relegating them to approach the

and Miscellaneous Provisions (Amendment) Bill, 2016 whereby

25. It is argued by Sri Manish Goyal learned Additional Advocate

is required to take possession of such asset and forward it to the

Chief Metropolitan Magistrate Kanpur Nagar12, a decision of the learned

(vi) The next safeguard available to a borrower within the framework

possession to the borrower and can also restore management of the

Act by recording that the above conditions are not fulfilled. If

is also relevant to note that in the ultimate conclusions in

Appellate Tribunal, to restore the possession of such secured asset if it

(4) of Section 13 and physical possession by force taken with the

of the Act. Thus, the Act itself contemplates an efficacious remedy

provisions of Section 14 of the Act. Consequently the said argument

Tribunal post-possession. As no enquiry either in the nature of judicial

to be heard in the proceeding under Section 14 of the SARFAESI Act

Section 17 of the SARFAESI Act, 2002, contained in Chapter III against

under Section 13(4) of the SARFAESI Act, 2002, to take possession of

85. The latin expression “per incuriam” literally means “through

acting under Section 14 of the SARFAESI Act, 2002 is not required to

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