JUDGMENT <NAME>, <NAME>

1. Rule. By consent of learned Counsel for the parties, rule made returnable forthwith and matter is taken up for final disposal. Heard learned Counsel for the petitioner and learned APP for the Respondent.

2. Both matters can be considered and disposed of, by common order, because the issue involved in both the matters, is common.

3. The Petitioner has approached this court, feeling aggrieved by the orders passed by the learned Chief Judicial Magistrate, Aurangabad, ("<ORG>" for short) on 4.3.2008 in Criminal M.A. Nos. 231 and 232 of 2008. Suffice it to say that the petitioner-bank had approached the <ORG> with applications under Section 14 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act , 2002 (" NPA Act " for brevitys sake). The applications are rejected by learned <ORG> with common line of reasons and we quote the observations:

...Therefore, by this application, Petitioner has prayed for assistance in taking possession of secured assets. Heard learned Counsel for the applicant. He relied on 2007 (1) Bom. C.R. (Cri.) 783. On perusal of judgment cited it is seen that there was decree passed by D.R.T. in favour of said Petitioner, who had prayed for such assistance in taking possession of secured assets by filing application before C.M.M. Admittedly, in our case nowhere Petitioner has come with the case that, he has obtained decree in his favour from competent court D.R.T. and in execution of same he is in need of assistance of this criminal Court.

4. Because of the writ petitions filed by the petitioner, we are required to consider the issue;

Whether, a creditor requesting assistance under Section 14(1) of the NPA Act is required to be armed with a decree for recovery of dues from the borrower, from competent court or D.R.T.?

It appears that the judgment rendered by <ORG> at Bombay of this High Court, in the matter of <CITATION> . 2007 (1) Bom. C.R. (cri.) 783, was placed before the learned <ORG> and reading the facts from that judgment, the learned <ORG> has taken a view that in the reported matter, there was a decree passed by <ORG> in favour of the creditor therein (respondent in that writ petition) and because the present writ petitioner, who is creditor and seeking assistance from the <ORG> for taking possession of secured assets as under Section 14(1)(a) of the NPA Act, is not armed with a decree against the borrower, from the competent court or <ORG>, the learned <ORG> felt that the present petitioner is not entitled to assistance of the <ORG> for taking possession of the secured assets. At present, we are concerned with these observations of the learned <ORG>.

5. During the course of his submissions, Advocate Shri <NAME>, has submitted that on going through the entire judgment in the matter of Trade Well (supra), it appears that the court has not laid down a ratio as understood by the <ORG> i.e. assistance under Section 14(1) of the NPA Act cannot be availed by a creditor, unless he is armed with a decree of competent court/DRT. Learned APP <NAME>, upon going through the judgment, has accepted this position.

Even on going through opening part of the judgment, we can gather as to what question court was dealing with. We quote:

The question which arises in these writ petitions is whether while dealing with written request made by a secured creditor under Section 14 of Financial Assets and Enforcement of Security Interest Act (for short, "the NPA Act "), 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?

As the court was seized only of this question and no other issue, the observations of the court on any other issue will have to be treated as "obiter dictum" and not "ratio decidendi".

The court has recorded its ten conclusions in paragraph 90 and first four conclusions (1 to 4) pertain to Section 14 , which we reproduce and to which we shall advert little later.

(1). The bank or financial institution shall, before making an application under Section 14 of the NPA Act, verify and confirm that notice under Section 13(2) of the NPA Act is given and that the secured asset falls within the jurisdiction of <ORG> before whom application under Section 14 is made. The bank and financial institution shall also consider before approaching <ORG> for an order under Section 14 of the NPA act, whether Section 13 of the NPA Act excludes the application of Sections 13 and 14 thereof to the case on hand.

(2). CMM/DM acting under Section 14 of the NPA Act is not required to give notice either to the borrower or to the 3rd 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 that 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 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 .

Even on going through all ten conclusions, we do not find the court laying down ratio as understood by learned CJM, Aurangabad.

In fact, in taking a view as recorded by learned CJM, Aurangabad, he has practically set the provisions of the NPA Act , at knot.

6. We may simply reproduce the statement of objects and reasons and certain provisions from the NPA Act which clearly indicate that this is a special legislation enabling the creditor to recover his dues by taking measures as provided in the NPA Act and in the manner as prescribed in the said Act, without getting entangled in the legal process and the delay or time consumption that occurs when a party is required to recover its dues through legal proceedings.

Statement of Objects and Reasons:- The financial sector has been one of the key drivers in Indias efforts to achieve success in rapidly developing its economy. While the banking industry in India is progressively complying with the international prudential norms and accounting practices, there are certain areas n which the banking and financial sector do not have a level playing field as compared to other participants in the financial markets in the world. There is no legal provision for facilitating securitisation of financial assets of banks and financial institutions. Further, unlike international banks, the banks and financial institutions in India do not have power to take possession of securities and sell them. Our existing legal framework relating to commercial transactions has not kept pace with the changing commercial practices and financial sector reforms. This has resulted in slow pace of recovery of defaulting loans and mounting level of non-performing assets of banks and financial institutions. <ORG> and II and <ORG> constituted by <ORG> for the purpose of examining banking sector reforms have considered the need for changes in the legal system in respect of these areas. These Committees, inter alia, have suggested enactment of a new legislation for securitisation and empowering banks and financial institutions to take possession of securities and to sell them without the intervention of the <ORG>. Acting on these suggestions, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Ordinance, 2002 was promulgated on the 21st June, 2002 to regulate securitisation and reconstruction of financial assets and enforcement of security interest and for matters connected therewith or incidental thereto. The provisions of the Ordinance would enable banks and financial institutions to realise long term assets, manage problem of liquidity asset liability mismataches and improve recovery by exercising powers to take possession of securities, sell them and reduce non-performing assets by adopting measures for recovery or reconstruction.

Section 13 , whichis regarding enforcement of security interest and more particularly Sub-section (1) of it, reads thus;

13. Enforcement of security interest:

(1). Notwithstanding anything contained in Section 69 or Section 69-A of the Transfer of Property Act, 1882 , any security interest created in favour of any secured creditor may be enforced, without the intervention of the <ORG> or tribunal, by such creditor in accordance with the provisions of this Act.

Sub-section (2) of Section 13 of the Act, requires the creditor to give a notice to borrower whose debt is classified by the secured creditor as NPA, inviting the borrower to discharge, in full; his liabilities to the secured creditor, within sixty days from the date of notice and failing which, the secured creditor is held entitled to exercise all or any of the rights under Sub-section (4).

Sub-section (3) requires the secured creditor to give details regarding amount due from the borrower and the secured assets against which the secured creditor desires to proceed, in case of failure on the part of the borrower to comply with notice under Section 13(2) .

Again we may refer to some part of text of Sub-section (4) of Section 13 , and the opening part reads;

In case the borrower fails to discharge his liability in full within the period specified in Sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely:

(a). take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset;

(b). take over the management of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale and realise the secured asset;

(c). appoint any person (hereinafter referred to as the manager), to manage the secured assets the possession of which has been taken over by the secured creditor;

(d). require at any time by notice in writing, any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower, to pay the secured creditor, so much of the money as is sufficient to pay the secured debt.

Sub-section (12) of Section 13 reads:

The rights of a secured creditor under this Act may be exercised by one or more of his officers authorised in this behalf in such manner as may be prescribed.

Sub-section (13) practically operates as injunction against the borrower, either from alienating or transferring or creating encumbrance against the secured assets.

On going through the entire Section 13 of the NPA Act, it is clear that it makes no reference to any judicial forum which the secured creditor is required to approach before taking steps, as permitted by Sub-section (4). The only condition required to be fulfilled by secured creditor, is serving of a notice under Section 13(2) . By virtue of insertion of amended Sub-section (3-A), the secured creditor is also required to communicate reasons to the borrower as to why representation of the borrower is not acceptable to the creditor. By reference to text of Sub-section (3-A), it is evident that mere rejection of the representation of the borrower, does not give the borrower a cause of action to approach <ORG> under Section 17 . It is only after the secured creditor takes steps under Section 13(4) that the borrower can approach <ORG>, by an appeal against such an action by secured creditor. On going through the text of the NPA Act , it is evident that no judicial forum comes into picture till that stage.

7. We feel that the statement of objects and reasons in enacting the NPA Act and the provisions quoted hereinabove, are self-eloquent and clearly indicate that the secured creditor is not required to obtain a decree from a competent court/DRT, before being entitled to take steps as permitted by NPA Act for the purpose of enforcement of recovery, by taking steps against the secured assets. We must, therefore, say that the learned CJM, Aurangabad, was completely on wrong foot in observing that the assistance cannot be sought unless there is a decree in favour the secured creditor.

In fact, we may also usefully reproduce Sub-section (1) of Section 14 and more particularly its opening part, just to confirm that even this Sub-section does not speak of requirement of decree in favour of secured creditor.

Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking possession of secured asset:

(1). 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 this Act, the secured creditor may, for the purpose of taking possession or control of any such secured asset, request, in writing, the Chief Metropolitan Magistrate or the District Magistrate, within whose jurisdiction any such secured asset....

Later half of Sub-section (1) states that the Chief Metropolitan Magistrate ("CMM") or the District Magistrate ("DM"), on such request being made, may take possession of such assets and documents relating thereto and forward such assets and documents to the secured creditor.

Even Section 14 , which can be availed of, by a secured creditor for the purpose of taking possession of secured assets, under the provisions of this Act, which is referable to Section 13(4) , does not speak regarding requirement of any decree of a competent court in favour of the secured creditor. The Act is a special enactment, enabling the secured creditors to stand on their own, so far as the purpose of recovery of the loans is concerned.

8. On reading the text of Section 14(1) repeatedly, during the course of submissions of learned Counsel for the petitioner and learned <ORG>, a new question has struck our mind and that is why we had adjourned the matter on the last occasion. We have drawn attention of learned Counsel for the petitioner to the titles of the authorities referred to in Section 14 . It refers to Chief Metropolitan Magistrate or District Magistrate. Reference to Chief Judicial Magistrate is conspicuously absent. The terminal portion of Section 14(1) reads:

...the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction any such secured asset or other documents relating thereto may be situated or found, to take possession thereof, and the Chief Metropolitan Magistrate or, as the case may be, the District Magistrate shall, on such request being made to him...take possession.

The authorities are referred thrice in Sub-section (1) of Section 14 . They are also referred in Sub-section (2) and Sub-section (3) of Section 14 , but every time, reference is made to the designations "Chief Metropolitan Magistrate" and "District Magistrate". There is no reference to "Chief Judicial Magistrate". We have, therefore, posed a question to Advocate <NAME> for the Petitioner that Section indicates assistance from <ORG> and <ORG>, within whose territorial limits the secured assets or documents relating thereto are situated at the time secured creditor desires taking possession of the secured assets. There is no reference to the CJM. We have, therefore, expressed that it would be the <ORG>, so far as metropolitan area is concerned and where there is a <ORG> appointed and posted. So far as other area is concerned, there being no post and appointment of <ORG>, secured creditor desirous of availing benefit of Section 14(1) , will have to approach <ORG>.

Advocate <NAME> has not been able to point out any provision in the NPA Act , or Cr.P.C . which will compel us to accept his proposition that, although words used in the section are "CMM/DM", sofar as area beyond metropolitan area is concerned, the words "CMM" can be read as "CJM". The legislature does not seem to have intended to entrust the function to CJM outside the metropolitan area, although the function is entrusted to CMM, a judicial officer, in metropolitan area.

Even on going through Section 3 of the Code of Criminal Procedure, relating to construction of reference and more particularly Sub-sections (2) and (3) of the same, any reference to Judicial Magistrate is required to be read as "Metropolitan Magistrate", insofar as metropolitan area is concerned by virtue of Sub-section (2), but this is only for the purpose of Cr.P.C . and Section 3(2) is not applicable to any other Acts. Sub-section (3) of Section 3 of . relates to other Acts, but which are passed before commencement of the Cr.P.C . Reference in any such enactment to Presidency Magistrate/Chief Presidency Magistrate is required to be construed as reference to Metropolitan Magistrate/Chief Metropolitan Magistrate. This change is necessitated because under Cr.P.C . 1898, the Magistrates in the metropolitan area, which was then called as "Presidency Town", were designated as Presidency Magistrate/Chief Presidency Magistrate and were so referred in the enactments which were passed before coming into force, the Code of Criminal Procedure, 1973.

9. Our attention could not be drawn by either Counsel to demonstrate that the words "CMM" in Section 14 of the NPA Act, can be read as "CJM", sofar as non metropolitan area is concerned, by any stretch of imagination.

We are, therefore, inclined to confirm the order of <ORG>, Aurangabad, rejecting assistance to the petitioner to recover possession of secured assets, although for different reasons. We have arrived at a conclusion that, sofar as non metropolitan area is concerned, powers vest in <ORG> and not with <ORG>, or Judicial Magistrate. Sofar as metropolitan area is concerned, the two authorities are available to the secured creditor, namely, <ORG> and <ORG>. But, so far as non metropolitan area is concerned, the secured creditor will have to approach the <ORG> only, for assistance under Section 14(1) of the Act.

10. While upholding the order passed by the <ORG>, Aurangabad, we have recorded our views on merits and we only record that the <ORG> could not have rejected assistance to the petitioner, if he (<ORG>) otherwise had jurisdiction to entertain such a request, on the ground that the secured creditor is required to be armed with a decree from the competent court. We may say that assistance cannot be refused either by <ORG> or <ORG>, on this ground.

What is required to be done by <ORG> or <ORG>, while considering the request of secured creditor for assistance to take possession of secured assets, is evident from the conclusions at serial Nos. 1 to 4 drawn by <ORG> at Bombay in the matter of Trade Well (supra) and which we have already reproduced in earlier part of this judgment. To state in brief, <ORG> or <ORG> acting under Section 14 , will not be required to serve a notice upon the borrower or a third party. But, the authority will have to verify from the bank/financial institution/secured creditor that the notice under Section 13(2) of the NPA Act is served; that the secured assets are within territorial jurisdiction of the authority concerned; that the borrower has not discharged liability as indicated in the notice under Section 13(2) and that the secured creditor has communicated reasons for rejection of representation, if any, of the borrower. If all these things are fulfilled by the secured creditor, <ORG>/<ORG> will not be in a position to refuse assistance under Section 14(1) to the secured creditor.

11. We, therefore, dispose of the writ petitions, by confirming refusal by <ORG>, Aurangabad, of assistance under Section 14(1) , not because the petitioner-creditor was not armed with a decree of a competent court, but because the <ORG> does not have power to render such assistance. We clarify that it will be open for the petitioner to approach the <ORG> and refusal of assistance under Section 14(1) of the Securitization Act, by <ORG>, Aurangabad, will not be an impediment in <ORG> providing such assistance to the petitioner/secured creditor upon demonstration by the secured creditor, of fulfilment of requirement as under Section 13(2) and 13 (3- A) of the Act .

12. Writ Petitions are disposed of and rule made absolute, in above terms.


JUDGMENT <NAME>, C.J.

1. This is an. application for a certificate that these; are fit cases for appeal to <ORG>; they are numbered Nos. 9 to 26 of 1922. The appellant is <NAME> and the respondent is <NAME> Single They were second appeals, that is to say, appeals to this Court from the decision of the lower <ORG> and were disposed of by my learned brothers <NAME> and <NAME>, JJ., in one judgment.

2. It is admitted by the learned <NAME> for the appellant that the subject-matter of the appeals, when taken together, will not be of sufficient value to justify us in granting a certificate having regard to the terms of the first clause of Section 110 of the C.P.C.

3. The grounds,, upon which the application was argund, are the 8th and 9th of the petition which are as follows:

8. For that your petitioner begs to submit further that the decision of <ORG> will affect indirectly a large number of resumed choukidari chakran lands within his estate and your petitioner will lose at least an annual income of about Rs. 5,000 (details of which will be submitted later on) if the decision of <ORG> is permitted to stand and that the several suits aforesaid may be consolidated and the decrees involve question or claim to or respecting property of over Rs. 10,000 in amount of value.

9. That your petitioner further craves leave to state that the decision involves not merely a question of individual or private importance but a question of wide public importance and will affect the property and income of many zemindars in Bengal, benefited or benefiting by the resumption of choukidari chakran lands by the Collector under Act VI of 1870 and as such, even if the appeals do not satisfy the statutory value, may be certified as otherwise a fit case, for leave to appeal to His Majesty in Council under Section 109, Clause (c) of the C.P.C.

4. The facts which are necessary for me to state are as follows: "The suits were brought to recover khas possession of certain resumed choukidari chakran lands together with mesne profits. The plaintiff claimed these lands as included in the putni taluk granted to his predecessors-in-interest by the predecessors-in-interest of the first defendant, who is the zemindar, by a putni patta of the year 1853, the Bengali date being the 29th Kartik 1260. It is not disputed that the lands in question were included in the putni patta, but it is said that these lands were not taken into account in settling the rent payable under the patta and that consequently the zemindar, the respondent, is entitled to a share of the rent derived from settling the resumed lands with tenants. No dispute arises with regard to the payment of <ORG> which has been assessed on the resumed lands and which, under the terms of the putni patta, is payable by the appellant. It is conceded that, from the time of the creation of the putni until the lands were resumed, the choukidars rendered private personal service to the putnidar, and not to the zemindar.

5. It was argued on behalf of the zemindar that the lands which had been resumed, that is to say, the choukidari chakran lands, were not taken into account when the jama was fixed. On the other hand, it was contended on behalf of the plaintiff that the lands were comprised in the putni patta and consequently it must follow that the rents and profits of these lands belonged to the putnidar, and further that the rents and profits must be taken as the equivalent of the personal service which had been rendered to the putnidar by the choukidars before the resumption.

6. As to the first ground, it is suggested that the decision of this Court indirectly affects a number of other resumed lands within the estate of the appellant and that the appellant will lose at least an annual income of rupees five thousand, the details of which were to be given later on, and that if that amount is taken into consideration, there would be a question relating to property of the value of rupees ten thousand. Before this Court could, come to a decision on that question, it would be necessary to investigate whether the terms of the various leases between the appellant on the one hand and the putnidars on the other in respect of the lands, which are not included in these suits, are the same as the terms of the patta in these cases. Further it would be necessary to ascertain the facts and conditions existing at the time those leases were granted and to inquire whether in each case the services of the choukidars were rendered to the putnidars or to the zemindar. It is only necessary to state these facts to see that on this application it is not possible for this Court to hold that the decree involves directly or indirectly a claim or question to or respecting property of the amount or value of Rs. 10,000. Consequently, in my judgment, the first ground, on which the applicant relied, must fail.

7. It was upon the second ground that the learned <NAME> for the applicant chiefly relied, namely, that the question involved in the decision of this <ORG> is not only a question of private importance but is a question of wide public importance. It was alleged as a ground in the petition that it would affect the property and income of many zemindars in Pengal. In order to establish this allegation the learned <NAME> drew our attention to six or seven reported cases. These cases go to show that there have been frequent disputes between the putnidars on the one hand and the zemindars on the other relating to choukidari chakran lands which have been resumed. The fact, however, that there have been in the past many disputes in relation to such lands between the putnidars and zemindars, does not prove that the decision of this <ORG> in these suits involves a question of wide public importance. On the contrary, when the reported cases are examined, it appears that the facts relating to the respective cases, vary considerably, and the cases certainly do not show that the facts proved in these suits are such as would cover the arrangements between putnidars and zemindars in Bengal generally. Before the <ORG> could come to the conclusion that this decision involves a question of wide public importance, there should be some evidence that the rights of the zemindars and the putnidats in Bengal inrespect of such lands are, generally speaking, dependent upon the same facts as appear in these suits and that the terms of the leases regulating such rights are similar to the terms of the pattas in these suits. There is no evidence before the <ORG> which would justify us in arriving at that conclusion.

8. It has been pointed out in some of the cases, to which we have been referred, that each case must depend upon its own facts; as for instance, in the case of <CITATION> 66 Ind. Cas. 357 : 34 C.L.J. it was stated that the question, whether the plaintiffs, the putnidars, were entitled to have the lands on payment of the assessment payable to the choukidari fund or were liable to pay some additional rent on account of the land to the zemindar, no doubt, should be decided having regard to the terms of the contract in each case.

9. In my judgment there is not sufficient evidence before us at the present time to justify the <ORG> in holding that the decision in these suits involves a question of wide public importance and in certifying that these are fit cases for appeal to <ORG>. Consequently, in my judgment, these applications must be dismissed with costs, ten gold mohurs for the eighteen cases.

<NAME>, <NAME>

10. I agree. As I was a party to the decision sought to be appealed against, I should have been glad if certificates could have been granted in these cases for leave to appeal to <ORG>. I have nothing to add to the reasons given by my Lord the Chief Justice in his judgment for refusing leave.