ACJM Not Subordinate To CJM In Judicial Functions In SARFAESI Possession Proceedings: Bombay High Court

The Bombay High Court has held that an Additional Chief Judicial Magistrate is competent to entertain applications under Section 14 of the SARFAESI Act, ruling that the magistrate exercises judicial powers at par with a Chief Judicial Magistrate.

Section 14 allows a secured creditor (bank/financial institution) to seek assistance from a magistrate to take physical possession of secured assets when a borrower defaults.

A coram of Justice Urmila Joshi Phalke dismissed a criminal application filed by Shubham Flour Mill under Section 482 of the CrPc seeking to quash and set aside the orders passed by the ACJM and the Additional Sessions Judge.

Shubham Flour Mill, a proprietary concern at Akola, had availed multiple loan and credit facilities from Indian Bank, securing the borrowings by mortgaging four immovable properties situated at Akola, Akot and Nagpur.

Upon default, the account was classified as a Non-Performing Asset, and a demand notice under the SARFAESI Act was issued. The bank thereafter moved the ACJM, Akola, under Section 14 of the SARFAESI Act seeking assistance to take possession of the secured assets. The ACJM allowed the plea and appointed a court commissioner to take possession.

The borrowers' revision before the Sessions Court was dismissed, prompting the application before the High Court.

Shubham Flour Mill contended that the ACJM lacked jurisdiction to entertain and allow the bank's application under Section 14, as no specific notification conferred such powers, rendering the possession order without authority of law.

On the other hand, the bank argued that an ACJM exercises the same judicial powers as a CJM, and that the CJM's superiority is only administrative, not judicial.

Rejecting the borrowers' contention, the Bench held that under Section 12(2) of the CrPC (now Section 10(2) of the BNSS, 2023), an ACJM has all judicial powers of a CJM, as directed by the High Court.

The Court observed:

“Thus, it is pertinent to note that the subordination of the Additional Chief Judicial Magistrate is only in regard to administrative functions. In regard to the judicial functions, Section 10(2) of the BNSS 2023 specifically provides that the Addition Chief Judicial Magistrate shall have all the powers of the Chief Judicial Magistrate.”

The Court further held that the SARFAESI Act provides a statutory remedy under Section 17 before the Debt Recovery Tribunal against measures taken by the bank.

Emphasising the legislative intention, the Court noted:

“while the banks and financial institutions have been vested with stringent powers for the recovery of their dues, safeguards have also been provided for rectifying any error or wrongful use of such powers by vesting the DRT with authority after conducting an adjudication into the matter to declare any such action invalid and also to restore possession even though possession may have been made over to the transferee.”

Holding that an efficacious alternative remedy was available before the DRT, the Court ruled that the application under Section 482 of CrPC before the High Court was not maintainable.

Accordingly, the application was rejected. The Court also declined to stay the possession proceedings.

For Applicants: Advocate S.M Pande

For Respondents: Advocates A.M Kadukar, APP, Karan Sachdev, D.A Sonwane and Sunita Paul