# Shipra Hotels Ltd. & Anr v. Union of India & Ors

- **Citation:** (2023) 1 ILRA 247
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2022-11-25
- **Case number:** Writ-C No. 22594 of 2022
- **Bench:** Mrs. Sunita Agarwal, Vipin Chandra Dixit
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/shipra-hotels-ltd-anr-v-union-of-india-ors-49137
- **Pages:** 24

## Headnote

(A) SARFAESI Law - The Securitisation
and Reconstruction of Financial Assets
and Enforcement of Securities Interest
Act, 2002 - Section 13(2), 13(4) -
Enforcement of security interest, Section
14 - Chief Metropolitan Magistrate or
District
Magistrate
to
assist
secured
creditor in taking possession of secured
asset - "Ministerial Act" - The Security
Interest (Enforcement) Rules, 2002 - Rule
8 - sale of immovable secured assets -
principles of natural justice are integral
part of Article 14.(Para - 43)

Validity of order passed under Section 14 of the
SARFAESI Act' 2002 - under challenge - ground
- no notice or opportunity of hearing granted to
petitioners (borrowers) - issue - whether
borrower entitled to notice and opportunity of
hearing in the proceeding under Section 14 of
the SARFAESI Act, 2022.(Para -2,22)

(B)
Principles
of
natural
justice
-
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
248 INDIAN LAW REPORTS ALLAHABAD SERIES
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.(Para - 46)

HELD:-Section 14 of the SARFAESI Act, 2002
states that CMM/DM acting under this act is not
required to give notice to the borrower at the
stage of the decision or passing order. Instead,
the Magistrate must serve upon the borrower
before taking any steps for his forcible
dispossession by such steps or use of force. The
date fixed for such forcible action must be sent
in advance so that the borrower can remove
their
belongings
or
make
alternative
arrangements. Orders passed under this Act,
however, were turned down.(Para - 52,53)

Petitions Dismissed. (E-7)

List of Cases cited

## Text

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1 All. Shipra Hotels Ltd. & Anr. Vs. Union of India & Ors.
247
this section can be initiated, even if land in
dispute is abadi land.

27. It has already been concluded that
since the petitioner does not belong to the
scheduled caste or scheduled tribe, the
benefit under sub-section (4F) is not
available to him. In Ganga Saran Vs.
State of UP it is held that the benefit of
sub-section (4F) is not available to a
member of backward class.

28. On the basis of the aforesaid
discussion this Court is of the view that the
petitioner was not in possession and
occupation over the property in suit since
before the zamindari abolition. He had
occupied the land later on after the closer
of consolidation proceedings over the
banjar land of Gram Panchayat for which
he was in no way entitled. He is a rank
trespasser and he is responsible to pay the
damages
for
misappropriating
and
unauthorizedly occupying the land of Gram
Panchayat hence the order of the revisional
court is upheld. The petition lacks merit
and is liable to be dismissed with costs.

ORDER

29. The petition is dismissed and the
order of revisional court dated 25.04.2000
is affirmed. The respondents may proceed
to comply with the order of the revisional
court and this Court as well.

30. A copy of this order be sent to the
Collector,
Ghazipur
for
necessary
compliance.
----------
(2023) 1 ILRA 247
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 25.11.2022

BEFORE
THE HON'BLE MRS. SUNITA AGARWAL, J.
THE HON'BLE VIPIN CHANDRA DIXIT, J.

Writ-C No. 22594 of 2022
Connected with
Other Writ-C Cases

Shipra Hotels Ltd. & Anr. ...Petitioners
Versus
Union of India & Ors. ...Respondents

Counsel for the Petitioners:
Sri Komal Mehrotra, Sri Aditya Sharma, Sri
Mohammad Khalid, Sri Amit Saxena, Sri
Anurag Khanna (Senior Adv.)

Counsel for the Respondents:
C.S.C., Sri Raghav Dwivedi, Sri Veerendra
Kumar Shukla, Sri Navin Sinha (Senior
Adv.), Sri Apurva Hajela

(A) SARFAESI Law - The Securitisation
and Reconstruction of Financial Assets
and Enforcement of Securities Interest
Act, 2002 - Section 13(2), 13(4) -
Enforcement of security interest, Section
14 - Chief Metropolitan Magistrate or
District
Magistrate
to
assist
secured
creditor in taking possession of secured
asset - "Ministerial Act" - The Security
Interest (Enforcement) Rules, 2002 - Rule
8 - sale of immovable secured assets -
principles of natural justice are integral
part of Article 14.(Para - 43)

Validity of order passed under Section 14 of the
SARFAESI Act' 2002 - under challenge - ground
- no notice or opportunity of hearing granted to
petitioners (borrowers) - issue - whether
borrower entitled to notice and opportunity of
hearing in the proceeding under Section 14 of
the SARFAESI Act, 2022.(Para -2,22)

(B)
Principles
of
natural
justice
-
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
248 INDIAN LAW REPORTS ALLAHABAD SERIES
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.(Para - 46)

HELD:-Section 14 of the SARFAESI Act, 2002
states that CMM/DM acting under this act is not
required to give notice to the borrower at the
stage of the decision or passing order. Instead,
the Magistrate must serve upon the borrower
before taking any steps for his forcible
dispossession by such steps or use of force. The
date fixed for such forcible action must be sent
in advance so that the borrower can remove
their
belongings
or
make
alternative
arrangements. Orders passed under this Act,
however, were turned down.(Para - 52,53)

Petitions Dismissed. (E-7)

List of Cases cited

1. Shipra Hotels Limited & anr. Vs St. of U.P. &
ors., Writ-C No. 22594 of 2022

2. Dharampal Satyapal Ltd. Vs Deputy
Commissioner of Central Excise, Gauhati & ors. ,
(2015) 8 SCC 519

3. A. K. Kraipak & ors. Vs U.O.I. & ors. , 1969
(2) SCC 262

4. Managing Director, ECIL, Hyderabad Vs B.
Karunakar , 1993 (4) SCC 727 (para 20)

5. Kumkum Tentiwal Vs St. of U.P. & Ors. ,
(2019) 2 AII L J 332

6. Harsh Govardhan Sondagar Vs International
Assets Reconstruction Co. Ltd.. , (2014) 6 SCC
1

7. M/s Kaushambi Paper Mills Pvt. Ltd. & ors. Vs
A.D.M. & 2 ors. , Writ-C No. 12699 of 2020

8. Smt Shakeela Begum Vs St. of U.P. & ors. ,
Writ-C No. 16399 of 2021

9. Zainul Abdin Vs B.O.B. & 3 ors. , Writ-C No.
12624 of 2020

10. CA. Manisha Mehta & ors. Vs Board of
Directors & ors. , AIR 2022 Bombay 178

11. Standard Chartered Bank Vs V. Noble
Kuma r & ors.. , (2013) 9 SCC 620

12. M/s Trade Well, a Proprietorship Firm,
Mumbai & anr. Vs Indian Bank & anr. , 2007
SCC Online Bom 1232

13. Anuradha Singh & anr. Vs C.M.M. Kanpur
Nagar & ors. , 2018 (5) ADJ 712 (DB)

14. Shakuntala Devi Jan Kalyan Samiti through
Secretary & ors. Vs St. of U.P. & ors. , 2020
(139) ALR 466

15. Mardia Chemicals Ltd. etc. etc. Vs U.O.I. &
ors. etc. etc. , (2004) 4 SCC 311

16. Kanhaiyalal Lalchand Sachdev & ors. Vs
St. of Maha. & ors. , (2011) 2 SCC 782

17. NKGSB Cooperative Bank Ltd. Vs Subir
Chakravarty & ors. , 2022 SCC Online SC 239

18. M/s R.D. Jain & Co. Vs Capital First Ltd. &
ors. , Civil Appeal no. 175 of 2022

19. Phoenix ARC Private Ltd. & ors. Vs the St.
of Maha. & ors. , Writ Petition No. 9794 of
2021

20. C. Bright Vs District Collector & ors. ,
(2021) 2 SCC 392

21. Phoenix ARC Pvt. Ltd. Vs Vishwa Bharati
Vidya Mandir & ors.. , (2022) 5 SCC 345

22. Transcore Vs U.O.I.and anr. , (2008) 1 SCC
125

23. St. of U.P. & anr. Vs Synthetics & Chemicals
Ltd. & anr. , (1991) 4 SCC 139

24. Hyder Consulting (UK) Ltd. Vs Governor, St.
of Orissa through Chief Engineer, (2015) 2 SCC
189

25. Fuerst Day Lawson Ltd. Vs Jindal Exports
Ltd. , 2001 (6) SCC 356
1 All. Shipra Hotels Ltd. & Anr. Vs. Union of India & Ors.
249
26. A. R. Antulay Vs R. S. Nayak & anr., (1988)
2 SCC 602

(Delivered by Hon'ble Mrs. Sunita
Agarwal, J.
&
Hon'ble Vipin Chandra Dixit, J.)

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 and another vs. State of U.P.
and 3 others), 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 subsection (1) of Section 14 of the SARFAESI
Act, 2002.

4. The main prayer of the petitioners,
thus, is that a declaration that 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.

It is argued that the applicability
of principles of natural justice is not
250 INDIAN LAW REPORTS ALLAHABAD SERIES
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.

Reliance is placed on the decision
of the Apex Court in Dharampal Satyapal
Limited Vs. Deputy Commissioner of
Central Excise, Gauhati and others 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}]

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.

In A. K. Kraipak and others vs.
Union of India and others, 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.

It
was
held
in
Managing
Director,
ECIL,
Hyderabad
v.
B.
Karunakar 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.

6. 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 approach the Writ Court.

7. 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
1 All. Shipra Hotels Ltd. & Anr. Vs. Union of India & Ors.
251
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.

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.

Reliance is placed on the decision
of the Division Bench of this Court in
Kumkum Tentiwal vs. State of U.P. &
Others
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 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.

8. 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.. 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
252 INDIAN LAW REPORTS ALLAHABAD SERIES
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.

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.

9. It was argued that relying upon the
said decision, various Division Benches of
this Court from time to time have disposed
of the 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 M/s Kaushambi
Paper Mills Pvt. Ltd. And 2 others vs.
Additional District Magistrate and 2
others dated 31.8.2020 and Smt Shakeela
Begum vs. State of U.P. and 4 others
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 vs. Bank of Baroda and 3
others 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.

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.

10. 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.

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.

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.

11. Learned Senior Counsels for the
respondents have insisted that the matter be
1 All. Shipra Hotels Ltd. & Anr. Vs. Union of India & Ors.
253
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.

12. 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
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 due to Banks
and Financial Institutions Act, 1993 were
enacted for expeditious recovery of loans
of banks and financial institutions. Though
the Recovery of Debts due to Banks and
Financial Institutions 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 subsection (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.

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
254 INDIAN LAW REPORTS ALLAHABAD SERIES
secured creditors to return such secured
assets.

13. 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.

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 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.

14. As regards the declaration by the
Authorized Officer of the secured creditor
in the affidavit accompanying application
1 All. Shipra Hotels Ltd. & Anr. Vs. Union of India & Ors.
255
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.

15. Reliance is placed on the decision
of the Bombay High Court in CA.
Manisha Mehta and others vs. Board of
Directors and others to assert that Section
14 cannot stand independent of Section
13(4) as explained by the Apex Court in
Standard Chartered Bank vs. V. Noble
Kumar and others.

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.

Reliance is further placed on the
decision of the Bombay High Court in M/s
Trade Well, a Proprietorship Firm,
Mumbai & another vs. Indian Bank &
another, the judgment of the Division Bench
of this Court in Anuradha Singh and
another vs. Chief Metropolitan Magistrate
Kanpur Nagar and others, a decision of the
learned Single Judge of this Court in
Shakuntala Devi Jan Kalyan Samiti
through Secretary and others vs. State of
U.P. and others, the judgments of the Apex
Court in Mardia Chemicals Ltd. etc. etc. vs.
U.O.I. and others etc. etc.; Kanhaiyalal
Lalchand Sachdev and others vs. State of
Maharashtra
and
others;
NKGSB
Cooperative Bank Limited vs. Subir
Chakravarty and others and the judgment
and order dated 27th July, 2022 in M/s R.D.
Jain and Co. vs. Capital First Ltd. &
others as also the decision of the Bombay
High Court in Phoenix ARC Private
Limited and others vs. the State of
Maharashtra and others to buttress the
above submissions.

16. 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.
256 INDIAN LAW REPORTS ALLAHABAD SERIES

17. 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.

18. Sri Naveen Sinha learned Senior
Advocate for the respondent no. 4 has
adopted the arguments of Sri Manish Goyal
learned Additional Advocate General.

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
secured asset, in case, the borrower does
not part with his possession despite receipt
of the notice.

19. 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.

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.

20. In rebuttal, the reliance is placed
on the decision of the Apex Court in C.
Bright vs. District Collector and others
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
1 All. Shipra Hotels Ltd. & Anr. Vs. Union of India & Ors.
257
days and for reasons to be recorded within
60 days.

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.

21. 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.

Reliance is placed on the decision
of the Apex Court in Phoenix ARC
Private Limited vs. Vishwa Bharati
Vidya Mandir and others.

22. 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".

23. 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 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).

24. 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.

25. 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.

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
258 INDIAN LAW REPORTS ALLAHABAD SERIES
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.

(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.

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 subsection (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.

26. In Transcore vs.