# NKGSB COOPERATIVE BANK LIMITED v. SUBIR CHAKRAVARTY & ORS

- **Citation:** [2022] 1 S.C.R. 1177
- **Court:** Supreme Court of India
- **Decided:** 2022-02-25
- **Case number:** Civil Appeal No. 1637 of 2022
- **Bench:** A. M. Khanwilkar, C. T. Ravikumar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/nkgsb-cooperative-bank-limited-v-subir-chakravarty-ors-36033
- **Pages:** 38

## Headnote

Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002: s.14(1A) - Power of
CMM/DM to appoint and authorize an advocate to take possession
of the secured assets and documents and to forward the same to the
secured creditors by virtue of s.14(1A) of the 2002 Act - Held:
Purpose of the 2002 Act is to empower the financial institutions to
manage the non performing assets by adopting measures for
recovery or reconstruction - s.13(4) states that when a default is
committed by the borrower in discharging his liability in full, the
secured creditor may take recourse to one or more of the measures
- One of the measures is to take possession of the secured assets of
the borrower - If secured creditor intends to take possession of
secured assets, the application u/s.14 must be moved to CMM/DM
in writing - s.14(1A) added by amendment provides that CMM/DM
may authorize any officer subordinate to him for the aforesaid
purpose - The statutory obligation enjoined upon the CMM/DM is
to immediately move into action after receipt of a written application
under s.14(1) of the 2002 Act - There is de jure functional
subordinate relationship between the CMM/DM and the advocate
being an officer of the Court - There is no rule as such framed by
the central government which expressly or impliedly prohibits CMM/
DM to engage an advocate commissioner for taking possession -
Hence, by applying 'functional subordination' test, CMM/DM may
appoint advocate as a subordinate officer for the purpose of s.
14(1A) of the 2002 Act.
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[2022] 1 S.C.R.
Allowing the Appeals filed by secured creditors and
delinking the SLP (Civil) No.12011 of 2020 filed by borrowers,
the Court
HELD: 1. The underlying purpose of the 2002 Act is to
empower the financial institutions in India to have similar powers
as enjoyed by their counterparts, namely, international banks in
other countries. One such feature is to empower the financial
institutions to take possession of securities and sell them. Section
13 deals with enforcement of security interest. Sub-Section (4)
thereof envisages that in the event a default is committed by the
borrower in discharging his liability in full within the period
specified in sub-Section (2), the secured creditor may take
recourse to one or more of the measures provided in Sub-Section
(4). One of the measures is to 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. Section
14 of the 2002 Act predicates that if the secured creditor intends
to take possession of the secured assets, must approach the
CMM/DM by way of an application, in writing, and on receipt of
such request, the CMM/DM must move into action in right
earnest. After passing an order thereon, he/she (CMM/DM) must
proceed to take possession of the secured assets and documents
relating thereto for being forwarded to the secured creditor in
terms of Section 14(1) read with Section 14(2) of the 2002 Act.
As noted earlier, Section 14(2) is an enabling provision and
permits the CMM/DM to take such steps and use force, as may,
in his opinion, be necessary. This position obtained even before
the amendment of 2013 i.e., insertion of sub-Section (1A) and
continues to this date. Sub-Section (1A) is in the nature of an
explanatory provision and it merely restates the implicit power
of the CMM/DM in taking services of any officer subordinate to
him. The insertion of Sub-Section (1A) is not to invest a new
power for the first time in the CMM/DM as such. [Paras 22, 23,
24][1198-G-H; 1199-A-B; 1195-C-D; 1199-F-H]
2. 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 2002 Act from the secured
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creditor for that purpose. It is common knowledge that in the
respective jurisdictions, there is only one CMM/

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[2022] 1 S.C.R. 1177
1177
NKGSB COOPERATIVE BANK LIMITED
v.
SUBIR CHAKRAVARTY & ORS.
(Civil Appeal No. 1637 of 2022)
FEBRUARY 25, 2022
[A. M. KHANWILKAR AND C. T. RAVIKUMAR, JJ.]
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002: s.14(1A) - Power of
CMM/DM to appoint and authorize an advocate to take possession
of the secured assets and documents and to forward the same to the
secured creditors by virtue of s.14(1A) of the 2002 Act - Held:
Purpose of the 2002 Act is to empower the financial institutions to
manage the non performing assets by adopting measures for
recovery or reconstruction - s.13(4) states that when a default is
committed by the borrower in discharging his liability in full, the
secured creditor may take recourse to one or more of the measures
- One of the measures is to take possession of the secured assets of
the borrower - If secured creditor intends to take possession of
secured assets, the application u/s.14 must be moved to CMM/DM
in writing - s.14(1A) added by amendment provides that CMM/DM
may authorize any officer subordinate to him for the aforesaid
purpose - The statutory obligation enjoined upon the CMM/DM is
to immediately move into action after receipt of a written application
under s.14(1) of the 2002 Act - There is de jure functional
subordinate relationship between the CMM/DM and the advocate
being an officer of the Court - There is no rule as such framed by
the central government which expressly or impliedly prohibits CMM/
DM to engage an advocate commissioner for taking possession -
Hence, by applying 'functional subordination' test, CMM/DM may
appoint advocate as a subordinate officer for the purpose of s.
14(1A) of the 2002 Act.
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SUPREME COURT REPORTS
[2022] 1 S.C.R.
Allowing the Appeals filed by secured creditors and
delinking the SLP (Civil) No.12011 of 2020 filed by borrowers,
the Court
HELD: 1. The underlying purpose of the 2002 Act is to
empower the financial institutions in India to have similar powers
as enjoyed by their counterparts, namely, international banks in
other countries. One such feature is to empower the financial
institutions to take possession of securities and sell them. Section
13 deals with enforcement of security interest. Sub-Section (4)
thereof envisages that in the event a default is committed by the
borrower in discharging his liability in full within the period
specified in sub-Section (2), the secured creditor may take
recourse to one or more of the measures provided in Sub-Section
(4). One of the measures is to 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. Section
14 of the 2002 Act predicates that if the secured creditor intends
to take possession of the secured assets, must approach the
CMM/DM by way of an application, in writing, and on receipt of
such request, the CMM/DM must move into action in right
earnest. After passing an order thereon, he/she (CMM/DM) must
proceed to take possession of the secured assets and documents
relating thereto for being forwarded to the secured creditor in
terms of Section 14(1) read with Section 14(2) of the 2002 Act.
As noted earlier, Section 14(2) is an enabling provision and
permits the CMM/DM to take such steps and use force, as may,
in his opinion, be necessary. This position obtained even before
the amendment of 2013 i.e., insertion of sub-Section (1A) and
continues to this date. Sub-Section (1A) is in the nature of an
explanatory provision and it merely restates the implicit power
of the CMM/DM in taking services of any officer subordinate to
him. The insertion of Sub-Section (1A) is not to invest a new
power for the first time in the CMM/DM as such. [Paras 22, 23,
24][1198-G-H; 1199-A-B; 1195-C-D; 1199-F-H]
2. 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 2002 Act from the secured
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creditor for that purpose. It is common knowledge that in the
respective jurisdictions, there is only one CMM/DM. If he is
expected to reach at every location himself for taking possession,
in some jurisdictions it would be impracticable, if not impossible,
for him to do so owing to large number of applications in the
given jurisdiction being a commercial city. Accordingly, strict
construct would defeat the legislative intent and purpose for
enacting the 2002 Act. Indeed, logistical problems of the Office
of the CMM/DM cannot be the basis to overlook the statutory
provision. It could be taken by the CMM/DM himself/herself or
through any officer subordinate to him/her, including the Advocate
Commissioner who is considered as an officer of his/her court.
The Advocate Commissioner is not a new concept. The advocates
are appointed as Court Commissioner to perform diverse
administrative and ministerial work as per the provisions of Code
of Civil Procedure and Code of Criminal Procedure. An advocate
is an officer of the court. [Paras 28, 29, 36][1204-G-H;
1205-C-D; 1210-C-D]
3. Whereas, applying the "functional subordination" test,
this Court held that sub-Section (1A) of Section 14 of the 2002
Act is no impediment for the CMM/DM to engage services of an
advocate (an officer of the court) - only for taking possession of
secured assets and documents relating thereto and to forward
the same to the secured creditor. It does not follow that the
advocate so appointed needs to be on the rolls in the Office of
the CMM/DM or in public service. There is intrinsic de jure
functional subordinate relationship between the CMM/DM and
the advocate being an officer of the court. The apprehension of
the borrowers about improper execution of orders of the CMM/
DM passed under Section 14(1) of the 2002 Act by the Advocate
Commissioner, is plainly misplaced. There is no reason to assume
that the advocate so appointed by the CMM/DM would misuse
the task entrusted to him/her and that will not be carried out
strictly as per law or it would be a case of abuse of power. Rather,
going by the institutional faith or trust reposed on advocates being
officers of the court, there must be a presumption that if an
advocate is appointed as commissioner for execution of the orders
passed by the CMM/DM under Section 14(1) of the 2002 Act,
NKGSB COOPERATIVE BANK LTD. v. SUBIR CHAKRAVARTY
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that responsibility and duty will be discharged honestly and in
accordance with rules of law. [Para 42][1212-E-H; 1213-A-C]
Authorised Officer, Indian Bank v. D. Visalakshi & Anr.
[2019] SCR 177 - relied on.
Muhammed Ashraf & Anr. v. Union of India & Ors.
AIR 2009 Kerala 14; The Federal Bank Ltd.,
Ernakulam v. A.V. Punnus AIR 2014 Kerala 7; V.S.
Sunitha v. Federal Bank Ltd. 2018 SCC OnLine Ker
12866; S. Chandramohan & Anr. v. The Chief
Metropolitan Magistrate, Egmore, Chennai & Ors.
2014 SCC OnLine Mad 7869; Rahul Chaudhary v.
Andhra Bank & Ors. 2020 SCC OnLine Del 284; M/s.
J. Marks Exim (India) Pvt. Ltd. v. Punjab National Bank
2017 SCC OnLine Bom 2246; Sakiri Vasu v. State of
Uttar Pradesh & Ors. [2007] 11 SCR 980; Dattatraya
Moreshwar v. The State of Bombay & Ors. [1952] SCR
612; Mahadev Govind Gharge & Ors. v. Special Land
Acquisition Officer, Upper Krishna Project, Jamkhandi,
Karnataka [2011] 8 SCR 829; Sangram Singh v.
Election Tribunal, Kotah & Anr. [1955] SCR 1; A. St.
Arunachalam Pillai v. M/s. Southern Roadways Ltd. &
Anr. 1960 SCR 764; S. Krishnaswamy Mudaliar & Anr.
v. P.S. Palani Pillai & Anr. AIR 1957 Mad 599; B.
Veeraswamy & Ors. v. State of Andhra Pradesh & Ors.
AIR 1959 AP 413; Lalit Mohan Das v. The AdvocateGeneral, Orissa & Anr. [1957] SCR 167; O.P. Sharma
& Ors. v. High Court of Punjab & Haryana [2011]
6 SCR 301; Satheedevi v. Prasanna & Anr. [2010] 6
SCR 657; M/s. Hiralal Rattanlal etc. etc. v. State of U.P.
& Anr. etc. etc. [1973] 2 SCR 502; Dipak Babaria &
Anr. v. State of Gujarat & Ors. [2014] 2 SCR 71 -
referred to.
Case Law Reference
[2007] 11 SCR 980
referred to
Para 9
[1952] SCR 612
referred to
Para 12
[2011] 8 SCR 829
referred to
Para 12
[1955] SCR 1
referred to
Para 12
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[1960] SCR 764
referred to
Para 17
[1957] SCR 167
referred to
Para 38
[2011] 6 SCR 301
referred to
Para 39
[2010] 6 SCR 657
referred to
Para 43
[1973] 2 SCR 502
referred to
Para 43
[2014] 2 SCR 71
referred to
Para 43
[2019] SCR 177
relied on
Para 44
CIVIL APPELLATE JURISDICTION: Civil Appeal No.1637 of
2022.
From the Judgment and Order dated 06.11.2019 of the High Court
of Judicature at Bombay in Writ Petition (L) 28480 of 2019.
With
Civil Appeal Nos.1638, 1639 and 1640 of 2022 and S.L.P. (Civil)
No.12011 of 2020.
Rana Mukherjee, Sr. Adv., Manish Shanker Srivastava, Ms.
Kalpana, Ms. Pallavi Baghel, Abhishek Kumar Singh, Viraj Kadam, Soumya
Dutta, Devendra Kumar Singh, Karunakar Mahalik, Manoranjan Mishra,
Gouranga Biswal, B. Raghunath, Sriram P., Ms. N. C. Kavitha, Pawan
Kr. Dabas, Ms. Prerna Robin, Ms. Muskaan Garg, Ms. Jessica Bhardwaj,
Ms. Daisy Hannah, Ms. Kanika Sharma, Ms. Oindrilla Sen, M. L. Ganesh,
K. V. Vijayakumar, Rahul Chitnis, Sachin Patil, Aaditya A. Pande, Geo
Joseph, Ms. Shwetal Shepal, Advs. for the appearing parties.
The Judgment of the Court was delivered by
A. M. KHANWILKAR, J.
1. The seminal question involved in these cases is: whether it is
open to the District Magistrate1 or the Chief Metropolitan Magistrate2
to appoint an advocate and authorise him/her to take possession of the
secured assets and documents relating thereto and to forward the same
to the secured creditor within the meaning of Section 14(1A) of the
Securitisation and Reconstruction of Financial Assets and Enforcement
of Security Interest Act, 20023?
1 for short, "DM"
2 for short, "CMM"
3 for short, "2002 Act"
NKGSB COOPERATIVE BANK LTD. v. SUBIR CHAKRAVARTY
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2. The High Court of Judicature at Bombay4 vide judgment and
order dated 6.11.2019 in Writ Petition (L) No.28480 of 2019 opined that
the advocate, not being a subordinate officer to the CMM or DM, such
appointment would be illegal. Against this decision, four separate appeals5
have been filed by the concerned parties. On the other hand, the High
Court of Judicature at Madras6 vide judgment and order dated 18.3.2020
in C.R.P. No.790 of 2020 has taken a contrary view while following
earlier decision of the same High Court on the reasoning that the advocate
is regarded as an officer of the court and, thus, subordinate to the CMM
or the DM. Having so held, it allowed the civil revision petition filed by
the secured creditor (Canara Bank). Against this decision, a special leave
petition7 has been filed by the borrowers.
3. The High Courts of Kerala (in Muhammed Ashraf & Anr. vs.
Union of India & Ors.8; The Federal Bank Ltd., Ernakulam vs.
A.V. Punnus9; and V.S. Sunitha vs. Federal Bank Ltd.10), Madras (in
S. Chandramohan & Anr. vs. The Chief Metropolitan Magistrate,
Egmore, Chennai & Ors.11) and Delhi (in Rahul Chaudhary vs.
Andhra Bank & Ors.12), have taken the same view as in the case of
Canara Bank impugned in the special leave petition13 arising from the
decision of the Madras High Court.
4. Additionally relying on the dictum in M/s. J. Marks Exim
(India) Pvt. Ltd. vs. Punjab National Bank14 decided by the Division
Bench of the Bombay High Court, it was urged that the coordinate Bench
of the Bombay High Court had answered the issue under consideration
in favour of the secured creditors and against the borrowers on the
same lines as the view taken by other three High Courts, namely, High
4 for short, "Bombay High Court"
5 Civil Appeal No..... of 2022 @ SLP (Civil) No.30240 of 2019; Civil Appeal No.....
of 2022 @ SLP (Civil) No.2055 of 2020; Civil Appeal No.....of 2022 @ SLP (Civil)
No......of 2022 @ Diary No.17059 of 2020; and Civil Appeal No.....of 2022 @ SLP
(Civil) No......of 2022 @ Diary No.23733 of 2020
6 for short, "Madras High Court"
7 SLP (Civil) No.12011 of 2020
8 AIR 2009 Kerala 14
9 AIR 2014 Kerala 7
10 2018 SCC OnLine Ker 12866
11 2014-5-L.W. 620: 2014 SCC OnLine Mad 7869
12 2020 SCC OnLine Del 284
13 see Footnote No.7
14 2017 SCC OnLine Bom 2246
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Courts of Kerela, Madras and Delhi. However, in the judgment of the
Bombay High Court of coordinate Bench impugned before this Court, it
has been observed that the dictum in the said decision had not considered
the precise question that has been dealt with in the impugned judgment.
5. Briefly stated, in each of the cases under consideration, the
CMM/DM appointed an advocate purportedly in exercise of powers
under Section 14(1A) of the 2002 Act. In the cases arising from the
judgment of the Bombay High Court, the borrowers had urged before
the High Court that the Additional Chief Metropolitan Magistrate15, 3rd
Court, Esplanade, Mumbai on application filed by the secured creditor
(Bank) under Section 14 of the 2002 Act passed an order dated 26.7.2019,
appointing an advocate to take possession of the secured assets and
documents relating thereto and to forward the same to the secured
creditor. The order passed by the ACMM records that the Bank had
advanced a loan in the sum of Rs.4.44 crore on 31.1.2015 to the borrowers,
who had mortgaged Flat No.262, 26th Floor, Building No.02 with two
basement car spaces in a building known as 'Kalpataru Pinnacle' in
Goregaon (West), Mumbai. Further, the borrowers had defaulted on
30.10.2017. Their account was declared Non-Performing Asset16. As a
sequel, on 13.11.2017, a notice under Section 13(2) of the 2002 Act was
issued to them and posted by Registered Post A.D. The docket was
returned with 'intimation posted' meaning thereby, the noticees were
not available at the given address. The order further records that the
Bank served the notice upon the borrowers by publication on 31.12.2017
calling upon them to pay the outstanding dues within sixty days. However,
loan amount remained unpaid. As a result, the secured creditor approached
the ACMM to pass appropriate directions, on which application the stated
order dated 26.7.2019 came to be passed appointing an advocate. The
same was communicated to the borrowers by the advocate on 11.10.2019.
That order was challenged before the Bombay High Court by the
borrowers by way of writ petition17 under Article 226 of the Constitution
of India, which has been decided by the High Court vide impugned
judgment and order holding that Section 14(1A) of the 2002 Act does
not permit the CMM/DM to authorise an advocate. The language used
in the provision is amply clear. Such delegation could be done only to an
15 for short, "ACMM"
16 for short, "NPA"
17 Writ Petition (L) No.28480 of 2019
NKGSB COOPERATIVE BANK LTD. v. SUBIR CHAKRAVARTY
[A. M. KHANWILKAR, J.]
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officer subordinate and none else. The High Court rejected the argument
that the overburdened CMM/DM had inadequate subordinate staff and
it would be difficult, if not virtually impossible for the secured creditor to
take possession of and realise the outstanding dues by disposing the
secured asset. The High Court was not impressed with that argument
and preferred to strictly construe the stated provision. The secured
creditors have assailed this decision by way of appeals18 before this
Court.
6. Reverting to the special leave petition19 arising from the decision
of the Madras High Court. The Bank had given loan to the borrowers
upon mortgage of their property. Despite the demand to clear the
outstanding dues, the loan amount remained unpaid. Resultantly, the Bank
classified the account as NPA followed by notice under Section 13(2) of
the 2002 Act dated 21.7.2017 to the borrowers. Eventually, the Bank
took symbolic possession of the property through its authorised officer
after issuing possession notice. That was published in two leading
newspapers. The borrowers challenged the notice issued to them under
Section 13(4) of the 2002 Act. That challenge was unsuccessful.
Whereafter, the Bank invoked action under Section 14 of the 2002 Act
by filing application before the CMM for taking possession of the secured
assets. The borrowers challenged the sale notice by filing application
being S.A. No.59 of 2019. No injunction was granted in favour of the
borrowers and to restrain the Bank from proceeding with the sale of the
secured property. Hence, the Bank pursued the application under Section
14 of the 2002 Act before the CMM, which came to be disposed of on
6.8.2019 by appointing an Advocate Commissioner to take possession
of the secured property. Thereafter, the application filed by the borrowers,
being S.A. No.59 of 2019, came to be dismissed. In the interregnum, the
borrowers filed another application in S.A. No.399 of 2019, challenging
the order dated 6.8.2019 passed by the CMM, appointing an Advocate
Commissioner, in Crl. M.P. No.2995 of 2019. The Debts Recovery
Tribunal II20, Chennai was pleased to allow S.A.No.399 of 2019, inter
alia, holding that the procedure mandated under clauses (i) to (ix) of the
proviso to Section 14(1) of the 2002 Act had not been complied with by
the secured creditor (Bank) and in any case, the appointment of the
18 see Footnote No.5
19 see Footnote No.7
20 for short, "Tribunal"
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Advocate Commissioner was illegal. The Tribunal allowed the challenge
vide order dated 4.2.2020. That decision came to be assailed by the
Bank before the Madras High Court by way of civil revision petition21
under Article 227 of the Constitution of India. The High Court noted two
issues arising for its consideration, in paragraph 9 of the impugned
judgment. The first issue was regarding the correctness of the conclusion
recorded by the Tribunal on the plea of non-compliance of clauses (i) to
(ix) of Section 14 of the 2002 Act. That came to be set aside being
manifestly erroneous (see paragraphs 10 and 11 of the impugned
judgment). However, on the second issue about power of the CMM/
DM to appoint an Advocate Commissioner, the High Court, amongst
other, relied upon its earlier decision as well as of the High Courts of
Delhi and Kerala, to conclude that the Tribunal committed manifest error,
including not to take notice of the decision of the same High Court referred
to in the impugned judgment. In short, the Madras High Court accepted
the argument of the secured creditor (Bank) that it was open to the
CMM/DM to appoint an Advocate Commissioner for taking possession
of the secured assets and documents relating thereto for being forwarded
to the secured creditor in terms of Section 14(1A) of the 2002 Act. This
decision has been challenged by the borrowers by way of a special
leave petition22 before this Court.
7. We have heard Mr. Rana Mukherjee, learned senior counsel,
Mr. Viraj Kadam, Mr. Manish Shanker Srivastava, Mr. Devendra Kumar
Singh and Mr. M.L. Ganesh, learned counsel appearing for the Banks,
Mr. B. Raghunath, learned counsel appearing for the borrowers and Mr.
Rahul Chitnis, learned counsel appearing for the State of Maharashtra.
8. As aforesaid, the one and only question common to all these
cases is: whether the CMM/DM can appoint an advocate in exercise of
powers under Section 14(1A) of the 2002 Act? This issue arises because
of the expression used in the said provision, "may authorise any officer
subordinate to him".
9. The earliest decision dealing with the issue under consideration
is that of the High Court of Kerala in Muhammed Ashraf23 wherein
the Division Bench of the High Court rejected the argument that
21 C.R.P. No.790 of 2020
22 see Footnote No.7
23 supra at Footnote No.8
NKGSB COOPERATIVE BANK LTD. v. SUBIR CHAKRAVARTY
[A. M. KHANWILKAR, J.]
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mandate of Section 14 obliges the CMM/DM to go personally and
take possession of the secured assets and documents relating thereto.
It noted that Section 14(2) of the 2002 Act enabled the CMM/DM to
pass order even to take Police assistance and use all necessary powers
in taking possession of the secured assets. To buttress this view,
reference has been made to the decision of this Court in Sakiri Vasu
vs. State of Uttar Pradesh & Ors.24 wherein the Court noted that an
express grant of statutory powers carries with it by necessary
implication the authority to use all reasonable means to make such
grant effective. In other words, the authority had implied powers to
grant relief which is not expressly granted to it by the Act. On that
logic, the Division Bench of the High Court of Kerala opined that it
would be open to the Magistrate who has the power under Section 14
of the 2002 Act to take possession of the secured assets including to
take assistance of Police including an Advocate Commissioner so as
to facilitate the secured creditor to take over the secured assets. As a
result, the Magistrate could also appoint a commissioner for identification
of the secured assets and taking possession thereof. This decision has
attained finality owing to the dismissal of S.L.P. (Civil) No.1671 of
2009 on 2.2.2009 by this Court. Notably, this decision was rendered
before the amendment of Section 14 and in particular insertion of subSection (1A)25.
10. The aforementioned decision, however, had been followed by
the learned Single Judge of the High Court of Kerala in the case of The
Federal Bank Ltd., Ernakulam26 which had arisen after the
amendment of Section 14 of the 2002 Act and insertion of sub-Section
(1A) therein. Despite insertion of sub-Section (1A), learned Single Judge
following the judgment in Muhammed Ashraf27,answered the issue in
the following words:
"5. ...It may however appear at first blush that such an Advocate
Commissioner is not an officer subordinate to the District
Magistrate or the Chief Judicial Magistrate. But a reference to
Sections 12 and 17 of the Code of Criminal Procedure, 1973
24 (2008) 2 SCC 409
25 Inserted by Act 1 of 2013, sec.6(b) (w.e.f. 15.1.2013, vide S.O.171(E), dated 15.1.2013)
26 supra at Footnote No.9
27 supra at Footnote No.8
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indicates that the term District Magistrate or Chief Metropolitan
Magistrate denotes the court and not the officer in person. An
Advocate Commissioner is certainly an officer subordinate
to the court and the words employed in Section 14 (1A) of
the SARFAESI Act are not to be understood as meaning an
officer subordinate in service. Section 284 of the Code of
Criminal Procedure, 1973 in fact empowers an Advocate
Commissioner to record the examination of witnesses whose
personal appearance in court is dispensed with. Similar provisions
can be found in Order XXVI Rule 17 of the Code of Civil
Procedure, 1908 enabling the Advocate Commissioner to record
evidence of witnesses and Section 75 (g) thereof to perform any
ministerial act even. Taking over possession of the secured asset
and handing over the same to the creditor bank is nothing but a
ministerial act of the Advocate Commissioner on behalf of the
court. The Advocate Commissioner exercising such function
under Section 14 (1A) of the SARFAESI Act is only
discharging his duty as an officer subordinate to the court
presided by the Magistrate. The contention of the borrower
that the Advocate Commissioner is not an officer
subordinate in service to the Chief Judicial Magistrate and
hence incompetent is only to be rejected."
(emphasis supplied)
11. Once again, another learned Single Judge of the High Court
of Kerala in V.S. Sunitha28 reiterated the same view and held that the
Magistrate rendering assistance to the secured creditor is competent to
appoint a commissioner to take possession of the secured assets.
12. This very issue had also arisen before the Madras High Court
in S. Chandramohan29. The Division Bench of the Madras High Court
after adverting to Section 14(1A) of the 2002 Act went on to observe as
follows:
"8. ....
The same is an enabling provision conferring power on the Chief
Metropolitan Magistrate or District Magistrate to authorise any
28 supra at Footnote No.10
29 supra at Footnote No.11
NKGSB COOPERATIVE BANK LTD. v. SUBIR CHAKRAVARTY
[A. M. KHANWILKAR, J.]
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officer subordinate to him to take possession of the assets and
documents relating thereto and forward the assets and documents
to the secured creditors.
9. The Advocate Commissioners appointed by the learned Chief
Metropolitan Magistrate is in tune with Section 14(1-A) of the
SARFAESI Act, 2002. As per Section 14 of the Act, the secured
creditors can approach the Chief Metropolitan Magistrate/District
Magistrate to take possession of the assets and documents of the
secured creditor. The Chief Metropolitan Magistrate, instead of
personally visiting the spot to take possession of assets and
documents, can very well appoint the Advocate Commissioner to
visit on his behalf, as in the case of issuing of commissions under
the Civil Procedure Code, as it is not possible for the Chief
Metropolitan Magistrate/District Magistrate to visit personally to
take possession.
10. The amendment inserted by Act 1 of 2013 viz., Section 14(1A) is permitting the Subordinate Officers to do the above said
acts and nowhere prohibits the Chief Metropolitan Magistrate from
authorising an Advocate Commissioner to go on his behalf for
taking possession of assets and documents and forwarding the
same to the secured creditor. The amendment gives discretion to
the Chief Metropolitan Magistrate/District Magistrate either to
authorise or take possession of such assets and document and the
word used being 'may', it is not always necessary on the part of
the Chief Metropolitan Magistrate to authorise any officer
subordinate to him. It is a well settled proposition of law that the
observance of the word 'may' used in the statute is only directory,
in the sense, non-compliance with those provisions will not render
the proceedings invalid. Sometimes, the word 'shall' may also be
directory and not mandatory. ...."
It then adverted to the decisions of this Court in Dattatraya
Moreshwar vs. The State of Bombay & Ors.30, Mahadev Govind
Gharge & Ors. vs. Special Land Acquisition Officer, Upper Krishna
Project, Jamkhandi, Karnataka31 and Sangram Singh vs. Election
Tribunal, Kotah & Anr.32 on the principles of interpretation of statute
and noted thus:
30 AIR 1952 SC 181
31 (2011) 6 SCC 321
32 AIR 1955 SC 425
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"11.The object of the amendment introduced in Act 1 of
2013 being to give assistance to the Chief Metropolitan
Magistrate/District Magistrate, the Chief Metropolitan
Magistrate is justified in appointing Advocate
Commissioners, instead of authorising Subordinate Officers
to take possession. It is well settled in law that Advocates
are also Officers of the Court, though not subordinate to
Chief Metropolitan Magistrate. As Officers of the Court, the
Advocates can perform their duty more effectively than the
Officers, subordinate to the Chief Metropolitan Magistrate in taking
possession of assets and documents and in delivering the same to
the Secured Creditor. Thus, in any event, the contention raised by
the learned counsel appearing for the petitioner is devoid of merits."
(emphasis supplied)
13. The issue also received attention of the High Court of Delhi in
Rahul Chaudhary33. The High Court answered the issue in the following
words:
"3.1 To be noted, the receiver has been appointed by the learned
CMM vide order dated 05.12.2019.
4. The learned CMM has appointed an advocate to take
possession of the secured asset.
5. Counsel for the petitioner does not dispute that fact that the
receiver appointed by the learned CMM has taken possession of
the subject secured asset on 16.01.2020.
6. It is, however, the say of the counsel for the petitioner that
appointment of an advocate as a receiver was contrary to the
provisions of Section 14 (1A) of the SARFAESI Act and, therefore,
that part of the order passed by the learned CMM should be set
aside as was done by the Bombay High Court in the
aforementioned matter.
7. To my mind, the writ petition, in fact, has been rendered
infructuous, in a sense, that the receiver would have handed over
the possession of the subject asset to the secured creditor, that is,
the Andhra Bank.
8. Nevertheless, according to me, the language of Section 14(1A)
of the SARFAESI Act uses the expression "may" and not "shall".
33 supra at Footnote No.12
NKGSB COOPERATIVE BANK LTD. v. SUBIR CHAKRAVARTY
[A. M. KHANWILKAR, J.]
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8.1 There are two ways of appreciating the provision. First, that
the expression "may" relates to the choice of the subordinate
officer. The other meaning that can be placed on the provision is
that District Magistrate/CMM is vested with discretion to appoint
officers subordinate to him to take possession of the secured asset.
8.2 The District Magistrate/CMM is obliged to take possession
once an application in that behalf is preferred under sub-section
(1) of Section 14 of the SARFAESI Act by the secured creditor.
8.3 It is in the exercise of such power that recourse can be taken
by the District Magistrate/CMM to the provisions of sub-section
(1A) of Section 14. This provision was introduced via Act 1 of
2013. Before that the District Magistrate/CMM were perhaps
taking recourse to sub-section (2) of Section 14 and, thus, appointing
advocates as receiver.
8.4 To my mind, after the insertion of sub-section (1A) in Section
14, the only change that has been brought about is that the District
Magistrate/CMM has now the discretion to appoint even their
subordinate officers as receivers.
8.5 Pertinently, sub-section (1A) of Section 14 does not bar
the appointment of advocates as receivers. The same position
obtains vis-à-vis Rule 8(3) of The Security Interest (Enforcement)
Rules, 2002, which has been cited in the aforementioned judgment
of the Bombay High Court.
9. As was noticed in Subir Chakravarty's case34, the District
Magistrates and the CMMs are overburdened. The position is no
different in Delhi.
10. Thus, in my view, since the provision vests discretion in the
District Magistrate/CMM and as long the discretion is exercised
with due care and caution, the appointment of advocates as
receivers cannot be faulted."
(emphasis supplied)
As noticed from the extracted portion of the judgment, the High
Court of Delhi disagreed with the view taken by the Bombay High Court
in the impugned judgment which has been assailed in the cases under
consideration.
34 see Footnote No.17
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14. Concededly, there is conflict of opinion between the three
High Courts35 on the one side and the Bombay High Court on the other.
In the impugned judgment, the Bombay High Court observed as follows:
"9 The language of the legislature is clear. The District Magistrate
or the Chief Metropolitan Magistrate may authorize any officer
subordinate to take possession of such asset and this means that
the person authorized to take possession has to be an officer
subordinate to the District Magistrate or the Chief Metropolitan
Magistrate.
10 The decision dated 17th March 201736 passed by the Division
Bench was not premised on a challenge to the authorization in
favour of an Advocate to take possession of a secured asset. The
observations at the end of the order are probably the result of the
facts noted in the impugned order. The overburdened Metropolitan
Magistrates or the District Magistrates having inadequate
subordinate staff find it a handicap to deal with large number of
applications under Section 14 of the SARFAESI Act, 2002, but
this would be no ground to violate the language of the statute. The
legislature may be requested to intervene. We propose to do that
at the end of the present order.
11 .....
12 A perusal of the sub-rule37 shows that after possession of
immovable property is physically taken over by the Officer
authorized custody thereof can be handed over for care and
protection of the property to any person authorized or appointed
by him. Thus, after possession of a secured asset is taken over, its
custody can be entrusted to any person who need not be an Officer
of the Court or authorized subordinate staff of the Court. This
could perhaps solve half the problem faced by District Magistrates
and Chief Metropolitan Magistrates.
13 The cry of anguish in paragraph No.7 of the impugned order is
also justified. Each day, atleast two, if not three petitions, are filed
by way of mercy pleading to this Court that some time be given to
the defaulting borrower to clear the defaulting loan so that the
property mortgaged can be saved. Wide and varied facts such as
35 High Courts of Kerala, Madras and Delhi
36 supra at Footnote No.14
37 Rule 8(3) of the Security Interest (Enforcement) Rules, 2002
NKGSB COOPERATIVE BANK LTD. v. SUBIR CHAKRAVARTY
[A. M. KHANWILKAR, J.]
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exams of the children are ensuing, old and aged parents, paternal
or maternal aunt are suffering from an ailment and are under
going treatment at a nearby hospital are pleaded. The borrower is
making attempts to sell another property to clear the outstanding
amounts etc. Equities are pleaded.
14 Courts in India being not only Courts of Justice but Courts of
Equity, the orders passed under Section 14 are stayed, but
ultimately the petitions fail.
15 Howsoever inconvenient it may be to a Court, rights of parties
cannot be curtailed in the manner done in the impugned order. If
law permits, the borrower can always tender the outstanding
amounts to the Bank or the Financial Institution before a sale of
the secured assets take place.
16 The two troubling parts of the impugned order being dealt with
by us resulting in the hurdle in the way of the petitioner to seek
further reliefs from the Debt Recovery Tribunal having been clear,
we dispose of the petition expunging the directions in paragraph
No.7 of the impugned order, as also expunging the authorization
in favour of Ms.Priti S. Chavan, Advocate to take possession of
the Security as a Court Commissioner requiring the learned
Metropolitan Magistrate to appoint an officer subordinate to take
possession of the secured asset who, in turn may give custody
thereof to any person.
16 We terminate the proceedings in the instant writ petition
observing that on the merits of the order passed, the petitioners
may approach the Debt Recovery Tribunal."
The above view taken by the Bombay High Court is one of strict
or literal interpretation of the provision as it exists.
15. At the outset, we must notice that the expression "any officer
subordinate to him" has been used in several legislations38 enacted by
38 Section 14 of the Suppression of Immoral Traffic in Women and Girls Act, 1956;
Section 5 of the Orphanages and other Charitable Homes (Supervision and Control)
Act, 1960; Section 166 of the Manipur Land Revenue and Land Reforms Act, 1960;
Section 10K of the Export (Quality Control and Inspection) Act, 1963; Section 43A of
the Unlawful Activities (Prevention) Act, 1967; Section 5 of the Wild Life (Protection)
Act, 1972; Sections 55 and 165 of the Code of Criminal Procedure, 1973; Sections 64
and 70 of the Delhi Police Act, 1978; Section 41 of the Narcotic Drugs and Psychotropic
Substances Act, 1985; Sections 11 and 16 of the Foreign Trade (Development and
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Parliament/State Legislature. Somewhat similar expression has been used
in Articles 53, 154 and 311 of the Constitution of India and in other
legislations39 enacted by Parliament/State Legislature with little variation
to further the intent of the concerned enactment.
Regulation) Act, 1992; Section 44 of the Delhi Rent Act, 1995 (also in 1958); Section 22
of the Chemical Weapons Convention Act, 2000; Section 17 of the Prevention of
Money-Laundering Act, 2002; Section 30 of the Food Safety and Standards Act, 2006;
Sections 107, 108 and 112 of the Central Goods and Services Tax Act, 2017; Section 8
of the Fugitive Economic Offenders Act, 2018; and Section 31 of the Banning of
Unregulated Deposit Schemes Act, 2019.
39 Article 53 ("officers subordinate to him"), Article 154 ("officers subordinate to him"
and "any authority subordinate to the Governor") and Article 311 ("an authority
subordinate to that") of the Constitution of India;
Section 376 ("police officer subordinate to such police officer") of the Indian Penal
Code, 1860;
Section 2 ("members of the subordinate ranks of any police-force") and Section 7 ("any
police-officer of the subordinate ranks") of the Police Act, 1861;
Section 4A ("any such officer subordinate to him") of the Guardians and Wards Act,
1890;
Section 3(5) ("Officer subordinate to the Governor General of India") of the General
Clauses Act, 1897;
Sections 8 and 22 ("officers subordinate to the Jailer") and Section 48 ("officer
subordinate to the Superintendent") of the Prisons Act, 1894;
Section 195 ("any officer subordinate to the Collector") of the Indian Succession Act,
1925;
Section 34H ("any subordinate officer of his"), and Sections 110A and 110B ("any
person subordinate to him") of the Insurance Act, 1938;
Section 2(a) ("any officer subordinate to that officer") of the Indian Coconut Committee
Act, 1944;
Section 14A ("such officer or authority subordinate to the Central Government" and
"such officer or authority subordinate to the State Government") of the Industrial
Employment (Standing Orders) Act, 1946;
Section 39 ("authority subordinate to the Central Government" and "authority
subordinate to the State Government") of the Industrial Disputes Act, 1947;
Section 2(g) ("subordinate officer") of the Central Reserve Police Force Act, 1949;
Section 47 ("his subordinate in rank") of the Army Act, 1950;
Section 17 ("by an officer subordinate to that Government" and "by an officer
subordinate to the State Government") and Section 23 ("by an officer or authority
subordinate to that Government") of the Requisitioning and Acquisition of Immovable
Property Act, 1952;
Sections 24A and 24B ("any such officer subordinate to the Central Government or a
State Government") and Section 43 ("such officer or authority subordinate to the
Central Government" and "such officer or authority subordinate to the State
Government") of the Arms Act, 1959;
Section 56 ("an officer subordinate to the Administrator") of the Children Act, 1960;
NKGSB COOPERATIVE BANK LTD. v. SUBIR CHAKRAVARTY
[A. M. KHANWILKAR, J.]
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16. The construct of the provision, however, must depend on the
context of the legislative intent and the purpose for which such
dispensation has been envisaged.