Addl Commissioner Of Police Not Subordinate To Addl DM, Can't Possess Or Delegate Power To Possess Assets U/S 14(1-A) Of SARFAESI Act: Allahabad HC

The Allahabad High Court has held that Additional Commissioner of Police is not subordinate to Additional District Magistrate and cannot be delegated the authority to possess or further delegate power to possess assets under Section 14(1-A) of the Securitisation And Reconstruction Of Financial Assets And Enforcement Of Security Interest Act, 2002.Perusing Sections 14(1) and 14(1-A), Justice Pankaj Bhatia held “it is clear that Section 14 empowers the District Magistrate or the Chief Metropolitan Magistrate to take possession of the property concerned. Section 14(1-A) further empowers the District Magistrate or the Chief Metropolitan Magistrate to “authorized any Officer subordinate to him” to take possession of the said assets and thereafter to forward such assets to the secured creditor. Thus, in terms of the mandate of Section 14 (1-A), it is clear that the District Magistrate or the Chief Metropolitan Magistrate can either take the possession himself or can authorize any officer subordinate to him.”The Court held that a writ would be maintainable where mandatory provisions ( here, Section 14(1-A) SARFAESI Act) have not been followed which has led to the violation of the Constitutional right to property under Article 300-A of the Constitution of India. Case BackgroundPetitioner no.1 took a loan in 2015 to which petitioners 2-4 were personal guarantors. In 2020, the Bank classified the loan as a Non-Performing Asset and issued a notice under Section 13(2) of the Act. Notices were also issued under Section 13(4) and application under Section 14 was filed before the Additional District Magistrate (ADM), Gautam Budh Nagar for taking possession of the property. The ADM directed the Assets Reconstruction Company to take possession of the property with the help of police authorities. The Bank and the police were directed to give reasonable notice to the occupier before taking possession to enable him to shift their goods elsewhere. In the Securitisation Application filed by the petitioners, an interim order was passed directed the ADM/CMM to issue notice 15 days prior to taking possession. While the case was pending before DRT, the Assets Reconstruction Company(ARC) issued notices to the petitioner for taking possession of the property. Petitioners pleaded that neither any notice was ever issued by the ADM/CMM as directed by DRT nor any official of the Government was present when the ARC took forceful possession of petitioner's property. It was pleaded that petitioner's right to property under Article 200-A had been violated. Counsel for ARC argued that it was a private body against whom writ petition was not maintainable. It was also argued that since the petitioner had already approached the DRT, alternate remedy was being availed and the petitioner should be relegated to the same. In his affidavit, the ADM submitted that he had already passed an order under Section 14 of the SARFAESI Act directing the Deputy Commissioner of Police, Gautam Budh Nagar to execute the said order after nominating a suitable police officer. High Court VerdictThe Court noted that in NKGSB Co-operative Bank Limited vs Subir Chakravarty and others, the Supreme Court observed that for an Advocate Commissioner to take possession under Section 14(1-A) of the SARFAESI Act he must be an officer of the Court and be subordinate to the DM/ CMM. Applying the test of 'functional subordination' the Apex Court held that an advocate was subordinate to DM/CMM enabling him to take possession of the disputed property under Section 14(1-A). Examining Sections 14(1) and 14(1-A) of the Act, Justice Bhatia moved to the question whether Additional Commissioner of Police is an officer subordinate to the District Magistrate and whether the DM could empower the ACP to delegate the powers of possession further. The Court held that the ACP could not be termed as subordinate to the ADM even by applying the 'functional subordination' test laid down by the Supreme Court in NKGSB Co-operative Bank Limited. “Admittedly as per the pleadings, the possession of immovable property (mortgaged) was taken by an Officer who was delegated the authority by the Additional Commissioner of Police and the officer delegated by him are neither functionally subordinate to the Additional District Magistrate nor can be termed as an officer of the court. In addition, the petitioners were also deprived of their possession over movable assets (which were not hypothecated/ mortgaged).”Observing that the possession of immovable and movable assets of the petitioner were taken without following the mandatory provisions of the SARFAESI Act, the Court held that petitioner's right under Article 300-A of the Constitution of India were violated because of which the writ petition was maintainable. Rejecting the contentions of the Assets Reconstruction Company, the Court held that since the possession had been taken by the Government, a writ petition was maintainable. Holding that the procedure ...

Addl Commissioner Of Police Not Subordinate To Addl DM, Can't Possess Or Delegate Power To Possess Assets U/S 14(1-A) Of SARFAESI Act: Allahabad HC

Upasna Agrawal

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