Although Magistrate's Jurisdiction U/S 14 Of SARFAESI Act Does Not Involve Adjudication, Order Cannot Be Passed Without Application Of Mind: Kerala HC

The Kerala High Court reiterated that while a Magistrate exercising jurisdiction under Section 14 of the SARFAESI Act does not adjudicate on creditor's application for taking possession of the secured assets, they are required to clearly apply mind since it can have drastic consequences. The Court stated that this is the reason why the Parliament has empowered high officials like Chief Judicial Magistrate or District Magistrates under Section 14 to assist the secured creditor in taking possession of secured assets.Justice Gopinath P. observed that an order under Section 14 cannot be issued in printed format by merely filling in necessary details without application of mind. Court said, “it is clear that, though the exercise of jurisdiction by the Magistrate under Section 14 of the SARFAESI Act does not involve any adjudication, the act of the Magistrate in passing orders in printed form by filling in necessary details in blank spaces cannot be justified under any circumstances. It cannot be forgotten that the power under Section 14 of the SARFAESI Act involves drastic consequences and that is why the Parliament conferred the power to take action under Section 14 of the SARFAESI Act on high officials such as District Magistrate or the Chief Judicial Magistrate.”In this case, the Petitioners-Banking Company and Authorized officer is before the Court challenging the order of the Debt Recovery Tribunal which set aside the order of the Chief Judicial Magistrate issued under Section 14. The Order of the Magistrate was set aside by stating that it was issued in a printed format without application of mind. The Counsel for Petitioners submitted that CJM is not an adjudicating authority and can only exercise administrative power for assisting the secured creditor in taking possession of the secured asset under Section 14. It was submitted that the Tribunal ought not to have interfered in the order which was passed by CJM since it was issued by exercising a ministerial power and was not a judicial order.On the other hand, the borrower who is the respondent herein submitted that order of the Debt Recover Tribunal must be challenged before the Debt Recovery Appellate Tribunal. It was also argued that CJM is not expected to adjudicate any lis but could only conduct a quasi- judicial enquiry through a non-judicial process. It was also submitted that order of the Tribunal must be upheld since CJM cannot pass orders casually. The Court relying upon decisions Indian Bank v. D. Visalakshi (2019) , R.D. Jain & Co. v. Capital First Ltd (2023), Balkrishna Rama Tarle v. Phoenix ARC (P) Ltd. (2023) observed that even though CJM/DM do not conduct adjudicatory process, they must apply their mind and determine whether procedure contemplated under Section 14 was complied with. Court said, “ While it may not be necessary to examine the correctness of the averments in the affidavit filed by a bank/financial institution in support of the application for orders under Section 14 of the SARFAESI Act, the Magistrate must clearly apply his mind to the averments in the application and determine as to whether procedure contemplated has been followed before passing an order under Section 14 of the SARFAESI Act.”Accordingly, the Court dismissed the Petition and held that the Tribunal was justified in setting aside the order of the CJM.Case Title: South Indian Bank Ltd. v Jahfer MCase No: OP (DRT) NO. 336 OF 2024Citation: 2025 LiveLaw (Ker) 204Click here to read/download Order

Although Magistrate's Jurisdiction U/S 14 Of SARFAESI Act Does Not Involve Adjudication, Order Cannot Be Passed Without Application Of Mind: Kerala HC

Tellmy Jolly

Tags