Finding that the Debt Recovery Tribunal (DRT) has properly considered the question of whether the Chief Judicial Magistrate (CJM) had displayed a judicial approach in verifying the affidavit and the documents produced along with it, the Kerala High Court held that the said order passed by the DRT requires no interference by the Court exercising jurisdiction under Article 227 of the Constitution of India.

The High Court however granted liberty to the petitioners to invoke their statutory remedies if they approach the appropriate statutory forum.

The High Court held so while considering a case, whereby the proceedings initiated under the SARFAESI Act by the secured creditor (bank) for taking possession of the secured assets upon turning the debt as a Non-performing Asset (NPA), as well as the inquiry conducted by the CJM under Section 14 of the SARFAESI Act, were claimed to be not headed properly by the DRT.

Clarifying on this issue, a Single Judge Bench of Justice K. Babu clarified that “the inquiry conducted by the Chief Judicial Magistrate under Section 14 of the SARFAESI Act does not result in an adjudication of the parties' inter se rights regarding the subject matter. It is an administrative or executive function regarding the verification of the affidavit and documents relied on by the parties.”

Advocate R. Surendran appeared for the Petitioner whereas Advocate S. Ambily appeared for the Respondent.

The brief facts of the case were that the first Petitioner is a partnership firm registered under the Indian Partnership Act, whereas the second Petitioner is the Managing Partner of the firm and the third Petitioner is one of the partners. The fourth Petitioner is a guarantor of the loan availed by first petitioner from first respondent i.e., the bank (secured creditor). During relevant year, the second Petitioner had availed a credit facility from the bank to the tune of Rs.10 Crores in favour of the firm, with fourth petitioner standing as a guarantor. The immovable property was given as security for repayment of the loan amount. The title deeds of the property were deposited with the bank to create an equitable mortgage. Later, the bank classified the loan account as a Non-Performing Asset (NPA). Thereafter, the bank initiated proceedings under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) by issuing notice to the petitioners to pay the amount. The bank issued a possession notice under Section 13(4) of the SARFAESI Act proclaiming that the movable and immovable properties involved have been taken possession by way of symbolic possession. The petitioners challenged the measures taken by the bank under Section 13(4) of the SARFAESI Act by filing an Application before the Debts Recovery Tribunal-II. The Tribunal granted an interim stay and, after final adjudication, dismissed the Securitization Application. The bank filed an Original Application before the Debts Recovery Tribunal. The bank issued notice under Section 13(8) of the SARFAESI Act proposing to sell the property mortgaged on the failure of the petitioners to discharge the liability.

In the meantime, the bank approached the Chief Judicial Magistrate Court for the appointment of an Advocate Commissioner under Section 14 of the SARFAESI Act. The Chief Judicial Magistrate appointed an Advocate Commissioner and directed him to take possession of the properties. The Advocate Commissioner issued a notice proposing to take possession of the properties. Therefore, the second Petitioner approached the Court by filing a Writ Petition to direct the respondent to consider the request for One Time Settlement. The bank rejected the proposal submitted by the petitioners for a one-time settlement. Hence, the second Petitioner withdrew the Writ Petition with the liberty to challenge the proceedings under Section 14 of the SARFAESI Act before the Debts Recovery Tribunal. The Tribunal initially granted an interim order. However, after hearing both sides, the Tribunal dismissed the interim application.

After considering the submission, the Bench noted that all orders of the Tribunal, including the interim order challenged in the present proceedings, are appealable under Section 18 of the SARFAESI Act.

The Bench pointed by the plain reading of Section 17 of the SARFAESI Act, that any person aggrieved by any of the measures referred to in sub-section (4) of Section 13 of the SARFAESI Act taken by the secured creditor or his authorized officer may challenge the same before the Tribunal.

The Bench also stated with the reference of Section 18 of the SARFAESI Act, that any order made by the Tribunal in a proceeding under Section 17 of the SARFAESI Act is appealable before the Appellate Tribunal.

Referring to the case of Raveendran Pilla P. & Ors. v. State of Kerala & Ors. [(2020 (6) KLT 838], the Bench expressed that the power under Article 227 of the Constitution may be exercised when there is grave injustice or failure of justice and when the Court or the Tribunal has assumed a jurisdiction which it does not have, has failed to exercise a jurisdiction which it does have, such failure occasioning a failure of justice and the jurisdiction. However, available is being exercised in a manner which tantamount to overstepping the limits of jurisdiction.

“The power under Article 227 is exercised sparingly in appropriate cases, like when there is no evidence at all to justify, or the finding is so perverse that no reasonable person can possibly come to such a conclusion that the Court or Tribunal has come to. It is axiomatic that such discretionary relief must be exercised to ensure that there is no miscarriage of justice”, added the Bench.

Therefore, emphasizing that the Tribunal has considered the matter in its proper perspective and the impugned order shows the application of mind by the Tribunal, the High Court refused to entertain a petition under Article 227 merely because another view could have been taken.

Cause Title: M/s. Sama Rubbers and Ors. Vs. South Indian Bank Ltd. and Anr. [Neutral Citation: 2023/KER/64423]

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Kerala High CourtJustice K Babu

Pankaj Bajpai