Facts in Brief:
1. The petitioner-Bank extended Cash Credit facility to the first respondent. Respondents 2 to 7 are the guarantors or co-borrowers. The borrowers' defaulting on dues running into crores, the Bank started recovery proceedings. Under Section 14 of the SARFAESI Act, the Bank filed C.M.P. No.3839 of 2018 before the Chief Judicial Magistrate (CJM), Thrissur. In those proceedings, the Bank also filed Ext.P3 Miscellaneous Petition praying the CJM Court to dispense with prior notice.
2. But the learned CJM has felt it desirable to put the debtors on notice and, so, passed the Ext.P4 order. Assailing that order, the Bank filed this writ petition.
3. The Bank’s counsel has submitted that the borrowers have mortgaged five items of immovable properties, besides hypothecating movable assets. According to him, the borrowers have hypothecated the entire movable assets lying in 2 to 6 immovable properties: granite and marble blocks and slabs.
4. The Bank’s counsel, placing reliance on the hypothecation agreement, contends that if the CJM’s Court issues notice, the debtors will take away all the movables before the actual attachment and physical possession could take place. So he urges this Court to dispense with notice.
5. In the alternative, the Bank’s counsel has also contended that Section 14
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of the Act does not require the creditor to notify the debtor before it could possess the secured properties.
6. Heard Sri Paulochan Antony P., the learned counsel for the Bank, besides perusing the record.
7. Indeed, even when a statute does not, in so many words, compel an authority to put an aggrieved or affected person on notice, the Courts have expansively interpreted the doctrine of fairness and have read the requirement of notice into the principles of natural justice. So this Court cannot per se hold that Ext.P4 is illegal. Yet, here, the facts are different.
8. It is not unusual, for example, even for civil courts, under Order XXXIX Rule 1 and 2, to attach the properties first and then notify the respondents. The courts do so only to ensure that the property to be attached does not disappear or gets dissipated before the petitioner could attach them.
9. I may, before moving ahead, examine Section 14 of the Act. It reads:
Section 14 - Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking possession of secured asset:
(1) Where the possession of any secured assets is required to be taken by the secured creditor or if any of the secured assets is required to be sold or transferred by the secured creditor under the provisions of this Act, the secured creditor may, for the purpose of taking possession or control of any such secured asset, request, in writing, the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction any such secured asset or other documents relating thereto may be situated or found, to take possession thereof, and the Chief Metropolitan Magistrate or, as the case may be, the District Magistrate shall, on such request being made to him-
(a) take possession of such asset and documents relating thereto; and
(b) forward such assets and documents to the secured creditor.
[Provided that any application by the secured creditor shall be accompanied by an affidavit duly affirmed by the authorised officer of the secured creditor, declaring that-
(i) the aggregate amount of financial assistance granted and the total claim of the Bank as on the date of filing the application;
(ii) the borrower has created security interest over various properties and that the Bank or Financial Institution is holding a valid and subsisting security interest over such properties and the claim of the Bank or Financial Institution is within the limitation period;
(iii) the borrower has created security interest over various properties giving the details of properties referred to in sub-clause (ii) above;
(iv) the borrower has committed default in repayment of the financial assistance granted aggregating the specified amount;
(v) consequent upon such default in repayment of the financial assistance the account of the borrower has been classified as a non-performing asset;
(vi) affirming that the period of sixty days’ notice as required by the provisions of sub-section (2) of section 13, demanding payment of the defaulted financial assistance has been served on the borrower;
(vii) the objection or representation in reply to the notice received from the borrower has been considered by the secured creditor and reasons for nonacceptance of such objection or representation had been communicated to the borrower;
(viii) the borrower has not made any repayment of the financial assistance in spite of the above notice and the Authorised Officer is, therefore, entitled to take possession of the secured assets under the provisions of sub-section (4) of section 13 read with section 14 of the principal Act;
(ix) that the provisions of this Act and the rules made thereunder had been complied with:
Provided further that on receipt of the affidavit from the Authorised Officer, the District Magistrate or the Chief Metropolitan Magistrate, as the case may be, shall after satisfying the contents of the affidavit pass suitable orders for the purpose of taking possession of the secured assets 2[within a period of thirty days from the date of application]:
[Provided further that if no order is passed by the Chief Metropolitan Magistrate or District Magistrate within the said period of thirty days for reasons beyond his control, he may, after recording reasons in writing for the same, pass the order within such further period but not exceeding in aggregate sixty days.]
Provided also that the requirement of filing affidavit stated in the first proviso shall not apply to proceeding pending before any District Magistrate or the Chief Metropolitan Magistrate, as the case may be, on the date of commencement of this Act.]
[(1A) The District Magistrate or the Chief Metropolitan Magistrate may authorise any officer subordinate to him,--
(i) to take possession of such assets and documents relating thereto; and
(ii) to forward such assets and documents to the secured creditor.]
(2) For the purpose of securing compliance with the provisions of sub-section (1), the Chief Metropolitan Magistrate of the District Magistrate may take or cause to be taken such steps and use, or cause to be used, such force, as may, in his opinion, be necessary.
(3) No act of the Chief Metropolitan Magistrate or the District Magistrate [any officer authorised by the Chief Metropolitan Magistrate or District Magistrate] done in pursuance of this section shall be called in question in any court or before any authority.
10. Sweeping is the scope of Section 14; wide are the powers of the CJM. To read the needs of natural justice into a procedure, we need to examine the statutory objective, too. In Trade Well v. Indian Bank (2007 Cri LJ 2544) the Bombay High Court acknowledged the common-law proposition that hearing the affected is indispensable before action is taken. Then it cautions about the crippling impact of the procedural rigmarole on the economy. So it observes that 'we cannot ignore the object of the NPA Act. . . It is a stringent statute. It proceeds on the basis that liability of the borrower is crystallized. It seeks to take care of menace of mounting non-performing assets which if not checked would cripple the national economy by blocking public money.' The NPA Act aims at, the Court observes, enforcing security interest without the intervention of the court. 'It only deals with disputes of secured creditors inter se [?] and not between secured creditor and borrower.'
11. Trade Well, then, refers to Union of India v. Tulsi Ram Patel(1985) II LLJ 206 SC) where the Supreme Court observed that 'in certain circumstances, application of principles of natural justice should be modified and even excluded.' According to the Court, where a right to a prior notice and an opportunity of hearing would obstruct prompt action, such a right could be excluded. The Supreme Court clarified that, if the action to be taken, its object and purpose, and the scheme of the relevant statutory provisions warrant, the right to prior notice and hearing stand excluded. If legislation and the necessities of a situation, the Supreme Court also observed, 'can exclude the principles of natural justice including the audi alteram partem rule, a fortiori, so can a provision of the Constitution.'
12. Echoing Trade Will, this Court in C. R. Sindhu v. State of Kerala(2007 (0) SCJOnline (Ker) 101 (S.B.) has observed that the object of the Securitisation Act is to accelerate recovery of debts and to remove the obstacles from the path of debt recovery by a non-adjudicatory process. The strong bias of the legal fraternity towards the adversarial litigation paved the way for the degeneration of the regular civil courts where delay and digression defeat the justice delivery process. Technical hairsplitting has become the bane of our law courts, causing cynicism among the public over the interminable delays in civil litigation.
13. C. R. Sindhu also observes that when a secured creditor, entitled to possession of the secured asset, requests in wring under Section 14(1) of the Act, the Chief Judicial Magistrate has no other option than help the secured creditor take possession of the secured asset. After examining Section 14, C. R. Sindhu also holds that the expression "shall" after the words "District Magistrate' towards the end of Sub-section (1) indicates that the Magistrate has no discretion in the matter and he is not expected to pass any order except take possession of the asset and hand it over to the creditor. The very fact that this function is entrusted with the Magistrate indicates that resistance, if any, in the act of taking possession of the asset can be easily got over by calling into aid the police power of the State. Sub-section 3 of Section 14 indicates that the said act (not "order") of taking possession of the asset by the Chief Judicial Magistrate is not justiciable; it must not be questioned before any court or authority.
14. Summing up, C. R. Sindhu declares that, while dealing with the secured creditor’s written request under Section 14 of the Securitisation Act, the Chief Judicial Magistrate need not give notice to or hear the borrower or any person in possession of the secured asset.
15. Coupled with the circumstances under which ‘prior’ notice could be dispensed with, even the hypothecation agreement has dealt with this contingency. In fact, the debtors in that agreement have waived their right to notice.
16. It pays to reproduce a clause from the hypothecation agreement, dated 31st March 2016, for much turns upon it:
"26. That the Bank and its Officers and Agents shall be entitled at any time as if absolute owners and without notice to the Borrowers but at the Borrowers risks and expenses and if so requires as attorneys for and in the name of the Borrowers to enter and remain at any place where the hypothecated goods shall be and to take possession or recover and receive the same and/or appoint any Officer or Officers of the Bank as receiver/s to sell or otherwise deal with all or any part of the hypothecated goods and to enforce, realize, settle, compromise, give notice of demand to debtors and third parties liable to the Borrowers and to deal settle, compromise, give notice of demand to debtors and third parties liable to the Borrowers and to deal with any of the rights aforesaid without being bound to exercise any of these powers or without being liable for any loss in the exercise thereof and without prejudice to the Bank's rights and remedies of suit against the Borrowers and to apply the net proceeds of such sale in or towards liquidation of the balance due to the Bank and the Borrowers hereby agree to accept the Bank's account of sales and realization and to pay any shortfall or deficiency therein shown."
17. Given the consensual procedural mechanism agreed to between the parties, I reckon this is a fit case, in which the learned CJM could dispense with notice to the borrowers. So I set aside Ext.P4 and hold that the learned CJM will exercise his power under Article 14; that is, of appointing an Advocate Commissioner and ordering possession of the properties, dispensing prior notice.
18. There is a touch of poetic justice in this Court’s disposing of the case. Here, too, the Court did not choose to put the respondents on notice. It is for the same reason this Court desired the CJM to adopt a similar course of action-not to enable the debtors to defeat the salutary objective of attachment and possession.
19. I may reiterate what C.R. Sindhu asserted: It is not as if the persons who lost possession were left with no remedy. Under Section 17 of the Securitization Act, any person including the borrower aggrieved by any of the measures referred to in Subsection 4 of Section 13 taken by the secured creditor or his authorized officer can prefer an application to the Debt Recovery Tribunal within 45 days. If the D.R.T. concludes that the secured creditor took possession of the asset violating any statutory provision, it can even direct restoration of possession of the assets to the borrower, under Sub-section 3 of Section 17 of the Act.
With these observations, I allow the writ petition.