Supreme Court on section 14(1) of the SARFAESI ACT: Magistrates can appoint an advocate commissioner to assist them in in execution of the order passed by them

Supreme Court while delivering judgment [NKGSB Cooperative Bank Limited vs Subir Chakravarty | SLP (C) 30240 OF 2019 | 25 February 2022    Coram: Justices AM Khanwilkar and Justice CT Ravikumar] said that the District Magistrate or the Chief Metropolitan Magistrate can appoint an advocate commissioner to assist him/her in the execution of the order passed under Section 14(1) of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 [SARFAESI act 2002].

The matter was raised in the Apex Court whether it is open to the District Magistrate or the Chief Metropolitan Magistrate 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, 2002. This issue arises because of the expression used in the said provision, “may authorise any officer subordinate to him”.

The High Court of Bombay, in the impugned judgment, opined that the advocate, not being a subordinate officer to the CMM or DM, such appointment would be illegal. Whereas High Courts of Kerala (in Muhammed Ashraf & Anr. vs. Union of India & Ors.; The Federal Bank Ltd., Ernakulam vs. A.V. Punnus; and V.S. Sunitha vs. Federal Bank Ltd., Madras (in S. Chandramohan & Anr. vs. The Chief Metropolitan Magistrate, Egmore, Chennai & Ors., and Delhi (in Rahul Chaudhary vs. Andhra Bank & Ors.12), Court took a contrary view holding that the advocate is regarded as an officer of the court and, thus, subordinate to the CMM or the DM.

The Court referred to Section 14(1A) of the SARFAESI act while considering the appeal.

Section 14[(1A) of the Act reads as under: “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 or 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”.

While considering the appeals, the Apex court bench observed that this issue arises because of the expression used in the said provision, “may authorise any officer subordinate to him”. The court noted that the expression “any officer subordinate to him” has been used in Articles 53, 154, and 311 of the Constitution of India and in other legislations. Noticing that the Bombay High Court has followed the strict and literal interpretation rule and, thus, preferred “statutory subordination” logic, the bench observed. However, the Court pointed out that no rule has been framed by the Central Government in reference to sub-Section (1A) of Section 14 of the 2002 Act much less to expressly or by necessary implication prohibiting the CMM/DM to engage an Advocate Commissioner for taking possession of the secured assets. The court, therefore, applied the “functional subordination” test.   “ Whereas, applying the “functional subordination” test, we are persuaded to take the view 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 in furtherance of the orders passed by the CMM/DM under Section 14(1) of the 2002 Act in that regard. 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 an intrinsic de jure functional subordinate relationship between the CMM/DM and the advocate being an officer of the court. The bench, therefore, said that an advocate must be regarded as an officer of the court and subordinate to the CMM/DM for the purposes of Section 14(1A) of the SARFAESI Act 2002. To buttress this view, reference has been also made to the decision of this Court in Sakiri Vasu vs. State of Uttar Pradesh & Ors, 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.

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, the Court said. Further, being an officer of the court and appointed by the CMM/DM, the acts done by the Advocate Commissioner would receive immunity under Section 14(3) of the 2002 Act — as an officer authorised by the CMM/DM” the bench added. The court also observed that an advocate is a guardian of constitutional morality and justice equally with the Judge. It further observed that the Advocate Commissioner is not a new concept and that advocates are appointed as Court Commissioner to perform diverse administrative and ministerial work as per the provisions of the Code of Civil Procedure and Code of Criminal Procedure. 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 the execution of the orders passed by the CMM/DM under Section 14(1) of the 2002 Act, that responsibility and duty will be discharged honestly and in accordance with rules of law.

In view of the above observations, the Court aside the Bombay High Court Judgment with the following order:

(i) The appeals filed by the secured creditors are allowed. Resultantly, the impugned judgment and order passed by the Bombay High Court is set aside and the subject writ petition stands dismissed.

(ii) The special leave petition65 filed by the borrowers against the impugned judgment and order of the Madras High Court is delinked for being heard for admission on 4.3.2022, on the limited issue (first issue) regarding compliance or non-compliance of clauses (i) to (ix) of Section 14 of the 2002 Act in the fact situation of the present case.

(iii) No order as to costs.

Pending application(s), if any, stands disposed of.