Isabella Mariam

The High Court of Kerala Single Bench of Justice Gopinath P. has declared that the Chief Judicial Magistrate has no jurisdiction to adjudicate on petitions challenging the actions of banks under Section 14 of the SARFAESI Act. The Court held that a borrower cannot maintain an application before the Chief Judicial Magistrate once proceedings under the SARFAESI Act are underway and all statutory requirements are fulfilled by the secured creditor. The Court further directed that the proceedings initiated before the Chief Judicial Magistrate on the strength of such a petition will stand set aside, and the petition itself is dismissed.

In delivering the judgement, the Court unequivocally stated that Section 14 of the SARFAESI Act involves a ministerial act and not an adjudicatory function. The Court clarified that the Chief Judicial Magistrate's role is limited to verifying the affidavit submitted by the secured creditor and does not include entertaining objections or petitions filed by the borrower. Accordingly, the Court disposed of the writ petition by quashing the contested proceedings pending before the Chief Judicial Magistrate.

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The writ petition was filed by a banking company seeking a declaration that a petition filed by the borrower before the Chief Judicial Magistrate (CJM), Kozhikode, was not maintainable. The banking company had initiated proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) to recover dues from borrower parties. These proceedings included an application under Section 14 of the SARFAESI Act before the CJM, Kozhikode, seeking assistance in taking possession of the secured asset.

The second respondent, a borrower, had earlier filed an application under Section 17 of the SARFAESI Act before the Debts Recovery Tribunal-I, Ernakulam (DRT), challenging the bank’s proceedings. The DRT, on 12.08.2024, passed a conditional interim order directing the borrower to deposit a sum of Rs.1,00,00,000 by 30.09.2024. This interim order was further challenged before the High Court in OP(DRT) No.264 of 2024.

The High Court, on 22.08.2024, directed that the borrower shall not be dispossessed from the secured asset if he deposited Rs.1,00,00,000 before 30.09.2024. However, on the subsequent hearing date of 30.09.2024, the High Court was informed that no such amount had been deposited, and consequently, OP(DRT) No.264 of 2024 was dismissed by order dated 30.09.2024.

Following the dismissal, the second respondent filed CMP No.2801/2024 in CMP No.747/2024 before the CJM, Kozhikode. The reliefs sought included recalling the Advocate Commissioner appointed in the earlier proceedings, a direction for furnishing a new affidavit, and dismissal of the bank’s application on the ground that the affidavit was not satisfactory. Interim relief to stay further proceedings was also requested.

The petitioner bank opposed the application by filing a counter statement and argued that such a petition was not maintainable under the SARFAESI Act. The core grievance raised in the writ petition was that despite this objection, the CJM had not yet dismissed the petition filed by the borrower.

The petitioner’s counsel, Sri Mohan Jacob George, submitted that the power exercised by the Magistrate under Section 14 of the SARFAESI Act is purely ministerial. The counsel relied on the Supreme Court’s decisions in Balkrishna Rama Tarle v. Phoenix ARC Pvt. Ltd. [(2023) 1 SCC 662], Indian Bank v. D. Visalakshi [(2019) 20 SCC 47], and R.D. Jain & Co. v. Capital First Ltd. [(2023) 1 SCC 675], as well as the Kerala High Court’s own judgment in State Bank of India, TVM v. CJM, Kollam [2021 (6) KHC 83] and Sama Rubbers v. South Indian Bank Ltd. [2023 KLT OnLine 1955].

The respondent’s counsel, Smt. Gayathri Muraleedharan, submitted that the CJM is not a mere mechanical functionary under Section 14 and is obligated to verify the correctness of the contents in the affidavit. It was also submitted that the second respondent was not a party to a restructuring agreement dated 21.01.2021 entered into by co-borrowers and therefore had no obligation under it. It was further argued that no valid security interest was created due to the absence of the second respondent’s signature on the said agreement.

The second respondent contended that the mortgaged property belonged to him, and since he had not executed the restructuring agreement, the bank’s claim was flawed. It was also submitted that the account in question was classified as a Non-Performing Asset only on 03.06.2023, and the CJM had the authority to verify the facts before passing orders under Section 14.

The borrower’s case essentially sought a reconsideration and recall of the earlier order passed by the CJM based on these arguments.

The Court recorded that it was clear from precedents that no application will lie at the instance of the borrower before the CJM under Section 14 of the SARFAESI Act. Referring to multiple decisions, the Court stated:

"The power exercised by a Magistrate under Section 14 of the SARFAESI Act has been the subject matter of many decisions of the Supreme Court."

Citing Indian Bank v. D. Visalakshi, the Court observed: "An inquiry conducted by the stated authority under Section 14 of the 2002 Act is a sui generis inquiry. In that, majorly it is an administrative or executive function regarding verification of the affidavit and the relied upon documents filed by the parties."

The judgment further quoted: "While undertaking such an inquiry, as is observed by this Court, the authority must display judicious approach, in considering the relevant factual position asserted by the parties. That presupposes that it is a quasi-judicial inquiry though, a non-judicial process."

With respect to R.D. Jain & Co. v. Capital First Ltd., the Court observed: "The step taken by the CMM/DM while taking possession of the secured assets and documents relating thereto is a ministerial step. It could be taken by the CMM/DM himself/herself or through any officer subordinate to him/her, including the Advocate Commissioner who is considered as an officer of his/her court."

The Court went on to quote from Balkrishna Rama Tarle: "The powers exercisable by CMM/DM under Section 14 of the Sarfaesi Act are ministerial steps and Section 14 does not involve any adjudicatory process qua points raised by the borrowers against the secured creditor taking possession of the secured assets."

The Court stated that once statutory conditions under Section 14 are satisfied, the CJM must render assistance in taking possession and has no authority to adjudicate disputes between the borrower and the bank. The Court also noted:

"The borrower cannot maintain any application under section 14 of the SARFAESI Act nor can the borrower invoke the jurisdiction of the authorised Magistrate under section 14 of the Act."

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It was observed that the Magistrate’s role is confined to verifying the affidavit and confirming that statutory preconditions are met. The Court stated: "The procedure prescribed under section 14 of the SARFAESI Act is part of a non-judicial process."

Therefore, the borrower’s petition filed after failure to comply with the earlier conditional order and dismissal of OP(DRT) No.264 of 2024, seeking an adjudication from the CJM, was found to be unsustainable.

The Court concluded the matter by issuing the following directions:

"This Writ Petition is allowed. It is declared that the Chief Judicial Magistrate, Kozhikode has no jurisdiction to adjudicate on the issues set out in Exhibit P3 petition."

The Court further directed: "The proceedings taken on Exhibit P3 petition by the Chief Judicial Magistrate, Kozhikode will stand set aside and consequently Exhibit P3 petition will stand dismissed."

Advocates Representing the Parties

For the Petitioners: Mohan Jacob George, P.V. Parvathy (P-41), Reena Thomas, Nigi George, Ananthu V. Lal, Sherin Varghese, Brahma R.K.

For the Respondents: Gayathri Muraleedharan, Biju Abraham (Kaippanplackal), Archana B, Antija James, Naeem

Case Title: The Federal Bank Limited v. Chief Judicial Magistrate, Kozhikode & Others

Neutral Citation: 2025: KER:20660

Case Number: WP(C) No. 3317 of 2025

Bench: Justice Gopinath P.

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