The Kerala High Court has reiterated that while a Magistrate exercising jurisdiction under Section 14 of the SARFAESI Act does not adjudicate a creditor’s application for possession of secured assets, they must apply their mind before passing an order. The Court emphasized that such orders cannot be issued in a mechanical, pre-filled format, as they have serious consequences.
Justice Gopinath P. observed:
"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 passing orders in printed form by filling in necessary details in blank spaces cannot be justified under any circumstances."
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Case Background
In this case, the petitioners, a banking company and its authorized officer, approached the High Court challenging an order of the Debt Recovery Tribunal (DRT), which had set aside the Chief Judicial Magistrate’s (CJM) order under Section 14. The Tribunal found that the CJM had issued the order in a pre-filled format without applying judicial discretion.
The petitioners argued that the CJM does not function as an adjudicating authority but merely assists the secured creditor in taking possession of the secured asset under Section 14. They contended that the DRT should not have interfered with the CJM’s order, as it was purely administrative in nature.
Arguments Presented
Petitioners' Stand
- The CJM’s role under Section 14 is purely administrative.
- The Magistrate does not adjudicate disputes but only facilitates possession.
- The DRT erred in setting aside the CJM’s order merely on procedural grounds.
Respondent's Stand
- The DRT’s order must be challenged before the Debts Recovery Appellate Tribunal, not the High Court.
- Though the CJM does not adjudicate disputes, they must conduct a quasi-judicial inquiry.
- The Tribunal’s decision to set aside the printed-format order was justified, as it lacked due judicial consideration.
Court’s Observations
The Kerala High Court referred to previous rulings, including:
- Indian Bank v. D. Visalakshi (2019) – Emphasized that a Magistrate’s inquiry under Section 14 is a quasi-judicial process requiring a judicious approach.
- R.D. Jain & Co. v. Capital First Ltd. (2023) – Held that while a Magistrate’s role is ministerial, they must verify procedural compliance.
- Balkrishna Rama Tarle v. Phoenix ARC (P) Ltd. (2023) – Stated that the Magistrate’s duty is to assist in possession-taking but must ensure legal procedures are followed.
The Court further noted:
"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 whether the procedure contemplated has been followed before passing an order."
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The High Court upheld the DRT’s decision, dismissing the petition. It reiterated that while a Magistrate does not adjudicate disputes under Section 14, they must ensure procedural compliance and cannot mechanically approve requests in a pre-filled format. The judgment also directed the court registry to communicate this ruling to the concerned CJM to prevent such practices in the future.
Thus, the case reinforces the principle that judicial officers, even when exercising ministerial powers, must apply their minds and ensure legal due process is followed.
Case Title: South Indian Bank Ltd. v Jahfer M
Case No: OP (DRT) NO. 336 OF 2024
