Supreme Court Allows Appeal Against Chief Judicial Magistrate’s Order Under Section 14 Of The SARFAESI Act

A Supreme Court vacation bench granted leave to appeal directly against a Chief Judicial Magistrate's order under Section 14 of the Securitisation and Reconstruction of Financial Assets & Enforcement of Security Interest Act (SARFAESI) recently.

The bench did so after noting that there are conflicting views by different high courts with regard to the jurisdiction of Chief Judicial Magistrates under Section 14 of the SARFAESI Act. The act empowers or district magistrates to assist secured creditors to take possession of secured assets.

After a precedent was set by the Kerala High Court, Chief Judicial Magistrates in that state began to entertain applications under Section 14. The Kerala High Court had held that a Chief Judicial Magistrate in a non-metropolitan area stands on the same footing as a Chief Metropolitan Magistrate in a metropolitan area, and thus has jurisdiction under Section 14 of the SARFAESI Act.

Consequently, one such order which was passed by the Special Additional Chief Judicial Magistrate of Ernakulam (Kerala), in favor of Federal Bank against Harley Carmbel India Pvt Ltd, ended up being challenged directly before the Supreme Court recently.

After hearing that case, a Supreme Court vacation bench comprising Justice Indira Banerjee and Justice Sanjiv Khanna passed an interim order, restraining the Federal Bank from dispossessing Harley Carmbel India Pvt Ltd from a property in question, for a period of seven weeks.

Additionally, the bench restrained the bank from transferring, encumbering or creating any third party right in respect of the property in question. The bench also tagged this case with another civil appeal pending against a Kerala High Court judgment.

The Supreme Court vacation bench noted that the Calcutta, Bombay and Madras high courts had taken the view that Chief Judicial Magistrates have no powers to entertain applications filed under Section 14 of the SARFAESI Act, whereas the Kerala, Andhra Pradesh as well as Allahabad high courts took a diametrically opposite view that Chief Judicial Magistrates can indeed exercise such powers under the act.

There are conflicting views on the issue. For instance, in the Mohammed Ashraf versus Union of India case, the Kerala High Court had held that a Chief Judicial Magistrate in a non-metropolitan area stands on the same footing as a Chief Metropolitan Magistrate in a metropolitan area, and thus has jurisdiction under Section 14 of the SARFAESI Act.

The Allahabad High Court had also taken a similar view in the Abhishek Mishra versus State Of UP case.

A full bench of the Andhra High Court too held that the nomenclature Chief Metropolitan Magistrate referred to in Section 14 is inclusive of the Chief Judicial Magistrate in a non-metropolitan area and as such, the Chief Judicial Magistrate in a non-metropolitan area gets the jurisdiction to entertain an application under Section 14 of the SARFAESI Act, 2002.

Lastly, the Madras High Court had held in the case of K Arockiyaraj versus Chief Judicial Magistrate Srivilliputhur, that in order to gain assistance to secure their assets and creditors, judicial magistrates may approach Chief Metropolitan Magistrates in metropolitan areas and in non-metropolitan areas.