This post analyses the recent Kerala High Court Judgment[i] concerning the legality of Order passed by the Additional Chief Judicial Magistrate (ACJM) under Section 14 of the SARFAESI Act, 2002. Under the Scheme of Section 14, a secured creditor who desires to seek the assistance of the State’s coercive power for obtaining possession of the secured asset is required to make a request in writing to the Chief Metropolitan Magistrate or District Magistrate within whose jurisdiction, the secured asset is located praying for the assistance in securing the possession of the secured assets and documents related thereto. While it is clear from precedents that the reference to Chief Metropolitan Magistrate can be taken to mean Chief Judicial Magistrates in non-metropolitan area,[ii] the question concerning validity and legality of order passed by ACJM under Section 14 of SARFAESI remains in realm of speculation and doubt.

In the present case, an official Memorandum dated 13.06.2018 was issued by the Kerala High Court to the Chief Judicial Magistrate, Ernakulam directing him to transfer cases filed under Section 14 of the SARFAESI Act to the Special Court of Judicial Magistrate of the First Class. This directive, as it appears, was intended to relieve the workload of the court of CJM as the court of CJM was designated for the trial of the criminal cases against MPs/MLA. Therefore, in order to ensure that the trial of such cases is not disturbed, High Court issued the OM directed the transfer of cases to the Court of Additional Chief Judicial Magistrate vide Section 410 of the CrPC.

The Petitioners claim that in absence of an express notification being issued by the High Court under Section 12(2) of the CrPC, ACJM could not have assumed jurisdiction nor have issued the impugned orders, providing assistance to the respondents-banks to take physical possession of the secured assets in question. Consequently, the order passed by the ACJM being without jurisdiction was to be declared null and void. Petitioner claim that it is only if the High Court specially authorizes an ACJM and notifies it in the official Gazette, can such Magistrate exercise powers under Section 14 of the SARFAESI Act. Per Contra, Respondent claims that a specific gazette notification is not necessary for the purpose of specially directing the ACJM to act under SARFAESI Act.

Finding of the Court

The thrust of the arguments of the petitioner was that ACJM cannot automatically exercise all the powers of a CJM going by the mandate of the CrPC. The exercise of power and validity thereof is dependent upon the interpretation of Section 12 of the Code of Criminal Procedure.

Section 12(2) provides that

(2) The High Court may appoint any Judicial Magistrate of the first class to be an Additional Chief Judicial Magistrate, and such Magistrate shall have all or any of the powers of a Chief Judicial Magistrate under this Code or under any other law for the time being in force as the High Court may direct.”

In the present context, we deal with two specific issues; firstly, whether the direction under Section 12(2) of the CrPC requires publication in official gazette in order to be operative and secondly, whether the non-invocation of Section 12(2) can be assumed to be fatal for the competence of ACJM to decide upon application under Section 14 pursuant to transfer of cases under Section 410(1) of the CrPC.

NEED OF PUBLICATION IN OFFICIAL GAZETTE

Insofar as the need of special publication in official gazette is concerned, the Court held that there was no mandatory stipulation in the section that the direction of the High Court must be notified in the official gazette. Consequently, non-publication in the official gazette was not held to incapacitate ACJM from acting under a particular statute.

Section 410 and Question of Competency

The need or the power to rationalize workload of subordinate court is the domain of High Court owing to its power of superintendence under Article 227 of the Constitution. The specific question herein is whether the proper procedural compliance to the end of empowerment of ACJM has been undertaken by the Court or not.

 Section 410 of the CrPC requires that withdrawal, recall or reference made under the section only be to such magistrates who are competent to inquire into or try the same. The question therefore arises as to whether ACJM, erstwhile incompetent, can be said to be empowered to adjudicate applications pertaining to Section 14 by virtue of Office Memorandum issued to the Chief Judicial Magistrate, Ernakulam. The Court, on this point, ruled that the contention that even if the CJM is authorized by the Court to transfer the case to the ACJM as per the OM, the latter cannot still exercise powers under Section 14 of the SARFAESI Act since he/she is not competent to hear such cases was misplaced. It held that ACJM has been empowered by the OM itself to dispose of the transferred cases and it would thus axiomatically be inevitable that this Court has empowered the said Magistrate to act under Section 14 of the SARFAESI. It is important to note that this empowerment is a consequence of operation of Section 12(2) of the CrPC. Consequently, non-invocation of Section 12(2) would result in non-devolvement of competence to the ACJM to decide petitions under Section 14 of the SARFAESI Act.

As the OM is not placed in the judgment, the Court’s Interpretation of OM and its effect appears slightly confusing in terms of its import. In Para 10, the Court holds that the Notification under Section 12(2) of the CrPC was “irrelevant” as filing of fresh matters under SARFAESI continued to be in the Court of the Chief Judicial Magistrate and that there would be no cause of concern or prejudice to any litigant or Advocate on account of such a work distribution. The question of legal incompetence is fatal to the order passed by the judicial authorities; such lack of jurisdiction cannot be flexibly interpreted based on “no cause of concern or prejudice to the litigant”. Therefore, it seems that invocation of Section 12(2) is essential for the purpose of devolvement of power to hear and decide applications under Section 14 of SARFAESI Act.

Insofar as we are concerned, it would seem that ACJM can be empowered to act upon  the petition under Section 14 of SARFAESI provided a direction to that effect is issued under Section 12(2) of the CrPC so as to devolve competence upon the magistrate for the exercise of power under the Act.  Consequently, it would appear that the OM issued in such regard must conform to the requirements of Section 12  of CrPC.

— Ankur Mishra

[i] Shiyas v. Union of India, W.P. (C) No. 41394 of 2018

[ii] Muhammaed Ashraf and Another v. Union of India and others