NKGSB COOPERATIVE BANK LIMITED versus SUBIR CHAKRAVARTY & ORS.

Citation: [2022] 1 S.C.R. 1177 · Decided: 25-02-2022 · Supreme Court of India · Bench: A.M. KHANWILKAR · Disposal: Disposed off

cites 6 · see the full citation network in Lexace

Judgment (excerpt)

A
B
C
D
E
F
G
H
1177
[2022] 1 S.C.R. 1177
1177
NKGSB COOPERATIVE BANK LIMITED
v.
SUBIR CHAKRAVARTY & ORS.
(Civil Appeal No. 1637 of 2022)
FEBRUARY 25, 2022
[A. M. KHANWILKAR AND C. T. RAVIKUMAR, JJ.]
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002: s.14(1A) – Power of
CMM/DM to appoint and authorize an advocate to take possession
of the secured assets and documents and to forward the same to the
secured creditors by virtue of s.14(1A) of the 2002 Act – Held:
Purpose of the 2002 Act is to empower the financial institutions to
manage the non performing assets by adopting measures for
recovery or reconstruction – s.13(4) states that when a default is
committed by the borrower in discharging his liability in full, the
secured creditor may take recourse to one or more of the measures
– One of the measures is to take possession of the secured assets of
the borrower – If secured creditor intends to take possession of
secured assets, the application u/s.14 must be moved to CMM/DM
in writing – s.14(1A) added by amendment provides that CMM/DM
may authorize any officer subordinate to him for the aforesaid
purpose – The statutory obligation enjoined upon the CMM/DM is
to immediately move into action after receipt of a written application
under s.14(1) of the 2002 Act – There is de jure functional
subordinate relationship between the CMM/DM and the advocate
being an officer of the Court – There is no rule as such framed by
the central government which expressly or impliedly prohibits CMM/
DM to engage an advocate commissioner for taking possession –
Hence, by applying ‘functional subordination’ test, CMM/DM may
appoint advocate as a subordinate officer for the purpose of s.
14(1A) of the 2002 Act.
A
B
C
D
E
F
G
H
1178
SUPREME COURT REPORTS
[2022] 1 S.C.R.
Allowing the Appeals filed by secured creditors and
delinking the SLP (Civil) No.12011 of 2020 filed by borrowers,
the Court
HELD: 1. The underlying purpose of the 2002 Act is to
empower the financial institutions in India to have similar powers
as enjoyed by their counterparts, namely, international banks in
other countries. One such feature is to empower the financial
institutions to take possession of securities and sell them. Section
13 deals with enforcement of security interest. Sub-Section (4)
thereof envisages that in the event a default is committed by the
borrower in discharging his liability in full within the period
specified in sub-Section (2), the secured creditor may take
recourse to one or more of the measures provided in Sub-Section
(4). One of the measures is to take possession of the secured
assets of the borrower including the right to transfer by way of
lease, assignment or sale for realising the secured asset. Section
14 of the 2002 Act predicates that if the secured creditor intends
to take possession of the secured assets, must approach the
CMM/DM by way of an application, in writing, and on receipt of
such request, the CMM/DM must move into action in right
earnest. After passing an order thereon, he/she (CMM/DM) must
proceed to take possession of the secured assets and documents
relating thereto for being forwarded to the secured creditor in
terms of Section 14(1) read with Section 14(2) of the 2002 Act.
As noted earlier, Section 14(2) is an enabling provision and
permits the CMM/DM to take such steps and use force, as may,
in his opinion, be necessary. This position obtained even before
the amendment of 2013 i.e., insertion of sub-Section (1A) and
continues to this date. Sub-Section (1A) is in the nature of an
explanatory provision and it merely restates the implicit power
of the CMM/DM in taking services of any officer subordinate to
him. The insertion of Sub-Section (1A) is not to invest a new
power for the first time in the CMM/DM as such. [Paras 22, 23,
24][1198-G-H; 1199-A-B; 1195-C-D; 1199-F-H]
2. The statutory obligation enjoined upon the CMM/DM is
to immediately move into action after receipt of a written
application under Section 14(1) of the 2002 Act from the secured
A
B
C
D
E
F
G
H
1179
creditor for that purpose. It is common knowledge that in the
respective jurisdictions, there is only one CMM/DM. If he is
expected to reach at every location himself for taking possession,
in some jurisdictions it would be impracticable, if not impossible,
for him to do so owing to large number of applications in the
given jurisdiction being a commercial city. Accordingly, strict
construct would defeat the 

Excerpt shown. Read the full judgment & AI analysis in Lexace.