C. Bright vs The District Collector on 5 November, 2020


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Supreme Court of India

C. Bright vs The District Collector on 5 November, 2020

Author: Hemant Gupta

Bench: L. Nageswara Rao, Hemant Gupta, Ajay Rastogi

                                                                                   REPORTABLE

                                          IN THE SUPREME COURT OF INDIA

                                            CIVIL APPELLATE JURISDICTION


                                         CIVIL APPEAL NO. 3441 OF 2020
                                 (ARISING OUT OF SLP (CIVIL) NO. 12381 OF 2020)
                                           (DIARY NO. 46087 OF 2019)



                      C. BRIGHT                                                  .....APPELLANT(S)


                                                              VERSUS


                      THE DISTRICT COLLECTOR & ORS.                            .....RESPONDENT(S)



                                                 JUDGMENT

HEMANT GUPTA, J.

1. The challenge in the present appeal is to an order passed by the

Division Bench of the Kerala High Court of 19.7.2019, whereby it

was held that Section 14 of the Securitisation and Reconstruction

of Financial Assets and Enforcement of Security Interest Act, 2002 1

mandating the District Magistrate to deliver possession of a

secured asset within 30 days, extendable to an aggregate of 60
Signature Not Verified

Digitally signed by
Vishal Anand
days upon reasons recorded in writing, is a directory provision.
Date: 2020.11.05
16:30:42 IST
Reason:

The High Court held as under:

1 For short “the Act”

1
“18. The primary question in these Writ Petitions,
namely, whether the time limits in section 14 of the
SARFAESI Act are mandatory or directory should be
answered in light of the principles enumerated above.
As stated above, the object and purpose of the said
time limit is to ensure that such applications are
decided expeditiously so as to enable secured creditors
to take physical possession quickly and realise their
dues. Moreover, as stated earlier, the consequences of
non-compliance with the time limit are not specified
and the sequitur thereof would be that the district
collector/district magistrate concerned would not be
divested of jurisdiction upon expiry of the time limit. In
this connection, it is also pertinent to bear in mind that
if the “consequences of non-compliance” test is
applied, the borrower, guarantor or lessee, as the case
may be, is not adversely affected or prejudiced, in any
manner, whether such applications are decided in 60,
70 or 80 days. On the other hand, the secured creditor
is adversely affected if the provision is construed as
mandatory and not directory in as much as it would
delay the process of taking physical possession of
assets instead of expediting such process by entailing
the filing of another application for such purpose. For
all these reasons, the time limit stipulation in the
amended Section 14 of the SARFAESI Act is directory
and not mandatory.”

2. The High Court examined Section 14 of the Act as amended, which

reads thus:

“14. Chief Metropolitan Magistrate or District Magistrate
to assist secured creditor in taking possession of
secured asset.- (1)

xx xx xx

Provided, further that on receipt of the affidavit from
the Authorised Officer, the District Magistrate or the
Chief Metropolitan Magistrate, as the case may be,
shall, after satisfying the contents of the affidavit pass
suitable orders for the purpose of taking possession of
the secured asset within a period of thirty days from the

2
date of application:

Provided also that if no order is passed by the Chief
Metropolitan Magistrate or District Magistrate within the
said period of thirty days for reasons beyond his
control, he may, after recording reasons in writing for
the same, pass the order within such period not
exceeding in the aggregate sixty days.”

3. The Act was enacted in the year 2002 for reasons that the legal

framework relating to commercial transactions had not kept pace

with the changing commercial practices. Further, financial sector

reforms resulted in a slow pace of recovery of defaulting loans and

mounting level of non-performing assets of banking and financial

institutions. The objectives behind the Act, recognised that unlike

international banks, banks and financial institutions in India, did

not have power to take possession of securities and sell them. The

provisions of the Act were upheld by this Court except that of sub-

section (2) of Section 17 which provided that the Debt Recovery

Tribunal shall not entertain an appeal preferred by a borrower

unless seventy-five per cent of the amount claimed has been

deposited before it2. Thereafter, the question as to whether the

withdrawal of an application filed under the Recovery of Debts due

to Banks and Financial Institutions Act, 19933 is a condition

precedent to take recourse to the Act was examined by this Court 4.

This Court observed that when Civil Courts failed to expeditiously
2 Mardia Chemicals Ltd. & Ors. v. Union of India & Ors., (2004) 4 SCC 311
3 For short “DRT Act”
4 Transcore v. Union of India and Another, (2008) 1 SCC 125

3
decide suits filed by the banks, the DRT Act was enacted, however

it did not provide for assignment of debts to Securitisation compa-

nies. The Act which was enacted thereafter in 2002 sought to fur-

ther empower the banks and facilitate the recovery of debt. It pro-

ceeded on the basis that once the liability of a borrower to repay

crystallises; it becomes due and that on account of delay, the ac-

count of such borrower becomes substandard and non-performing.

4. Recently, this Court noticed the objects and reasons for amending

the Act in 2014 and held that the Magistrate takes possession of

the asset and “forwards” such asset to the secured creditor under

Section 14(1); the management of the business of a borrower can

actually be taken over under Section 15 of the Act and that

Section 13(4) must be read in the light of Sections 14 and 15.

These are separate and distinct modes of exercise of powers by a

secured creditor under the Act5.

5. Section 14 of the Act, as originally enacted, empowered the Chief

Metropolitan Magistrate or the District Magistrate to take posses-

sion of such assets and documents relating to secured assets.

Later, by the Central Act No. 1 of 2013, which came into force on

15.1.2013, a proviso to sub-section (1) of Section 14 of the Act

was inserted contemplating that upon filing of an affidavit, in the

format mentioned therein, by an Authorised Officer of the secured

5 Hindon Forge Private Limited & Anr. v. State of Uttar Pradesh through District Magistrate,
Ghaziabad & Anr. (2019) 2 SCC 198

4
creditor, the District Magistrate or the Chief Metropolitan Magis-

trate shall pass suitable orders for the purpose of taking posses-

sion of the secured assets. It is, thereafter, the Act was amended

vide Central Act 44 of 2016, which came into force on 1.9.2016.

6. The argument of Mr. Khan, learned counsel for the appellant, is

that the proviso mandating the District Magistrate to record rea-

sons, if the order is not passed within 30 days, in order to avail an

extended period of a total 60 days, shows that the provision is

mandatory. If the District Magistrate is not able to take decision

within 60 days, the secured creditor has to find its remedy else-

where and not in terms of Section 14 of the Act. It is contended

that the proviso mandates the District Magistrate to pass an order

within 30 days as the word “shall” is used in first part of the pro-

viso. Thus, the time limit provided is unambiguous and by corollary

the provision is mandatory. Reliance is placed on the judgments of

this Court in Union of India & Ors. v. A.K. Pandey6, Harshad

Govardhan Sondagar v. International Assets Reconstruc-

tion Company Limited & Ors.7, Dipak Babaria & Anr. v. State

of Gujarat & Ors.8, in support of his arguments that the use of

expression “shall” and the language of the second proviso in fixing

the time limit of 60 days after recording of reasons makes the pro-

6    (2009) 10 SCC 552
7    (2014) 6 SCC 1
8    (2014) 3 SCC 502

                                                                            5

vision mandatory. If the District Magistrate has not been able to

take possession, the proceedings before him abates.

7. A well settled rule of interpretation of the statutes is that the use

of the word “shall” in a statute, does not necessarily mean that in

every case it is mandatory that unless the words of the statute are

literally followed, the proceeding or the outcome of the

proceeding, would be invalid. It is not always correct to say that if

the word “may” has been used, the statute is only permissive or

directory in the sense that non-compliance with those provisions

will not render the proceeding invalid9 and that when a statute

uses the word “shall”, prima facie, it is mandatory, but the Court

may ascertain the real intention of the legislature by carefully at-

tending to the whole scope of the statute 10. The principle of literal

construction of the statute alone in all circumstances without ex-

amining the context and scheme of the statute may not serve the

purpose of the statute11.

8. The question as to whether, a time limit fixed for a public officer to

perform a public duty is directory or mandatory has been

examined earlier by the Courts as well. A question arose before

the Privy Council in respect of irregularities in the preliminary

proceedings for constituting a jury panel. The Municipality was

9 State of U.P. v. Manbodhan Lal Srivastava, AIR 1957 SC 912
10 State of U.P. & Ors. v. Babu Ram Upadhya, AIR 1961 SC 751
11 Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. & Ors. ,
(1987) 1 SCC 424

6
expected to revise the list of qualified persons but the jury was

drawn from the old list as the Sheriff neglected to revise the same.

It was in these circumstances, the decision of the jury drawn from

the old list became the subject matter of consideration by the

Privy Council. It was thus held that it would cause greater public

inconvenience if it were held that neglecting to observe the

provisions of the statute made the verdicts of all juries taken from

the list ipso facto null and void so that no jury trials could be held

until a duly revised list had been prepared12.

9. The Constitution Bench of this Court held that when the provisions

of a statute relate to the performance of a public duty and the

case is such that to hold acts done in neglect of this duty as null

and void, would cause serious general inconvenience or injustice

to persons who have no control over those entrusted with the

duty, the practice of the courts should be to hold such provisions

as directory13. In a seven Bench judgment, this Court was consid-

ering as to whether the power of the Returning Officer to reject

ballot papers is mandatory or directory. The Court examined well-

recognised rules of construction to observe that a statute should

be construed as directory if it relates to the performance of public

duties, or if the conditions prescribed therein have to be per-

12 Montreal Street Railway Company v. Normandin, AIR 1917 PC 142
13 Dattatraya Moreshwar Pangarkar v. State of Bombay & Ors., AIR 1952 SC 181

7
formed by persons other than those on whom the right is con-

ferred14.

10. In a judgment reported as Remington Rand of India Ltd. v.

Workmen15, Section 17 of the Industrial Disputes Act, 1947 came

up for consideration. The argument raised was that the time limit

of 30 days of publication of award by the labour court is

mandatory. This Court held that though Section 17 is mandatory,

the time limit to publish the award within 30 days is directory

inter-alia for the reason that the non-publication of the award

within the period of thirty days does not entail any penalty.

11. In T.V. Usman v. Food Inspector, Tellicherry Municipality,

Tellicherry16, the time period during which report of the analysis

of a sample under Rule 7(3) of the Prevention of Food Adulteration

Rules, 1955 was to be given, was held to be directory as there was

no time-limit prescribed within which the prosecution had to be

instituted. When there was no such limit prescribed then there was

no valid reason for holding the period of 45 days as mandatory. Of

course, that does not mean that the Public Analyst can ignore the

time-limit prescribed under the rules. He must in all cases try to

comply with the time-limit. But if there is some delay, in a given

case, there is no reason to hold that the very report is void and, on

that basis, to hold that even prosecution cannot be launched.
14 Hari Vishnu Kamath v. Ahmad Ishaque & Ors.AIR 1955 SC 233
15 AIR 1968 SC 224
16 (1994) 1 SCC 754

8

12. This Court distinguished between failure of an individual to act in a

given time frame and the time frame provided to a public

authority, for the purposes of determining whether a provision was

mandatory or directory, when this Court held that it is a well-

settled principle that if an act is required to be performed by a

private person within a specified time, the same would ordinarily

be mandatory but when a public functionary is required to perform

a public function within a time-frame, the same will be held to be

directory unless the consequences therefor are specified17.

13. In P.T. Rajan v. T.P.M. Sahir & Ors.18, this Court examined the

affect of non-publication of final electoral rolls before the time of

acceptance of nomination papers. The Court held as under:

“48. Furthermore, even if the statute specifies a time
for publication of the electoral roll, the same by itself
could not have been held to be mandatory. Such a
provision would be directory in nature. It is a well-
settled principle of law that where a statutory
functionary is asked to perform a statutory duty within
the time prescribed therefor, the same would be
directory and not mandatory. (See Shiveshwar Prasad
Sinha v. District Magistrate of Monghyr
[AIR 1966 Pat
144 : ILR 45 Pat 436 (FB)] , Nomita Chowdhury v. State
of W.B
. [(1999) 2 Cal LJ 21] and Garbari Union Coop.
Agricultural Credit Society Ltd. v. Swapan Kumar
Jana [(1997) 1 CHN 189] .)”

14. A recent Constitution Bench held that the provisions of the

Consumer Protection Act granting 30 days’ time to file response by

17 Nasiruddin & Ors. v. Sita Ram Agarwal, (2003) 2 SCC 577
18 (2003) 8 SCC 498

9
the opposite party or such extended period not exceeding 15 days

is mandatory as the object of the statute is for the benefit and

protection of the consumer. It observed that such act had been

enacted to provide expeditious disposal of consumer disputes. In

this case, an individual was called upon to file his written

statement in contradiction for a pubic authority to decide the issue

before it19.

15. The Full Bench of Patna High Court in Shiveshwar Prasad Sinha

was examining the provisions of the Bihar Buildings (Lease, Rent

and Eviction) Control Act, 1947 which permitted a Government

servant in occupation of a building as a tenant to serve a notice of

15 days on the landlord and the District Magistrate of his intention

to vacate the premises. The High Court held that the Government

servant to whom the house was allotted had no control over the

District Magistrate, therefore, the time limit required by the

provision was not mandatory.

16. A Single Bench of Madhya Pradesh High Court 20 examined the

provisions of Section 14 of the Act as amended. The Court held

that the second proviso to sub-section (1) of Section 14 was

inserted in order to ensure that Chief Metropolitan Magistrate or

District Magistrate pass the order within a stipulated time. The

19 New India Assurance Company Limited v. Hilli Multipurpose Cold Storage Private
Limited
, (2020) 5 SCC 757
20 In Manish Makhija v. Central Bank of India & Ors., 2018 SCC OnLine MP 553

10
Bank/secured creditor has no control over the District Magistrate.

After filing an application under sub-section (1) of Section 14, the

Bank had no authority to compel the Chief Metropolitan Magistrate

or District Magistrate to pass orders within reasonable time. The

legislature, in order to bind the said authorities, inserted the said

proviso. Thus, the basic object and purpose was to fix a time limit

for the concerned Magistrate to pass an order and not to give a

clean chit to an unscrupulous borrower/guarantor, who had not

repaid the debts.

17. Now, coming to the Judgments referred to by Mr. Khan. In A.K.

Pandey, the respondent was not provided 96 hours of interval time

as contemplated by the relevant rules, before commencing a trial

by the Court Martial. This Court held that such proceedings were

vitiated as the purpose of the time limit was that before the

accused is called upon for trial, he must be given adequate time to

give a cool thought to the charge or charges for which he is to be

tried, decide about his defence and ask the authorities, if

necessary, to take reasonable steps in procuring the attendance of

his witnesses. He may even decide not to defend the charge(s) but

before he decides his line of action, he must be given clear ninety-

six hours.

18. Harshad Govardhan Sondagar was a case where the person in

11
possession claimed tenancy rights in the premises as well as a

protected tenancy, being a tenant prior to creation of a mortgage.

It was held that the remedy of an aggrieved person against a

decision of Chief Metropolitan Magistrate or a District Magistrate

lay only before the High Court. However, after the aforesaid

judgment was rendered on 3.4.2014, the Act had been amended

and sub-section 4A was inserted in Section 17 with effect from

1.9.2016. This provided a right to move an application to the

Debts Recovery Tribunal by a person who claimed tenancy or

leasehold rights.

19. Dipak Babaria was a case wherein agricultural land was sold by

an agriculturist to another person for industrial purposes.

Permission was to be granted by the Collector for the same. In

these circumstances, it was held that when a statute provides for

a thing to be done in a particular manner then it should be done in

that manner itself. Such proposition does not arise for

consideration in the present case.

20. The Act was enacted to provide a machinery for empowering

banks and financial institutions, so that they may have the power

to take possession of secured assets and to sell them. The DRT

Act was first enacted to streamline the recovery of public dues but

the proceedings under the said Act have not given desirous re-

sults. Therefore, the Act in question was enacted. This Court in

12
Mardia Chemical, Transcore and Hindon Forge Private Lim-

ited has held that the purpose of the Act pertains to the speedy

recovery of dues, by banks and financial institutions. The true in-

tention of the Legislature is a determining factor herein. Keeping

the objective of the Act in mind, the time limit to take action by

the District Magistrate has been fixed to impress upon the author-

ity to take possession of the secured assets. However, inability to

take possession within time limit does not render the District Mag-

istrate Functus Officio. The secured creditor has no control over

the District Magistrate who is exercising jurisdiction under Section

14 of the Act for public good to facilitate recovery of public dues.

Therefore, Section 14 of the Act is not to be interpreted literally

without considering the object and purpose of the Act. If any other

interpretation is placed upon the language of Section 14, it would

be contrary to the purpose of the Act. The time limit is to instill a

confidence in creditors that the District Magistrate will make an at-

tempt to deliver possession as well as to impose a duty on the Dis-

trict Magistrate to make an earnest effort to comply with the man-

date of the statute to deliver the possession within 30 days and for

reasons to be recorded within 60 days. In this light, the remedy

under Section 14 of the Act is not rendered redundant if the Dis-

trict Magistrate is unable to handover the possession. The District

13
Magistrate will still be enjoined upon, the duty to facilitate delivery

of possession at the earliest.

21. Even though, this Court in United Bank of India v. Satyawati

Tondon & Ors.21 held that in cases relating to recovery of the

dues of banks, financial institutions and secured creditors, stay

granted by the High Court would have serious adverse impact on

the financial health of such bodies/institutions, which will

ultimately prove detrimental to the economy of the nation.

Therefore, the High Court should be extremely careful and

circumspect in exercising its discretion to grant stay in such

matters. Hindon Forge Private Limited has held that the rem-

edy of an aggrieved person by a secured creditor under the Act is

by way of an application before the Debts Recovery Tribunal, how-

ever, borrowers and other aggrieved persons are invoking the ju-

risdiction of the High Court under Articles 226 or 227 of the Consti-

tution of India without availing the alternative statutory remedy.

The Hon’ble High Courts are well aware of the limitations in exer-

cising their jurisdiction when affective alternative remedies are

available, but a word of caution would be still necessary for the

High Courts that interim orders should generally not be passed

without hearing the secured creditor as interim orders defeat the

very purpose of expeditious recovery of public money.

21 (2010) 8 SCC 110

14

22. Thus, we do not find any error in the order passed by the High

Court. Consequently, the appeal is dismissed.

………………………………………J.

(L. NAGESWARA RAO)

………………………………………J.

(HEMANT GUPTA)

………………………………………J.

(AJAY RASTOGI)
NEW DELHI;

NOVEMBER 5, 2020.

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