In a significant ruling, the Kerala High Court has clarified that a Chief Judicial Magistrate (CJM) cannot exercise adjudicatory powers while dealing with proceedings under Section 14 of the SARFAESI Act, 2002.
The Court was hearing a writ petition filed by The Federal Bank Limited, challenging the maintainability of a petition filed by the borrower before the CJM, Kozhikode. The borrower had sought to recall the appointment of an Advocate Commissioner and requested interim relief from asset possession actions initiated by the bank.
“The CJM’s role under Section 14 of the SARFAESI Act is limited to ministerial functions and does not involve adjudication,” the Court emphasized.
Background of the Case
The petitioner bank had initiated recovery proceedings under the SARFAESI Act due to non-repayment of loans by the respondents. The second respondent challenged these proceedings before the Debt Recovery Tribunal (DRT), which granted a conditional stay requiring a payment of ₹1 crore. When the amount was not paid, the High Court dismissed the respondent’s plea.
Following this, the borrower approached the CJM, Kozhikode, seeking several directions, including the recall of the Advocate Commissioner’s appointment. The bank then moved the High Court, arguing that such a petition was legally not maintainable under Section 14.
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The High Court referred to several key Supreme Court and High Court rulings. In Balkrishna Rama Tarle v. Phoenix ARC Pvt. Ltd., and Indian Bank v. D. Visalakshi, it was established that the Magistrate’s actions under Section 14 are administrative and ministerial, not judicial.
“The satisfaction of the Magistrate under Section 14 requires checking factual correctness in the affidavit—not legal issues. There is no scope for a borrower to raise objections at this stage,” the Court observed.
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The Court also referenced R.D. Jain & Co. v. Capital First Ltd. and held that CJMs merely assist in taking possession of secured assets as directed by the bank and cannot adjudicate borrower claims.
The Kerala High Court declared that the petition filed by the borrower before the CJM was not maintainable and set aside all proceedings initiated based on that petition.
“The Chief Judicial Magistrate, Kozhikode has no jurisdiction to adjudicate the issues in Exhibit P3. Hence, those proceedings stand dismissed,” the Court concluded.
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This ruling affirms that the SARFAESI Act’s purpose is to provide a quick, non-judicial remedy for secured creditors and does not allow borrowers to delay proceedings by filing petitions seeking adjudication at the Magistrate level.
Case Title: The Federal Bank Limited v. Chief Judicial Magistrate, Kozhikode & Others
Judge: Justice Gopinath P.
Date of Order: 11 March 2025
“Section 14 of the SARFAESI Act is a non-judicial process. The Magistrate cannot pass any adjudicatory order or entertain petitions from borrowers,” the Court emphasized.