IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 24.8.2009 CORAM: THE HONOURABLE MR.JUSTICE ELIPE DHARMA RAO AND THE HONOURABLE MR.JUSTICE M.VENUGOPAL Writ Petition No.16914 of 2009 and M.P.No.1 of 2009 M/s.Merit International Educational Foundation (Regd.) represented by its Trustee Mr.M.R.Sarangapani, No.320/199, Royapettah High Road, Mylapore, Chennai-600004. .. Petitioner Vs. 1.The Authorised Officer, Canara Bank, Teynampet Branch, Teynampet, Chennai-18. 2.Sri Lakshmi Ammal Educational Trust, represented by its Authorised Signatory S.K.Annadurai, No.29, Tilak Street, T.Nagar, Chennai-600017. .. Respondents Writ Petition filed under Article 226 of the Constitution, praying to issue a Writ of Certiorari to call for the records on the file of the Sessions Judge of Nilgiris at Udhagamandalam in Cr.M.P.No.141/2009 and quash the order dated 29.4.2009 granting police protection to take possession of the petitioner's property measuring an extent of 10.34 acres namely the land and building bearing Door No.4/278 Ooty-Kothagiri Main Road, Doddabetta junction, Nilgiris-643001 comprised in R.S.No.222/1,NewR.S.No.630/1,building measuring 77,222 sq.ft. For petitioner : Mr.S.Ramasamy for Mr.G.Desingu For R.1 : Mr.G.Masilamani, Senior Counsel for Mr.Srinath Sridevan For R.2 Mr.Venkatesh Mahadevan https://hcservices.ecourts.gov.in/hcservices/ O R D E R ELIPE DHARMA RAO, J. One M/s.Merit Resorts Private Limited, having their office at No.547, Anna Salai, Chennai-600018 (hereinafter referred to as the 'borrower company') had borrowed a sum of Rs.13 crores as loan from the first respondent Bank and created an equitable mortgage over the property at Door No.4/278, Ooty-Kotagiri Main Road, Doddabetta Junction, Nilgiris as a security for the above said loan. Since the said company has committed default in payments, the first respondent Bank had issued a notice dated 31.10.2005, demanding payment of the sum of Rs.10,77,02,656/= together with interest at the rate of 10% p.a. from 1.9.2005 and as the borrower company did not comply with the above demand, the first respondent Bank initiated the proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (Act 54 of 2002) (SARFAESI Act in short) and issued a statutory notice under Section 13(2) of the SARFAESI Act to the said company on 4.1.2006, calling upon the said borrower company to repay the sum of Rs.10,77,02,656/= (Rupees Ten Crores Seventy Seven Lakhs Two Thousand Six Hundred and Fifty six only) and also published the said notice in the English Daily 'The Hindu'. The said notice issued under Section 13(2) was challenged by the borrower company before the Debts Recovery Tribunal-I, Chennai in S.A.No.27 of 2006 and the same was dismissed by the Tribunal, as being premature, since it was challenging only the notice issued under Section 13(2). 2. Thereupon, the first respondent Bank issued a notice of possession under Section 13(4) of the SARFAESI Act on 5.9.2006. Again the borrower company preferred an appeal in S.A.No.109 of 2007 as against the said possession notice, before the Debts Recovery Tribunal-I, Chennai and the Tribunal has granted an interim conditional order in favour of the borrower company, but since the said conditional order was not complied with, the interim order was vacated by the Tribunal and the said order of the Tribunal has attained finality. Therefore, the first respondent Bank had issued the sale notice on 30.8.2007, inviting tenders from the general public for the auction of the properties. 3. Challenging the said sale notice, one Shalini, said to be one of the Directors of the borrower company preferred an appeal in S.A.No.260 of 2007 before the Debts Recovery Tribunal-I, Chennai and the same was dismissed by the Tribunal on 18.10.2007, holding that the sale of the property sought to be injuncted, was owned only by the borrower company vide sale deeds registered as Document Nos.340/1999, 657/1999 and 906/2001 and a Director of the said company, individually, is not a proper party to sue and that a Director or a shareholder of a company, while subscribing to the https://hcservices.ecourts.gov.in/hcservices/ shares of the company, do not purchase any right over the assets of the company and the company per se, in the eye of law, would always remain a juristic person, with all rights to own movable and immovable assets and sue or be sued in its own name. This order of the Tribunal was unsuccessfully challenged before the Debt Recovery Appellate Tribunal in R.A.(SARFAESI) 54/2008 by the said Director Shalini and the same was also dismissed on 18.7.2008. Thereupon, she filed W.P.No.23709 of 2008 before this Court, which was dismissed by this Court on 17.4.2009. It seems, even the Special Leave Petition No.11505 of 2009 filed before Honourable Apex Court has met the same fate of dismissal. Thus, with dismissal orders served at all appellate and revisional forums, upto the Honourable Apex Court, as against the above said Director of the borrower company, the order passed by the Tribunal has attained finality. 4. In the meantime, the first respondent Bank has proceeded with the sale and conducted auction on 4.10.2007, wherein the second respondent has emerged as the successful purchaser. According to the first respondent Bank, the second respondent/purchaser had complied with all the conditions of auction sale and therefore, they have issued a Certificate of Sale in favour of the second respondent Trust on 15.10.2007 and the same has been registered as Document No.1875 of 2007 on 17.10.2007 in the office of the Sub Registrar at Ootacamund. 5. Thereupon, the first respondent Bank and the second respondent/auction purchaser have filed a petition under Section 14 of the SARFAESI Act before the learned District Judge-cum-Chief Judicial Magistrate at Udhagamandalam in C.M.P.No.141 of 2009 as against the above said M/s.Merit Resorts Private Limited, the borrower company, represented by its Managing Director Mr.S.Harshavardhan as the first respondent and its Directors as respondents 2 to 6 and the present writ petitioner viz. M/s.Merit International Educational Foundation as the seventh respondent. In the said petition, it has been prayed to issue appropriate orders and directions to take forcible possession of the secured assets together with documents, by using such force as may be necessary and from whosoever found in possession and by breaking open the locks, if the situation so demands and to hand over the same to the second respondent Trust herein, as provided under Section 14 of the SARFAESI Act and the Security Interest Enforcement Rules framed thereunder and also to issue appropriate orders to the concerned Police Station within whose jurisdiction the said secured assets are situated, to provide necessary police protection during the taking over of the secured properties. The learned District and Sessions Judge-cum- Chief Judicial Magistrate, Udhagamandalam, by the impugned order dated 29.4.2009 has allowed the said petition filed by the respondents herein, who are the creditor Bank and the auction purchaser, ordering that they can take possession of the properties with the help of police and the concerned police having jurisdiction https://hcservices.ecourts.gov.in/hcservices/ over the place in which the above properties are situate, are also directed to give necessary aid in accordance with law to them to take possession of the properties. 6. This order passed by the learned District and Sessions Judge-cum-Chief Judicial Magistrate, Udhagamandalam is under challenge in this writ petition by the petitioner. The case of the petitioner is that they are an Educational Trust formed with the objective to provide qualitative education in Hotel Management, Catering Technology, in-house training and such other activities of education and since they required substantial area of accommodation to accommodate its students at single large area for better co- ordination among students, easy accessibility to laboratories, libraries etc., they have entered into an agreement of lease with the borrower company viz. M/s.Merit Resorts Private Limited Company on 27.4.1998 and subsequently a Memorandum of Understanding for lease of Hostel accommodation on 21.4.2009. 7. According to the petitioner, as per the said Memorandum of Understanding, it was agreed between the writ petitioner and the borrower company that the borrower company shall offer 1,50,000 square feet (approximately) for the hostel accommodation of students, besides provision of auditorium, conference halls, sports area with such other amenities; that they shall be making lease rental advance of Rs.1200 lakhs for the ongoing proposed accommodation project; that the original title deeds of the property would be deposited by the borrower company with the writ petitioner till the refund of lease advances by the company. It has been submitted by the petitioner that in terms of the agreement, the writ petitioner Trust had paid totally a sum of Rs.9,40,03,512/= as long term lease advance as on 31.3.2002 and the lessor company had constructed a built up area about 70,000 sq.ft. and further in terms of the Memorandum of Understanding, the owners of the property had, on 31.3.2002, deposited the title deeds of the property viz. land and building at Door No.4/278, Ooty- Kothagiri Road, Kodapetta Junction, Nigiris with the writ petitioner as security for the lease advances paid by the writ petitioner and thereby created an equitable mortgage over the schedule property. 8. The writ petitioner would further submit that one of the Directors of the borrower company fabricated an agreement of lease dated 15.1.2000 as if the writ petitioner Trust agreed to pay annual rent of Rs.3 crores for the period of 15 years commencing from 1.4.2000 and based on the said rental agreement, he had approached the first respondent Bank and obtained CAN Rent Loan to the extent of Rs.16 crores on 27.12.2004 and the loan was to be repaid in 84 monthly statements and that the said Director had resigned from the Directorship on 13.1.2005. The petitioner would submit that the said ex-Director had fabricated the loan documents, as if the loan was availed by the company and he had also forged documents of the title https://hcservices.ecourts.gov.in/hcservices/ deeds in respect of the Ooty property and created equitable mortgage. 9. It has also been submitted that the order of the learned Sessions Judge, Udhagamandalam, permitting the respondents to take possession of the property, knowing fully well that the property is occupied by a tenant namely the writ petitioner, would amount to taking delivery of the property, which is in possession of the petitioner as a lawful tenant without following the due process of law. It has also been submitted that the Bank cannot invoke the provision of Section 14 of the SARFAESI Act to take possession of a property which is in the possession of a lawful tenant and by allowing the respondent to take possession of a property from the hands of lawful tenant would violate the principles of natural justice as a tenant is not a borrower and was inducted to the property much before the mortgage was created. On such and other grounds, the writ petitioner would pray to set aside the impugned order. 10. Heard Mr.S.Ramasamy, learned counsel for the petitioner and Mr.G.Masilamani, learned senior counsel for the respondents. 11. The learned counsel for the petitioner would attack the impugned order on the ground that the order has been passed by the District Judge, which is impermissible under Section 14 of the SARFAESI Act and on this ground itself, the impugned order is liable to be set aside. 12. For better appreciation, we extract hereunder Section 14 of the SARFAESI Act: "14. Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking possession of secured asset - (1) Where the possession of any secured asset is required to be taken by the secured creditor or if any of the secured asset is required to be sold or transferred by the secured creditor under the provisions of this Act, the secured creditor may, for the purpose of taking possession or control of any such secured asset, request, in writing, the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction any such secured asset or other documents relating thereto may be situated or found, to take possession thereof, and the Chief Metropolitan Magistrate or, as the case may be, the District Magistrate shall, on such request being made to him - (a) take possession of such asset and documents relating thereto; and (b) forward such asset and documents to the secured creditor. https://hcservices.ecourts.gov.in/hcservices/ (2) For the purpose of securing compliance with the provisions of sub-section (1), the Chief Metropolitan Magistrate or the District Magistrate may take or cause to be taken such steps and use, or cause to be used,such force, as may, in his opinion, be necessary. (3) No act of the Chief Metropolitan Magistrate or the District Magistrate done in pursuance of this section shall be called in question in any Court or before any authority." 13. On a careful perusal of the above Section, there is no doubt or ambiguity, that an application under this Section has to be filed by the secured creditor either before the Chief Metropolitan Magistrate or the District Magistrate. 14. At this juncture, we feel it appropriate to mention that in a similar case, a learned single Judge of the Madurai Bench of this Court in Criminal Original Petition (MD) No.3102 of 2008, filed under Section 482of the Criminal Procedure Code, had referred a legal question to be decided by a Division Bench, as to whether the term 'Chief Metropolitan Magistrate' used in Section 14 of the SARFAESI Act includes 'Chief Judicial Magistrate also' since the terms "Chief Metropolitan Magistrate and District Magistrate" have not been defined in the SARFAESI Act. In the above said matter, this Division Bench had the occasion to hear and decide the matter, while we were sitting at Madurai Bench of this Court. By our order dated 30.7.2008 in the above said Criminal Original Petition (MD) No.3102 of 2008 [INDIAN OVERSEAS BANK, K.ABISHEKAPURAM BRANCH, MANNAPURAM, TIRUCHIRAPPALLI-620020, REP.BY THE AUTHORIZED OFFICER, A.RASHEEDKHAN vs. M/s.SREE ARAVINDH STEELS LTD. AND OTHERS], it has been held that 'the term 'Chief Metropolitan Magistrate' will have reference to a Metropolitan area and the term 'Chief Judicial Magistrate' will have reference to an area outside a Metropolitan area' and therefore, the Chief Judicial Magistrate, is having the jurisdiction to entertain the petition filed by the secured creditor under Section 14 of the SARFAESI Act. Now, therefore, there is no doubt that the term 'Chief Metropolitan Magistrate' used in Section 14 of the SARFAESI Act will have reference even to the Chief Judicial Magistrate. Therefore, it follows that a petition under Section 14 of the SARFAESI Act can be filed before a Chief Metropolitan Magistrate, in a metropolitan area, before a Chief Judicial Magistrate in his jurisdictional area or the District Magistrate regarding other areas like the rural areas, as the case may be. 15. In these circumstances, now we have to see as to whether the argument advanced on the part of the learned counsel for the petitioner that the impugned order having been passed by the District Judge, which is impermissible under Section 14 of the SARFAESI Act, the same is liable to be set aside, merit consideration or not. https://hcservices.ecourts.gov.in/hcservices/ 16. The judicial district of Nilgiris is headed by the District Judge-cum-Chief Judicial Magistrate. Therefore, the learned Judge will act as the District Judge, Sessions Judge and also as the Chief Judicial Magistrate, depending upon the nature of the case he deals with. As could be seen from the petition in C.M.P.No.141 of 2009, it has been filed before 'the Chief Judicial Magistrate-cum- District Judge at Udhagamandalam' and the learned Judge has entertained the petition, in his capacity as the Chief Judicial Magistrate. But, a typographical error has crept into the order, mentioning the designation of the learned Judge as the 'Sessions Judge', instead of mentioning it as the 'District and Sessions Judge- cum-Chief Judicial Magistrate', and from such an inadvertent typographical error, no advantage would flow to the petitioner. Therefore, this argument advanced on the part of the petitioner merit no consideration and the same is, accordingly, rejected. 17. Coming to the other argument advanced on the part of the learned counsel for the petitioner that since they being the lawful tenants, the Bank cannot invoke the provision of Section 14 of the SARFAESI Act to take possession of a property, it is to be mentioned that the property belongs to the borrower company and a portion of the same is said to have been leased out to the petitioner Trust. The Founding Directors of both the borrower company and the present writ petitioner Trust are one and the same viz. Mr.M.R.Sarangpani, his wife Mrs.S.Shalini and son Mr.S.Harshavardhan. One more thing to be pointed out is that a tripartite agreement has been entered into by the borrower company, the first respondent Bank and the lessee i.e. the present writ petitioner Trust on 7.1.2005, wherein it has been agreed that the borrower directed the lessee to pay the monthly rent to the Bank and authorized the Bank to receive the monthly rent of Rs.28,94,892/= directly from the lessee and in clause clause 6(a) of the said agreement, it has been agreed that 'if the lessee defaults in paying even one month rent (within) the stipulated time, the bank shall, without concurrence of the borrower/lessor, be entitled to initiate appropriate steps including termination of lease and such steps shall be taken at the sole discretion of the bank and without any obligation on the part of the Bank'. Significantly, in this tripartite agreement, the said S.Harshavardhan has signed as 'authorised signatory' both for the borrower company (i.e. the owner of the property) and for the lessee Trust. The Bank hasproceeded against the property in a lawful and legal manner, which were unsuccessfully challenged by the borrower company and its Directors at various levels. The rights would flow to the lessee or the purchaser only from the original owner. When the original owner himself has suffered an order at the hands of the judicial forums, the tenant or the purchaser cannot cling on his so called rights flown to him from the original owner. In the case on hand, the borrower company has offered the property as a security and the same https://hcservices.ecourts.gov.in/hcservices/ has been brought for sale by the respondent Bank, after following due process of law. If any prejudice is caused to the petitioner by virtue of the orders passed against the borrower company, who mortgaged the land and obtained loan, before the expiry of the lease period, he can claim damages or any such other reliefs against the owner of the property. If at all, if they are so advised, the petitioner Trust has to sue the borrower company, which has leased out the property to the petitioner Trust. Therefore, this argument advanced on the part of the petitioner also must fail. In the present case, since as has already been observed by us supra, the lessee Trust is nothing but an off-shoot of the borrower company, any such initiation of the proceedings by the lessee Trust against the borrower company, may only amount to spitting on the sky. 18. On a perusal of the entire materials placed on record, it is seen that as against the very same impugned order passed by the learned District Judge-cum-Chief Judicial Magistrate, Udhagamandalam, the above said Shalini, said to be one of the Directors of the borrower company, had filed Criminal Revision Case No.472 of 2009 before this Court in her individual capacity, praying to quash the order passed in Crl.M.P.No.141 of 2009. The said Revision Petition was dismissed as withdrawn on 6.5.2009. Thereafter, she has filed W.P.No.9200 of 2009 again in her individual capacity as one of the Directors of the borrower company, praying to quash the very same impugned order and the said writ petition was also dismissed as withdrawn on 8.6.2009. Thereafter, W.P.No.10228 of 2009 was filed by the borrower company M/s.Merit Resorts Private Limited, represented by its Director Mrs.S.Shalini, again for the same relief of setting aside the order passed by the learned District Judge-cum-Chief Judicial Magistrate, Udhagamandalam in Crl.M.P.No.141 of 2009. A Division Bench of this Court, while taking up the said matter along with two other similar matters, by the common order dated 30.7.2009, on a thorough discussion of the entire case, has dismissed the said writ petition as devoid of merits. On such dismissal of the writ petition filed by Mrs.S.Shalini, the present writ petition came to be filed by her husband Mr.Sarangapani as the Trustee of M/s.Merit International Education Foundation on 19.8.2009. On a close scrutiny of the entire materials placed on record, we are able to find that it is nothing but a old wine in the new bottle and it appears that the petitioner is trying to deviate itself from the borrower company, as if they both are different entities, when the facts on record speak otherwise and make it crystal clear that the founder directors of both the borrower company and the lessee Trust are one and the same. 19. A desperate attempt has been made on the part of the petitioner that if the respondents are permitted to take over the possession, much injustice will be caused to the students, who are numbering nearly 2,500 and pursuing their studies with the College being run by the petitioner Trust. The petitioner placed much https://hcservices.ecourts.gov.in/hcservices/ reliance on the Memorandum of Understanding dated 21.4.2009, entered into by the borrower company and the petitioner Trust. As has already been discussed supra, the SARFAESI proceedings are pending against the borrower company from the beginning of the year 2006 and thereafter, all futile attempts are being made on the part of the borrower company or its Directors to stall the proceedings somehow or other. Knowing pretty well the consequences and the lack of legal sanctity for such an understanding, the petitioner, who is nothing but an off-shoot of the borrower company, cannot be permitted to putforth this type of argument, seeking clemency of this Court. 20. Viewing from any angle, this petition merit no consideration and as has already been observed by us supra, this petition is nothing but an extension of the delay tactics being played on the part of the borrower company, of course through the petitioner Trust, which is nothing but an off-shoot of the borrower company. For all the above reasons, this writ petition is dismissed. No costs. Consequently, M.P.No.1 of 2009 is also dismissed. Sd/ Asst.Registrar /true copy/ Sub Asst.Registrar Rao To 1. The Sessions Judge, Nilgiris at Ootacamandalam. 2. The Authorised Officer, Canara Bank, Teynampet Branch, Chennai - 18. 1 cc To Mr.Venkatesh Mahadevan, Advocate, SR.40765. 2 cc To Mr.G.Desingu, Advocate, SR.40747. Order in W.P.No.16914/2009 KA(CO) RVL 28.08.2009 https://hcservices.ecourts.gov.in/hcservices/