Can CMM/DM appoint advocate to take possession of secured assets under SARFAESI Act? Supreme Court answers

The Supreme Court recently held that an advocate is an officer of the court and is subordinate to the Chief Metropolitan Magistrate (CMM) or District Magistrate (DM) for the purposes of Section 14(1A) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI Act) [NKGSB Cooperative Bank Ltd v. Subir Chakravarty and Ors]..A Bench of Justice AM Khanwilkar and CT Ravikumar thus held that the CMM/DM can avail the services of an advocate to take possession of secured assets and related documents, and that the insertion of sub-section (1A) does not come in the way of the same."...no such rule has been framed by the Central Government in reference to sub-Section (1A) of Section 14 of the 2002 Act much less to expressly or by necessary implication prohibiting the CMM/DM to engage an Advocate Commissioner for taking possession of the secured assets. In absence thereof, exclusion of engagement of an advocate as commissioner cannot be countenanced," the Court added..The apex court was hearing appeals from the High Courts of Bombay and Madras. While the Bombay High Court had decided that since an advocate is not a subordinate officer to the CMM or DM, such appointment under the Act would be illegal, the Madras High Court held that an advocate could be appointed for this purpose by the CMM/DM.The Bench traced the history of the issue to 2008, when the Kerala High Court gave expansive meaning to the rule and held that it was open to the CMM/DM to take assistance of an advocate to be appointed as a commissioner for taking possession of secured assets and documents. This view was consistently followed by the High Courts of Madras and Delhi, and most CMMs/DMs across the country had been following this practice. The only discordant note, the Court said, was the decision of the Bombay High Court..It was held that a strict construction of the provision would defeat the legislative intent of the SARFAESI Act, and that there was a “functional subordination” of advocates to the CMM/DM. Accordingly, it was held,"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 legislative intent and purpose for enacting the 2002 Act. Indeed, logistical problems of the Office of the CMM/DM cannot be the basis to overlook the statutory provision. However, we are persuaded to take the view that an advocate is and must be regarded as an officer of the court and subordinate to the CMM/DM for the purposes of Section 14(1A) of the 2002 Act.".The Court also made some observations on the role played by an advocate in the process. It stated,“It is well established that an advocate is a guardian of constitutional morality and justice equally with the Judge. He has an important duty as that of a Judge. He bears responsibility towards the society and is expected to act with utmost sincerity and commitment to the cause of justice. He has a duty to the court first. As an officer of the court, he owes allegiance to a higher cause and cannot indulge in consciously misstating the facts or for that matter conceal any material fact within his knowledge.”This observation was in light of the apprehension of borrowers about improper execution of orders of the CMM/DM passed under Section 14(1) of the 2002 Act by the Advocate Commissioner, which the Court described as being "plainly misplaced"."There is no reason to assume that the advocate so appointed by the CMM/DM would misuse the task entrusted to him/her and that will not be carried out strictly as per law or it would be a case of abuse of power," the Court held..Consequently, the judgment of the Bombay High Court was held as being not good in law. The Court upheld the view taken by the High Courts of Kerala, Delhi and Madras..Senior Advocate Rana Mukherjee and Advocates Viraj Kadam, Manish Shanker Srivastava, Devendra Kumar Singh and ML Ganesh appeared for the appellant-banks. Advocate B Raghunath along with advocate Sriram Parakkat appeared for the borrowers who had filed a special leave petition in the matter. Advocate Rahul Chitnis appeared for the State of Maharashtra..[Read judgment]