Rule 2(a) defines ‘Authorised Officer’ as under:-
"authorised officer" means an officer not less than a chief manager of a public sector bank or equivalent, as specified by the Board of Directors or Board of Trustees of the secured creditor or any other person or authority exercising powers of superintendence, direction and control of the business or affairs of the secured creditor, as the case may be, to exercise the rights of a secured creditor under the 1[Act];
a) Authorised Officer must be of rank not less than Chief Manager in a public sector bank or equivalent.
b) (i)Board of Directors
(ii) or Board of trustees of the secured creditor
(iii)or any other person
(iv) or authority exercising powers of superintendence, direction and control of business or
affairs of the secured creditor under the Act is competent to initiate action.
There are two categories of persons i.e. a) and b) as stated above. One is Chief Manager or equivalent. Another is Board of directors or Controller of the business of the secured creditor. All the acts of Authorized Officers are supposed to be bona fide, fair and reasonable as the action taken under the Act is administrative in nature and not a judicial action (Supreme Court in Mardia Chemicals case : 11 (2004) BC).
Authorised Officer who is clothed with statutory power has to perform his action as per prescription of law. Performing action or omitting to perform the action contrary to prescription of law contemplated is not permissible (expressio unius est exclusio alterius). He enjoys immunity from civil and criminal prosecution if his acts are bona fide. For malafide acts, he is not only answerable personally but also binds his secured creditor for vicarious liability in Civil & Criminal prosecution. He possesses unlimited pecuniary jurisdiction (provided the financial asset is not below one lakh rupees) and unlimited territorial Jurisdiction for enforcement of security interest. Demand notice served by him operates as injunction against borrowers from dealing with secured assets. He represents secured creditor. His services are not mandatory but may be engaged to exercise the rights of the secured creditor (See Sec.13(12). Chief Manager level officer is chosen because with rich experience and maturity of mind he will be able to take action with due care and caution in view of stringent nature of the provisions of the Act.
The Supreme Court in ICICI bank Vs. Shanti Devi Sharma & Ors. :2008 (2) Bank CLR 745 (S.C.) held that in addition to Guidelines on Fair Practices Code for Lenders, Master circular on outsourcing financial services and Master Circular on credit card operations and another Circular on ‘Code of Bank’s Commitment to Customers (COBCC) were promulgated by RBI with advise to banks to strictly adhere to them in loan recovery process. It seems they are not strictly adhered to and are treated as mere ritual exercise and RBI also had taken serious note of it and remarked that complaints are received regarding violation of the guidelines. In this case the borrower committed suicide on account of humiliation caused by repossessors engaged by the bank. Supreme Court declined to expunge the remarks of the High Court as well as to quash the order of the High Court in directing the police to investigate into the matter. The Supreme Court also imposed costs of Rs.25,000/- to the bank. [In this book all the above circulars of RBI are included for ready reference of the readers. The readers may refer to the index and find them].
In another case (Sheeba Philominal Merlin & Anr. Vs. The Repatriates Co-op Finance & Development Bank Ltd. & Ors.:2010-4-L.W. 497) Madras High Court ordered CBCID to proceed according to law after investigation of fraudulent sale of secured asset (by bank officials) belonging to the guarantor for a very low price tampering of bid amounts, in an action taken under SARFAESI Act in the loan account without serving the statutory notice. The High Court also imposed costs of Rs.50,000/- payable by the bank to the petitioners. Therefore it is clear that the secured creditor doe not enjoy the immunity in respect of his action if it is not bona fide. Chief Manager level officer is chosen because with rich experience and maturity of mind he will be able to take action with due care and caution in view of stringent nature of the provisions of the Act.
As can be seen from the language in the sub Section action under the Act by Authorised Officer is not mandatory. Every branch is extended hand of secured creditor. Services of Chief Manager is utilised as Authorised Officer with an idea that the officer in the rank of Chief Manager has more experience than a junior grade officer and he will be able to perform the action under the Act with all precautions as the provisions are stringent in nature. The purpose of the action under the Act is for (expeditious) recovery. In case of claims involving higher amount, the branch manager (irrespective of his cadre) can file suits or OAs with or without Power of Attorney and without seeking assistance of any officer of higher rank. In Union Bank of India Vs. Naresh Kumar, AIR 1997 SC 3 the suit filed by the Union Bank of India was dismissed on the ground that the plaint was not duly signed and verified by a competent person. Though other issues were found in favour of the bank, the suit was dismissed by 3 courts namely, the Trial Court, the First Appellate Court and the High Court on this short ground and the bank filed an appeal before the Supreme Court. The decisions of all the three Courts were reversed by the Supreme Court and the suit filed by the bank was decreed. Though the decision of the Court primarily revolved around public interest and Order XXIX, Rule 1, CPC, the Supreme Court went to the extent of holding, in paragraph 10 of its decision, that by virtue of Order VI, Rule 14, together with Order XXIX, Rule 1 of the Code of Civil Procedure, the signing and verification of the plaint, by a person holding an office, could be accepted, even in the absence of any formal letter of authority or power of attorney.
When suits can be filed by officer of the bank irrespective of his cadre for recovery of debt the question often arises as to why a branch manager cannot take action under the Act without seeking assistance of Authorised Officer. The word “may” in the sub Sec.13(12) leaves scope to contend that an officer below the rank of Chief Manager with his experience and ability, can also initiate action under the Act without assistance of the Authorised Officer as his service is not mandatory. The purpose of engaging services of Authorised Officer is to see that action under the Act is initiated by an officer of Chief Manager cadre as he is supposed to have acquired more experience in bank than an officer of lower cadre and knows his limits and responsibility. Therefore it is clear from the above discussion that, there is no absolute bar for an officer of lower cadre than Chief Manager to take action under the Act for secured creditor. However it is better that the Rule 1 (a) is amended substituting ‘Senior Manager’ in place of ‘Chief Manager’ so that a Senior or Dy. Chief Manager (in scale III cadre) can take action in NPA accounts of his branch for expeditious recovery of the debt instead of waiting for services of Authorised Officer / Chief Manager in each case.