No bar on advocates being appointed as ‘receivers’ under Section 14(1A) SARFAESI, Delhi HC

The Delhi High Court has held that there was no bar on advocates being appointed as ‘receivers’ under Section 14(1A) of The Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002.

The judgment was passed by a Single Judge Bench of Justice Rajiv Shakdher in a challenge to an order passed by a Chief Metropolitan Magistrate (CMM) appointing an advocate as a receiver to take possession of a secured asset under Section 14(1A) of SARFAESI.

The petitioner contended that the appointment of an advocate as a receiver was contrary to the language of Section 14 (1A).

After hearing the petitioner, the Court, at the outset, observed that the petition was infructuous since the possession of the subject asset had already been handed over to the secured creditor i.e. the Andhra Bank.

It nonetheless proceeded to address the contention with respect to the bar on appointment of advocates as receivers.

The Court noted that the language of Section 14(1A) of the SARFAESI Act used the expression “may” and not “shall”.

Stating that were two ways of appreciating the provision, the Court added,

“First, that the expression “may” relates to the choice of the subordinate officer. The other meaning that can be placed on the provision is that District Magistrate/CMM is vested with discretion to appoint officers subordinate to him to take possession of the secured asset.”

The Court said that in terms of Section 14(1), the District Magistrate/CMM was obliged to take possession once an application in that behalf was preferred by the secured creditor and then recourse is taken to Section 14 (1A) to appoint a 'receiver'.

The Court concluded that after the insertion of sub-section (1A) to Section 14 in 2013, the District Magistrate/CMM was granted the discretion to appoint even their subordinate officers as receivers.

The Court thus held that Section 14(1A) did not bar the appointment of advocates as 'receivers' and the same position was obtained vis-à-vis Rule 8(3) of The Security Interest (Enforcement) Rules, 2002.

It held,

The petition was accordingly dismissed with a finding that there was no merit in the petition.

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