Author: Dharmesh

• In a recent judgment of the division bench of the Hon’ble Calcutta High Court in Joy Kali Oil Industries Pvt. Ltd. v. Union Of India and Ors., the Appellant filed an appeal on the grounds that the Executive Magistrate is not the District Magistrate as contemplated under Section 14 of the SARFAESI Act and the order of the District Magistrate (“DM”) delegating his powers to the Executive Magistrate for taking possession of the assets of the Appellant was illegal and ought to be quashed.​

• The Hon’ble Bench discussed and relied on the decisions of the Hon’ble Supreme Court whereby it was held that Section 14 of the SARFAESI Act is not a provision dealing with the jurisdiction of the Court as such. It is a remedial measure available to the secured creditor, who intends to take assistance of the authorized officer for taking possession of the secured asset for enforcement of security furnished by the borrower. The authorized officer essentially exercises administrative or executive functions, to provide assistance to the secured creditor and this may take the color of quasi-judicial function, which can be discharged even by the Executive Magistrate. The authorized officer is not required to adjudicate the contentious issues raised by the concerned parties but only verify the compliances referred to in the first proviso of Section 14 of SARFAESI Act and being satisfied in that behalf proceed to pass an order(s) to facilitate the taking over of the possession of the secured assets.​

• In view of the above facts and circumstances, the Hon’ble Bench held that the step taken by the Chief Metropolitan Magistrate (“CMM”)/DM while taking possession of the secured assets and documents relating thereto is a ministerial step. It could be taken by the CMM/DM himself or through any officer subordinate to him. Section 14 does not oblige the CMM/DM to go personally and take possession of the secured assets which can be discharged even by the Executive Magistrate as was done in this case. Thereby, upheld the decision of the Single Judge and refused to interfere with his order rejecting the submissions of the Appellants.​

The above issue became relevant due to conflicting judgments made by various National Company Law Tribunals (“NCLTs“) regarding the question of whether a petition for Corporate Insolvency Resolution Process (“CIRP“) filed against a Corporate Debtor that was withdrawn in accordance with Section 12A of the I&B Code can be revived in the event the Corporate Debtor breaches the provisions of the said Settlement Agreement. 

In the recent case of Bajaj Rubber Company Pvt. Ltd. v. Saraswati Timber Pvt. Ltd., the Applicant being the Operational Creditor (Bajaj Rubber Company Pvt. Ltd.) filed an Application for reviving its company petition filed under section 9 of the I&B Code which was withdrawn pursuant to the settlement between the parties, and an order in this regard was passed granting liberty to revive the petition in the event of default. In the said facts and circumstances, the Hon’ble NCLT, New Delhi Bench observed that:

•An unpaid installment as per the settlement agreement cannot be treated as an operational debt as per Section 5(21) of I&B Code, 2016 as it is not a claim in respect of the provision of goods or services etc.

•Therefore, the failure or breach of the terms and conditions of the settlement agreement cannot be a ground to trigger CIRP against  the Corporate Debtor under the provision of I&B Code.

•The remedy may lie elsewhere not necessarily before the Adjudicating Authority (NCLT).

The bench thus, rejected and thereof dismissed the said Application.