Q. whether an Advocate can be appointed as Receiver under section 14 (1A) of the SARFAESI Act ?

The question came up recently before Delhi HC where it was answered in affirmative:

The appointment of  advocate as receiver by Learned CMM  has been challenged on basis of decision of Bom HC in Subir Chakravarty and Ors. vs. Kotak Mahindra Bank Ltd.  [Writ Petition No. 28480 of 2019]

Sub-section (1) of Section 14 of the SARFAESI Act, 2002 reads as under :-

(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 assets and documents to the secured creditor.

The Delhi HC, However rules that  Sec 14 uses the word ‘may’ and not ‘shall’ which would import either of below two interpretations:

1) “that the expression “may” relates to the choice of the subordinate officer.” ;

2)  that District Magistrate/CMM has the discretion to appoint officers subordinate to him to take possession of secured asset

Once an application is made on behalf of secured creditor under Sec 14(1) SARFAESI the District Magistrate/CMM has to take action. Even before when Sec 14(1A) was introduced advocates were appointed as receivers under sub-section (2) of Sec 14. The position is also settled by Rule 8(3) of The Security Interest (Enforcement) Rules, 2002.

The reason for appointing advocates as receivers was that District Magistrates/CMM  were over burdened and due to lack of subordinate staff a handicap arose in dealing large number of applications under Sec 14

In view of Hon’ble HC the insertion of sub-section (1A) has only conferred choice on District Magistrate/CMM to appoint subordinate officers as Receivers.

Thus the appointment of advocates as Receivers under  under section 14 (1A) of the SARFAESI Act is permissible.