Whether a Bank can request police assistance under section 14 of the SARFAESI Act, 2002 after the proceedings under the SARFAESI Act came to an end due to a compromise reached between the parties.

Whether a Bank can request police assistance under section 14 of the SARFAESI Act, 2002 after the proceedings under the SARFAESI Act came to an end due to a compromise reached between the parties.

According to Section 14 of the Insolvency and Bankruptcy Code, 2016 (hereinafter "IBC"), on the insolvency commencement date, the National Company Law Tribunal (hereinafter "NCLT") must issue an order prohibiting the institution of new suits or the continuation of existing suits or proceedings against the corporate body, including the execution of any judgement or order in any court of law, tribunal, arbitral panel, or other authority. The issue for discussion before the Securities Appellate Tribunal (hereinafter "SAT") in the case of Dewan Housing Finance Corporation Limited (hereinafter "DHFL") v. SEBI was whether the SEBI can commence or continue the prosecution for breach of securities laws against the corporate debtor. 

In the instant case titled Dewan Housing Finance Corporation Ltd. v. SEBI the issue raised before the Securities Appellate Tribunal  for clarification was:

  1. When a moratorium is imposed under Section 14 of the IBC, does SEBI have jurisdiction to begin proceedings against the company?

With regard to this issue, the SEBI adjudicating officer's order alluded to the Insolvency Law Committee Report, 2018's comment that an action to determine or assess the obligation is distinct from recovering the assessed or decided liability. IBC may not have intended to place a moratorium on a proceeding to determine responsibility. The adjudicating officer should not have resorted to the Insolvency Committee Report, 2018, according to the SAT, because external aids for interpretation should only be used in cases of ambiguity.

The Court categorically held that the adjudicating officer will not be able to initiate proceedings after the moratorium is imposed under Section 14 of the IBC. As a result of the SEBI adjudicating officer's order, the proceedings of recovery under Section 28A upon failure to pay and SCN are annulled, as procedures can't be started after the moratorium is imposed under Section 14 of the IBC.