The Calcutta High Court has clarified that observations made by a Debts Recovery Tribunal on the classification of a loan account as a Non-Performing Asset during an interlocutory stage are inherently tentative and cannot preclude a final determination in the main SARFAESI proceeding. The Court also affirmed that a Chief Judicial Magistrate, while acting under Section 14 of the SARFAESI Act, possesses inherent power to extend the time for execution of possession orders, even if expressed using imprecise terminology.
Background & Facts
The Dispute
The petitioners, Somnath Cold Storage Private Limited and others, are borrowers whose loan account with Punjab National Bank was declared a Non-Performing Asset (NPA). The Bank initiated proceedings under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), filing SARFAESI Application SA 185 of 2025 before the Debts Recovery Tribunal - I, Kolkata, seeking enforcement of security interest. The petitioners filed an interlocutory application (IA No. 3488 of 2025) challenging the validity of the NPA classification and the procedural compliance of the Bank.
Key Facts
- The Bank issued a demand notice under Section 13(2) of the SARFAESI Act on 15.07.2025
- The petitioners filed a reply on 05.08.2025 disputing the NPA classification and alleging procedural irregularities
- On 20.09.2025, the learned Chief Judicial Magistrate, Purba Bardhaman, passed an order under Section 14(1) of the SARFAESI Act authorizing the Bank to take possession of the secured assets
- The order mandated possession to be taken within 90 days from the date of issue, i.e., by 18.12.2025
- On 19.12.2025, the same Magistrate passed an order in Misc. Case No. 472 of 2025 extending the time for execution of the possession order, citing "review of the petition" and "consideration of arguments"
- The Bank filed IA No. 3488 of 2025 before the Debts Recovery Tribunal seeking direction for compliance with the possession order
- On 25.02.2026, the Tribunal dismissed the petitioners’ interlocutory application and observed that the NPA classification was valid
- The petitioners challenged both the Tribunal’s order dated 25.02.2026 and the Magistrate’s order dated 19.12.2025 before the Calcutta High Court via Civil Revisional Jurisdiction
Procedural History
- 15.07.2025: Bank issued Section 13(2) notice
- 05.08.2025: Petitioners replied disputing NPA classification
- 20.09.2025: Chief Judicial Magistrate passed Section 14(1) order for possession; 90-day deadline set
- 19.12.2025: Magistrate extended execution time via Misc. Case No. 472 of 2025
- 25.02.2026: Debts Recovery Tribunal dismissed IA No. 3488 of 2025 and observed NPA classification was valid
- 31.03.2026: Civil Revisional Application (C.O. No. 951 of 2026) heard and decided by Calcutta High Court
Relief Sought
The petitioners sought quashing of the Tribunal’s order dated 25.02.2026 and the Magistrate’s order dated 19.12.2025, arguing that both were beyond jurisdiction and prejudicial to their right to a fair hearing in the main SARFAESI proceeding.
The Legal Issue
The central questions were: (1) Whether a Debts Recovery Tribunal can make a conclusive finding on the validity of NPA classification at the interlocutory stage, and (2) Whether a Chief Judicial Magistrate, acting under Section 14 of the SARFAESI Act, possesses the power to extend the time for execution of a possession order, even if the order uses the term "review".
Arguments Presented
For the Petitioner
Mr. Samrat Sen, Senior Advocate, contended that the Tribunal exceeded its jurisdiction by conclusively affirming the NPA classification in an interlocutory order, thereby prejudicing the petitioners’ right to contest the issue in the main SARFAESI proceeding. He further argued that the Magistrate had no review jurisdiction under Section 14 of the SARFAESI Act and that extending the time for execution without a fresh application was ultra vires. He relied on Punjab National Bank v. State of West Bengal & Others to argue that altering the scope of a Section 14 order after issuance is impermissible.
For the Respondent
Mr. Saptansu Basu, Senior Advocate, submitted that any observation by the Tribunal on NPA classification was necessarily provisional and would be fully adjudicated at the final hearing. He argued that Section 14(2) of the SARFAESI Act empowers the Magistrate to take all necessary steps to secure compliance with the possession order, including extending time. He further contended that the use of the word "review" was merely a misstatement and did not invalidate the exercise of power under Section 14(2), citing the principle that an act done under a valid power is not invalidated by incorrect citation of law.
The Court's Analysis
The Court examined the nature of interlocutory proceedings under the SARFAESI Act and the scope of authority vested in the Magistrate under Section 14. It emphasized that interlocutory orders are inherently provisional and cannot operate as res judicata or pre-determine issues reserved for final adjudication.
"The observation would therefore only be tentative and it would be open to the petitioners to canvass all points available to the petitioners in support of their contention as regards legality or validity of the classification of the NPA at the time of final hearing of the SARFAESI application pending before the Debts Recovery Tribunal."
The Court held that the Tribunal’s observation on NPA classification was made in response to a challenge raised during the interlocutory stage and was not intended as a final determination. It directed the Tribunal to decide the issue afresh at the final hearing, without being influenced by the earlier observation.
Regarding the Magistrate’s order extending the time for execution, the Court noted that while the order used the term "review", the substance of the order was an extension of time to secure compliance with the possession order. It relied on Section 14(2) of the SARFAESI Act, which empowers the Magistrate to "take or cause to be taken such steps and use or cause to be used such force as may in his opinion be necessary for the purpose of securing compliance" with the Section 14(1) order.
"It is well established that if an authority exercises a power that it has but cites the wrong provision of law, the act done in such exercise of power or the exercise of power itself is not invalidated; instead, it is upheld by referencing and attributing it to the correct source of authority."
The Court distinguished the precedent cited by the petitioners (Punjab National Bank v. State of West Bengal & Others) on the ground that it involved the impermissible addition of new properties to an existing order, whereas the present case involved only an extension of time - a power explicitly contemplated under Section 14(2).
The Verdict
The Calcutta High Court dismissed the revisional application. The orders dated 19.12.2025 and 25.02.2026 were upheld. The Debts Recovery Tribunal is directed to decide the issue of NPA classification fully and finally at the time of hearing the SARFAESI application, uninfluenced by its prior interlocutory observation. No costs were awarded.
What This Means For Similar Cases
Interlocutory NPA Observations Are Not Binding
- Practitioners must not treat any NPA classification observation made during interlocutory proceedings as conclusive
- Borrowers retain the right to challenge NPA classification afresh at the final hearing of the SARFAESI application
- Tribunals must record clear disclaimers that such observations are tentative and subject to final adjudication
Magistrates Have Inherent Power to Extend Execution Time
- Section 14(2) of the SARFAESI Act grants Magistrates broad authority to ensure compliance with possession orders
- Extensions of time for execution are permissible even if the order uses imprecise language such as "review" or "reconsider"
- Courts will uphold the substance of the order if the underlying power exists under the statute, regardless of misstated terminology
- Practitioners should cite Section 14(2) explicitly in applications seeking time extensions to avoid procedural challenges
