The Madhya Pradesh High Court has clarified the procedural safeguards available to borrowers facing enforcement under the SARFAESI Act when their appeal before the Debts Recovery Tribunal remains pending due to administrative delays. In a significant interim order, the Court balanced the rights of secured creditors with the procedural hardships faced by borrowers, establishing a clear financial condition for staying coercive possession actions.
Background & Facts
The Dispute
The petitioners, M/s Mahaveer Stone Crusher through its proprietor Shri Ashu Jain and others, are borrowers who defaulted on loan obligations to Bank of Maharashtra. The bank initiated proceedings under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), leading to the issuance of a possession order under Section 14 by the Chief Judicial Magistrate. The petitioners challenge this order and the subsequent notice to take physical possession of the secured assets.
Key Facts
- The petitioners had availed credit facilities from Bank of Maharashtra secured against movable and immovable assets.
- Default occurred, triggering the bank’s right to enforce security under the SARFAESI Act.
- A possession order was issued under Section 14 of the SARFAESI Act, authorizing the bank to take physical control of the secured property.
- The petitioners filed a Special Appeal (S.A. No. 436/2025) before the Debts Recovery Tribunal (DRT), Jabalpur, challenging the bank’s actions.
- The post of Presiding Officer at DRT Jabalpur has remained vacant since late 2024, resulting in no hearings being conducted on pending matters.
- The petitioners allege that the delay in hearing their appeal is causing irreparable harm due to imminent coercive action by the bank.
Procedural History
- Date of default: Not specified in judgment, but implied to have occurred prior to issuance of notice under Section 13(2) of SARFAESI Act.
- Notice under Section 13(2): Issued by Bank of Maharashtra, triggering the 60-day repayment window.
- Possession notice under Section 13(4): Issued after expiry of the 60-day period.
- Possession order under Section 14: Passed by Chief Judicial Magistrate, Indore, on an unspecified date prior to 15.03.2026.
- 15.03.2026: Writ Petition No. 15629 of 2026 filed before the Madhya Pradesh High Court seeking stay of possession.
- 25.03.2026: Respondent bank filed reply, citing M/s D.G Oil Foods Pvt. Ltd. v. Indian Bank, W.P. No. 12124/2026, decided by a coordinate bench at Jabalpur.
- 01.04.2026: Supreme Court delivered judgment in E. Muthuranthinasabathy & Others v. M/S. Sri International & Others, SLP(C) Nos. 8850-8851 of 2023, which formed the legal basis for the present order.
- 30.04.2026: Judgment delivered by the Madhya Pradesh High Court.
Relief Sought
The petitioners sought immediate stay of the possession order and prohibition of any coercive action by the bank until their Special Appeal before the DRT is heard. They also requested directions to the DRT to expedite hearing of S.A. No. 436/2025.
The Legal Issue
The central question was whether a borrower facing enforcement under the SARFAESI Act, whose appeal before the DRT is delayed due to administrative vacancy, can be granted interim protection from possession without depositing any portion of the dues, and if not, what is the appropriate quantum of deposit to balance the rights of both parties.
Arguments Presented
For the Petitioner
Counsel for the petitioners argued that the prolonged vacancy at DRT Jabalpur has rendered their statutory remedy ineffective. They contended that allowing possession without any interim relief would cause irreparable loss to their business and livelihood. They relied on the principle of audi alteram partem and the Supreme Court’s observation in E. Muthuranthinasabathy that courts must ensure procedural fairness even during enforcement proceedings.
For the Respondent
The respondent bank, through counsel, submitted that the petitioners have defaulted on their obligations and the bank is entitled to enforce its security under the SARFAESI Act. They argued that the petitioners’ delay in approaching the DRT and the absence of any interim stay order from the tribunal render their writ petition premature. They cited the coordinate bench’s decision in D.G Oil Foods as binding precedent.
The Court's Analysis
The Court acknowledged the procedural impasse caused by the vacancy at DRT Jabalpur but emphasized that the SARFAESI Act does not contemplate a complete stay of enforcement merely because an appeal is pending. The Court relied on the Supreme Court’s judgment in E. Muthuranthinasabathy & Others v. M/S. Sri International & Others, which held that while borrowers are entitled to a fair hearing, secured creditors must not be unduly prejudiced by procedural delays.
"The remedy under Section 17 of the SARFAESI Act is not rendered illusory merely because of administrative delay, but the Court must ensure that the enforcement process does not become a tool of oppression."
The Court noted that the petitioners had not sought interim relief from the DRT due to its non-functionality, and therefore, the High Court was compelled to intervene to prevent abuse of process. It held that requiring a partial deposit of dues serves as a fair compromise: it protects the bank’s interest in recovering its dues while preventing the petitioners from being rendered homeless or bankrupt before their appeal is heard.
The Court also emphasized that the direction to deposit 20% of the outstanding amount is not an admission of liability but a procedural condition to preserve the status quo. It further directed the DRT to prioritize the hearing of S.A. No. 436/2025 and prohibited any coercive action against the petitioners provided the deposit condition is met.
The Verdict
The writ petition is disposed of with the following directions: (i) The petitioners shall deposit 20% of the amount due as on date with the bank within 30 days, with 50% of this amount (i.e., 10% of total dues) to be deposited within the first fortnight; (ii) The DRT shall hear S.A. No. 436/2025 expeditiously upon becoming functional; (iii) No coercive action shall be taken against the petitioners during this period, subject to compliance with the deposit condition; (iv) The petitioners shall communicate this order to the Registrar, DRT Jabalpur, within seven working days; (v) The bank and auction purchaser shall strictly comply with Rule 9(1) of the SARFAESI Enforcement Rules, 2002; (vi) The Court has expressed no opinion on the merits of the appeal.
What This Means For Similar Cases
Deposit Requirement Is Now a Standard Interim Condition
- Practitioners must now advise borrowers facing SARFAESI enforcement to prepare for a 20% deposit requirement when seeking interim relief from High Courts during DRT delays.
- The 50% of 20% (i.e., 10%) within 15 days is a practical timeline that must be strictly adhered to avoid loss of protection.
DRT Vacancies Do Not Invalidate Enforcement, But Trigger Judicial Intervention
- Courts will not stay possession outright due to administrative delays, but will impose financial conditions to balance rights.
- Borrowers must proactively communicate court orders to DRT registries to ensure procedural compliance.
Rule 9(1) Compliance Is Non-Negotiable
- Banks must strictly follow the procedural safeguards under Rule 9(1) of the SARFAESI Enforcement Rules, 2002, including notice to the borrower and inventory of assets before taking possession.
- Failure to comply may render possession invalid, even if the borrower has not deposited the 20%.
No Merits Opinion = No Prejudice
- The explicit disclaimer that no opinion on merits was expressed means that the deposit order cannot be cited as precedent on liability or validity of the bank’s claim.
- Borrowers retain full right to contest the claim before the DRT without prejudice.
When Delay Defeats Remedy
- If the DRT continues to remain non-functional beyond a reasonable period, parties may return to the High Court under the same writ petition without filing a fresh one.
- This creates a mechanism for ongoing judicial oversight in cases of systemic delay.
