The Madhya Pradesh High Court has reinforced the statutory obligation of District Collectors to enforce possession orders under the SARFAESI Act within strict timelines, closing a critical gap in implementation that has long hindered financial institutions' recovery efforts. This judgment establishes a binding procedural framework that transforms theoretical rights into enforceable remedies.
Background & Facts
The Dispute
The petitioner, Cholamandalam Investment and Finance Company Ltd, a secured creditor under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, initiated proceedings under Sections 13 and 14 of the SARFAESI Act after borrowers defaulted on loans. Despite the issuance of a possession order by the District Magistrate, Guna on 04.07.2025, the respondent authorities failed to deliver physical possession of the secured assets to the petitioner.
Procedural History
- 2024: Petitioner filed writ petition under Article 226 seeking enforcement of possession order
- Prior Precedent: Coordinate Bench of the same Court in IIFL Home Finance Ltd. v. State of M.P. had issued detailed directions on SARFAESI enforcement
- 2025: District Magistrate’s order remained unexecuted for over six months
- 2026: Petitioner invoked judicial review citing non-compliance and delay
Relief Sought
The petitioner sought: (i) mandatory direction to the State authorities to deliver possession; (ii) compliance with the precedent set in IIFL Home Finance Ltd.; and (iii) costs for litigation.
The Legal Issue
The central question was whether Section 14 of the SARFAESI Act imposes a mandatory, time-bound duty on the District Collector to execute possession orders, and whether judicial intervention is warranted when such duty is neglected despite a valid order.
Arguments Presented
For the Petitioner
The petitioner relied on the binding precedent in IIFL Home Finance Ltd. v. State of M.P., arguing that the Court’s earlier directions were not merely advisory but constituted a judicial mandate under Article 226. Counsel emphasized that delay in execution defeats the very purpose of the SARFAESI Act, which is designed to ensure expeditious recovery. The petitioner also cited Mardia Chemicals Ltd. v. Union of India to underscore the legislative intent behind time-bound enforcement.
For the Respondent/State
The State did not dispute the validity of the possession order but contended that administrative delays were due to logistical constraints and ongoing civic initiatives like "Swachh Bharat Mission." The Government Advocate offered no legal justification for non-compliance, instead suggesting a voluntary contribution by the petitioner as a goodwill gesture.
The Court's Analysis
The Court examined the statutory scheme of the SARFAESI Act and the binding nature of its own earlier directions in IIFL Home Finance Ltd. It held that Section 14 is not a mere procedural formality but a critical enforcement mechanism designed to empower secured creditors without prolonged litigation. The Court observed that the Collector acts as an agent of the State under the Act and cannot treat enforcement as discretionary.
"The Collector’s duty under Section 14 is not a matter of administrative convenience but a statutory obligation that must be discharged with urgency and without undue delay."
The Court distinguished the State’s reliance on civic drives as irrelevant to statutory duties under the SARFAESI Act. It reaffirmed that judicial orders under Article 226 are binding and that failure to comply invites contempt consequences. The Court also noted the specific failure of the Tahsildar to execute the order within a reasonable time, calling it a dereliction of duty.
The Verdict
The petitioner succeeded. The Court held that the Collector must execute possession orders under Section 14 of the SARFAESI Act within a time-bound framework, and directed the District Administration to comply with the precedent set in IIFL Home Finance Ltd. within four weeks. The Tahsildar was specifically directed to complete execution within one month.
What This Means For Similar Cases
Execution Is Not Discretionary
- Financial institutions must now insist on written compliance timelines from Collectors post-SARFAESI order
- Any delay beyond four weeks triggers a fresh writ petition for contempt or specific performance
- Courts will no longer tolerate administrative excuses for non-execution of possession orders
Judicial Precedents Are Binding Across Jurisdictions
- Orders issued by Coordinate Benches in the same High Court are binding unless overruled by a larger bench
- Practitioners can cite IIFL Home Finance Ltd. as controlling authority in all SARFAESI enforcement matters in Madhya Pradesh
- Failure to apply such precedents may constitute a procedural irregularity warranting reversal
Accountability of Lower Officials Is Now Explicit
- Tahsildars and Sub-Divisional Officers are now personally accountable for delays in executing SARFAESI orders
- Petitioners may seek cost imposition or departmental action against erring officials in subsequent proceedings
- This creates a deterrent against bureaucratic inertia in recovery enforcement
