The Madhya Pradesh High Court has affirmed that state authorities, including police, have a legal obligation to assist secured creditors in recovering possession of mortgaged assets under the SARFAESI Act. This ruling clarifies the state’s role in enforcing private financial rights and reinforces the statutory framework designed to expedite recovery without judicial delay.
Background & Facts
The Dispute
The petitioner, AU Small Finance Bank Limited, initiated proceedings under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) against defaulting borrowers who had mortgaged property as security for a loan. Despite issuance of possession notices under Section 13 and application for assistance under Section 14, the borrowers refused to vacate the premises, and the respondent authorities declined to provide police support for peaceful repossession.
Procedural History
- The bank filed a writ petition under Article 226 seeking mandamus for police assistance in dispossessing the borrowers.
- The bank relied on a prior judgment in Cholamandalam Investment and Finance Company Limited v. District Magistrate, Gwalior (WP No. 1681/2025), which had directed similar assistance.
- The State opposed the petition but conceded factual parity with the cited precedent.
Relief Sought
The petitioner sought:
- A writ of mandamus directing state authorities to assist in the physical repossession of the secured asset.
- Directions to take action against borrowers for illegal trespass.
The Legal Issue
The central question was whether Section 14 of the SARFAESI Act imposes a mandatory duty on state authorities to provide police assistance for the repossession of secured assets when a secured creditor has lawfully initiated enforcement proceedings under Section 13.
Arguments Presented
For the Petitioner
The petitioner argued that Section 14 of the SARFAESI Act explicitly empowers the Chief Metropolitan Magistrate or District Magistrate to assist the secured creditor in taking possession. Citing Cholamandalam v. District Magistrate, it was contended that refusal to assist undermines the legislative intent of expeditious recovery and renders Section 13 ineffective. The bank emphasized that non-assistance amounts to a violation of the statutory scheme and the principle of ut res magis valeat quam pereat.
For the Respondent
The State did not dispute the factual matrix but suggested an alternative: that the bank fulfill its Corporate Social Responsibility (CSR) obligations by depositing ₹20,000 in a municipal cleanliness account. This was framed as a condition for cooperation, not a legal rebuttal to the statutory mandate.
The Court's Analysis
The Court examined the statutory scheme of the SARFAESI Act and the binding precedent in Cholamandalam. It held that Section 14 is not discretionary but mandatory in nature, designed to ensure that the enforcement mechanism under Section 13 is not rendered otiose by bureaucratic inaction.
"The legislature intended that the secured creditor should not be left to enforce its rights by self-help, and the State machinery must act as an instrument to give effect to the statutory right conferred under the Act."
The Court rejected the State’s attempt to condition assistance on a voluntary CSR deposit, noting that such a condition has no basis in the SARFAESI Act and introduces an extraneous consideration that undermines the statutory framework. The Court emphasized that the obligation to assist arises upon compliance with Section 13 and Section 14, irrespective of any collateral social obligations.
The Court further held that the precedent in Cholamandalam was directly on point and must be followed to ensure uniformity in the application of the SARFAESI Act across jurisdictions.
The Verdict
The petitioner succeeded. The Court held that Section 14 of the SARFAESI Act mandates state authorities to provide police assistance for repossession of secured assets upon lawful invocation of enforcement proceedings. The writ petition was allowed, and the State was directed to assist the bank in dispossessing the borrowers and handing over possession of the property.
What This Means For Similar Cases
Police Assistance Is Not Discretionary
- Banks and financial institutions can now rely on this judgment to demand immediate police support during SARFAESI enforcement.
- District Magistrates and police cannot refuse assistance on grounds of administrative convenience, pending litigation, or unrelated social conditions.
CSR Cannot Override Statutory Obligations
- Voluntary CSR commitments cannot be used as a precondition for fulfilling statutory duties under the SARFAESI Act.
- Practitioners must challenge any attempt by authorities to link legal enforcement with extraneous conditions.
Precedent Binding Across Jurisdictions
- Judgments from one High Court on SARFAESI enforcement are persuasive authority in other jurisdictions.
- Banks should cite Cholamandalam and this judgment together to strengthen applications for assistance in other states.
