The Madhya Pradesh High Court has unequivocally affirmed that revenue officers such as Collectors have no legal authority to interfere with actions taken by secured creditors under Section 13(4) of the SARFAESI Act, 2002. This ruling reinforces the statutory exclusivity of the Debt Recovery Tribunal as the sole forum for borrowers to challenge enforcement measures by banks and financial institutions.
Background & Facts
The Dispute
The petitioner, Bank of Baroda, a secured creditor, initiated recovery proceedings against respondent No. 2, the borrower, under Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). Following the issuance of a demand notice and the borrower’s failure to repay, the bank took physical possession of the secured asset. The borrower challenged this action before the Collector, Bhopal, who issued an order on 30.10.2019 directing the bank to restore possession to the borrower and pursue recovery through the District Magistrate under Section 14 of the Act.
Key Facts
- The borrower defaulted on a loan secured by a mortgage of immovable property
- The bank issued a notice under Section 13(2) of the SARFAESI Act on 15.05.2013
- The borrower failed to repay or settle the dues within 60 days
- The bank issued a possession notice under Section 13(4) on 10.07.2013 and took physical possession on 18.07.2013
- The borrower filed a representation before the Collector, Bhopal, on 25.08.2013
- The Collector passed the impugned order on 30.10.2019 (Annexure P/8)
- The Collector’s order did not reference Section 13(4) or acknowledge the bank’s compliance with it
Procedural History
- 15.05.2013: Demand notice issued under Section 13(2) of SARFAESI Act
- 18.07.2013: Bank took possession under Section 13(4)
- 25.08.2013: Borrower filed representation before Collector, Bhopal
- 30.10.2019: Collector issued order directing restoration of possession and recourse to Section 14
- 12.11.2013: Writ Petition No. 19858 of 2013 filed before the High Court of Madhya Pradesh at Jabalpur
- 22.06.2026: Judgment delivered by Justice Maninder S. Bhatti
The Parties' Positions
For the Petitioner (Bank of Baroda): The bank argued that it had fully complied with the procedural requirements of Section 13(4), which permits a secured creditor to take possession without court intervention. The Collector’s order was ultra vires as it ignored the statutory framework and improperly substituted the DRT’s exclusive jurisdiction.
For the Respondent (Collector and State): The State did not dispute that Section 13(4) was overlooked. The Collector’s office had erroneously assumed that Section 14 was the only lawful route to possession, failing to recognize that Section 13(4) operates independently.
Relief Sought
The petitioner sought quashing of the Collector’s order dated 30.10.2019, a declaration that the order was without jurisdiction, and a direction restraining enforcement of the order.
The Legal Issue
The central question was whether a Collector, under the Land Revenue Code, has jurisdiction to interfere with or set aside a secured creditor’s possession of property taken under Section 13(4) of the SARFAESI Act, 2002, or whether such challenges must be addressed exclusively before the Debt Recovery Tribunal under Section 17.
Arguments Presented
For the Petitioner
The petitioner relied on the statutory scheme of the SARFAESI Act, emphasizing that Section 13(4) grants secured creditors the independent right to take possession without court or collector intervention. Counsel cited Mardia Chemicals Ltd. v. Union of India to affirm that the Act creates a self-contained mechanism for enforcement. The Collector’s order was argued to be a clear encroachment on a statutory domain reserved for the DRT under Section 17, rendering it void ab initio.
For the Respondent
The State did not contest the petitioner’s legal position. The respondent’s counsel conceded that the Collector had failed to consider Section 13(4) and had erroneously treated Section 14 as the sole pathway to possession, thereby misapprehending the legislative intent.
The Court's Analysis
The Court conducted a detailed review of the SARFAESI Act’s structure and found that the Collector’s order was fundamentally flawed. The judgment emphasized that Section 13(4) is a self-executing provision allowing a secured creditor to take possession upon default, without requiring any prior approval from civil or revenue authorities.
"The Collector, Bhopal was required to appreciate that it was a case where the petitioner bank had taken recourse to the measures as detailed in Section 13(4) of the Sarfaesi Act, 2002 and once the said steps were taken, the only course with the respondent No.2/borrower was to assail the said steps by filing a securitisation application under Section 17 of the Sarfaesi Act, 2002 before the Debt Recovery Tribunal (DRT)."
The Court held that Section 14 applies only when the secured creditor seeks assistance from the District Magistrate to take possession - a step distinct from and subsequent to Section 13(4). The Collector’s reliance on Section 14 to invalidate the bank’s possession was legally unsustainable. The Court further clarified that the Collector, as a revenue officer, has no adjudicatory authority under the SARFAESI Act and cannot entertain disputes arising from enforcement actions.
The order was declared void ab initio because it was passed without jurisdiction, in contravention of the Act’s exclusive remedy mechanism. The Court noted that the borrower’s remedy, if aggrieved, lies solely before the DRT under Section 17, not before revenue authorities.
The Verdict
The writ petition was allowed. The Collector’s order dated 30.10.2019 is quashed. The bank’s possession of the secured asset under Section 13(4) is upheld. The borrower is at liberty to file an application under Section 17 of the SARFAESI Act before the Debt Recovery Tribunal within 45 days from the date of this judgment.
What This Means For Similar Cases
Collector’s Interference Is Legally Invalid
- Practitioners must immediately challenge any order by revenue officers (Collector, Tehsildar, etc.) interfering with SARFAESI enforcement as void ab initio
- No application or representation before a Collector can stay or nullify a bank’s possession under Section 13(4)
- Such orders are non-est in law and cannot be enforced even if they appear on record
Section 17 Is the Exclusive Remedy
- Borrowers must file Section 17 applications within 45 days of possession or notice - delay defeats remedy
- Courts will not entertain collateral challenges to SARFAESI actions before civil, revenue, or administrative forums
- Legal notices to Collectors or District Magistrates regarding SARFAESI enforcement are procedurally futile and should be avoided
Procedural Compliance by Banks Is Critical
- Banks must ensure strict adherence to Sections 13(2), 13(4), and 13(5) - including proper notices and documentation
- Failure to comply with procedural steps under the Act may still expose banks to Section 17 challenges, but not to revenue officer interference
- Legal teams should advise clients to preserve all notices, acknowledgments, and possession records as evidence of compliance
