The Madhya Pradesh High Court set aside an Additional District Magistrate's order that exceeded jurisdiction by adjudicating borrower objections under SARFAESI Act Section 14, affirming that the DM's role is confined to verifying mortgage documents and statutory compliance.
Background & Facts
The Dispute
Canara Bank filed a writ petition challenging an order dated 07.09.2026 passed by the Additional District Magistrate (ADM), Indore in Case No.0165/B-121/2026-27. The ADM had rejected the Bank's application under Section 14 of the SARFAESI Act to take possession of secured assets, observing that relevant documents were not filed and considering prior actions taken after demand notice issuance.
Key Facts
- The petitioner-bank (Canara Bank) preferred an application dated 03.07.2026 under Section 14 of the SARFAESI Act before the ADM, Indore.
- The application sought to take physical possession of secured assets due to borrower default in repayment of financial assistance.
- The impugned order dated 07.09.2026 rejected the application, stating the ADM had observed non-filing of relevant documents and considered earlier actions post-demand notice.
- The bank contended it had filed all necessary documents, including affidavit declaring compliance with Section 13(2) and 13(4) of the SARFAESI Act, valid mortgage creation, and classification of borrower's account as non-performing asset.
- The ADM exceeded jurisdiction by entering into adjudication of borrower objections regarding the application's merits.
Procedural History
- 03.07.2026: Petitioner-bank filed application under Section 14 of SARFAESI Act before ADM, Indore.
- 07.09.2026: ADM passed impugned order rejecting the application.
- 07.10.2026: Present writ petition (WP No. 40958 of 2026) filed before Madhya Pradesh High Court, Indore Bench.
Relief Sought
The petitioner sought: (a) Allowance of the writ petition. (b) Quashing and setting aside the impugned order dated 07.09.2026. (c) Direction to the ADM to proceed with and allow the Section 14 application for taking possession of secured assets. (d) Direction to the ADM to reconsider and decide the application afresh in accordance with law.
The Legal Issue
The central question was whether the District Magistrate/Additional District Magistrate, while processing an application under Section 14 of the SARFAESI Act, is required to adjudicate upon objections raised by the borrower regarding the application's merits, or whether the inquiry is limited to verifying mortgage validity and compliance with Sections 13(2) and 13(4) of the Act.
Arguments Presented
For the Petitioner
The petitioner relied on the Supreme Court judgment in M/s R.D. Jain and Co. Vs. Capital First Ltd and others (Civil Appeal No. 175/2022, decided 27.07.2022), which held that Section 14 does not involve an adjudicatory process concerning borrower objections. It argued the ADM exceeded jurisdiction by considering prior actions post-demand notice and questioning document sufficiency, when the law only requires verification of: (i) mortgage deed validity, (ii) compliance with Sections 13(2) and 13(4), and (iii) the affidavit declaring non-performing asset status and limitation period compliance. The petitioner contended it had filed all required documents, including the affidavit under Section 14(1), and the ADM's inquiry into borrower objections was legally impermissible.
For the Respondent
The respondent/State argued the ADM correctly rejected the application after observing non-filing of relevant documents and considering actions taken within days of demand notice issuance. It submitted that the ADM, as an authority under Section 14, is duty-bound to scrutinize the application for completeness and legality before permitting possession, and that no error was committed as the bank failed to provide necessary details. The respondent relied on the ADM's observation that relevant documents were not filed and the consideration of prior actions as valid grounds for rejection.
The Court's Analysis
The Court examined the SARFAESI Act provisions and Supreme Court precedent. It noted Section 14(1) requires an application accompanied by an affidavit declaring specific compliances, including valid mortgage creation, non-performing asset classification, and limitation period adherence. The Court emphasized the Supreme Court's holding in M/s R.D. Jain that "Section 14 does not involve an adjudicatory process qua points raised by the borrower against the secured creditor taking possession of secured assets".
The Court found the ADM had exceeded its jurisdiction by:
- Entering into adjudication of borrower objections regarding application merits.
- Considering prior actions taken post-demand notice, which is irrelevant to Section 14 inquiry.
- Questioning document sufficiency when the affidavit under Section 14(1) already declares compliance.
The Court held the DM/ADM's role is strictly limited to:
- Verifying the mortgage deed and documents regarding valid mortgage.
- Checking compliance with Sections 13(2) and 13(4) of the Act.
- Ensuring the affidavit declares the six compliances under Section 14(1)(i) to (viii).
It quoted: "the District Magistrate / Additional District Magistrate is not required to carry out the adjudicatory process regarding the contentions raised by the parties and he has to examine only relevant aspect/s, like mortgage deed, the documents regarding valid mortgage, the documents regarding compliance of section 13(2) and 13(4) of the Act and thereafter by keeping in mind the provision of Section 14 of the Act, he has to pass appropriate order".
The Court concluded the impugned order was passed without jurisdiction and required the ADM to decide the application strictly in accordance with Section 14, preferably within 30 days of receiving the certified copy of the order.
The Verdict
The petitioner succeeded. The Court set aside the impugned order dated 07.09.2026, directed the ADM to proceed with and allow the Section 14 application dated 03.07.2026 for taking possession of secured assets, or alternatively grant permission to file a fresh application. The ADM was directed to decide the application strictly in accordance with law, examining only mortgage validity and Sections 13(2) and 13(4) compliance, and to expeditiously decide, preferably within 30 days from receipt of the certified copy of this order. No costs were awarded.
What This Means For Similar Cases
Strictly Limited Inquiry Under Section 14
Practitioners must note that DM/ADM inquiries under SARFAESI Act Section 14 are confined to verifying mortgage documents and statutory compliances. Any consideration of borrower objections regarding loan terms, prior actions, or application merits exceeds jurisdiction and invites judicial intervention.
Affidavit as Conclusive Compliance Proof
The affidavit under Section 14(1) declaring the eight compliances (including valid mortgage, non-performing asset status, and limitation period adherence) is sufficient for the DM/ADM to proceed. Challenging document sufficiency without specific averments of non-compliance is untenable.
Expeditious Disposal Mandate
The Court emphasized expeditious disposal, directing decisions preferably within 30 days of receiving the certified copy of the order. This timeline creates a enforceable benchmark for DM/ADM actions, reducing delays in secured asset possession proceedings.
