The Madhya Pradesh High Court has clarified that financial institutions may file multiple applications under Section 14 of the SARFAESI Act, 2002, provided each is supported by reasonable grounds. This ruling reinforces the statutory framework for asset recovery while directing aggrieved parties to seek redress exclusively through the Debt Recovery Tribunal.
Background & Facts
The Dispute
The petitioner, Ravi Joshi, is a guarantor in a loan transaction involving respondents No.3 and 4, who are borrowers from a private bank. The bank, having declared the loan account as non-performing, initiated enforcement proceedings under the SARFAESI Act, 2002. After the initial enforcement action under Section 14, the bank filed a second application before the Additional District Magistrate, Khargone, seeking possession of the secured asset. The petitioner challenged this second application as abusive and repetitive.
Procedural History
- 2024: First application under Section 14 filed by the bank; possession order issued
- Late 2024: Petitioner filed objection before DRT under Section 17, which remained pending
- February 2025: Bank filed second Section 14 application, citing new grounds including deterioration of asset value and non-cooperation of borrowers
- March 2025: Petitioner filed Writ Petition under Article 226 before the Madhya Pradesh High Court, seeking quashing of the second Section 14 order
Relief Sought
The petitioner sought quashing of the second Section 14 order on grounds of abuse of process, multiplicity of proceedings, and violation of natural justice. He argued that Section 14 applications must be singular and that repeated filings undermine the statutory balance between creditor rights and debtor protections.
The Legal Issue
The central question was whether Section 14 of the SARFAESI Act, 2002 permits multiple applications by a secured creditor for enforcement of security interest, and if so, whether such repetition constitutes an abuse of process absent clear justification.
Arguments Presented
For the Petitioner
The petitioner relied on the principle of res judicata by analogy and contended that repeated Section 14 applications, without material change in circumstances, amount to harassment. He cited M/s. Muthoot Finance Ltd. v. P. Rajendran to argue that the SARFAESI Act must be interpreted to prevent multiplicity of proceedings. He further asserted that the DRT, under Section 17, is the exclusive forum to challenge enforcement orders, and that High Courts should not entertain writ petitions on matters already triable before DRT.
For the Respondent/State
The State and the bank contended that Section 14 is a remedial provision designed to facilitate swift enforcement, and that each application must be assessed on its own merits. They relied on Bank of India v. M/s. V. S. Enterprises to argue that a fresh application is permissible if new facts emerge - such as decline in asset value, discovery of hidden assets, or failure of prior enforcement. They emphasized that Section 17 provides an adequate remedy, and that the High Court’s jurisdiction under Article 226 must not be invoked to circumvent statutory forums.
The Court's Analysis
The Court examined the structure of the SARFAESI Act and noted that Section 14 is not a final adjudicatory provision but a procedural mechanism enabling possession without judicial intervention. It observed that the Act deliberately avoids imposing a limit on the number of Section 14 applications, leaving it to the secured creditor to act based on evolving circumstances. The Court distinguished between abuse of process and legitimate recourse to statutory remedies.
"The legislature has not imposed any restriction on the number of times a secured creditor may invoke Section 14, provided each invocation is supported by a reasonable ground and is not a mere repetition without any fresh basis."
The Court further held that the remedy under Section 17 is comprehensive and expressly designed to address grievances arising from enforcement actions, including allegations of repetition or mala fide intent. It affirmed the precedent set by the Jabalpur Division Bench in Sunil Garg v. Bank of Baroda, which held that Section 17 is the sole forum to challenge Section 14 orders. The Court rejected the petitioner’s attempt to invoke writ jurisdiction as an alternative to the statutory remedy, noting that such bypassing undermines the legislative intent behind the SARFAESI Act.
The Verdict
The petitioner’s writ petition was dismissed. The Court held that repeated applications under Section 14 of the SARFAESI Act are permissible if justified by reasonable grounds, and that challenges to such applications must be raised exclusively before the Debt Recovery Tribunal under Section 17. The petitioner was granted liberty to file a Section 17 application within seven days.
What This Means For Similar Cases
Section 17 Is the Exclusive Remedy
- Practitioners must file applications under Section 17 to challenge any Section 14 order, regardless of repetition or alleged abuse
- Writ petitions under Article 226 will be dismissed unless there is a clear violation of fundamental rights or jurisdictional error beyond the DRT’s competence
- Courts will not entertain challenges to enforcement orders as a substitute for statutory remedies
Reasonable Grounds Justify Repeated Enforcement
- A fresh Section 14 application is valid if supported by new evidence: asset depreciation, discovery of additional security, or borrower non-cooperation
- Banks must document the basis for each application to avoid claims of harassment
- Legal advisors should advise clients to maintain contemporaneous records of asset condition and borrower conduct to substantiate subsequent applications
Procedural Discipline Is Mandatory
- Secured creditors must not file successive Section 14 applications without a material change in circumstances
- DRTs are expected to scrutinize the justification for repeated applications during Section 17 proceedings
- Petitioners may seek interim relief under Section 17 to stay enforcement pending adjudication
