Bench aligns with Bombay High Court view, permits fresh plea where borrower forcibly retakes possession post-execution
In a recent ruling that strengthens the position of secured creditors under the SARFAESI regime, the Allahabad High Court has held that the District Magistrate is competent to entertain a fresh application under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, SARFAESI where the borrower unlawfully re-enters the secured property after possession has already been delivered to the bank.
A Division Bench comprising Justice Shekhar B. Saraf and Justice Praveen Kumar Giri, while allowing the writ petition filed by DCB Bank, held that a fresh application under Section 14 of the SARFAESI Act is maintainable where the borrower has unlawfully re-entered the secured asset after possession has already been delivered to the secured creditor.
The petitioner bank had advanced a loan of ₹18 lakhs, secured by way of an equitable mortgage. Following the borrower’s default, the account was classified as a Non-Performing Asset. Possession proceedings were initiated under Sections 13 and 14 of the SARFAESI Act. The District Magistrate allowed the application under Section 14, and possession was handed over to the bank. Subsequently, the mortgaged property was auctioned and sold, with a sale certificate issued to the successful bidder.
However, the borrower allegedly broke open the locks and retook possession of the premises. When the bank sought redress through a second application under Section 14, the authorities refused to act, asserting that once possession was granted, no fresh application was maintainable.
Challenging this inaction, the petitioner invoked Article 226 of the Constitution, urging the High Court to direct restoration of possession.
The Court categorically endorsed the view taken by the Bombay High Court in The Nashik Merchant Co-operative Bank (Multi State Scheduled Bank) v. The District Collector, Jalna & Ors., where it was held that, “We do not find any prohibition under the scheme of the SARFAESI Act that comes in the way of District Magistrate or his delegate to re-exercise the powers to execute the orders passed under section 14.”
Relying on the factual and legal matrix in Nashik Merchant Co-operative Bank and allied precedents from the Andhra Pradesh, Kerala, and Madhya Pradesh High Courts, the Allahabad High Court observed that allowing trespassers to defy judicial orders would amount to undermining the rule of law. It cited with approval the Bombay High Court’s condemnation of such conduct as an “assault on the law and statute” and a “modus operandi to defeat ends of justice and fair play.”
Allowing the petition, the Bench directed, “Upon considering the issue at hand, we are at consensus ad idem of the view taken by the Bombay High Court, and accordingly, direct the Additional District Magistrate to grant him opportunity of hearing to the petitioner and pass a fresh order on the fresh application under Section 14 of SARFAESI Act filed before him, in accordance with law. The entire exercise should be completed within a period of two months by the respondent concerned.”
The judgment ensures that financial institutions are not left remediless against deliberate acts aimed at undermining the execution of possession orders under the SARFAESI Act. It further clarifies that the powers conferred upon the District Magistrate under Section 14 do not lapse once exercised, particularly where legal possession is subsequently disrupted through unlawful means.
Case Title: DCB Bank Ltd Vs. State Of Uttar Pradesh And 7 Others
Case No.: Writ - C No. - 18575 of 2025
Coram: Justice Shekhar B. Saraf and Justice Praveen Kumar Giri
Advocate for Petitioner: Advocate Aniket Raj
Advocate for Respondent: Additional Chief Standing Counsel Advocates Dilip Kumar Kesharwani
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