Madhya Pradesh High Court
Au Small Finance Bank Ltd Having Its ... vs The State Of Madhya Pradesh on 22 August, 2025
Author: Anand Pathak
Bench: Anand Pathak
NEUTRAL CITATION NO. 2025:MPHC-GWL:18926
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IN THE HIGH COURT OF MADHYA PRADESH
AT GWALIOR
BEFORE
HON'BLE SHRI JUSTICE ANAND PATHAK
&
HON'BLE SHRI JUSTICE PUSHPENDRA YADAV
ON THE 22nd OF AUGUST, 2025
WRIT PETITION No. 31163 of 2025
AU SMALL FINANCE BANK LTD HAVING ITS REGISTERED OFFICE
AT 19A DHULESHWAR GARDEN THROUGH ITS AUTHORIS
Versus
THE STATE OF MADHYA PRADESH AND OTHERS
Appearance:
Shri Ajay Sharma - Advocate for the petitioner.
Shri Sohit Mishra - Government Advocate for the respondents/State.
ORDER
Per: Justice Anand Pathak
The present petition under Article 226 of the Constitution of India
is preferred by the petitioner seeking following reliefs:
"i) That, this Hon'ble Court be pleased to issue
directions to the respondent authorities to render
necessary assistance with the aid and assistance of
Police for restoration of secured assets in the hands of
Authorized Officer of the petitioner in the light of the
judgment passed in W.P.1681/2025.
ii) Authorities may be directed to take appropriate
action against the borrowers for illegal act,
iii) Any other relief deemed fit and expedient in the
facts of the case may also be granted to the petitioner."
2. Precisely stated facts of the case, giving rise to the present
petition are that petitioner is a financial institution as defined under
the Securitization and Reconstruction of Financial Assets and Enforcement
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of Security Interest Act, 2002 (hereinafter referred to as "the Securitization
Act"). Petitioner company extended the loan facility to the borrower in lieu
of property mortgaged by the borrower. Thereafter, since borrower failed to
pay the loan amount, therefore, petitioner issued a notice under Section 13(2)
of the the Securitization Act but borrower did not chose to repay the
loan amount. Therefore, petitioner moved an application under Section 14 of
the the Securitization Act before the District Magistrate, Vidisha for taking
possession of the property from the borrower. That application was allowed
on 11.11.2022 directing the concerned Tahsildar to take possession of the
property under mortgage.
3 . Possession was handed over to the petitioner on 01.03.2023.
However, borrower and his family members again reentered into the
possession of the mortgaged property and thereafter, not ready to vacate the
mortgaged premises. Petitioner again approached the respondents authorities
but they denied to help the petitioner on the pretext that the order of District
Magistrate, Vidisha dated 11.11.2022 has already been executed and now
they cannot re-execute the said order. Therefore, petitioner is before this
Court.
4. It is the submission of learned counsel for the petitioner
that respondents are not adhering to the provisions of the Securitization Act
as they are under bounden duty to provide assistance to the secured creditor
to recover loan in case of default. The reason assigned by the respondents
authorities for not executing the order of handing over of possession to the
petitioner again, is unsustainable and amounts to mockery of rule of law.
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Petitioner is a financial institution having the money of public at large,
therefore, as a secured creditor, respondents authorities are required to extend
assistance to recover the loan from the borrower. Thus, prayed for
suitable directions to the respondents authorities.
5. Learned counsel for the respondents/State opposed the
submission and prayed that petitioner has been handed over the possession of
the mortgaged property but it failed to maintain it and borrower again entered
into the mortgaged property, therefore, once possession of the mortgaged
property is handed over to the petitioner, provisions of the Securitization Act
have been followed by the respondents. The plea of alternative remedy has
also been raised. Thus, prayed for dismissal of this petition.
6. Heard learned counsel for the parties and perused the
documents appended thereto.
7. This is a case where the petitioner which is a financial institution
is seeking the relief of restoration of possession of secured
creditor. Borrower reentered into the possession of the mortgaged
property. Earlier the respondents authorities handed over possession of
the mortgaged property to the petitioner but now they are not ready
to dispossess the borrower from the mortgaged property ignoring the fact that
borrower is under illegal possession of the mortgaged property.
8. The Aims and Objects of the Securitisation Act is worth
consideration because this Act addresses the predicament of the creditors
and difficulties faced by them for realization of their debts/ dues
from borrowers. For ready reference, Aims and Objects of the Act
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are reproduced as under:-
"The financial sector has been one of the key drivers
in India's efforts to achieve success in rapidly
developing its economy. While the banking industry in
India is progressively complying with the international
prudential norms and accounting practices there are
certain areas in which the banking and financial sector
do not have a level playing field as compared to other
participants in the financial markets in the world. The is
no legal provision for facilitating securitisation of
financial assets of banks and financial institutions.
Further, unlike international banks, the banks and
financial institutions in India do not have power to take
possession of securities and sell them. Our existing legal
framework relating to commercial transactions has not
kept pace with the changing commercial practices and
financial sector reforms. This has resulted in slow pace
of recovery of defaulting loans and mounting levels of
non-performing assets of banks and financial
institutions. Narasimham Committee I and II
and Andhyarujina Committee constituted by the
Central Government for the purpose of examining
banking sector reforms have considered the need for
changes in the legal system in respect of these areas.
These committees, inter alia, have suggested enactment
of a new legislation for securitisation and empowering
banks and financial institutions to take possession of the
securities and to sell them without the intervention of
the court. Acting on these suggestions, the
Securitisation and Reconstruction of Financial Assets
and Enforcement of Security Interest Ordinance, 2002
was promulgated on 21-06-2002 to regulate
securitisation and reconstruction of financial assets and
enforcement of security interest and for
matters connected therewith or incidental thereto. The
provisions of the Ordinance would enable banks and
financial institutions to realise long-term assets, manage
problem of liquidity, asset liability mismatches and
improve recovery by exercising powers to take
possession of securities, sell them and reduce non-
performing assets by adopting measures for recovery or
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reconstruction."
9 . Section 14 of the Securitization Act deals in respect of
providing assistance to the secured creditor to recover its loan, which reads
as under:
"14. Chief Metropolitan Magistrate or District
Magistrate to assist secured creditor in taking
possession of secured asset.--(1) Where the possession
of any secured assets is required to be taken by the
secured creditor or if any of the secured assets
is required to be sold or transferred by the secured
creditor under the provisions of this Act, the secured
creditor may, for the purpose of taking possession or
control of any such secured assets, request, in writing,
the Chief Metropolitan Magistrate or the District
Magistrate within whose jurisdiction any such secured
asset or other documents relating thereto may be
situated or found, to take possession thereof, and the
Chief Metropolitan Magistrate or, as the case may be,
the District Magistrate shall, on such request being
made to him--
(a) take possession of such asset and documents relating
thereto; and
(b) forward such asset and documents to the secured
creditor:
Provided that any application by the secured creditor
shall be accompanied by an affidavit duly affirmed by
the authorised officer of the secured creditor, declaring
that--
(i) the aggregate amount of financial assistance granted
and the total claim of the Bank as on the date of filing
the application;
(ii) the borrower has created security interest over
various properties and that the Bank or Financial
Institution is holding a valid and subsisting security
interest over such properties and the claim of the Bank
or Financial Institution is within the limitation period;
(iii) the borrower has created security interest over
various properties giving the details of properties
referred to in subclause (ii) above;
(iv) the borrower has committed default in repayment of
the financial assistance granted aggregating the
specified amount;
(v) consequent upon such default in repayment of the
financial assistance the account of the borrower has
been classified as a non-performing asset;
(vi) affirming that the period of sixty days notice as
required by the provisions of sub-section (2) of section
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13, demanding payment of the defaulted financial
assistance has been served on the borrower;
(vii) the objection or representation in reply to the
notice received from the borrower has been considered
by the secured creditor and reasons for non-acceptance
of such objection or representation had been
communicated to the borrower;
(viii) the borrower has not made any repayment of the
financial assistance in spite of the above notice and the
Authorised Officer is, therefore, entitled to take
possession of the secured assets under the provisions of
sub-section (4) of section 13 read with section 14 of the
principal Act;
(ix) that the provisions of this Act and the rules made
thereunder had been complied with:
Provided further that on receipt of the affidavit from
the Authorised Officer, the District Magistrate or the
Chief Metropolitan Magistrate, as the case may be, shall
after satisfying the contents of the affidavit pass suitable
orders for the purpose of taking possession of the
secured assets [within a period of thirty days from the
date of application]:
[Provided also that if no order is passed by the
Chief Metropolitan Magistrate or District Magistrate
within the said period of thirty days for reasons beyond
his control, he may, after recording reasons in writing
for the same, pass the order within such further period
but not exceeding in aggregate sixty days.]
Provided also that the requirement of filing affidavit
stated in the first proviso shall not apply to proceeding
pending before any District Magistrate or the Chief
Metropolitan Magistrate, as the case may be, on the date
of commencement of this Act.]
[(1A) The District Magistrate or the Chief
Metropolitan Magistrate may authorise any officer
subordinate to him,--
(i) to take possession of such assets and documents
relating thereto; and
(ii) to forward such assets and documents to the
secured creditor.]
(2) For the purpose of securing compliance with the
provisions of sub-section (1), the Chief Metropolitan
Magistrate or the District Magistrate may take or cause
to be taken such steps and use, or cause to be used, such
force, as may, in his opinion, be necessary.
(3) No act of the Chief Metropolitan Magistrate or the
District Magistrate [any officer authorised by the Chief
Metropolitan Magistrate or District Magistrate] done in
pursuance of this section shall be called in question in
any court or before any authority."
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10. From perusal of the aforesaid provision, it is clear that there is
no legal bar on re-executing the order of possession or providing
reassistance to the secured creditor as tried to be projected by
the respondents through their return. As such there is no legal impediment to
dispossess the borrower from the mortgaged property once he has illegally
entered into it.
11. Illegality cannot be permitted to be perpetuated. Here, in the
present case, the borrower with their family members, reentered into
the mortgaged property and thereafter if they are not vacating the mortgaged
property, then the petitioner being secured creditor has remedy to again
approach the respondents authorities to provide assistance and aid to take
possession back from the borrower by dispossessing him from the property
in question.
12. The tricks adopted by the borrower in entering into the
mortgaged property after taking over possession by the petitioner, cannot
be permitted to be rewarded. Once the borrower failed to repay the
loan amount then the property which is under mortgage should be taken over
by the petitioner as petitioner falls under the category of secured creditor. In
fact, by the action of borrowers, while re-entering into the premises, legally
owned by petitioner, made themselves vulnerable. Now, petitioner may
initiate criminal proceedings alsofor criminal trespass and other related
offences.
13. So far as the plea of respondents in relation to petitioner having
other alternative remedy is concerned, since the Securitization Act
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itself provides mechanism for recovery of loan amount, therefore, in
the attending facts and circumstances of the case, no effective legal remedy
is available to the petitioner.
14. The High Court of Bombay in W.P. No.6805/2023 Kotak
Mahindra Bank Vs. State of Maharastra & Ors., has decided in similar
matter and vide order dated 30/06/2023, directed the State Authority
to restore the possession to the secured creditor. Relevant para 13 of the
judgment is reproduced as under:-
13. Considering the law laid down by the Division
Bench of this court and referred to by us above, we are
unable to agree with the submission made by the
learned AGP that the District Magistrate does not have
the power to reexecute his own order or that he has
become functus officio. If we were to take the view as
propounded by the learned AGP it would lead to a
complete chaos. We have no hesitation in stating that
the borrowers have devised a novel, unimaginable and
unsustainable modus operandi to defeat the ends of
justice. It is not only the mater of physical altercation by
assaulting the security guard appointed by the Petitioner
Bank and breaking open the lock and seal affixed on the
secured asset which is wholly illegal, but the same
would also tantamount to an assault on the law and the
statute itself. If, after orders are passed under section 14
for dispossession of the borrower, and the same are
inter-meddled with by any person including
the borrower, the same would result in a mockery of the
rule of law. In such a situation the Court cannot and
should not remain a mute spectator and allow the
illegality to continue. The tendency of trying to
overreach the law as well as the orders passed by
Judicial Authorities has to be nipped in the bud right
away, lest the rule of law shall suffer."
15. In the case of HDB Financial Services Limited Vs. The State
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of Maharashtra & Ors. (W.P. 1080/2024), The High Court of
Bombay directed the authorities to re-execute the order. In many similar
cases where the possession of the secured assets are wrongfully taken
from the secured creditor, authorities are directed by the Hon'ble High Court
to restore the possession and take appropriate action against the persons who
committed this wrong.
16. The Full Bench of this Court in W.P. No.11500/2020 also
observed that "Therefore,, it is clear that the action taken under section 14
of the Act by the District Magistrate or Chief Metropolitan Magistrate is not
adjudicatory but merely ministerial, consequent to the action taken by the
secured creditor requiring the District Magistrate or Chief Metropolitan
magistrate to assist the secure creditor to take possession of the secured asset
and their action would in effect be deemed to be an action for and on behalf
of the secured creditors."
17. If one can see powers of the revenue Authorities/
Executive Magistrate while keeping Section 14 of the SARFAESI Act
in juxtaposition to Section 248 of the MPLRC then it appears that authorities
deserve to execute the work again in case of such event as referred above.
18. Further, learned counsel for the petitioner seeks parity with the
order dated 16.06.2025 passed in W.P. No. 1681/2025.
19. In the conspectus of facts and circumstances of the case, this Court
is of the considered view that the respondent authorities are required
to provide assistance and aid to the petitioner in dispossessing the borrower
from the mortgaged property (in question). Accordingly, the writ petition
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preferred by the petitioner is allowed. Respondents are directed to provide
necessary assistance to the petitioner to dispossess the borrower from the
mortgaged property and hand over the possession of the property in question
to the petitioner in accordance with law.
20. Writ Petition stands allowed and disposed of in above terms.
(ANAND PATHAK) (PUSHPENDRA YADAV)
JUDGE JUDGE
SP
