Rajasthan High Court - Jodhpur

Au Small Finance Bank Ltd vs The District Collector And District ... on 11 November, 2025

Author: Nupur Bhati

Bench: Nupur Bhati

[2025:RJ-JD:48323]

      HIGH COURT OF JUDICATURE FOR RAJASTHAN AT
                       JODHPUR
                S.B. Civil Writ Petition No. 21421/2025

Au Small Finance Bank Ltd., Having Its Office At 5Th Floor,
Shantivan Building, Sardarpura, Jodhpur Having Its Registered
Office At 19A Dhulasar Garden, Ajmer Road Jaipur Rajasthan,
302001.
                                                                     ----Petitioner
                                     Versus
1.       The District Collector And District Magistrate, Churu
         Rajasthan.
2.       Karni General Store Propritor German Songh, R/o Village
         Biran Tehsil Rajgarh District Churu.
3.       German Singh S/o Indra Singh, R/o Village Biran Tehsil
         Rajgarh District Churu.
4.       Smt. Ritu Devi W/o Kamal Singh, R/o Village Biran Tehsil
         Rajgarh District Churu.
5.       Amit Singh S/o German Singh, R/o Village Biran Tehsil
         Rajgarh District Churu.
6.       Suresh Singh S/o German Singh, R/o Village Biran Tehsil
         Rajgarh District Churu.
                                                                  ----Respondents


For Petitioner(s)          :     Mr. Vijay Purohit


               HON'BLE DR. JUSTICE NUPUR BHATI

Order 11/11/2025

1. The present writ petition has been filed by the petitioner

seeking the following reliefs:-

"xxxxx I. The present writ petition may kindly be allowed. II. The order impugned dated 1.10.2025 Annexure 3 may kindly be quashed and set side and allow the application filed under section 14 of the SARFASEI ACT 2002. xxxxx"

2. Brief facts of the case are that the respondents No.2 and 3-

Borrowers availed a loan facility from the petitioner-Bank.

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However, the Borrower failed to honor the repayment schedule

and defaulted in payment of the equated monthly installments

(EMIs) as agreed. Consequently, the account of the Borrowers was

classified as a Non-Performing Asset (NPA) in accordance with

regulatory norms. Thereafter, proceedings were initiated under the

provisions of the Securitization and Reconstruction of Financial

Assets and Enforcement of Security Interest Act, 2002

(hereinafter referred to as "the SARFAESI Act, 2002"). An

application under Section 14 of the SARFAESI Act, 2002 was filed

before the respondent authority seeking assistance in taking

possession of the secured asset. Upon registration of the said

application, certain objections were raised by the learned court

regarding non-submission of the possession notice under Section

13(4) of the Act. The petitioner-Bank contested such objections,

submitting that issuance or filing of a possession notice under

Section 13(4) is not a prerequisite for invoking jurisdiction under

Section 14 of the SARFAESI Act. The learned respondent authority,

after hearing the submissions of the petitioner-Bank, dismissed

the said application vide order dated 01.10.2025. The impugned

order dated 01.10.2025 (Annex.3) is alleged to be arbitrary,

illegal, and contrary to the provisions of the SARFAESI Act, 2002,

compelling the petitioner to approach this Court by way of the

present writ petition.

3. Learned counsel for the petitioner submits that the

application filed under Section 14 of the Act of 2002 was rejected

on the ground that the petitioner failed to comply with the

provisions of Section 13(4) of the SARFAESI Act, 2002. Referring

to the order dated 20.11.2024 passed by a Co-ordinate Bench of

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this Court at Jaipur in S.B. Civil Writ Petition No. 15/2023: Au

Small Finance Bank Limited v. Shri Rambharos & Ors.,

learned counsel for the petitioner submits that while invoking

jurisdiction under Section 14 of the SARFAESI Act, the secured

creditor is required neither to serve a notice under Section 13(4),

nor to resort to the provisions under Rule 8 of the Rules, 2002.

4. Learned counsel further submits that the impugned order

dated 01.10.2025 (Annex-3) has been passed in total disregard of

the law laid down by the Hon'ble Supreme Court in Standard

Chartered Bank v. Noble Kumar & Ors.: (2013) 9 SCC 620.

5. Relevant paragraphs thereof are reproduced hereunder:

"29. It is in the above-mentioned background of the legal frame of Sections 13 and 14, we are required to examine the correctness of the conclusions recorded by the High Court. Having regard to the scheme of Sections 13 and 14 and the object of the enactment, we do not see any warrant to record the conclusion that it is only after making an unsuccessful attempt to take possession of the secured asset, a secured creditor can approach the Magistrate. No doubt that a secured creditor may initially resort to the procedure under Section 13(4) and on facing resistance, he may still approach the Magistrate under Section 14. But, it is not mandatory for the secured creditor to make attempt to obtain possession on his own before approaching the Magistrate under Section 14. The submission that such a construction would deprive the borrower of a remedy under Section 17 is rooted in a misconception of the scope of Section 17.

30. The "appeal" under Section 17 is available to the borrower against any measure taken under Section 13(4). Taking possession of the secured asset is only one of the measures that can be taken by the secured creditor. Depending upon the nature of the secured asset and the terms and conditions of the security agreement, measures other than taking the possession of the secured asset are possible under Section 13(4). Alienating the asset either by lease or sale etc. and appointing a person to manage the secured asset are some of those possible measures. On the other hand, Section 14 authorises the Magistrate only to take possession of the property and forward the asset along with the connected documents to the borrower.

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Therefore, the borrower is always entitled to prefer an "appeal" 15 under Section 17 after the possession of the secured asset is handed over to the secured creditor. Section 13(4)(a) declares that the secured creditor may take possession of the secured assets. It does not specify whether such a possession is to be obtained directly by the secured creditor or by resorting to the procedure under Section 14. We are of the opinion that by whatever manner the secured creditor obtains possession either through the process contemplated under Section 14 or without resorting to such a process obtaining of the possession of a secured asset is always a measure against which a remedy under Section 17 is available.

31 to 33. xxx xxx xxx

34. The High Court recognized that the language of Rule 8 does not expressly warrant the compliance with the procedure contemplated therein when Section 14 is resorted to for obtaining possession of the secured asset:

In the absence of the rule, the strict compliance of the provisions of Section 13(4) and Rule 8, even in case of possession taken by virtue of an order under Section 14, assumes importance.

35. We are of the opinion that the High Court clearly erred in recording such a conclusion. The language of Rule 8 does not demand such a construction.....

36. xxx xxx xxx

37. Thus, there will be three methods for the secured creditor to take possession of the secured assets:

(i) The first method would be where the secured creditor gives the requisite notice under Rule 8(1) and where he does not meet with any resistance. In that case, the authorised officer will proceed to take steps as stipulated under Rule 8(2) onwards to take possession and thereafter for sale of the secured assets to realise the amounts that are claimed by the secured creditor

(ii) The second situation will arise where the secured creditor meets with resistance from the borrower after the notice under Rule 8(1) is given. In that case he will take recourse to the mechanism provided under Section 14 of the Act viz. making application to the Magistrate. The Magistrate will scrutinize the application as provided in Section 14, and then if satisfied, appoint an officer subordinate to him as provided under Section 14 (1)(A) to take possession of the assets and documents. For that purpose the Magistrate may authorise the officer concerned to use such force as may be necessary. After the possession is taken the assets and documents will be forwarded to the secured creditor.

(iii) The third situation will be one where the secured creditor approaches the Magistrate concerned directly

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under Section 14 of the Act. The Magistrate will thereafter scrutinize the application as provided in Section 14, and then if satisfied, authorise a subordinate officer to take possession of the assets and documents and forwards them to the secured creditor as under Clause (ii) above.

38. In any of the three situations, after the possession is handed over to the secured creditor, the subsequent specified provisions of Rule 8 concerning the preservation, valuation and sale of the secured assets,, and other subsequent rules from the Security Interest (Enforcement) rules, 2002, shall apply."

6. Also, the relevant paragraphs of the order dated 20.11.2024

passed by a Co-ordinate Bench of this Court at Jaipur in the case

of Au Small Finance Bank Limited v. Shri Rambharos & Ors.

(supra), reads as under:-

"In the backdrop of aforesaid precedential law, it is established that before invoking jurisdiction of Magistrate under Section 14 of the Act of 2002, the secured creditor is required neither to serve a notice under Section 13 (4) of the Act of 2002 nor, to resort to the provisions under Rule 8 of the Rules of 2002. In view thereof, the findings recorded by the learned Magistrate vide order impugned dated 16.09.2022 rejecting the application and the order impugned dated 18.10.2022 rejecting the review petition are not sustainable in the eye of law and the writ petition deserves to be allowed.

Since, it is a well established legal principle that before adjudicating an application under Section 14 of the Act of 2002 the borrower or the third party is not required to be heard by the Magistrate. (For reference: judgment of this Court dated 09.02.2018 in the case of Anil Kumar Sotwal Vs. District Magistrate cum District Collector: S.B. Civil Writ Petition No.1958/2018), this writ petition is being allowed in following terms without issuing notice to the respondents.

1. The order impugned dated 16.09.2022 as also the order dated 18.10.2022 are quashed and set aside.

2. Since, under the order impugned, Learned Magistrate has not recorded his satisfaction on the contents of the affidavit submitted by the petitioner-bank under proviso to Section 14, the matter is remanded back to decide the application afresh taking into consideration the judgment of the Hon'ble Supreme Court of India in the Case Standard Chartered Bank & Ors. (Supra).

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3. As the petitioner-bank had filed the application under Section 14 of the Act of 2002 more than two years ago, it is directed to file a fresh affidavit in terms of proviso to Section 14 of the Act of 2002."

7. In view of the settled legal position enunciated by the

Hon'ble Apex Court in the case of Standard Chartered Bank v.

Noble Kumar & Ors. (supra) and reiterated by the Co-ordinate

Bench of this Court at Jaipur in its order dated 20.11.2024 in the

case of Au Small Finance Bank Limited v. Shri Rambharos &

Ors. (supra), the impugned order dated 01.10.2025 (Annex-3) is

unsustainable in the eye of law and is accordingly quashed and set

aside.

8. The matter is remanded back to decide the application of the

petitioner-Bank afresh taking into consideration the judgment of

the Hon'ble Supreme Court in Standard Chartered Bank v.

Noble Kumar & Ors. (supra).