SARFAESI Act Does Not Mandate Bank to Approach DM for Taking Possession: Madhya Pradesh HC

The Madhya Pradesh High Court has clarified that a secured creditor is not mandatorily required to invoke Section 14 of the SARFAESI Act, 2002 for taking physical possession of secured assets, holding that recourse to the District Magistrate or Chief Metropolitan Magistrate is only necessary when assistance is required.

The Court set aside the orders passed by the Debts Recovery Tribunal, Jabalpur and the Debts Recovery Appellate Tribunal, Allahabad, which had directed UCO Bank to restore possession of mortgaged properties to the borrower and refund the auction purchaser’s money.

The Division Bench comprising Justice Anand Pathak and Justice Pushpendra Yadav allowed a writ petition filed by UCO Bank challenging the DRT order dated September 28, 2021 and the DRAT order dated May 14, 2025. The petition arose from SARFAESI proceedings initiated against M/s Asha Oil Industries and its proprietors, who had availed a cash credit facility of ₹5 crore and mortgaged two properties situated in Malanpur Industrial Area, Bhind and Laxmibai Colony, Gwalior.

The loan account was classified as a Non-Performing Asset in October 2018, following which statutory notices under Sections 13(2) and 13(4) of the SARFAESI Act were issued and published. Physical possession of the secured assets was thereafter taken by the Bank.

Aggrieved, the borrowers approached the DRT under Section 17 of the Act, contending that the Bank had taken possession illegally without invoking Section 14 and without the presence or consent of the borrowers. Accepting this contention, the DRT directed restoration of possession and refund of auction proceeds, which was later affirmed by the DRAT.

Appearing for UCO Bank, Advocate Praveen Surange submitted that the tribunals had committed a patent error by holding that invocation of Section 14 was mandatory in every case of physical possession. He argued that Section 13(4) read with Rule 8 of the Security Interest (Enforcement) Rules, 2002 expressly empowers an authorised officer to take possession without court intervention, and Section 14 only provides an enabling mechanism when assistance of the Magistrate is required. Reliance was placed on Supreme Court judgments including Standard Chartered Bank v. Noble Kumar and Transcore v. Union of India.

Opposing the petition, Advocate Santosh Agrawal contended that the Bank had forcibly taken possession with police assistance and that failure to approach the Magistrate vitiated the entire process. He supported the findings of the DRT and DRAT and sought dismissal of the writ petition.

After examining the statutory scheme and precedents, the High Court held that the interpretation adopted by the tribunals was contrary to law. The Bench observed that Section 13 of the SARFAESI Act permits enforcement of security interest without intervention of any court or tribunal, and Section 14 comes into play only when the secured creditor seeks administrative assistance for taking possession. The Court noted that Rule 8 of the 2002 Rules authorises the Bank’s officer to take possession by issuing and affixing a possession notice and that the presence of the borrower at the time of taking possession is not a statutory requirement.

Relying on the Supreme Court’s exposition in Standard Chartered Bank, the Bench reiterated that a secured creditor has three options: to take possession directly if there is no resistance, to approach the Magistrate in case of resistance, or to directly invoke Section 14 as a matter of choice. It further observed that drawing a rigid distinction between symbolic and physical possession finds no place in the statutory framework.

The Court also took note of the factual aspect that the factory premises were closed for several years and the residential property was under construction, with no resistance offered at the time possession was taken, as reflected in the panchnama. It cautioned that accepting the borrower’s interpretation would defeat the object of the SARFAESI Act and encourage defaulters to stall recovery proceedings through procedural objections.

Holding that the DRT and DRAT had erred in law, the High Court set aside both impugned orders and permitted UCO Bank to proceed in accordance with law from the appropriate stage. The writ petition was accordingly allowed.

Case Title: UCO Bank v. M/S Asha Oil Industries & Others

Judgment Date: 28.01.2026

Bench: Justice Anand Pathak and Justice Pushpendra Yadav