SARFAESI Act | District Magistrate Cannot Adjudicate Disputes Between Borrower And Secured Creditor While Assisting Possession: Madhya Pradesh High Court

"Section 14 does not involve an adjudicatory process qua points raised by the borrower against the secured creditor taking possession of secured assets." Madhya Pradesh High Court, in a ruling dated 7 October 2026, held that the District Magistrate (DM) or Additional District Magistrate (ADM) exercises a purely ministerial function under Section 14 of the SARFAESI Act and lacks the jurisdiction to adjudicate upon the merits of disputes between the borrower and the secured creditor.

A bench of Justice Sandeep N. Bhatt observed that the authority’s role is limited to verifying compliance with the procedural requirements of the Act rather than conducting a trial-like inquiry.

Limited Scope of Section 14 Proceedings

The petitioner, Canara Bank, challenged an order passed by the Additional District Magistrate, Indore, who had refused to grant assistance for taking physical possession of a secured asset. The bank contended that the ADM had overstepped its jurisdiction by entering into an adjudicatory process regarding the validity of the debt and the underlying documents, rather than confining itself to the procedural safeguards mandated by the statute.

Verification of Statutory Compliance

The court underscored that the ADM’s mandate under Section 14 is confined to ensuring that the application is accompanied by a duly affirmed affidavit as prescribed by the proviso to Section 14(1). The authority must verify that the bank has complied with the notice requirements under Section 13(2) and Section 13(4) of the Act, and that the bank possesses a valid and subsisting security interest.

Court Rejects Adjudicatory Role for DM

Relying on the Supreme Court’s dictum in M/s R.D. Jain and Co. vs. Capital First Ltd and others, the High Court reiterated that the legislature did not intend for the DM to act as an adjudicating forum for borrower grievances. The bench emphasized that any contention regarding the illegality of the security interest or the classification of the account as a Non-Performing Asset (NPA) must be addressed through the appropriate legal channels provided under the SARFAESI Act, not before the executive authority tasked with assisting in the physical recovery of assets.

"The ADM has exceeded its jurisdiction by entering into the process of adjudication, which is not permissible under the law."

The court further noted that once the statutory requirements—including the filing of the requisite affidavit—are met, the DM is obligated to pass an order for possession within the stipulated timeline. By refusing to facilitate the process based on a subjective appraisal of the merits of the bank's claim, the authority had essentially paralyzed the mechanism established by the statute.

Direction for Fresh Consideration

Consequently, the High Court quashed the impugned order passed by the ADM. The petitioner-bank has been granted liberty to file a fresh application under Section 14. The ADM has been directed to decide the matter afresh, strictly in accordance with the scope of Section 14, within 30 days of receiving a certified copy of the order, without engaging in any adjudicatory process regarding the underlying debt disputes.

Date of Decision: 07 October 2026