Sanchayita Lahkar

The High Court of Madhya Pradesh Division Bench of Justice Anand Pathak and Justice Hirdesh directed the respondent authorities to provide necessary assistance to dispossess the borrower and restore the possession of a mortgaged property to a secured creditor. The Court allowed the writ petition filed under Article 226 of the Constitution of India and mandated that the respondents act in accordance with the provisions of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The directive was issued in light of the petitioner's grievance that despite an earlier handover of the secured property, the borrower had re-entered it illegally, and the authorities had refused to intervene further.

The petitioner, a financial institution within the scope of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ("Securitization Act"), had granted a loan against mortgaged property. Following the borrower’s default on repayment, the petitioner served a notice under Section 13(2) of the Act. Upon no repayment being made, an application was filed under Section 14 before the District Magistrate, Guna, who issued an order on 04.09.2023 directing the Tahsildar to take possession of the mortgaged property.

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Despite the District Magistrate’s order, possession was not initially handed over, prompting the petitioner to file a writ petition (W.P. No.2643/2024), which ultimately led to the handover of the property on 29.07.2024. However, the borrower and family members allegedly re-entered the property and refused to vacate it. Upon approaching the authorities for re-execution, the petitioner was denied assistance on the grounds that the order had already been executed.

The petitioner submitted that the respondents failed to fulfil their statutory duty under the Securitization Act by refusing to re-assist in taking possession. It was contended that such inaction undermines the rule of law and jeopardizes public funds held by financial institutions. The petitioner sought direction from the High Court to compel the authorities to act again in accordance with Section 14 of the Act.

The State, through its counsel, opposed the petition, arguing that once possession had been handed over, the authorities had complied with their obligations under the Securitization Act. The State further contended that it was the petitioner's responsibility to maintain possession and raised the issue of alternative remedies.

The Court recorded that the matter concerned restoration of possession to a secured creditor after unauthorized re-entry by the borrower. The Court observed that: "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."

Referring to the aims and objects of the Securitization Act, the Court quoted: "This has resulted in slow pace of recovery of defaulting loans and mounting levels of non-performing assets of banks and financial institutions... [The Act enables] 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 reconstruction."

On the issue of re-execution, the Court stated: "From perusal of the aforesaid provision, it is clear that there is no legal bar on re-executing the order of possession or providing re-assistance to the secured creditor as tried to be projected by the respondents through their return."

The Court further remarked: "Illegality cannot be permitted to be perpetuated. Here, in the present case, the borrower with their family members, re-entered 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."

The conduct of the borrower was viewed unfavourably: "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."

Regarding possible further action, the Court stated: "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 also for criminal trespass and other related offences."

As to the plea of alternative remedy, the Court recorded: "Since the Securitization Act 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."

The judgment cited similar judgements from the Bombay High Court, including W.P. No.6805/2023 (Kotak Mahindra Bank Vs. State of Maharashtra) where the Court held: "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 Court also referred to the decision in W.P. No.1080/2024 (HDB Financial Services Ltd. Vs. The State of Maharashtra), where directions were issued to re-execute the order.

The Madhya Pradesh High Court noted that its own Full Bench had held in W.P. No.11500/2020: "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."

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In conclusion of observations, the Court affirmed: "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)."

The Court allowed the writ petition filed by the petitioner. It issued the following directions:

The respondent authorities were directed to provide necessary assistance to the petitioner to dispossess the borrower from the mortgaged property. The Court mandated that possession of the property in question be handed over to the petitioner in accordance with law. It stated: "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."

Advocates Representing the Parties:

For the Petitioners: Shri Ajay Sharma – Advocate

For the Respondents: Shri G.K. Agarwal – Government Advocate

Case Title: Capri Global Housing Finance Ltd. Vs. The State of Madhya Pradesh and Ors.

Case Number: Writ Petition No. 21222 of 2025

Bench: Justice Anand Pathak and Justice Hirdesh