The High Court of Judicature for Rajasthan (Jodhpur Bench) has held that police assistance provided for enforcing Section 14 SARFAESI orders is a statutory State function, and recovery of deployment costs from secured creditors is impermissible. The Court clarified that when a District Magistrate directs police assistance for taking possession of secured assets, the police act in furtherance of a statutory mandate and not as a private service provider.
The High Court asserted that State cannot recover police force charges from banks or other secured creditors merely because possession proceedings arise from a commercial lending transaction. Thus, the provision permitting recovery of police charges in certain situations relating to public events, gatherings or special arrangements cannot be invoked for implementation of Section 14 SARFAESI orders.
The Court found that the statutory scheme governing SARFAESI possession proceedings does not contemplate charging secured creditors for police assistance required to execute Magistrate’s orders. Hence, imposing additional costs on banks for obtaining possession of secured assets would hamper the speedy recovery mechanism envisaged by Parliament and undermine the effectiveness of the SARFAESI framework.
Briefly, the bank granted loans to various borrowers who subsequently defaulted, resulting in their accounts being classified as Non-Performing Assets (NPAs). The bank initiated recovery proceedings under the SARFAESI Act and, after taking statutory steps, approached the District Magistrate under Section 14 of the Act for assistance in obtaining physical possession of the secured properties. Orders were passed directing police assistance for taking possession.
However, the Rajasthan Police authorities demanded charges for deployment of police personnel. The bank challenged these demands and the related government circulars. While the Single Judge held that police charges could be levied, only as per Rule 10 of the Rajasthan Police Rules, 2008, the bank challenged that finding before the Division Bench.
The Division Bench comprising Justice Vinit Kumar Mathur and Justice Chandra Shekhar Sharma observed that Section 14 of the SARFAESI Act creates a complete statutory mechanism enabling secured creditors to obtain possession of secured assets through the assistance of the District Magistrate or Chief Metropolitan Magistrate. The Court noted that Section 14(2) specifically empowers the Magistrate to use or cause to be used necessary force for implementing possession orders. Therefore, police assistance provided in such cases is not a private service rendered to a bank but is part of the State’s obligation to enforce a statutory order.
The Court further held that orders passed under Section 14 possess a statutory character and their implementation is necessary to achieve the legislative objectives of the SARFAESI Act. When police personnel are deployed to enforce such orders, they are discharging a sovereign and statutory function of the State. Consequently, the cost of such deployment cannot be shifted to banks merely because the underlying transaction between the bank and borrower is commercial in nature.
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The Bench also found that Section 46 of the Rajasthan Police Act, 2007 permits recovery of charges only in specified situations such as occupations, gatherings, exhibitions, sales, entertainments or similar activities requiring additional police arrangements for public security or maintenance of public order. The provision does not contemplate charging fees for police assistance provided to implement statutory orders under Section 14 of the SARFAESI Act. Therefore, Section 46 could not be relied upon to justify the levy.
The Court emphasized that the SARFAESI Act was enacted to ensure speedy recovery of secured debts and reduce non-performing assets. Imposing police charges on secured creditors while enforcing Section 14 orders would dilute the effectiveness of the statutory recovery framework and undermine the very objective behind the legislation.
