Police Must Restore Possession to Bank Under SARFAESI Act: Rajasthan High Court

In a significant ruling aimed at upholding the rule of law regarding financial security, the Rajasthan High Court has directed the police authorities in Bhilwara to take immediate action to restore physical possession of a mortgaged property to a private lender.

The order, passed by Hon'ble Mr. Justice Sanjeet Purohit, serves as a stern reminder that the recovery processes mandated under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, are not to be undermined by the unlawful actions of defaulting borrowers.

Case Background: An Alleged Breach of Authority The petitioner, Roha Housing Finance Pvt. Ltd., had advanced a loan to Mukesh Kumar Soni and Santosh Devi. Following a failure to repay the loan, the account was declared a Non-Performing Asset (NPA). The bank subsequently initiated proceedings under the SARFAESI Act, successfully taking physical possession of the mortgaged property—located in Village Mali Kheda, Bhilwara—with the assistance of local police on January 28, 2026.

However, the bank alleged that the borrowers forcibly breached the premises and reoccupied the property, effectively nullifying the recovery process. Despite the lender’s formal complaints to the Station House Officer (SHO) of Kotdi, no action was taken, prompting the bank to file a writ petition under Article 226 of the Constitution of India seeking judicial intervention.

Arguments Presented The counsel for the petitioner argued that the borrowers’ act of breaking into the secured premises after the bank had already taken lawful possession constituted an "assault on the rule of law ." The bank expressed frustration over the "studied silence" of the police authorities, who, despite being the primary mechanism for enforcement, had failed to protect the interests of the lender.

By failing to act, the petitioner contended that the police were indirectly allowing the borrowers to circumvent statutory recovery measures, thereby undermining the efficacy of the SARFAESI Act.

Legal Analysis and Observations The High Court’s intervention underscores the gravity of police assistance in SARFAESI matters. The Court made it clear that once a bank has obtained possession through legal channels, the sanctity of that possession must be maintained.

Key Observations

  • "This Court deems it just and appropriate to dispose of present writ petition with directions to respondent No. 2 Superintendent of Police, Bhilwara and respondent No. 3 SHO, Kotdi, District Bhilwara to act immediately and take appropriate action for restoring the possession of mortgaged property to petitioner - bank, in accordance with law."
  • "This Court is compelled to observe that if petitioner – bank is not allowed to take possession of said property, it will amount to clear case of defiance of law."
  • "The Superintendent of Police, Bhilwara and SHO, Kotdi, District Bhilwara are under an obligation to act in consonance with the provisions of law for restoring the possession."

Court’s Decision and Future Implications Justice Sanjeet Purohit directed the Superintendent of Police, Bhilwara, and the SHO of Kotdi to restore the possession of the property to the bank within fifteen days from the receipt of the order.

This judgment acts as a vital precedent for financial institutions facing local defiance during recovery proceedings. It reaffirms that the state’s executive arm cannot remain passive when parties blatantly attempt to subvert court-backed financial recovery, ensuring that the SARFAESI Act remains a robust tool for non-performing asset management in India.