High Court Slams 'Clear Disobedience': Forces Haryana to Hand Over Assets Under SARFAESI Act

In a scathing rebuke to state authorities, the Punjab and Haryana High Court at Chandigarh has directed Haryana officials to deliver physical possession of secured assets to IIFL Home Finance Ltd. within two months, while imposing Rs.50,000 costs on both Haryana and Punjab governments for repeatedly failing to enforce Section 14 of the SARFAESI Act, 2002. The Division Bench of Justice Suvir Sehgal and Justice Deepak Manchanda labeled the inaction as "clear disobedience," warning that further delays could invite contempt proceedings.

The Borrower's Default and the Battle for Possession

IIFL Home Finance Ltd., a secured creditor under the SARFAESI Act, extended a loan to a borrower who defaulted on repayments. Following standard procedure, IIFL initiated recovery by applying to the District Magistrate (respondent No. 2) under Section 14 for administrative assistance to take physical possession of the mortgaged property. On June 23, 2025, the District Magistrate passed an order (Annexure P-3) directing handover of the assets.

Despite this, lower authorities—including the Tehsildar-cum-Executive Magistrate and police—failed to act. Multiple notices were issued (on July 8, August 11, September 19, and December 10, 2025), requesting police aid, but possession remained undelivered even nine months later. Frustrated, IIFL filed CWP-7214-2026(O&M), seeking court intervention to enforce compliance.

Petitioner's Plea: Statutory Mandate Ignored

IIFL's counsel, Vineet Sehgal, argued that the respondents' inaction violated the "statutory mandate under Section 14," which requires expeditious assistance to secured creditors. The financial institution highlighted that despite the District Magistrate's clear order authorizing possession with police help—absent any court stay—the process stalled, paralyzing recovery efforts and defeating the Act's aim to swiftly address non-performing assets (NPAs).

Respondents, represented by Haryana's Deputy Advocate General Anant Kataria, accepted notice but offered no substantive defense in the pleadings, leaving the court to focus on the admitted non-execution.

Echoes of Precedent: Courts Demand Time-Bound Action

The Bench drew heavily from prior rulings, invoking the doctrine of stare decisis to underscore binding precedents. In Bank of Maharashtra v. District Magistrate, Hisar (CWP-7018-2022, May 28, 2024) , a Coordinate Bench laid down detailed guidelines: applications under Section 14 must be decided within 30-60 days, orders implemented within 60 days, with oversight by Divisional Commissioners and nodal police officers. It mandated 15-day advance notice to occupants and monthly monitoring.

This was reinforced in AU Small Finance Bank v. State of Punjab (CWP-23941-2025, August 20, 2025) , where the court decried repeated delays, directed orientation training for District Magistrates and Tehsildars, and declared non-compliance "contempt of the orders passed by this Court." The Supreme Court's R.D. Jain & Co. v. Capital First Ltd. (2023 (1) SCC 675) clarified that the District Magistrate's role is purely administrative—verifying facts in the creditor's affidavit, not adjudicating borrower disputes, which fall under Section 17 before the Debt Recovery Tribunal.

The judges noted Haryana's guidelines (dated May 21, 2024) mirrored these but were ignored, burdening the court with "numerous petitions seeking identical reliefs."

Key Observations Straight from the Bench

  • On repeated failures : "This repeated non-compliance reflects a concerning state of affairs and amounts to clear disobedience of the orders passed by this Court."
  • DM's limited role : "The role of the District Magistrate is essentially administrative in nature and not adjudicatory... no element of quasi-judicial function or application of mind is required."
  • Warning on contempt : "Any failure on the part of District Magistrate/Deputy Commissioner in performing statutory duty... would amount to contempt of the orders passed by this Court."
  • Stare decisis emphasis : "Commands of law and judgments which have attained finality must not only appear to be respected, but must be faithfully enforced and implemented."

A Punitive Push: Directions, Costs, and Looming Contempt

The writ petition was allowed with firm directives: - Respondent No. 2 (District Magistrate) must handover possession within two months , absent any stay order. - Strict compliance with Bank of Maharashtra guidelines. - Non-compliance deemed contemptuous, with liberty for IIFL to file an application. - Rs.50,000 costs each on Haryana and Punjab, payable to the Institute for Blind, Sector-26, Chandigarh, within one month—failing which, the matter relists.

No opinion was expressed on the case merits, preserving borrowers' Section 17 remedies. This ruling, echoing media reports of the court "slamming" states for "paralysing" SARFAESI enforcement, signals zero tolerance for delays, potentially streamlining recoveries while pressuring authorities to prioritize NPAs and reduce litigation.