SARFAESI Act | Auction Purchaser Has Locus Standi To Appeal When Bank Is Denied Possession U/S 14: Calcutta High Court - 2025-09-09

Tracking Legal Developments.

Auction Purchaser Can Appeal Denial of Possession to Bank Under SARFAESI Act, Calcutta High Court Rules

Kolkata: In a significant ruling, the Calcutta High Court has held that an auction purchaser under the SARFAESI Act, 2002, has the legal standing (locus standi) to appeal an order that denies the secured creditor (the bank) assistance in taking physical possession of the property. The Division Bench, comprising Justice Debangsu Basak and Justice Md. Shabbar Rashidi , emphasized that the purchaser's rights are directly affected by such a refusal.

The Court set aside an order by a jurisdictional District Magistrate and directed the official to ensure the State Bank of India (SBI) obtains physical possession of the property in question within a stipulated timeframe.

Case Background

The appeal was filed by Vijay Prakash Bohra, who had purchased an immovable property in an auction conducted by the State Bank of India (SBI) under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002. Despite the sale certificate being issued on March 28, 2025, Mr. Bohra was never given actual physical possession of the property.

The issue stemmed from an application filed by SBI on February 18, 2016, under Section 14 of the SARFAESI Act, seeking the District Magistrate's assistance to take physical possession of the secured asset. This application was rejected by the District Magistrate on March 27, 2025. Subsequently, SBI challenged this rejection via a writ petition, but the learned Single Judge declined to direct the District Magistrate to provide assistance, leading to the present appeal by the auction purchaser.

Arguments Presented

Appellant's Contentions (Auction Purchaser): - The appellant argued that even though he was the purchaser, the bank's inability to secure physical possession directly impacted his rights. - Citing the Supreme Court's decision in (2018) 15 SCC 99 [ITC Limited vs. Blue Coast Hotels Limited & Ors.] , the appellant's counsel contended that a secured creditor can legally seek assistance under Section 14 to take physical possession even after the asset has been sold to a purchaser. - It was argued that both the District Magistrate and the Single Judge erred in not granting the relief, which is essential to complete the sale process.

Respondent's Contentions: - The private respondents challenged the maintainability of the appeal, arguing that the appellant, as a purchaser, had no right (locus) to file an appeal seeking a remedy available only to the secured creditor (the bank) under Section 14. - They also pointed to an injunction from a commercial court that restrained them from creating third-party rights over the property.

Court's Analysis and Legal Reasoning

The High Court meticulously analyzed the rights and roles of the parties involved under the SARFAESI framework.

"So far as the appellant is concerned, right, title and interests of the appellant stand affected by the impugned order... Such refusal, as noted above, affects the right, title and interests of the purchaser in respect of immovable property concerned," the Bench observed.

On the Locus Standi of the Purchaser: The Court decisively held that the appeal was maintainable. It reasoned that since the refusal to grant possession to the bank directly prevents the purchaser from enjoying the property he bought, his rights are undeniably affected. Therefore, he has a legitimate interest and the standing to challenge the order.

Reliance on ITC Limited Precedent: The Bench heavily relied on the ITC Limited judgment, which clarified that the transfer of a property without handing over physical possession is a "limited transfer." The Supreme Court in that case affirmed that the secured creditor's right to seek possession under Section 14 does not extinguish upon the sale of the asset. This right continues until the possession is delivered to the purchaser.

On the Commercial Court's Injunction: The Court dismissed the relevance of the injunction order, noting that it did not restrain SBI, which was not a party to that suit, from exercising its statutory rights under the SARFAESI Act. The repossession was an enforcement of a security interest, not a voluntary transfer by the respondents.

Final Decision and Implications

The Calcutta High Court set aside the District Magistrate's order dated March 27, 2025. The Bench issued a clear directive:

• The jurisdictional District Magistrate must dispose of SBI's original application from February 18, 2016, within a fortnight.
• The District Magistrate must ensure that actual physical possession of the property is handed over to the secured creditor (SBI) within four weeks from the date of the order.

This judgment reinforces the legal position that the process of enforcing a security interest under the SARFAESI Act is not complete until the auction purchaser is put in physical possession of the asset. It provides crucial clarity on the rights of auction purchasers, empowering them to seek legal recourse when the transfer of possession is stalled.