JUSTICE Anil S. Kilor and Justice Raj D. Wakode ,at the Nagpur Bench of the Bombay High Court, have dismissed the writ petition filed by M/s Himmatlal Agrawal and Shivkumar Bhisambhardayal Agrawal on August 6, 2026 with their verdict that scope of section 14 of the SARFAESI Act is very limited and ministerial in nature. The Collector has no power to adjudicate the claim or counterclaim raised in the application under section. The HC has pointed out that in this context, finality has been given to the order under section 14 of the SARFAESI Act is the correct position of law and there cannot be any dispute about the same.

 

 

However, in the said judgement it has not been held, as argued by the petitioners that, in case of asset reconstruction or assignment agreement, a fresh application will be required at the behest ARC under section14 of the SARFAESI Act, Hence, the judgement of the Union of India v. State Bank of Maharashtra –(200)5Mh.L.J. 270 is of no use to the petitioners. In this petition, the petitioners have raised a challenge to the legality and correctness of the order of February 23, 2026, passed by the District Magistrate, Nagpur, directing the Tahsildar, Saoner to handover possession of the mortgaged property to the respondent –Asset Reconstruction Company (ARC), instead of the respondent – HDFC Bank. The petitioner No. 1 is a partnership firm, which availed a credit facility from the respondent-Bank. The properties which were mortgaged against such credit facility are owned by the petitioner No. 2-Shivkumar. On declaration of account of the petitioner No.1 as ‘Non Performing Assets’ (NPA), the respondent No. 2 Bank approached the District Magistrate under section14 of the SARFAESI Act, 2002. The District Magistrate/ Additional Collector accordingly passed the order on December4, 2019,directing the Tahsildar to take possession of the mortgaged property in question.

 

Therefore, the respondent-Bank executed an assignment agreement in favour of the respondent-ARC. The step taken by the CMM/District Magistrate, while taking possession of the secured and documents relating to the assets it is a ministerial step and could be taken by CMM/DM itself /herself or through any other subordinate to him/her, including the Advocate/Commissioner, who is considered as an Officer of his/her Court. While disposing the application under section 14 of the SARFAESI Act, no element of quasi-judicial function or application of mind would be required. The Magistrate has to adjudicate and decide the correctness of the information given in the application and nothing more.

 

Therefore, section 14 of the SARFAESI Act does not involve the adjudicatory process qua points raised by the borrower against the secured creditor taking possession of the secured assets. It is thus amply clear that the District Magistrate is duty bound to take possession after order is passed under section 14(1) of the Act and till the possession is taken over, proceeding under section 14 cannot be considered and treated as concluded. In the circumstances, the HC has not accepted with the arguments made by the counsel of the petitioners that once the order under section 14(1) of the SARFAESI Act is passed, the CMM/ DM becomes functus officio. The said argument is misconceived in the light of the provision subsection (2) of section 14 of the SARFAESI Act, which is an enabling provision, which permits the District Magistrate to take or cause to take steps or to use force as may be necessary in his opinion for a purpose of securing compliance with the provision of section14(1).

 

It is important to note that section 5 of the Act provides that which relates to the acquisition right or interest in financial assets. Section 5(2) of the Act says that if the Bank or financial institution is a lender in relation to any financial assets acquired under sub section (1) by the ARC, such ARC shall, on such acquisition, be deemed to be lender and all the rights of such bank or financial institution shall vest in such company in relation to such financial assets. Similarly, the important provision is sub section (4) of section 5 of the Act, provides that if, on the date of acquisition of financial assets under sub section(1), any suit, appeal or other proceeding of whatever nature relating to the said financial asset is pending by or against the bank or financial institution , the same shall not abate, or be discontinued or be, in any way, prejudicially affected by reason of the acquisition of financial asset by the ARC, but the suit , appeal or other proceeding may be continued prosecuted and enforced by or against the Asset Reconstruction Company (ARC), as the case may be. Thus, section 5(5) of the Act provides remedy for ARC to apply for substitution of its name in place of secured creditor. This provision further provides that on acquisition of financial assets under sub section (1), the ARC may with the consent of the originator, may file an application before the Debt Recovery Tribunal or the Appellate Tribunal or any other Court or other authority for the purpose of substitution of its name in any pending suit, appeal or other proceedings.

 

In this case, admittedly, the respondent-Pegasus ARC, Mumbai stepped into shoes of the respondent-Bank after execution of the assignment agreement. Thus, in light of section 5(5) of the Act, the Collector directed the Tahsildar to handover possession of the properties to the to the respondent-ARC in place of the respondent-Bank. In the circumstances, Instead of the order to substitution of name, the impugned order to handover the possession is not bad in law. It is a settled law that substances prevail over the format. The important thing is the lawful intent and not the format. In the judgement- India Resurgence Arc Private Ltd. V. District Magistrate , Valsad, the Gujarat HC hasheld on October12,2021, that once the order under section 14 of the SARFAESI Act is passed by the D.M., it cannot be said that the proceeding is pending on the date of acquisition of assets. Having considered the judgement in the India Resurgence case, in the opinion of the Bombay HC, its ratio does not lay down the correct law, therefore, the said judgement is not helpful to the petitioners. The petition is without merits, hence dismissed.