Court directs state authorities to assist Vastu Housing Finance Corporation Ltd. in restoring possession of mortgaged property after illegal re-entry by borrower; emphasizes secured creditor's duty to vigilantly preserve possession
In a significant judgment dated November 2, 2026, the Madhya Pradesh High Court, Indore Bench, presided over by Justice Sandeep N. Bhatt, ruled in favor of Vastu Housing Finance Corporation Ltd., allowing the secured creditor to seek police and revenue assistance for repossession of mortgaged property under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), even after possession had been previously taken under Section 14 of the Act.
The case arose when the borrower, having defaulted on loan repayments, was dispossessed from the mortgaged property following an order under Section 14 of the SARFAESI Act executed by the Tehsildar. However, the borrower allegedly made an unauthorized re-entry into the property, refusing to vacate the premises. The petitioner, Vastu Housing Finance Corporation Ltd., approached the Tehsildar and police authorities seeking assistance to regain possession, but their request had not been acted upon.
The petitioner filed a writ petition under Article 226 of the Constitution of India, seeking directions for the respondents, including District Collectors, Magistrates, and Superintendents of Police, to provide necessary aid in restoring possession. The petitioner also urged action against unauthorized occupants and for enforcement of their rights as a secured creditor.
Justice Bhatt, after a detailed examination of the facts and legal provisions, reiterated the principle that once possession is taken under Section 14 of the SARFAESI Act, the secured creditor is under a statutory duty to vigilantly preserve the possession. However, if the borrower unlawfully re-enters, there is no legal impediment to the secured creditor seeking assistance again for repossession. The Court noted that the Tehsildar and police authorities are empowered and duty-bound to assist the secured creditor in such circumstances.
The Court referred to its earlier Division Bench ruling in W.P. No. 1681/2015, which clarified that illegality, such as unauthorized re-entry by the borrower, cannot be allowed to perpetuate. The Court emphasized that the borrower's actions in forcibly re-entering the mortgaged premises after lawful possession was taken made them vulnerable to legal action, including potential criminal proceedings for trespass.
Although the Court observed a lackadaisical approach on the part of the secured creditor in preserving possession initially, it refrained from imposing costs, instead urging greater vigilance by the petitioner in future cases.
In its final order, the Court directed the relevant authorities to assist the petitioner in repossessing the property and handing it over to the secured creditor within 15 days of receiving a certified copy of the judgment, ensuring compliance with legal procedures.
This judgment reinforces the rights of secured creditors under the SARFAESI Act to seek state assistance repeatedly if borrowers unlawfully interfere with possession and underscores the responsibilities on both secured creditors and state authorities to facilitate effective enforcement of security interests.
Bottom Line:
SARFAESI Act, 2002 - After possession of secured asset is taken pursuant to an order under Section 14, if borrower illegally re-enters, there is no legal bar to provide police/revenue assistance again for repossession - Tehsildar/State authorities are duty bound to assist secured creditor in retaking possession in accordance with law - However, secured creditor is also expected to remain vigilant and preserve possession once taken.
Statutory provision(s):
Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 Section 14; Constitution of India Article 226
