Court Highlights Substantial Legal Questions on Police Fee Demands for Asset Recovery Assistance
Jaipur, July 6, 2026 - In a significant legal development, the Rajasthan High Court has allowed AU Small Finance Bank Ltd. to amend its writ petition challenging the demand for charges by the Police Department for providing assistance in the recovery of secured assets under the SARFAESI Act. The decision was rendered by Justice Sameer Jain, who identified key issues concerning the interplay between the SARFAESI Act, the Rajasthan Police Act, and constitutional principles governing the levy of fees by state instrumentalities.
The legal dispute centers around Section 14 of the SARFAESI Act, which allows the deployment of police assistance to aid secured creditors in taking physical possession of assets. The petitioner, AU Small Finance Bank, argued that police assistance provided under judicial orders constitutes a sovereign function, and thus, charging fees for such services is unjustified unless explicitly authorized by law. The bank's counsel, Mr. Vijay Purohit, emphasized that the statutory framework under the Rajasthan Police Act, 2007, and the Rajasthan Police Rules, 2008, does not authorize such levies.
The petitioner relied on precedents from various high courts, including the Allahabad High Court's ruling in "Gopal v. Amarjeet Singh, 2019 AHC 3878," and previous orders from the Rajasthan High Court involving similar disputes. These judgments, according to Mr. Purohit, have consistently held that such charges are arbitrary and unsustainable in the absence of specific statutory provision.
On the other hand, the respondents, represented by Mr. Raj Singh Bhati and Mr. Paramvir Singh, contended that the charges constituted a fee based on the principle of quid pro quo, rather than a statutory tax. They argued that since AU Small Finance Bank is a commercial entity, it is obligated to pay for the specialized services rendered by the police force. The respondents maintained that the absence of a challenge to the foundational circular makes the petitioner's reliance on previous judgments distinguishable.
Justice Jain, acknowledging the substantial questions of law involved, granted AU Small Finance Bank the liberty to amend its petition, allowing it to incorporate challenges against the foundational circular issued by the competent authority. The Court has directed the petitioner to carry out the necessary amendments and supply an advance copy of the amended petition to the respondents before the next hearing scheduled for July 22, 2026.
This judgment underscores the complexity of legal issues surrounding the SARFAESI Act and the charging of fees by state instrumentalities, setting the stage for further deliberation on constitutional principles governing such levies.
Bottom line:-
SARFAESI Act - Police assistance provided under Section 14 of the SARFAESI Act for recovery of secured assets - Demand for charges by Police Department for such assistance not justified unless specifically authorized by law - Statutory provisions under Rajasthan Police Act, 2007 and Rajasthan Police Rules, 2008 do not authorize such levies.
Statutory provision(s): SARFAESI Act, 2002 Section 14, Rajasthan Police Act, 2007 Section 46, Rajasthan Police Rules, 2008 Rule 10, Constitution of India, 1950 Article 265
AU Small Finance Bank Ltd. v. State of Rajasthan, (Rajasthan) : Law Finder Doc id # 2937607
