Auction Purchasers Have Locus to Seek Physical Possession Under SARFAESI; Bombay High Court Directs Authorities to Execute Section 14 Order.
Facts
The petitioners, M/s. Jasraj Restaurants Pvt. Ltd. and others, were successful auction purchasers of a secured asset sold by the respondent bank under the SARFAESI Act, 2002. The property, situated at Village Nagaon, Taluka Alibag, District Raigad, was auctioned after the borrower defaulted on repayment of a term loan of ₹1.35 crore. The petitioners emerged as the successful bidders in the sixth auction, paid the entire consideration of ₹2,23,66,000, and obtained a sale certificate dated 26 July 2021, which was registered on 15 December 2021. Despite this, they were never given physical possession of the property.
Meanwhile, the borrower and guarantor challenged the SARFAESI measures before the DRT only after the sale certificate had been issued. Although the District Magistrate had already passed an order under Section 14 of the SARFAESI Act directing the Tahsildar to take physical possession and hand it over to the secured creditor, the order remained unexecuted for over four years. Throughout the proceedings before the DRT, DRAT and the High Court, no interim stay operated in favour of the borrower. After the DRT ultimately dismissed the securitisation application, the auction purchasers approached the Bombay High Court seeking directions to implement the Section 14 order and deliver possession.
Issues
- Whether auction purchasers have locus standi to maintain a writ petition seeking implementation of an order passed under Section 14 of the SARFAESI Act.
- Whether only the secured creditor can seek enforcement of a Section 14 order.
- Whether the pending DRAT appeal prevented delivery of possession when no interim order existed.
- Whether the State authorities could be directed to execute the District Magistrate’s order and deliver possession to the auction purchasers.
Petitioners’ Arguments
The petitioners contended that after paying the entire sale consideration and obtaining a registered sale certificate, they acquired a substantial interest in the property and therefore had every right to seek enforcement of the District Magistrate’s order passed under Section 14. They argued that the borrower had deliberately prolonged litigation without securing any interim protection and continued enjoying possession despite repeated failures before the DRT. The petitioners submitted that the authorities were under a statutory obligation to implement the Magistrate’s order and that they, as auction purchasers, were entitled to invoke Article 226 to compel performance of that duty.
They further argued that the borrower’s reliance upon ITC Ltd. v. Blue Coast Hotels Ltd. was misplaced because that judgment merely recognised that the secured creditor retained certain rights until actual possession was transferred; it did not prohibit auction purchasers from maintaining writ proceedings. Reliance was also placed on Celir LLP v. Bafna Motors and M. Rajendran v. KPK Oils to contend that the borrower’s right of redemption had substantially narrowed after the amendment to Section 13(8), though the petitioners submitted that the writ petition itself was confined to enforcement of the Section 14 order.
Respondents’ Arguments
The borrower and guarantor principally challenged the maintainability of the writ petition. They argued that an auction purchaser had no independent right to seek implementation of a Section 14 order because, under the law declared in ITC Ltd. v. Blue Coast Hotels Ltd., the secured creditor continued to remain the secured creditor until actual physical possession was obtained. Consequently, according to them, only the bank could maintain such proceedings.
They also attempted to raise issues relating to redemption under Section 13(8) and sought to contest the merits of the DRT’s decision. The State authorities, however, informed the Court that they would comply with any directions issued, while the secured creditor bank fully supported the petitioners’ request for delivery of possession.
Analysis of the Law
The Division Bench examined the scheme of Sections 13 and 14 of the SARFAESI Act together with the Supreme Court’s judgment in ITC Ltd. v. Blue Coast Hotels Ltd. The Court held that the Supreme Court had recognised only that the secured creditor retained certain rights until physical possession was delivered because the transfer in favour of the auction purchaser remained incomplete in that limited sense. However, the judgment did not state that an auction purchaser lacked the locus to invoke writ jurisdiction for enforcement of statutory duties owed by public authorities.
The Court observed that once an auction purchaser pays the entire consideration and obtains a registered sale certificate, he acquires a substantial legal interest in the secured asset. If public authorities fail to execute a valid Section 14 order despite the absence of any stay, the auction purchaser cannot be left remediless. Denying such a remedy would undermine the rule of law, weaken confidence in statutory auctions conducted under the SARFAESI Act, and frustrate the legislative objective of speedy recovery of secured assets.
Precedent Analysis
- ITC Ltd. v. Blue Coast Hotels Ltd., (2018) 15 SCC 99 – Distinguished. The Supreme Court recognised that the secured creditor retains limited rights until actual possession is transferred but did not prohibit auction purchasers from filing writ petitions seeking implementation of Section 14 orders.
- Celir LLP v. Bafna Motors (Mumbai) Pvt. Ltd., (2024) 2 SCC 1 – Referred to regarding the restricted scope of redemption after amendment of Section 13(8), though the High Court left that issue open for consideration before the DRAT.
- M. Rajendran v. KPK Oils and Proteins India Pvt. Ltd., (2026) 3 SCC 505 – Noted while recording the petitioners’ submissions on redemption, without deciding the issue in the writ petition.
- Md. Ajim @ Md. Ajim Uddin v. State of Bihar (Patna High Court, LPA No. 712 of 2025) – Followed to hold that auction purchasers have locus standi to seek writ relief where authorities fail to implement statutory obligations under the SARFAESI Act.
Court’s Reasoning
The Court found that the borrower had challenged the SARFAESI proceedings only after the auction had concluded and the sale certificate had been issued. Despite prolonged litigation, no interim order had ever protected the borrower. The DRT had eventually dismissed the securitisation application, yet the borrower continued to enjoy possession solely because the authorities had failed to implement the District Magistrate’s order. The Bench noted that allowing such a situation to continue would defeat both the SARFAESI mechanism and public confidence in statutory auctions.
Rejecting the objection to maintainability, the Court held that auction purchasers who have paid the entire consideration and obtained a registered sale certificate possess a sufficient legal interest to invoke Article 226. They are entitled to seek directions compelling public authorities to discharge their statutory duties. The Bench observed that if writ courts refused such relief, State authorities could indefinitely ignore lawful orders passed under Section 14, leaving auction purchasers without any effective remedy. The Court also declined to examine issues relating to redemption or the merits of the pending DRAT appeal, observing that those questions would appropriately be decided in appellate proceedings. The present writ petition was confined to enforcement of the District Magistrate’s order.
Conclusion
The Bombay High Court allowed the writ petition and held that auction purchasers have locus standi to maintain a writ petition seeking implementation of a Section 14 SARFAESI order. It directed the Tahsildar to take physical possession of the secured asset on 13 August 2026, hand it over to the secured creditor, and thereafter to the auction purchasers on the same day. The Superintendent of Police was also directed to provide adequate police protection for execution of the order, while clarifying that the borrower’s pending DRAT appeal would be decided independently on its own merits.
Case Details
- Case: M/s. Jasraj Restaurants Pvt. Ltd. & Ors. v. State of Maharashtra & Ors.
- Court: Bombay High Court
- Case Number: Writ Petition No. 8601 of 2026
- Coram: Justice Manish Pitale and Justice Shreeram V. Shirsat
- Date: 28 July 2026
- Result: Writ petition allowed; auction purchasers held entitled to maintain the petition, and authorities directed to deliver physical possession of the secured asset in execution of the Section 14 order.
