Borrower Cannot Demand Hearing Before Magistrate U/S 14 SARFAESI Act: Allahabad High Court

The Allahabad High Court on 25 August held that a borrower has no right to a hearing before the District Magistrate passes an order under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), as the Magistrate does not adjudicate disputes between the borrower and secured creditor.

Section 14 of the SARFAESI Act enables a secured creditor to approach the Chief Metropolitan Magistrate or District Magistrate having jurisdiction over the secured asset for assistance in taking possession of the asset and handing it over to the secured creditor. The application is required to be accompanied by an affidavit of the secured creditor's authorised officer.

A Division Bench of Justices Prakash Padia and Vivek Saran dismissed a petition challenging an order passed by the Additional District Magistrate against Sachchidanand Yadav and another. It held:

“..we are of the considered opinion that the petitioners being borrower himself was not required to be heard while disposing of the application under Section 14 of the SARFAESI Act by the concerned Magistrate since it is not required to adjudicate issues raised by the borrower qua the secured creditors.”

Petitioners approached the High Court seeking a writ of certiorari to quash an order dated 28 February 2026 passed by the Additional District Magistrate under Section 14 in proceedings initiated by Adhar Housing Finance Limited. They contended that the order suffered from a manifest error as they were not given an opportunity of hearing before it was passed. They relied on the Supreme Court's decision in Harshad Goverdhan Sondagar v. International Assets Reconstruction Co. Ltd.

Counsel for respondent nos. 3 and 4 submitted that an order under Section 14 does not require a hearing to be given to the borrower. They relied on a Coordinate Bench decision of the High Court in Bank of Baroda Earlier Vijaya Bank v. State of U.P. and others.

The High Court, examining Section 14, held that “there is no requirement to issue any notice to the borrower prior to proceeding against the mortgaged property”.

It observed that this position was supported by the Supreme Court's decisions in Balkrishna Rama Tarle Dead v. Phoenix ARC Private Limited and R.D. Jain & Co. v. Capital First Ltd., which held that proceedings under Section 14 do not involve adjudication and that the Magistrate is required to examine the correctness of the information placed before him.

The Bench also considered the petitioners' reliance on Harshad Goverdhan Sondagar and held:

“While going through the said judgement, we are of the considered opinion that the same is not applicable in case of the petitioner since the facts are different. The said case was that of a tenant and not of a borrower. Admittedly, the petitioner is a borrower and not a tenant.”

It noted that the Supreme Court in Balkrishna Rama Tarle Dead had itself considered the effect of Harshad Goverdhan Sondagar. It explained that the notice and opportunity of hearing contemplated in that case were to be given to a person in possession of the secured asset claiming to be a lessee of the mortgagor or borrower. The Top Court had not held that the Magistrate was required to adjudicate the rights of the parties while exercising powers under Section 14.

Accordingly, the High Court dismissed the petition.

Counsel for Petitioner(s): Umesh Chandra Prajapati

Counsel for Respondent(s): C.S.C., Ramesh Kumar Shukla