'NPAs Are A Huge Burden On Public Exchequer, DMs Can't Delay Process Under SARFAESI Act': P&H High Court Orders Training For Officers

Taking serious note of the mounting Non-Performing Assets (NPAs) and their adverse impact on the public exchequer, the Punjab and Haryana High Court has observed that District Magistrates cannot afford to delay on taking and handing possession of secured assets to the creditors under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).

Emphasizing the need for timely execution of recovery proceedings, the Court directed the Chandigarh Judicial Academy to conduct focused training programs for District Magistrates and other concerned officers to ensure proper understanding and effective implementation of the SARFAESI Act.

Section 14 of the SARFAESI Act, banks/financial institutions and reconstruction companies have the right to take possession of the secured asset and it is the responsibility of the concerned District Magistrate/Chief Metropolitan Magistrate to hand over the possession of such secured asset to the financial institutions with the help of the police.

This provision states that if a secured creditor needs to take possession or sell a secured asset, they may request the Chief Metropolitan Magistrate (CMM) or District Magistrate (DM) to do so. Upon receiving the request, the CMM/DM must take possession of the asset and related documents and forward them to the secured creditor.

Chief Justice Sheel Nagu and Justice Ramesh Kumari said, "Non-Performing Assets (NPAs) are a huge burden on the public exchequer, banking and financial system, and, thus, prompt enforcement of recovery mechanism under the SARFAESI Act is paramount for liquidity in the system."

The Court was surprised to note that time and again it is "coming across cause of actions raised by the Banks aggrieved by the fact that an order passed under Section 14 of the SARFAESI Act is not executed. The scheme of the SARFAESI Act enjoins the District Magistrate to pass an order under Section 14 of the SARFAESI Act within the extended period of 60 days, and thereafter, the Tehsildar or the concerned Revenue Authority to execute such order without any unnecessary delay."

Merely because, time frame is not prescribed for execution of an order passed under Section 14 of the SARFAESI Act does not mean that the District Magistrate and the concerned Revenue Authority sits over the file, thereby frustrating the object of SARFAESI Act, which is inter alia to expeditiously recover the mounting bad debts in shape of NPA which are a huge burden on the public exchequer, it added.

Reliance was placed on R.D. Jain & Co. Versus Capital First Limited and Others, wherein the Apex Court held that, as mandated by Section 14 of the SARFAESI Act, the CMM/DM has to act within the stipulated time-limit and pass a suitable order for the purpose of taking possession of the secured assets within a period of 30 days from the date of application which can be extended for such further period but not exceeding in the aggregate, sixty days.

Thus, the powers exercised by the CMM/DM is a ministerial act. He cannot brook delay. Time is of the essence. This is the spirit of the special enactment, it added.

The bench said, it appears that the functionaries of the State have either not been made known of this order passed by the Coordinate Bench of the Court in Cholamandal Investment and Finance Co Ltd v. DM Bhatinda and Ors passed in May 2024 (CWP No. 7738 of 2023), or they are intentionally not complying with the same.

In Cholamandal Investment case, the High Court had laid down not only the procedure to be followed by the District Magistrate/Chief Judicial Magistrate, as the case may be, to deal with an application u/s 14 of SARFAESI Act, but also prescribing timeline for implementation and execution of such orders passed u/s 14 of SARFAESI Act.

Consequently, the Court directed the Chandigarh Judicial Academy to hold an Orientation Course for all District Magistrates and Tehsildars of all the districts in the States of Punjab, Haryana and U.T., Chandigarh, as early as possible.

The bench further said that, It is expected that after attending the Orientation Course, the District Magistrates/Deputy Commissioners shall discharge their statutory duty of passing orders under Section 14 of the SARFAESI Act, within a maximum period of 60 days and ensure execution of the same by themselves or through subordinate Revenue Authorities without unnecessary delay but not later than 30 days of the passing of order u/s 14 of SARFAESI Act.

While listing the case for compliance on November 7, 2025, the Court said, "any failure on the part of District Magistrate/Deputy Commissioner in performing statutory duty of passing or executing an order under Section 14 of SARFAESI Act would amount to contempt of the orders passed by this Court."

Ms. Deepika Mittal, Advocate (Arguing Counsel) and Mr. Bharat Mani Goyal, Advocate for the petitioner.

Mr. Vipin Pal Yadav, Addl. Advocate General, Punjab.

Mr. Deepak Balyan Addl. Advocate General, Haryana 

Title: AU SMALL FINANCE BANK v. STATE OF PUNJAB AND OTHERS

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