Home Borrower Borrower has no right to be heard by a magistrate under SARFAESI Section 14: Bombay High Court

Borrower has no right to be heard by a magistrate under SARFAESI Section 14: Bombay High Court


The Bombay High Court refused to read the principles of natural justice in Section 14 of the SARFESI Act and order magistrates to put a borrower in default before taking possession of the asset for the bank or institution financial.

“Only a post-possession right to sue in court is granted to a borrower under Article 17, no more no less”, the observed bench.

The tribunal observed that the principles of natural justice under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Act 2002 (SARFESI Act) are only available to a borrower to a limited extent and not so much that the secured creditor has not taken possession of the asset. after serving and responding to a notice to the borrower.

“The SARFAESI Act is intended to facilitate the prompt collection of secured debts without providing any opportunity for a hearing to a borrower and without judicial/quasi-judicial intervention until possession of the secured property is taken by the secured creditor after serving notices and respond to objection/representation that may be filed/preferred by the Borrower under Section 13(3A).”


The bench thus dismissed the motion for writ filed by the debtors of various banks and financial institutions aggrieved by the orders of the Magistrate or Chief Metropolitan Magistrate under Section 14. The plea requested a declaration for the magistrate to hear borrowers before making a possession order under section 14 of the Act.

Without such an obligation, the article violates fundamental rights and the basic structure of the constitution. Consequently, the applicants also sought to set aside the orders made by the magistrates against them.


The plaintiffs represented by attorney Mathew Nedumpara argued that it was a well-known principle of law that if a law does not exclude observance of the principles of natural justice, either expressly or by necessary implication, the respect for natural justice must be read into the law.

He argued that since the SARFAESI Act neither expressly excluded nor impliedly excluded the requirement of natural justice when the magistrate considers the claim of creditors u/s 14, the creditor must be put on notice. Nadumpara further argued that since the magistrate’s order would have civil consequences on the borrower, the borrower must be heard.


The bench observed that the petitioner had completely ignored Article 13 of SARFAESI, which allows for the enforcement of security without the intervention of the court or tribunal.

“The decision of a quasi-judicial authority (see Article 17) on observance of natural justice is deferred until possession, symbolic or physical, is taken. SARFAESI law in no way suggests observance of natural justice. natural justice at the stage where section 13(4) or 14 operates.”

The court said that according to the case of Noble Kumar, there are 3 (three) methods to take possession of a secured property. The methods are mentioned in Article 14 and Article 13(4), which is why the two cannot operate independently of each other.

This means that if a borrower has no right to be heard when the secured creditor takes possession under Article 13(4), no hearing can be requested by a borrower after he has successfully resisted taking possession and forced the authorized agent to find a solution by requesting the assistance of the Metropolitan Magistrate/Premier Magistrate.

Rightly, the bench said, Article 14 of the SARFAESI law was amended twice, but the borrower was not given an opportunity to be heard.

“There appears to be little merit in the argument advanced by Mr. Nedumpara and we believe that the wording of Article 14 is too clear and unambiguous, and does not admit any obligation to comply with natural justice in putting the borrower in default while an application under it is under consideration.”

“We reiterate that natural justice for a borrower within the meaning of Section 2(f) of the SARFAESI Act has very limited application in the steps taken for the enforcement of a security [only consideration of objection/representation under section 13(3- A) of the SARFAESI Act is mandated] and remains excluded until recourse is had to Article 17.”

Case title: CALIFORNIA. Manisha Mehta and others. Vs The Board of Directors of Represented by its Managing Director of ICICI Bank and others.


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