Secured Creditors Must Act Speedily After SARFAESI Notice; Delay Defeats Law's Purpose: MP High Court

The Madhya Pradesh High Court has held that once a secured creditor initiates recovery proceedings under the SARFAESI Act, it must act without delay, failing which the very purpose of the law stands defeated.

A division bench of Justice Vivek Rusia and Justice Pradeep Mittal, while dismissing a review petition filed by Cent Bank Home Finance Ltd, observed that lenders cannot remain inactive after issuing a demand notice under Section 13(2) of the SARFAESI Act.

“After initiating the proceedings of Section 13(2) of the SARFAESI Act, the secured creditor is required to act speedily to recover the debt” the court said.

Emphasising the object of the SARFAESI Act, the bench said, “The purpose of enacting the SARFAESI Act is to give an authority/right to the secured creditor to recover the debt speedily without the intervention of the Court. If, after obtaining the order of possession, the secured assets are not sold and protected, then the situation may arise that the borrower or any other unauthorised person may take possession.”

The matter related to a mortgaged residential property in Sehore. In December 2023, the bank had obtained an order from the Judicial Magistrate First Class directing the local administration to take possession of the secured asset and hand it over to the lender.

However, possession of only the ground floor was taken in December 2024, nearly a year later, while the borrower was granted 15 days' time to vacate the second floor.

According to the bank, the borrower subsequently re-entered the premises, which led it to file a fresh execution application in September 2025 seeking enforcement of the earlier possession order. This application was dismissed as not maintainable.

The bank then sought a review of the High Court's earlier order dated November 24, 2025, which had disposed of its writ petition with liberty to issue a fresh demand notice under Section 13(2) to proceed under Section 13(4). The bank argued that issuing a fresh notice would render infructuous the securitisation application filed by the borrower before the Debts Recovery Tribunal.

The High Court rejected this contention, noting that despite obtaining a possession order in December 2023, the bank took nearly a year to take partial possession and thereafter failed to take any steps to sell the secured asset for recovery of its dues.

The court further noted that almost two years had elapsed between the issuance of the demand notice under Section 13(2) and the grant of possession under Section 13(4), thereby frustrating the purpose of initiating SARFAESI proceedings. Finding no error warranting review, the bench dismissed the petition.