Jodhpur: Rajasthan High Court Thursday ruled that banks and financial institutions cannot be made to pay police protection charges while taking physical possession of secured assets under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, holding that such assistance is part of the state’s statutory duty.A division bench of Justice Vineet Kumar Mathur and Justice Chandra Shekhar Sharma said enforcement of orders passed by a magistrate under Section 14 of the Act cannot be treated as a private service to be billed to banks, and set aside a single-judge order that had upheld the levy of such charges.In an Aug 12 order, a single bench upheld the demand for police protection charges from banks seeking assistance to take possession of secured assets. It directed that charges be levied under Rule 10 of the Rajasthan Police Rules, 2008.Challenging the decision before the division bench, the bank contended that police assistance under Section 14 of the SARFAESI Act was integral to the statutory enforcement mechanism and could not be treated as a private commercial service requiring payment by the beneficiary bank.Accepting the bank’s argument, the court held that orders passed by the chief metropolitan magistrate or district magistrate under Section 14 were statutory and involved judicial authority. Implementing them, including facilitating physical possession of secured assets, fell within the state’s sovereign functions, the bench said.Setting aside the single-judge order, the court directed state govt to provide the police force necessary to implement orders under Section 14 of the SARFAESI Act without levying charges.The court ruling will affect recovery proceedings initiated by banks and financial institutions against defaulting borrowers, reducing additional costs and facilitating enforcement of security interests and recovery of bad loans.
