Can Police Levy Charges For Assisting Banks With Asset Recovery Under SARFAESI Act? Rajasthan High Court To Examine
The Rajasthan High Court has agreed to examine whether the Police Department can levy charges on banks for providing assistance in taking possession of secured assets under Section 14 of the SARFAESI Act, 2002.Justice Sameer Jain observed that the issue raises substantial questions of law concerning the interplay between the SARFAESI Act, the Rajasthan Police Act, and the...
The Rajasthan High Court has agreed to examine whether the Police Department can levy charges on banks for providing assistance in taking possession of secured assets under Section 14 of the SARFAESI Act, 2002.
Justice Sameer Jain observed that the issue raises substantial questions of law concerning the interplay between the SARFAESI Act, the Rajasthan Police Act, and the constitutional principles governing the levy of fees by State instrumentalities.
The development comes in a petition been filed by AU Small Finance Bank, challenging the imposition of charges by the police department for assisting it in securing physical possession of the secured assets.
It was submitted that as per Section 14 of the SARFAESI Act, concerned authority issued directions for deployment of force to assist the secured creditor in taking physical possession of secured assets. The term “force” under this provision implied police force. Hence, when the police was acting pursuant to such directions, they were performing a judicial function, and no charges could be levied for carrying out such sovereign/judicial functions.
It was further argued that Section 46 of the Rajasthan Police Act, 2007, read with Rule 10 of the Rajasthan Police Rules, 2008, provided a list of services for which the police could levy charges. However, providing assistance in accordance with Section 14 of the SARFAESI Act, was not mentioned in this list.
On the contrary, it was argued on behalf of the State that the amount sought was not a statutory tax or levy, but a fee based on the principle of quid pro quo.
It was argued that since the petitioner and similarly situated entities were commercial and profit making entities who were not doing any charitable services to the public, they were bound to pay the prescribed fee for the specialized services rendered by the police.
After hearing the contentions, the Court opined,
“…the present petition involves an issue of high significance and raises substantial questions of law qua the interplay between the SARFAESI Act, the Rajasthan Police Act, and the constitutional principles governing the levy of fees by the State instrumentalities.”
Accordingly, the petitioner was directed to provide a copy of the petition to the Advocate General.
The matter is listed on July 22.
Title: AU Small Finance Bank Ltd. v State of Rajasthan