Executive circular cannot override statutory rates for police assistance under SARFAESI Act: Rajasthan High Court

Jodhpur: The Rajasthan High Court has held that police authorities cannot demand charges for assisting in the execution of possession orders under Section 14 of the SARFAESI Act beyond the rates prescribed under Rule 10 of the Rajasthan Police Rules, 2008, holding that the executive power of the State cannot be exercised to impose a compulsory fee or service charge without express statutory authority of law.

Justice Anoop Kumar Dhand, by an order dated Aug 21, 2026, disposed of two connected writ petitions filed by Muthoot Homefin (India) Limited in terms of the directions issued by a Co-ordinate Bench of the Court in AU Small Finance Bank Ltd. v. State of Rajasthan & Ors., decided on Aug 12, 2026, observing that the controversy had already been set at rest and that there was no reason to take a different view.

On the source of the power to levy such charges at all, the Co-ordinate Bench had observed:

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“While the provisions enshrined under Section 14 of the SARFAESI Act do not inherently specify the charges that need to be levied by the police authorities for providing the required force, and therefore, the State can levy and demand the charges for performing such functions, however, a strict statutory backing is a sine qua non for any such recovery or demand; the State’s power to levy charges for deploying police personnel must strictly be governed by statute.”

The petitions arose from an order passed by the Senior Civil Judge, Bhilwara under Section 14 of the SARFAESI Act, 2002 permitting the secured creditor to take possession of a secured asset. The petitioner challenged two conditions of that order to the extent they directed it to deposit police assistance charges before the Office of the District Superintendent of Police, Bhilwara, as being without jurisdiction and contrary to Section 14, and also assailed a communication dated Jan 28, 2025 issued by the District Superintendent of Police making the deployment of police force conditional upon prior deposit of those charges.

The Co-ordinate Bench recorded at the outset that under Section 13 of the SARFAESI Act, where a borrower defaults in repayment, the secured creditor is entitled to recover the outstanding dues along with all costs, charges and expenses ancillary and incidental to the recovery process, and that such expenses and charges become part of the legally recoverable dues from the borrower.

It observed that while the loan transaction arises out of a commercial contract and the relationship between borrower and bank is private in nature, the enforcement mechanism is governed by Section 14 of the SARFAESI Act, “which facilitates the use of ‘force’ under the orders of a judicial authority to take possession of secured assets”, orders passed thereunder by the Chief Judicial Magistrate or the District Magistrate being statutory directions requiring administrative and police assistance to deliver possession.

Turning to the statutory scheme, the Court held that under Section 46 read with Section 2(m) of the Rajasthan Police Act, 2007, charges for additional police deployment can only be levied at “prescribed rates”, meaning rates prescribed by the State Government by framing rules or notifications. Rule 10 of the Rajasthan Police Rules, 2008 is, as of today, the sole provision prescribing such rates — Rs 536 per day for a Constable, Rs 644 for a Head Constable, Rs 875 for an S.I., A.S.I. or P.C., and Rs 1,010 for an Inspector. The State authorities, it held, “cannot be permitted to execute a volte-face and bypass explicit statutory rules through the mere issuance of administrative instructions or circulars”.

The Advocate General had submitted that police deployment for private commercial recovery operates on the principle of quid pro quo — a fee for service — rather than as a statutory tax levied by the State. The Court recorded its agreement with that characterisation, but held that while Article 265 of the Constitution applies strictly to the levy and collection of taxes, “the underlying constitutional principle applies by analogy to compulsory fees and executive imposts”, and that read with Article 162, the executive power of the State cannot be exercised to impose a financial burden without express statutory authority of law.

On the quantum demanded, the Court remarked:

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“The charges demanded by the police authorities to the tune of Rs. 1,29,071/- for enforcing possession against a total loan default of Rs. 5.51 lacs are prima facie exorbitant and unreasonable. However, while leaving the broader question of arbitrariness and the mathematical nexus between police charges and loan quantum open for adjudication in an appropriate case, the present batch of petitions can be decisively resolved on the statutory ground alone.”

Holding that mere executive instructions, an administrative fiat or internal circulars — including the impugned circular dated Feb 03, 2026 issued by the ADG (Welfare) — cannot override, amend or substitute statutory rules, the Court said that if the Rule 10 rates have become obsolete due to the passage of time and rising salary costs of police personnel, the sole remedy available to the State Government is to formally amend Rule 10 in accordance with law, and that until such statutory amendment is notified, no demand can be raised in excess of the rates specified there. The decisions relied upon by the respondents were distinguished as not having had occasion to examine the statutory embargo under Section 46 read with Section 2(m) of the Act of 2007 and Rule 10 of the Rules of 2008.

Disposing of the petitions, the Court permitted the police authorities to raise demands for police assistance under Section 14 of the SARFAESI Act strictly in consonance with Section 46 read with Section 2(m) of the Rajasthan Police Act, 2007, restricted exclusively to the rates specified under Rule 10, “and not otherwise”. Any demand raised solely on the basis of executive circulars or instructions, including the circular dated Feb 03, 2026, in excess of those rates was held to be without authority of law and was quashed and set aside, with a direction to issue revised demand bills strictly adhering to the prescribed charges.

The Court clarified that the judgment shall operate with prospective effect on the principle of prospective overruling and shall not entitle borrowers or banks to reopen or seek refunds of retrospective police charges already imposed and deposited under earlier circulars. It recorded that the State Government “is expected to take expeditious steps and measures to update and revise the statutory schedule of obsolete rates as prescribed under Rule 10 of the Rules of 2008 in accordance with law, so as to bring them into conformity with present-day administrative costs and salary expenditure of the police personnel”.

Title: Muthoot Homefin (India) Limited v State of Rajasthan & Ors.

Case No.: S.B. Civil Writ Petition No. 13545/2026, connected with S.B. Civil Writ Petition No. 13455/2026

Citation: 2026:RJ-JD:41545

Counsel for petitioner: Mr. Dilip Singh Udawat

Counsel for respondents: Mr. Raj Singh Bhati for Mr. Ritu Raj Singh Bhati, GC