The Rajasthan High Court has permitted a private bank to amend its writ petition challenging the levy of police charges for providing assistance during the recovery of secured assets under the SARFAESI Act. While hearing the matter, Justice Sameer Jain observed that the dispute raises important legal questions regarding the interaction between the SARFAESI Act, the Rajasthan Police Act, and constitutional principles governing the collection of fees by State authorities.
Background of the Case
The petitioner-bank approached the High Court under Article 226 of the Constitution, arguing that the Police Department cannot recover charges for assisting in taking possession of secured assets when such assistance is provided pursuant to orders passed under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act.
The bank contended that police personnel, while executing such directions, perform a judicial or sovereign function. It further argued that neither Section 46 of the Rajasthan Police Act, 2007 nor Rule 10 of the Rajasthan Police Rules, 2008 authorises the recovery of charges for this specific service. According to the bank, any demand beyond the services expressly listed in the statute lacks legal backing.
State's Stand
Opposing the petition, the State submitted that the amount sought from the bank is a service fee and not a tax. It argued that the fee is based on the principle of quid pro quo, meaning payment for services rendered.
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The State also maintained that commercial banks benefit from specialised police assistance during asset recovery and are therefore liable to bear the prescribed charges. It further pointed out that the petitioner had not initially challenged the circular forming the basis of the demand, making the earlier judgments cited by the bank distinguishable.
Court's Observations
During the hearing, counsel for the petitioner sought permission to amend the writ petition so that the underlying government circular could also be challenged.
Accepting the request, Justice Sameer Jain remarked that the dispute involves significant legal issues.
The Court observed that the petition "involves an issue of high significance and raises substantial questions of law" concerning the relationship between the SARFAESI Act, the Rajasthan Police Act, and the constitutional principles governing the levy of fees by State instrumentalities.
The Court also directed the petitioner to furnish an advance copy of the amended petition to the respondents before the next hearing and to provide a copy to the office of the Advocate General.
Decision
The Rajasthan High Court granted liberty to the petitioner-bank to amend its writ petition and directed that the necessary amendments be carried out.
The matter has been listed for further hearing on 22 July 2026, with no final determination on the merits of the challenge at this stage.
Case Details
Case Title: AU Small Finance Bank Ltd. v. State of Rajasthan
Case Number: S.B. Civil Writ Petition No. 12432/2026
Judge: Justice Sameer Jain
Decision Date: 06 July 2026
