Housing Finance Companies Can't Invoke SARFAESI For Secured Debt Below ₹20 Lakh: Calcutta High Court

The Calcutta High Court has recently held that Tata Capital Housing Finance Ltd. as a housing finance company could not invoke the SARFAESI Act, as the secured debt was below the ₹20 lakh threshold prescribed under a Central Government notification. It accordingly set aside the enforcement measures initiated by the lender.

Justice Smita Das De ruled that Tata Capital Housing Finance lacked jurisdiction to invoke the SARFAESI Act in the present case.

The court observed, "In view of the above, this Court finds that the SARFAESI Act, 2002, is not applicable to the loan account of the petitioner as the secured debt is below the statutory threshold of Rs. 20 lakhs."

The court also held that the Debt Recovery Tribunal (DRT), Siliguri, ought to have examined the lender's jurisdiction to invoke the Act before dismissing the borrower's securitisation application.

The case arose from a housing loan taken by Chandan Bhowal from Tata Capital Housing Finance Ltd.

After the account was allegedly classified as a non-performing asset, the lender issued a demand notice in April 2024 and a possession notice in September the same year. It later obtained an order under Section 14 from the Additional Chief Judicial Magistrate, Siliguri, before issuing a redemption notice in January 2026.

Bhowal challenged the recovery proceedings before the DRT under Section 17(1) of the SARFAESI Act. The tribunal, however, dismissed the securitisation application, holding that a notice under Section 13(8) was not a coercive measure. It therefore found that the notice did not give rise to a cause of action under Section 17(1).

While granting liberty to file a fresh application if further measures were taken, it did not examine the borrower's objection that the lender lacked jurisdiction to invoke the Act.

Before the high court, Bhowal argued that Central Government notifications issued in 2020 and 2021 permit notified Housing Finance Companies and NBFCs with assets of ₹100 crores and above to invoke the SARFAESI Act only where the secured debt is at least ₹20 lakhs.

Since the outstanding dues were below that threshold, he contended that the proceedings were without jurisdiction.

The lender argued that the borrower had an alternative remedy before the Debt Recovery Appellate Tribunal and that a Section 13(8) notice is not independently challengeable.

Referring to Notification No. S.O. 652(E) dated February 12, 2021, and the Division Bench ruling in Piramal Capital & Housing Finance Ltd., the high court found that the outstanding principal appeared to be below ₹20 lakhs.

Since the lender produced no material to show otherwise, the court quashed the proceedings under Sections 13(2), 13(4), 13(8) and 14, set aside the DRT's order, and clarified that the lender may pursue recovery before the competent civil court.