Sek Saidul Human Hair & Others Vs Reserve Bank of India & Others (Calcutta High Court)
Summary: The Calcutta High Court held that the monetary threshold prescribed for specified non-banking financial companies under the Ministry of Finance notifications governing invocation of the SARFAESI Act, 2002 does not attach permanently to the underlying debt so as to restrict a bank that subsequently acquires the loan. The petitioners had originally borrowed Rs.14,33,500/- from Bajaj Finance Limited against mortgage of immovable property. After assignment of the loan to the respondent-bank, a demand notice under Section 13(2) was issued for Rs.18,75,630/- and proceedings under Sections 13(4) and 14 followed.
The petitioners contended that the secured debt was below the Rs.20 lakh threshold applicable to specified NBFCs under Notification S.O. 856(E) dated 24 February 2020, as amended by Notification S.O. 652(E) dated 12 February 2021. According to them, because the original financial institution could not have invoked SARFAESI for such debt, assignment of the loan could not confer greater enforcement rights upon the assignee bank. The High Court rejected this contention, observing that the notifications were issued specifically under Section 2(1)(m)(iv) and applied to financial institutions falling within that provision, whereas a “bank” under Section 2(c) constituted a distinct category.
The Court relied upon the Supreme Court ruling in Kotak Mahindra Bank Limited vs. Trupti Sanjay Mehta & Others, which held that acquisition by a bank already covered by SARFAESI of a non-performing secured loan from an entity outside its ambit clothes the loan with the attributes of a secured debt governed by SARFAESI. The Court also referred to M.D. Frozen Foods Exports (P) Ltd. vs. Hero Fincorp Ltd. and Indiabulls Housing Finance Ltd. vs. Deccan Chronicle Holdings Ltd. in reaching this conclusion.
Additionally, relying on Phoenix ARC Private Limited vs. Vishwa Bharati Vidya Mandir & Others, the High Court held that a writ challenging SARFAESI recovery action by a private bank could not be entertained when the borrower had the statutory remedy available under the SARFAESI Act. Accordingly, WPA 7240 of 2026 was disposed of without granting the relief sought, while expressly leaving the petitioners free to approach the appropriate forum, including the Debts Recovery Tribunal.
Cases Discussed
- Golam Sabir & Another vs. Piramal Capital and Housing Finance Limited & Others, W.P.A. 14007 of 2025, Calcutta High Court, decided on 24.12.2025 — Relied upon by the petitioners to contend that the original lender’s inability to invoke SARFAESI could not be overcome through assignment. The Court held that the decision did not assist the petitioners because the assignee initiating action was a bank covered by Section 2(c).
- Kotak Mahindra Bank Limited vs. Trupti Sanjay Mehta & Others, 2026 SCC OnLine SC 1744 — Applied to hold that when an institution already governed by SARFAESI acquires a non-performing secured loan from an entity not covered by the Act, the acquired loan becomes a secured debt amenable to SARFAESI enforcement.
- M.D. Frozen Foods Exports (P) Ltd. vs. Hero Fincorp Ltd., (2017) 16 SCC 741 — Referred to through the Supreme Court decision in Kotak Mahindra Bank Limited on subsequent applicability of SARFAESI to a loan/debt.
- Indiabulls Housing Finance Ltd. vs. Deccan Chronicle Holdings Ltd., (2018) 14 SCC 783 — Referred to through Kotak Mahindra Bank Limited on the applicability of SARFAESI to an acquired loan/debt.
- Phoenix ARC Private Limited vs. Vishwa Bharati Vidya Mandir & Others, (2022) 5 SCC 345 — Applied to hold that a writ against SARFAESI action by a private bank/bank/ARC is not maintainable where the entity is enforcing contractual security rights and the borrower has the statutory remedy under SARFAESI.
FULL TEXT OF THE CALCUTTA HIGH COURT JUDGMENT/ORDER
1. The petitioners are aggrieved by the action of the respondent-bank under the provisions of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 20021.
2. The petitioners have principally challenged an order dated September 24, 2025 passed by the District Magistrate, Purba Medinipur on an application filed by the Bank under Section 14 of the 2002 Act.
3. The petitioners had availed of certain credit facilities from a financial institution, namely, Bajaj Finance Limited. The principal sum borrowed by the petitioners was to the tune of Rs.14,33,500/-. The loan was secured by mortgage of certain immovable property.
4. Subsequently, the loan was assigned by the said financial institution to the respondent-bank. The respondent-bank, thereafter, issued a notice under Section 13(2) of the 2002 Act calling upon the petitioners to pay, within sixty days from the date of the said notice, an amount of Rs.18,75,630/- which, in terms of the said notice, was due and payable as on August 16, 2022.
5. As the said sum was not paid therefore, the bank proceeded to take steps under Section 13(4) of the 2002 Act. In such process the bank approached the District Magistrate, Purba Medinipur by way of an application under Section 14 of the said Act. The District Magistrate disposed of the said application under Section 14 of the 2002 Act by an order dated September 24, 2025, thereby granting police assistance to the respondent-bank for the purpose of taking possession of the mortgaged property.
6. Feeling aggrieved thereby, the petitioners have approached this Court by filing the present writ petition.
7. Mr. Banerjee, learned advocate appearing for the petitioners submits that the action of the respondent-bank is wholly without jurisdiction inasmuch as, the secured debt that has been assigned to the bank is below the threshold limit that would permit the financial institution to initiate measures under the 2002 Act.
8. It is submitted that non-banking financial companies can invoke the provisions of the 2002 Act only if the amount of secured debt is equivalent to or above the threshold limit of 20 lakh in terms of a notification dated February 24, 2020 as amended by the notification dated February 12, 2021 issued by the Ministry of Finance, Government of India.
9. He next submits that since, the financial institution from which the petitioner availed of the credit facility did not have jurisdiction to invoke the provisions of the 2002 Act therefore the assignment of loan to the bank would not clothe the assignee bank with jurisdiction to invoke the provisions of the said Act. He relies on a Co-ordinate Bench judgment of this Court in the case of Golam Sabir & Another vs. Piramal Capital and Housing Finance Limited & Others2.
10. In his usual fairness, he cites a judgment of the Hon’ble Supreme Court in the case of Kotak Mahindra Bank Limited vs. Trupti Sanjay Mehta & Others3 and submits that the said judgment might seemingly operate against the petitioner but the reality is otherwise. He astutely submits that in the said case, the issue that had fallen for consideration before the Hon’ble Supreme Court was as to “whether a bank, as defined by Section 2(1)(c) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest, Act, 20021, can take recourse to the provisions thereof for recovery of a debt assigned to or taken over by it from a financial entity that was not governed by the SARFAESI Act at the time of creation of such debt”, which is not the issue here.
11. He asserts that the issue that has arisen in the present case is quite different. According to him the issue the present case relates to the identity of the secured debt. He argues that in the case at hand, it is the quantum of debt rather than the nature of the institution holding the secured debt that is decisive as to whether the 2002 Act would apply or not.
12. Learned advocate appearing for the respondent-bank submits that the bank is fully authorized to initiate action under the 2002 Act and, as such, the bank’s action cannot be faulted. It is further submitted that in any case the present writ petition should not be entertained inasmuch as the petitioners have an efficacious alternative remedy before the relevant Debts Recovery Tribunal.
13. Heard learned advocates appearing for the respective parties and considered the material on record.
14. The 2002 Act defines bank and financial institution separately. Section 2(c) of the 2002 Act defines thus :-
“bank” means-
(i) a banking company; or
(ii) a corresponding new bank; or
(iii) the State Bank of India; or
(iv) a subsidiary bank; or
[iva] a multi-State co-operative bank; or]
(v) such other bank which the Central Government may, by notification, specify for the purposes of this Act;”
15. Section 2(m) of the said Act defines “financial Institution” in the following ways:-
“financial institution” means-
(i) a public financial institution within the meaning of section 4A of the Companies Act, 1956 (1 of 1956);
(ii) any institution specified by the Central Government under sub-clause (ii) of clause (h) of section 2 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993);
(iii) the International Finance Corporation established under the International Finance Corporation (Status, Immunities and Privileges) Act, 1958 (42 of 1958);
[(iiia) a debenture trustee registered with the Board and appointed for secured debt securities;]
[(iiib) asset reconstruction company, whether acting as such or managing a trust created for the purpose of securitisation or asset reconstruction, as the case may be;]
(iv) any other institution or non-banking financial company as defined in clause (f) of section 45-1 of the Reserve Bank of India Act, 1934 (2 of 1934), which the Central Government may, by notification, specify as financial institution for the purposes of this Act,”
16. The notifications dated February 24, 2020 and February 12, 2021 have been issued by the Ministry of Finance, Government of India in “exercise of the powers conferred by sub-clause (iv) of clause (m) of subsection (1) of section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002”. The same would therefore clearly apply only to institutions covered by Section 2(1)(m)(iv) of the 2002 Act and not to others. As would be evident from the definition of bank in Section 2(c) of the 2002 Act, the same is clearly distinct from a financial institution under Section 2(1)(m)(iv) of the 2002 Act.
17. The petitioner assets that since the loan was initially granted by an institution that falls under Section 2(1)(m)(iv) of the 2002 Act and the said institution was ineligible to invoke SARFAESI measures since the loan/secured debt was below the threshold limit prescribed by the notification dated February 24, 2020 as amended by the notification dated February 14, 2021 issued by the Ministry of Finance, Government of India therefore, such loan must be deemed to have been assigned to the assignee with the restriction imposed on it by the said notifications and as such the assignee cannot resort to SARFAESI action.
18. The argument is attractive in novelty but not in substance. The aforesaid notifications issued by the Ministry of Finance may be noticed once. The first notification reads thus:-
MINISTRY OF FINANCE
(Department of Financial Services)
NOTIFICATION
New Delhi, the 24th February, 2020
S.O. 856(E).—In exercise of the powers conferred by sub-clause (iv) of clause (m) of sub-section (1) of section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002), and in supersession of the notifications of the Government of India, Ministry of Finance numbers S.O. 2641(E), dated the 5th August, 2016, S.O. 4176 (E) dated the 27th August, 2018, and S.O. 5391(E) dated 24th October, 2018, except as respects things done or omitted to be done before such supersession, the Central Government hereby specifies such non- banking financial companies as defined in clause (f) of section 45-I of the Reserve Bank of India Act, 1934 (2 of 1934), having assets worth rupees one hundred crore and above, which shall be entitled for enforcement of security interest in secured debts of 1[rupees twenty lakh and above], as financial institutions for the purposes of the said Act.
[F. No. 31/52/2018-DRT]
VANDITA KAUL, Jt. Secy.
19. The amending notifications states as follows:-
MINISTRY OF FINANCE
(Department of Financial Services)
NOTIFICATION
New Delhi, the 12th February, 2021
S.O. 652(E).—In exercise of the powers conferred by sub-clause (iv) of clause (m) of subsection (1) of section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002), the Central Government hereby makes the following amendment in the notification of the Government of India, Ministry of Finance (Department of Financial Services), number S.O. 856 (E), dated the 24th February, 2020, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (ii), dated the 25th February, 2020, namely:—
In the said notification, for the words, “rupees fifty lakh and above” the words “rupees twenty lakh and above” shall be substituted.
[F. No. 31/52/2018-DRT]
VANDITA KAUL, Jt. Secy.
20. The notifications clearly relate only to a financial institution covered under Section 2(1)(m)(iv) of the 2002 Act and the prescription as regards the threshold limit of the secured debt is only one of the criteria required to be met by the relevant financial institution in order to be able to resort to the SARFAESI mechanism for recovery of its secured debts. It cannot be said that the notification is one aimed at a differential treatment of secured debts. A secured debt of even a lesser quantum in terms of Section 31(f) of the 2002 Act would be available to be recovered by a bank.
21. Furthermore, even if the petitioner’s contention are taken to be true, the underlined observations of the Hon’ble Supreme Court in Kotak Mahindra Bank Limited (supra) clearly explain the situation against him:-
“33. Though M.D. Frozen Foods (supra) and Indiabulls (supra) looked at the applicability of the the SARFAESI Act from a different angle, the core issue in those cases and the present appeals is the same, i.e., whether a loan/debt which was not covered by the SARFAESI Act in its inception could change its status thereafter, whereby its provisions would be applicable in the context of recovery thereof. Those decisions were concerned more with the identities of the entities which gave the loans and those that thereafter invoked the provisions of the SARFAESI Act, whereas in the present appeals, we are more concerned with the status of the loan/debt itself. However, semantics aside, the issue is the same, i.e., applicability of the SARFAESI Act to a loan/debt, which was originally not a loan/debt covered thereby. In this context, the observations made by this Court in the aforestated decisions clinch the issue.
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36. The decisions in M.D. Frozen Foods (supra) and Indiabulls (supra), therefore, put it beyond the pale of doubt that once a claim is ‘live and owing’ as on the date of coming into force of the SARFAESI Act, the provisions thereof would be available, as and when it becomes applicable to the institution holding that loan account. By the same logic, when the institution is one to which the SARFAESI Act is already applicable, acquisition of a non-performing secured loan account by such institution from an entity, that does not come within the ambit of the SARFAESI Act, would immediately clothe the said loan account with the attributes of a ‘secured debt’ covered by the provisions of the SARFAESI Act. In essence, it makes no difference as to whether it is the loan/debt along with the institution that comes within the ambit of the SARFAESI Act, as in the earlier two decisions, or it is the loan/debt alone which comes within the ambit thereof, by virtue of it being taken over by a ‘bank’ to which the SARFAESI Act is already applicable. In both cases, the provisions of the SARFAESI Act would be available for effecting recovery of the loan/debt.”
(Emphasis Supplied)
22. Thus referring to the earlier judgments of the Hon’ble Supreme Court in the cases of M.D. Frozen Foods Exports (P) Ltd. vs. Hero Fincorp Ltd.4, and Indiabulls Housing Finance Ltd. vs. Deccan Chronicle Holdings Ltd.5, the Hon’ble Court has taken it beyond the pale of doubt that when an institution which is entitled to take action under the 2002 Act acquires a non-performing asset from an entity which is not entitled to resort to the SARFAESI mechanism then the relevant financial asset would be clothed with the attributes of a ‘secured debt’ covered by the provisions of the 2002 Act, irrespective of “whether it is the loan/debt along with the institution that comes within the ambit of the SARFAESI Act, as in the earlier two decisions, or it is the loan/debt alone which comes within the ambit thereof, by virtue of it being taken over by a ‘bank’ to which the SARFAESI Act is already applicable.” The Hon’ble Court has clearly stated that “In both cases, the provisions of the SARFAESI Act would be available for effecting recovery of the loan/debt.”
23. Furthermore, it is noticed that this writ petition has been filed challenging SARFAESI action initiated by a private bank. In terms of the law laid down by the Hon’ble Supreme Court in the case Phoenix ARC Private Limited vs. Vishwa Bharati Vidya Mandir & Others6, no writ is maintainable against SARFAESI action taken by a bank or a private bank or an asset reconstruction company inasmuch as while seeking to recover loans granted by such entities, such entities do not discharge any public function. In this connection, the following paragraph of the said judgment may be noted:-
“18. Even otherwise, it is required to be noted that a writ petition against the private financial institution — ARC — the appellant herein under Article 226 of the Constitution of India against the proposed action/actions under Section 13(4) of the SARFAESI Act can be said to be not maintainable. In the present case, the ARC proposed to take action/actions under the SARFAESI Act to recover the borrowed amount as a secured creditor. The ARC as such cannot be said to be performing public functions which are normally expected to be performed by the State authorities. During the course of a commercial transaction and under the contract, the bank/ARC lent the money to the borrowers herein and therefore the said activity of the bank/ARC cannot be said to be as performing a public function which is normally expected to be performed by the State authorities. If proceedings are initiated under the SARFAESI Act and/or any proposed action is to be taken and the borrower is aggrieved by any of the actions of the private bank/bank/ARC, borrower has to avail the remedy under the SARFAESI Act and no writ petition would lie and/or is maintainable and/or entertainable. Therefore, decisions of this Court in Praga Tools Corpn. [Praga Tools Corpn. v. C.A. Imanual, (1969) 1 SCC 585] and Ramesh Ahluwalia [Ramesh Ahluwalia v. State of Punjab, (2012) 12 SCC 331 : (2013) 3 SCC (L&S) 456 : 4 SCEC 715] relied upon by the learned counsel appearing on behalf of the borrowers are not of any assistance to the borrowers.”
(Emphasis Supplied)
24. Golam Sabir and Anr. (supra) cannot come to the aid of the petitioner inasmuch as in the instant case the respondent-bank which has initiated action under the 2002 Act by issuing the statutory notice of demand under Section 13(2) of the said Act is covered by the definition of a bank under Section 2(c) of the 2002 Act and does not fall under the ambit of financial institution under Section 2(1)(m)(iv) of the said Act. The aforesaid notifications issued by the Ministry of Finance do not apply to a bank under Section 2(c) of the 2002 Act.
25. Thus looked at it from any point of view, the writ petition cannot be entertained. WPA 7240 of 2026 stands disposed of without passing any order as prayed for. No costs.
26. This order will, however, not prevent the petitioners from approaching the relevant forum including the relevant Debts Recovery Tribunal in accordance with law.
27. Urgent photostat certified copy of this judgment, if applied for, be supplied to the parties on urgent basis after completion of necessary formalities.
Notes:
1 Hereafter “the 2002 Act”
2 W.P.A.14007 of 2025, delivered on December 24, 2025
3 2026 SCC OnLine SC 1744
4 (2017) 16 SCC 741
5 (2018) 14 SCC 783
6 (2022) 5 SCC 345
