Calcutta High Court (Appellete Side)
Finance Limited & Ors vs Golam Sabir & Ors on 9 April, 2026
Author: Shampa Sarkar
Bench: Shampa Sarkar
2026:CHC-AS:578-DB
IN THE HIGH COURT AT CALCUTTA
CIVIL APPELLATE JURISDICTION
APPELLATE SIDE
BEFORE :-
THE HON'BLE JUSTICE SHAMPA SARKAR
&
THE HON'BLE JUSTICE AJAY KUMAR GUPTA
F.M.A 161 OF 2026
With
CAN 1 of 2026
Piramal Capital & Housing
Finance Limited & Ors.
vs.
Golam Sabir & Ors.
For the Appellants : Ms. Soni Ojha, Adv.
Ms. S.B. Chatterjee, Adv.
For the Respondent Nos. 1 & 2 : Mr. Proshit Deb, Adv.
Ms. Sucheta Mitra, Adv.
Judgment reserved on : 23.03.2026
Judgment pronounced on : 09.04.2026
Judgment uploaded on : 09.04.2026.
Shampa Sarkar, J.
1. The appeal arises out of a judgment and order dated December 24, 2025
passed by a learned Single Judge in WPA No. 14007 of 2025. The learned
Judge held that, as the claim of the Financial Institution/appellants was below
Rs. 20 lakhs, as would be evident from the notice under Section 13(2) of the
Securitisation and Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002 (hereinafter referred to as ‘the SARFAESI Act‘), the
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appellants could not undertake any action under the SARFAESI Act, being hit
by the threshold limit set forth in the notification dated February 12, 2021.
2. Ms. Ojha, learned Advocate for the appellants submitted that the
appellant No.1 belonged to a special category, being a company registered
under the National Housing Bank Act, 1987 (hereinafter referred to as the NHB
Act). The NHB Act was specially enacted for Housing Finance Companies
(HFC). Therefore, the notification of 2021 would not be applicable to HFCs. The
learned Judge failed to consider the said aspect and also failed to appreciate
the fact that, separate set of notifications were issued by the Central
Government, (Ministry of Finance) under the provisions of the NHB Act, which
were exclusively applicable to HFCs. The appellants would fall within the
definition of any other institution under Section 2(1)(m)(iv) of the SARFAESI
Act. The appellants belonged to a special genre of companies created under and
regulated by a special enactment. Thus, the appellant No.1 could not be
treated as a Non-Banking Financial Company. The provisions of the SARFAESI
Act and the notifications framed thereunder, which were applicable to NBFCs
would not be applicable to the appellants. The NHB Act did not postulate the
applicability of Chapter III-B read with Section 45-I (f) of the Reserve Bank of
India Act, 1934 (hereinafter referred to the RBI Act). Therefore, HFCs could
not be deemed to have been included under the umbrella of NBFCs. For this
reason the minimum pecuniary threshold of 20 lakhs in order to initiate
SARFAESI proceeding would not be applicable to the appellants.
3. According to Ms. Ojha, the Central Government had issued a separate
set of notifications for HFCs. Thus, those notifications which were issued by
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the Ministry of Finance with regard to NBFCs as defined under clause (f) of
Section 45-I of the RBI Act, would not be applicable to HFCs registered under
Section 29A of the NHB Act.
4. She also raised the question of maintainability of the writ petition in view
of the fact that an alternative efficacious remedy was available before the Debts
Recovery Tribunal. Reliance was placed on the decision of the Madhya Pradesh
High Court in the matter of Virendra Rathore and Others vs. Tehsildar
Distt. Mandsaur and Others. Reported in 2024 SCC OnLine MP 3427 in
support of the contention that the Madhya Pradesh High Court had held that a
notification issued by the Central Government, Ministry of Finance on the
applicability of the SARFAESI Act on NBFCs, shall not be applicable in respect
of HFCs, but only in the context of NBFCs so defined under Chapter III-B of the
RBI Act. An HFC was entitled under the law to take recourse to the SARFAESI
Act for recovery of loans and borrowings irrespective of the fact that the claim
was below the threshold of 20 lakhs.
5. Mr. Proshit Deb, learned Advocate for the writ petitioner submitted that,
the appellant No. 1 was an NBFC. It did not have the jurisdiction or the
authority to institute SARFAESI proceedings as a secured creditor, as the claim
was below 20 lakhs. He relied on the notification issued on February 12, 2021
to contend that, NBFCs were allowed to resort to the machinery under the
SARFAESI Act for recovery of loans only when the minimum debt was Rs. 20
lakhs or more. He urged that the HFCs were a sub-species of the larger
category of NBFCs and therefore, were categorised as an NBFC by the Reserve
Bank of India in various notifications and Master Circulars. He further urged
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that, HFCs were covered under the larger umbrella of NBFC and therefore, the
notifications applicable with respect to the pecuniary threshold to institute
SARFAESI proceedings by NBFCs would also apply with all force to HFCs.
Reference was made to the Press Release by the RBI dated August 13, 2019,
the Master Direction on HFCs and NBFCs for the year 2021 and the RBI’s list
dated September 14, 2023 containing names of NBFCs in the Upper Layer
(NBFC-UL) under Scale Based Regulations for NBFCs. He demonstrated that
the name of the appellant no. 1 figured at serial no. 6 under the category of
non-debt taking HFC. Further reliance was placed on a similar list of the RBI
dated January 16, 2025. The list contained the names of NBFCs registered
with the RBI as on September 30, 2025.
6. Thus, it was contended by Mr. Deb that pursuant to the Press Release of
the Reserve Bank of India and the Circulars and directions issued by the RBI,
HFCs would be treated as a category of NBFC for regulatory purposes. By
notification dated February 24, 2020, NBFCs were entitled to invoke the
provisions of the SARFAESI Act for secured debts of Rs. 50 lakhs and above.
By a notification of February 12, 2021, the threshold was reduced to Rs. 20
lakhs.
7. According to Mr. Deb, HFCs being a sub-category or a substrata of
NBFCs, would be entitled to invoke the provisions of the SARFAESI Act if the
secured debt was of Rs. 20 lakhs and above. The notifications of February 24,
2020 and February 12, 2021 restrained an NBFC, as defined under clause (f) of
45-I of the RBI Act having assets worth Rs. 100 crores and above, from
invoking proceedings under the said Act, unless the secured debt was Rs. 20
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lakhs or above. He referred to the Master Direction and Clauses 2.1 and 4.1.17
thereof, in support of the contention that an HFC would fall within the
definition of an NBFC, whose financial assets in the business of providing
finance for housing constituted at least 60% of its total assets. Housing
finance would mean providing finance as per clauses (a) and (k) of paragraph
4.1.1.6 of the said Master Direction. Similar provisions of the Reserve Bank of
India’s latest circular/direction dated November 28, 2025 were also relied
upon. Reliance was further placed on the Master Circular of January 5, 2022,
to buttress such argument. The decision of the Himachal Pradesh High Court
in Gupta Hardware Store and Ors. vs. Union of India and Ors. decided in
CWP No. 8566 of 2024 was referred to. The Hon’ble Court held that the
notifications of February 21, 2020 and February 12, 2021 would apply to
NBFCs and financial institutions, including HFCs.
8. Ms. Ojha countered such argument of Mr. Deb, inter alia, stating that at
present, the appellant no. 1 is a financial institution, but at the time of
issuance of the notice under Section 13(2) it continued to be an HFC and
retained its special category and uniqueness as an HFC. The earlier
notifications/circulars and directions of RBI, would not be applicable.
9. Heard the learned Advocates for the parties. The appellant No. 1 claimed
to be an HFC registered under the Act, 1987. It claimed to be covered by the
definition of “other institution” within the meaning of sub-clause (iv) of clause
(m) of sub-section 1 of Section 2 of the SARFAESI Act. The respondent nos. 1
and 2 were the borrowers and they had availed of financial assistance for
purchase of a house. Equitable mortgage was created as a security and a sum
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of Rs. 12,70,000/- and a further sum of Rs. 50,800/- towards insurance
premium had been sanctioned. The loan was sanctioned on a floating rate of
interest which was variable from time to time. Initially, the loan was repayable
in 180 equal monthly instalments of Rs. 17,368/-. The allegation was that the
borrower committed default in repayment of the loan and as a consequence
whereof, the loan was classified as a non performing asset (NPA) on September
3, 2024 as per the RBI guidelines.
10. The appellant no. 1 issued a demand notice dated September 16, 2024
under Section 13(2) of the SARFAESI Act. In spite of service of the notice, the
borrowers neither repaid the loan nor made any representations. On April 22,
2025, the borrowers raised objections in respect of the notice under Section
13(2) of the SARFAESI Act. The appellants replied to the same. Thereafter, the
borrowers filed an application under Article 226 of the Constitution of India,
challenging the notice dated September 16, 2024, issued by the appellant no.
1.
11. In the writ petition the authority of the appellant no. 1 to invoke the
provisions of the SARFAESI Act was challenged on the ground that, the
notification dated February 24, 2020, which was amended by the notification
dated February 12, 2021 by the Ministry of Finance would be applicable,
insofar as, the minimum threshold to initiate SARFAESI proceedings was
concerned. The claim of the appellant no. 1 was being less than Rs. 20 lakhs,
as such the notice under section 13(2) of the said Act, was bad in law. The
borrowers relied upon the Master Circular of January 5, 2022 and the Press
Release of the RBI dated September 14, 2022.
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12. The appellants specifically contended that, an HFC was a special
category of institution registered under the NHB Act. The regulations and the
notifications governing an NBFC, as defined either under the SARFAESI Act, or
under RBI Act would not govern HFCs. HFCs were unique in their procedure
for establishment, composition and their nature of business. The power to
invoke the SARFAESI Act would not be governed by the Circulars applicable to
NBFC. HFCs had the authority to invoke SARFAESI proceedings even if the
debt due was below the threshold of 20 lakhs.
13. The learned Single Judge considered the facts of the case and the
submissions of the respective parties with regard to the maintainability of the
writ petition. His Lordship held that when a litigant had a statutory remedy
available to him as an alternative or an efficacious remedy for ventilating his
grievances, a writ court would be slow to entertain a writ petition. However, in
the case in hand, the issue was not with regard to a challenge to the action
taken under the SARFAESI Act simpliciter, but the issue was with regard to the
jurisdiction of the appellants to initiate proceedings under the SARFAESI Act.
The issue of jurisdiction of the appellants over the subject matter of the writ
petition went to the very root and as such, the writ petition was maintainable.
14. The decisions of State of U.P vs. Mohammad Nooh reported in 1958
SCR 595 and Whirlpool Corporation vs. Registrar of Trade Marks,
Mumbai and Others reported in (1998) 8 SCC 1 are referred to. These
decisions had carved out the exceptions as to when the existence of an
alternative remedy would not be a bar to entertaining a writ petition, namely, a)
where the writ petition was for enforcement of any fundamental right; b) where
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there were violations of principles of natural justice’ c) where the order or the
proceeding was wholly without jurisdiction; and d) where the vires of an Act
was under challenge.
15. Hence, we agree with the findings of the learned Single Judge that, when
the question of jurisdiction of the appellant no. 1 to proceed under the
SARFAESI Act had been raised, the same being a pure question of law, the
question of self-imposed restriction by the writ court, requiring the borrowers
to approach the Debts Recovery Tribunal did not arise. Lack of subject matter
jurisdiction went to the very root of authority of the appellant no. 1 to proceed
under the SARFAESI Act. The allegation was that, the appellant no. 1 acted in
excess of jurisdiction under the law and in such a situation, an alternative and
efficacious remedy would not be a bar. The writ petition was filed alleging
wrongful exercise of power by the HFC. It is trite that, when questions of
jurisdiction in respect of any action by a statutory authority are raised or when
pure questions of law arise with regard to the existence and exercise of power
by a statutory authority, alternative remedy is not a bar to entertaining the writ
petition. The writ court has the jurisdiction to address such issue and amend
the wrong.
16. In the decision of M/S Godrej Sara Lee Ltd. vs. The Excise and
Taxation Officer cum-Assessing Authority & Ors. reported in 2023 SCC
OnLine SC 95, it was held that an alternative remedy would not stand in the
way when questions of jurisdiction or pure questions of law which went to the
very root of exercise of power by a concerned authority had been raised.
Admittedly, in this case, there are no disputed questions of fact, but only a
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question of law as to whether the appellant no. 1 could invoke the SARFAESI
Act when the claim was below the threshold of 20 lakhs. Reference is made to
the decisions of State of U.P and Others vs. Indian Hume Pipe Co. Ltd.
reported in (1977) 2 SCC 724 and Union of India and Another vs. State of
Haryana and Another reported in (2000) 10 SCC 482. The learned Single
Judge did not err in holding that the writ petition was maintainable.
17. Now, adverting to the issues which fell for consideration before the
learned Judge, we find that the learned Judge relied on the Press Release dated
August 13, 2019 which recorded that the Finance No. 2 Act, 2019 had
amended the NHB Act, conferring certain powers with regard to regulation of
HFCs, to the RBI. The RBI pursuant thereof, brought within its fold all HFCs,
and directed that those HFCs would thenceforth be treated as one of the
categories of NBFCs. The RBI also directed that the HFCs would comply with
the directions and instructions issued by NHB till such time the RBI issued a
revised framework for the HFCs. The relevant portions of the August 13, 2019,
Press Release are quoted below :-
” August 13, 2019
Transfer of Regulation of Housing Finance Companies (HFCS) to
Reserve Bank of India
The Finance (No.2) Act, 2019(23 of 2019) has amended the National
Housing Bank Act, 1987 conferring certain powers for regulation of Housing
Finance Companies (HFCs) with Reserve Bank of India. The Central
Government has since issued notification appointing August 09, 2019 as the
date on which the relevant part of that Act, namely, Part VIl of Chapter VI
shall come into effect.
HFCs will henceforth be treated as one of the categories of Non-Banking
Financial Companies (NBCs) for regulatory purposes. Reserve Bank will
carry out a review of the extant regulatory framework applicable to the FCs
and come out with revised regulations in due course. In the meantime, HFCs
shall continue to comply with the directions and instructions issued by the
National Housing Bank (NHB) till the Reserve Bank issues a revised
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2026:CHC-AS:578-DBframework. NHB will continue to carry out supervision of HFCs and HFCs
will continue to submit various returns to NHB as hitherto. The grievance
redressal mechanism with regard to HFCs will also continue to be with the
NHB.
A housing finance institution, which is a company, desirous of making an
application for registration under sub-section 2 of section 29A of the
National Housing Bank Act, 1987(as amended by Act 23 of 2019) may
approach the Department of Non-Banking Regulation, Reserve Bank of
India.
Any clarification in this regard can be obtained over email or from
The Chief General Manager
Department of Non-banking Regulation (DNBR)
Reserve Bank of India
2nd floor, Centre 1, World Trade Centre
Cuffe Parade, Colaba
Mumbai- 400005Yogesh Dayal
Chief General Manager”
18. Pursuant to the Press Release, RBI issued a revised framework in 2021.
The directions of 2021 were called the Non-Banking Financial Company –
Housing Finance Company (Reserve Bank Directions) 2021. Apart from
Chapter XII of the said directions, all other directions were made applicable to
HFCs registered under Section 29-A of the NHB Act, Clause 4.1.17 of which is
quoted below :-
“4.1.17. “Housing finance company” shall mean a company
incorporated under the Companies Act, 2013 that fulfils the following
conditions :
a. It is an NBFC whose financial assets, in the business of providing
finance for housing, constitute at least 60% of its total assets (netted off
by intangible assets). Housing finance for this purpose shall mean
providing finance as stated at clauses (a) and (k) to Paragraph 4.1.16.
b. Out of the total assets (netted off by intangible assets), not less than
50% should be by way of housing finance for individuals as stated at
clauses (a) to (e) of Paragraph 4.1.16.”
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19. The definition clearly states that an HFC was an NBFC, whose financial
assets in the business of providing housing loan constituted at least 60% of its
total assets.
20. Certain parameters were framed under the said directions. The Master
Circular of the Reserve Bank of India dated January 5, 2022, specified under
clause 1.1(a) that NBFCs would mean Non-Banking Financial Companies
registered under the RBI which also included housing finance companies
registered under Section 29A of the NHB Act. The relevant portion is quoted
below :-
“a. NBFCs means the Non-Banking Financial Companies registered with
the Reserve Bank of India, which shall also include Housing Finance
Company (HFC) registered under Section 29A of the National Housing
Bank Act, 1987.”
21. Thus, His Lordship relied on the Master Direction of 2021 and the
Master Circular of 2022 to hold that the definition of NBFC was inclusive and
HFCs were also within the umbrella of NBFC. It was a sub-set within the set of
NBFCs. By a further direction or clarification in the form of a List, the Reserve
Bank of India included 15 NBFCs in its list of Upper Layer under Scale Based
Regulation. The list provided as follows :-
Sl. Name of the NBFC Category of the NBFC
No.
1. LIC Housing Finance Limited Deposit taking HFC
2. Bajaj Finance Limited Deposit taking BNFC-ICC
Shriram Finance Limited
3. (formerly Shriram Transport Deposit taking NBFC-ICC.
Finance Company Limited)
4. Tata Sons Private Limited Core Investment Company (CIC).
5. L & T Finance Limited Non-deposit taking NBFC-ICC.
Piramal Capital & Housing
6. Non-deposit taking HFC.
Finance Limited
7. Cholamandalam Investment and Non-deposit taking NBFC-ICC.
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Finance Company Limited
Indiabulls Housing Finance
8. Non-deposit taking HFC
Limited
Mahindra & Mahindra Financial
9. Deposit taking NBFC-ICC
Services Limited
Tata Capital Financial Services
10 Non-deposit taking NBFC-ICC
Limited
11 PNB Housing Finance Limited Deposit taking HFC
12 HDB Financial Services Limited Non-deposit taking NBFC-ICC
13 Aditya Birla Finance Limited Non-deposit taking NBFC-ICC
14 Muthoot Finance Limited Non-deposit taking NBFC-ICC
15 Bajaj Housing Finance Ltd. Non-deposit taking HFC
22. The appellant no. 1 appeared at serial no. 6 and had been identified
under the category of NBFC, as a non-deposit taking HFC. Similarly, in the list
of January 16, 2025, the name of Piramal Capital and Housing Finance
Limited appears at serial No. 10 which is quoted below :-
Sl. No. Name of the NBFC Category of the NBFC
1 LIC Housing Finance Limited Deposit taking HFC
2 Bajaj Finance Limited Deposit taking NBFC-ICC
3 Shriram Finance Limited Deposit taking NBFC-ICC
4 Tata Sons Private Limited Core Investment Company
5 Cholamandalam Investment and Finance
Company Limited Non-deposit taking NBFC-ICC
6 L&T Finance Limited (Formerly known as
L&T Finance Holdings Limited) Non-deposit taking NBFC-ICC
7 Mahindra & Mahindra Financial Services
Limited Deposit taking NBFC-ICC
8 Aditya Birla Finance Limited Non-deposit taking NBFC-ICC
9 Tata Capital Limited Non-deposit taking NBFC-ICC
10 Piramal Capital & Housing Finance Limited Non-deposit taking HFC
11 PNB Housing Finance Limited Deposit taking HFC
12 HDB Financial Services Limited Non-deposit taking NBFC-ICC
13 Sammaan Capital Limited (Formerly known
as Indiabulls Housing Finance Limited) Non-deposit taking NBFC-ICC
14 Muthoot Finance Limited Non-deposit taking NBFC-ICC
15 Bajaj Housing Finance Limited Non-deposit taking HFC
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23. His Lordship rightly held that, based on the classification of an HFC in
the Master Circular, the directions and the Press Release of the RBI read with
the definition of NBFC under Section 45-I (f) of the RBI, the appellant no. 1 was
an NBFC. Section 45-I (f) defines a Non-Banking Financial Company as a
financial institution, which is a company. The relevant definition is quoted
below :-
“45-I. ***
(f) “non-banking financial company” means –
(i) a financial institution which is a company;
(ii) a non-banking institution which is a company and which has as
its principal business the receiving of deposits, under any scheme or
arrangement or in any other manner, or lending in any manner;
(iii) such other non-banking institution or class of such institutions, as
the Bank may, with the previous approval of the Central Government
and by notification in the Official Gazette, specify.”
24. The notification issued by the Central Government on June 17, 2021
specified that a Housing Finance Company registered under sub-section 5 of
Section 29A of the NHB Act, 1987 was a financial institution for the purpose of
the said Act i.e. the SARFAESI Act. Thus, HFCs were brought within the fold of
NBFC as a financial institution by the notification of the Ministry of Finance
dated June 17, 2021. The relevant portion is quoted below :-
“NOTIFICATION
New Delhi, the 17th June, 2021
S.O. 2405(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.1282 (E), dated
the 10th November, 2003, S.O. 1083 (E) dated 16th March, 2006, S.O.
2757 dated 19th September, 2007, S.O. 1516(E) dated 23rd June,
2010, S.O. 3466 (E) dated 18th December, 2015, and S.O.404(E) dated
22nd January, 2018, except as respects things done or omitted to be
done before such supersession, the Central Government hereby
specifies such housing financial companies registered under sub-section
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2026:CHC-AS:578-DB(5) of section 29A of the National Housing Bank Act, 1987 (53 of 1987),
having assets worth rupees one hundred crore and above, as financial
institutions for the purposes of the said Act.”
25. Under the RBI Act, a NBFC, as has already been discussed hereinabove,
includes a financial institution, which is a company. The notification of June
17, 2021 read with the definition of Non-Banking Financial Company under
Section 45-I(f) of the RBI Act establishes the fact that the Central Government
had specified that HFCs registered under sub-section (5) of Section 29A of the
NHB Act, 1987 having assets worth Rs. 100 crores and above would be a
financial institution for the purpose of the SARFAESI Act. Section 2(1)(m)(iv) of
the SARFAESI ACT defines a financial institution as hereunder. Section
2(1)(m)(iv) is quoted below:-
“2.(1).(m) “financial institution” means—
(iv) any other institution or non-banking financial company as defined
in clause (f) of section 45-I 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;”
26. A combined reading of Section 2(1)(m)(iv) of the SARFAESI Act, the
notification of June 27 of 2021 and Section 45-I(f) of the RBI Act clearly
indicates that HFCs were brought under the fold of NBFC. His Lordship rightly
appreciated that the amendment of August 29, 2023, which was relied upon by
Ms. Ojha had been repealed and replaced by the Master Direction of October
19 , 2023, being the Master Direction /Reserve Bank of India (Non-Banking
Financial Company – Scale Based Regulations) Directions, 2023. Regulation 2
thereof, provided that the regulatory structure of Non-Banking Financial
Companies would be in four layers based on size. Regulation 2.3 clearly
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specified that the middle layer included Housing Finance Companies as
NBFCs. Regulation 4 which related to the applicability of the directions also
specifically pertained to Housing Finance Companies. Regulation 4.3.6,
provided that, all such HFCs were bound by the Master Direction-Non-Banking
Financial Company – Housing Finance Company (Reserve Bank) Directions,
2021 as amended from time to time. HFCs were a category of NBFCs as would
be apparent from the Press Release and thereafter the Master Directions of
2021. Regulation 2.3 and 4.3.6 are quoted below:-
2.3 Middle Layer The Middle Layer shall consist of (a) all deposit taking
NBFCs (NBFCs-D), irrespective of asset size, (b) non-deposit taking
NBFCs with asset size of ₹1,000 crore and above and (c) NBFCs
undertaking the following activities (i) Standalone Primary Dealer (SPD),
(ii) Infrastructure Debt Fund-Non-Banking Financial Company (IDF-
NBFC), (iii) Core Investment Company (CIC), (iv) Housing Finance
Company (HFC) and (v) Non-Banking Financial Company-Infrastructure
Finance Company (NBFC-IFC).
***
***
4.3.6 HFC – Master Direction – Non-Banking Financial Company –
Housing Finance Company (Reserve Bank) Directions, 2021, as amended
27.
from time to time.
28. The decision of the Madhya Pradesh High Court in Virendra Rathore
(supra) was rightly distinguished by the learned Judge. It had been observed in
the decision that, there were no notifications which indicated either an express
or implied intention of the Central Government to bring Housing Finance
Companies within the fold of NBFCs. The relevant paragraphs of the said
decision are quoted below :-
“29. That it was further contention of the petitioner that the notifications of
2021 & 2022 have applied the pecuniary threshold to all the NBFCs as a
generic class, across the board and therefore specific mention of any
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company or for that matter of respondent HFC (SRG Finance) was never
needed. Since the minimum pecuniary threshold was being determined and
prescribed for all NBFCs across the plane, therefore it would automatically
cover Respondent HFC as well. This contention of the petitioner is taken
forward only to be rejected. As already stated supra, the HFIs/HFCs being a
special genre of FIs/companies, created and regulated by special enactment
of NHB Act, the same cannot be compartmentalised.
In the bogie of NBFCs, more so when NHB Act does not u/s 29-A postulate
the applicability of Chapter HI-B r/w Section 45(I)(f) of the RBI Act. Therefore
HFIs/HFCs like the respondent cannot impliedly be deemed to have been
included under the umbrella of NBFCs, till and until such an intention is
express and explicit under the NHB Act or the notifications issued under it.
For this reason, therefore the minimum pecuniary threshold of 20 lakhs shall
not apply to HFIs/HFCs as contended by the petitioner as prescribed in case
of the NBFCs.
30. For yet another reason the contention of the petitioner is liable to be
rejected. That being issuance of separate series of notifications by the very
same department, very same arm of the Central Government (Ministry of
Finance), as would be explicated infra for the HFCs/HFIs. HFCs/HFIs are
governed holistically by Section 29- A of the NHB Act, the notifications that
have been issued qua them specifically shall regulate applicability of
SARFAESI to them and not other notifications issued generically for NBFCs.
Bare glance at various notifications issued for HFCs/HFIs from time to time
by the Central Government also shows that earlier HFCs were being
mentioned specifically to be treated as FIs under Section 2(I)(m)(iv) of
SARFAESL Otherwise there was never any occasion or necessity for the
Central Government to have come up with a distinct bee line of notifications
for HFCs/HFIs. The fact that notifications are issued separately with a
separate list of enumerated HFCs/HFIs by the Central Government is
indicative of the regime that HFCs/HFIs stand in an altogether different steel
silo then the NBFCs. Ergo therefore the contentions of the respondent
deserves acceptance that HFCs/HFIs are an entirely different special class,
which are covered under the phrase ‘any other institution’ adumbrated under
Section 2(1)(m)(iv) of SARFAESI Act and can’t be classed with other NBFCs.”
29. In the case in hand, the borrowers brought on record the notification of
September 14, 2023 and also the master circulars and directions, which would
indicate that, HFCs had been classified as NBFCs, being sub-categorised as a
non-deposit taking HFC.
30. The Central Government specified in 2020 that NBFCs as defined in
clause (f) of 45-I of the RBI Act having assets worth Rs. 100 crores and above
would be entitled to enforce security interest if the secured debts were Rs. 50
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lakhs and above, as a financial institution for the purpose of the said Act. This
threshold of 50 lakhs was reduced to 20 lakhs by the amendment vide
notification dated February 12, 2021. Both the notifications are quoted below :-
“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, 2022 (54 of 2002),
and in supersession of the notifications of the Government of India, Ministry
of Finance numbers S.O. 2641(E), dated 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 (f0 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 rupees fifty lakh and above, as financial institutions for the
purposes of the said Act.”
“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.”
31. The notifications were made applicable to financial institutions for the
purpose of the SARFAESI Act. The notification of 17th June, 2021 specified that
HFCs registered under sub-section 5 of Section 29A of the NHB Act, 1987
having assets worth Rs. 100 crores and above would be a financial institution
for the purpose of the SARFAESI Act. Thus, a combined reading of the
notification of February 24, 2020 and of June 17, 2021 would indicate that
Central Government specified that such Non-Banking Financial Companies
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which fell within the definition of Section 45-I (f) of the RBI Act being a
financial institution, would be entitled to proceed under the SARFAESI Act to
recover secured debt of Rs. 50 lakhs and above, which was later reduced to 20
lakhs upon granting the HFCs the status of a financial institution. The
notification of June 17 also granted HFCs the status of financial institution for
the purpose of the Act and moreover, as per Section 45-I financial institutions
were companies falling within the definition of NBFC.
32. Under such circumstances, we do not have any hesitation to hold that
the learned Single Judge rightly arrived at a finding that the notifications of
February 24, 2020 and February 12, 2021 would be applicable in the case of
the appellant no. 1. By the time the notice under Section 13(2) of the
SARFAESI Act had been issued by the appellant no. 1, the appellant no. 1 was
already under the umbrella and/or within the definition of the NBFC for the
purpose of invocation of the provisions of the SARFAESI Act.
33. Thus, we agree with the conclusion arrived at by the learned Single
Judge that once HFCs had been notified as financial institutions on June 17,
2021 and brought within the purview of the SARFAESI Act and upon being
within the regulatory framework of the Reserve Bank of India, there was no
reason to hold that an HFC would not be bound by the notification of February
24, 2020 as modified on February 12, 2021. The appellant no. 1 was clearly
covered by the notifications and could not proceed under the SARFAESI Act in
respect of the claim against the borrowers, which was below Rs. 20 lakhs.
34. However, His Lordship clarified that the decision would not preclude the
appellant no. 1 from undertaking other step available in law to recover the
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outstanding amount from the writ petitioner. Consequently, the order
impugned does not call for interference.
35. Accordingly the appeal is dismissed. Connected application is also
disposed of.
36. Urgent photostat certified copies of this judgment, if prayed for, be
supplied to the parties upon fulfilment of requisite formalities.
(Shampa Sarkar, J.)
1. I agree.
(Ajay Kumar Gupta, J.)