The Calcutta High Court has held that a Housing Finance Company cannot invoke the summary enforcement mechanism under the SARFAESI Act for secured debts below Rs 20 lakh, as the statutory notifications prescribing this threshold apply to HFCs. The Court set aside eviction orders passed by a Magistrate lacking jurisdiction and directed restoration of possession within 15 days.
Background & Facts
The Dispute
The petitioners, Rita Bose Saha and others, challenged their eviction from a residential house executed pursuant to orders passed by the learned Additional Chief Judicial Magistrate at Alipore, South 24 Parganas, in Miscellaneous Case No. 237 of 2026. The eviction was carried out under Section 14 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) at the instance of respondent nos. 3 to 5, a Housing Finance Company (HFC). The petitioners had approached the Debt Recovery Tribunal seeking restoration of possession, but the Tribunal could not pass any order before closing for vacation.
Key Facts
- The petitioners are borrowers who mortgaged their residential property to the HFC (respondent nos. 3 to 5)
- The HFC initiated proceedings under Section 14 of the SARFAESI Act before the Additional Chief Judicial Magistrate, Alipore, South 24 Parganas
- As per the affidavit filed by the bank before the learned Magistrate, the outstanding debt amount was Rs. 16,55,621.71 (approximately Rs. 16.56 lakh)
- The Central Government issued a notification on 24 February 2020 specifying that Non-Banking Financial Companies (NBFCs) would be entitled to enforce security interest in secured debts of Rs. 20 lakh and above
- This notification was subsequently modified by a notification dated 12 February 2021
- A further notification dated 17 June 2021 granted Housing Finance Companies the status of Financial Institutions for the purpose of the SARFAESI Act
- The petitioners contended that since the debt was below Rs. 20 lakh, the Magistrate lacked jurisdiction to pass possession orders
Procedural History
- 09 June 2026: Learned Additional Chief Judicial Magistrate, Alipore, South 24 Parganas passed order in Misc. Case No. 237 of 2026 directing possession
- 14 September 2026: Subsequent order passed by the same Magistrate in the same matter
- The petitioners filed proceedings before the Debt Recovery Tribunal for restoration of possession, but the Tribunal could not adjudicate before vacation
- 28 October 2026: Present writ petition (WPA 31206 of 2026) heard and decided by the High Court
The Parties' Positions
For the Petitioners: The learned counsel submitted that the notifications dated 24 February 2020 and 12 February 2021 prescribe a minimum threshold of Rs. 20 lakh for NBFCs to enforce security interest under the SARFAESI Act. They relied on a Division Bench judgment of this Court in FMA 161 of 2026, which held that a combined reading of the notifications dated 24 February 2020 and 17 June 2021 indicates that HFCs, having been granted the status of Financial Institutions, are covered by the February 2020 notification as modified in February 2021, and therefore cannot proceed under the SARFAESI Act for claims below Rs. 20 lakh.
For the Respondents (HFC): The learned counsel for respondent nos. 3 to 5 contended that the notification dated 17 June 2021 of the Ministry of Finance excludes Housing Finance Companies from the purview of the notifications dated 24 February 2020 and 12 February 2021. They argued that the HFC was therefore entitled to proceed with recovery for the loan amount below Rs. 20 lakh.
Relief Sought
The petitioners sought quashing of the Magistrate's orders dated 09 June 2026 and 14 September 2026, restoration of possession of the residential house, and a declaration that the HFC lacked jurisdiction to proceed under the SARFAESI Act for a debt below Rs. 20 lakh.
The Legal Issue
The central question was whether a Housing Finance Company, after being notified as a Financial Institution under the SARFAESI Act, is bound by the threshold of Rs. 20 lakh prescribed in the notifications dated 24 February 2020 and 12 February 2021 for enforcement of security interest, or whether the subsequent notification dated 17 June 2021 excludes HFCs from this threshold requirement.
Arguments Presented
For the Petitioners
The petitioners relied on the Division Bench decision in FMA 161 of 2026, wherein this Court held that a combined reading of the notifications dated 24 February 2020 and 17 June 2021 would indicate that the Central Government specified that such Non-Banking Financial Companies which fall 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 lakh and above, which was later reduced to Rs. 20 lakh upon granting HFCs the status of a Financial Institution. The petitioners argued that the notification of 17 June 2021 granted HFCs the status of Financial Institution for the purpose of the SARFAESI Act and, as per Section 45-I(f), Financial Institutions were companies falling within the definition of NBFC. Therefore, HFCs are clearly covered by the notifications and cannot proceed under the SARFAESI Act in respect of claims against the petitioners which are below Rs. 20 lakh.
For the Respondents
The HFC submitted that the notification dated 17 June 2021 of the Ministry of Finance excludes Housing Finance Companies from the purview of the notifications dated 24 February 2020 and 12 February 2021. They contended that the HFC was therefore rightly entitled to proceed with the recovery procedure with regard to the loan amount below Rs. 20 lakh.
The Court's Analysis
The Court examined the Division Bench judgment in FMA 161 of 2026 and found it directly governing the present controversy. The Division Bench had held that the notifications dated 24 February 2020 and 12 February 2021 would be applicable in the case of HFCs. It was further held that there was no reason to hold that HFCs would not be bound by the notification dated 24 February 2020 as modified on 12 February 2021, as the HFC was clearly covered by the notifications and could not proceed under the SARFAESI Act in respect of claims below Rs. 20 lakh.
The Court agreed with the Division Bench's interpretation. It observed that once HFCs were granted the status of Financial Institutions under the SARFAESI Act via the 17 June 2021 notification, they became subject to the same regulatory thresholds applicable to NBFCs/Financial Institutions under the earlier notifications. The threshold of Rs. 20 lakh for enforcement of security interest is a jurisdictional prerequisite - a condition precedent to the exercise of power under Section 14 of the SARFAESI Act.
"In view of the decision rendered by the Division Bench of this Court, it is clear that the HFC is governed by the notifications dated 24th February, 2020 read with 12th February, 2021. As such, the HFC could not have proceeded for recovery of an amount below Rs. 20 lakhs before the learned Magistrate and there was inherent lack of jurisdiction of the learned Magistrate while taking up the matter."
The Court concluded that the Magistrate's orders were passed without jurisdiction and were therefore liable to be set aside. However, the Court clarified that the HFC remains at liberty to recover the dues from the borrower in accordance with law, preserving their substantive rights while striking down the summary enforcement route.
The Verdict
The petitioners succeeded. The Court set aside the orders passed by the learned Additional Chief Judicial Magistrate, Alipore, South 24 Parganas dated 09 June 2026 and 14 September 2026 in Misc. Case No. 237 of 2026, holding them to be without jurisdiction. The Court directed respondent nos. 3 to 5 (the HFC) to restore possession of the residential house to the petitioners within 15 days from 28 October 2026. The Court made clear that the HFC shall be at liberty to recover the dues from the petitioner-borrower in accordance with law. No order as to costs was made. The writ petition (WPA 31206 of 2026) stands allowed.
What This Means For Similar Cases
Jurisdictional Threshold Is Mandatory
The Rs. 20 lakh threshold prescribed by the notifications dated 24 February 2020 and 12 February 2021 is a jurisdictional prerequisite for NBFCs and HFCs invoking Section 14 of the SARFAESI Act. Magistrates must verify this threshold before entertaining possession applications. Practitioners should:
- Verify the outstanding debt amount against the statutory threshold at the filing stage
- Raise jurisdictional objections at the earliest opportunity before the Magistrate
- Cite the Division Bench precedent in FMA 161 of 2026 as binding authority
HFCs Are Bound By NBFC Notifications
The notification dated 17 June 2021 granting HFCs the status of Financial Institutions does not exempt them from the threshold requirements; it brings them within the regulatory framework. This means:
- HFCs cannot bypass the Rs. 20 lakh minimum for SARFAESI enforcement
- The summary procedure under Section 14 remains unavailable for smaller debts
- HFCs must pursue civil remedies (money suits, mortgage enforcement) for debts below the threshold
Restoration of Possession Is Immediate
Where a Magistrate's order is found to be without jurisdiction, the Court will direct immediate restoration of possession. The 15-day compliance deadline set by the Court is a firm timeline. Borrowers facing similar wrongful evictions should:
- Seek urgent interim relief pending writ proceedings
- Document the eviction and any property damage
- Note that the lender's substantive recovery rights remain intact through alternative legal channels
