The Calcutta High Court on Wednesday delivered a closely watched ruling that may quietly reshape how housing finance companies pursue smaller loan defaults. Sitting in a packed courtroom, Justice Reetobroto Kumar Mitra made it clear that when the law fixes a financial threshold, lenders cannot simply step around it. The case involved a home loan of under ₹14 lakh and raised a sharp legal question: can a housing finance company invoke the SARFAESI Act for such an amount?
Background
The dispute began with a home loan of ₹13.20 lakh taken by Golam Sabir and another borrower in September 2023 from Piramal Capital and Housing Finance Ltd. Like many borrowers, they managed to repay some instalments but eventually slipped into default. By September 2024, the account was declared a non-performing asset, and soon after, the lender issued a demand notice under Section 13(2) of the SARFAESI Act, claiming about ₹13.86 lakh.
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The borrowers approached the High Court, not to contest the default as such, but to challenge the very authority of the lender to use the SARFAESI route for a loan below ₹20 lakh. Their argument rested on RBI notifications and regulatory changes treating housing finance companies as non-banking financial companies (NBFCs), which are subject to a minimum loan threshold for invoking SARFAESI.
Court’s Observations
At the outset, the lender argued that the writ petition itself was not maintainable, pointing out that borrowers have a remedy before the Debt Recovery Tribunal. The court, however, was not convinced. As the bench observed, “When the challenge goes to the root of jurisdiction itself, asking the petitioner to first approach the Tribunal would be a mere technicality.”
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The court examined a trail of RBI press releases, master directions, and government notifications issued between 2019 and 2023. These documents, the judge noted, clearly brought housing finance companies within the broader category of NBFCs for regulatory purposes. Referring to RBI’s own classification lists, the bench pointed out that the respondent company was expressly named as an NBFC in the upper regulatory layer.
On the threshold issue, the court was blunt. RBI notifications allow NBFCs to invoke SARFAESI only where the secured debt is ₹20 lakh or more. “Since the claim of the respondent financial institution is below rupees twenty lakh,” the bench observed, “the respondent cannot undertake any action under the said Act.”
The court also distinguished contrary rulings relied upon by the lender, noting that in the present case, official notifications specifically included the respondent company within the NBFC framework.
Decision
Holding that the SARFAESI action was without legal authority, the High Court set aside the demand notice and all consequential steps taken by the lender under the Act. At the same time, the court clarified that the company was free to recover its dues through other legal means available under law. No order as to costs was passed.
Case Title: Golam Sabir & Another vs Piramal Capital and Housing Finance Limited & Others
Case No.: WPA 14007 of 2025
Case Type: Writ Petition (Constitutional Writ Jurisdiction, Appellate Side)
Decision Date: 24 December 2025
