Financial institutions cannot initiate SARFAESI proceedings for loan amounts below Rs.20,00,000/- as per Central Government regulations.

JUDGMENT :

Tarlok Singh Chauhan, J.

The instant petition has been filed for grant of the following reliefs:-

“A. Issue an appropriate writ, order or direction including a writ in the nature of certiorari and setting aside/quash the impugned Symbolic possession taken after Notice dated 27.07.2024 (ANNEXURE P-2) passed by the respondent no. 2 under Section 13 (4) of Securitisation and Reconstruction Assets of Financial and Enforcement of Security Interest Act, 2002 under Rule 8 of Security Interest (Enforcement) demand Notice Rules, 2002 and dated 19.03.2024 (ANNEXURE P-1)under Section 13 (2) of Reconstruction Securitisation and of Financial Assets and Enforcement Security Interest Act, 2002 issued by the of respondents Financial Institution with regard to shop property comprised n Khata No. 1442/264, Khasra no. 1150 having land measuring 38-00 Sq. Mtrs. LE Gair Mumkin Dukan pakki situated at Mohal Sunni Pratham, Tehsil Sunni, District Shimla, H.P. as per Jamabandi for the year 2010-11 and other subsequent action proceedings initiated by respondent Financial Institution as the same have been initiated in complete contravention of Securitisation and reconstruction of financial Assets and Enforcement of security interest Act, 2002 and rules framed there under which are illegally, unjustified, erroneous, unwarranted, null and void and arbitrarily in manner, in the interest of justice.

B. Further prayer a issuance of the writ in the nature of certiorari quashing the impugned possession notice dated 27.07.2024 (Annexure P-2) under Rule 8 of Security Interest Enforcement) Rules, 2002, vide which respondent nos.2 & have issued notice of possession qua the demised premises of the petitioners and taking further coercive method against the petitioners and their properties;”

2. Shorn of unnecessary details, the petitioners secured a loan of Rs.25,00,000/- (Rupees twenty lac) from Shriram City Union Finance Limited (for short ‘finance company’) and had been paying monthly EMI of Rs.72083/- regularly, but later defaulted, constraining the finance company to issue demand notice to the petitioner dated 27.07.2024 under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short ‘SARFAESI Act’), raising a total demand of Rs.18,45,198/-.

3. Petitioners submitted reply to the said notice, but to no avail.

4. The moot question before this Court is whether the financial company is justified in resorting to provisions of SARFAESI Act for recovery of the outstanding dues from the petitioners, when it is lower than the monetary threshold of Rs.20,00,000/- (Rupees twenty lac); a bar fixed by the Central Government (Ministry of Finance) for Non-Banking Financing Company (for short ‘NBFC’).

CONTENTIONS ON BEHALF OF THE PETITIONERS

5. The petitioners have questioned the jurisdiction and authority of the finance company to institute SARFAESI proceedings as a ‘secured creditor’ of the loan amount lent by a financial institution (for short ‘FI’) under the SARFAESI Act, 2002. It has been contended that the proceedings under the SARFAESI Act could not be invoked by the finance company, since the company, admittedly, is an NBFC and the debt owed was less than Rs.20 lac.

6. Relying upon the Notification issued under Section 21(m) (iv) of the SARFAESI Act, specifically the latest Notification dated 12.02.2021 (Annexure P-5), the petitioner vehemently argue that the finance company is one of the sub-species of larger category of NBFCs, and therefore, having once been categorized as such bound is by the Gazette Notifications.

7. It is contended that the competent authority issued a list of NBFCs, but later on superseding all the earlier Notifications on 12.02.2021, it was held and directed that if any NBFC intends to kickstart SARFAESI proceedings, then, the same will be applicable to loan net worth amounting to Rs.20,00,000/- (Rupees twenty lac) and more. Thus, in the present case, when the loan amount sought to be reco