A bank acquiring a secured loan may invoke SARFAESI despite the originator’s threshold ineligibility.

The petitioners had obtained credit facilities of approximately ₹14,33,500 from Bajaj Finance Limited, secured by a mortgage over immovable property.

The loan was subsequently assigned to the respondent-bank.

The bank issued a demand notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act”), claiming ₹18,75,630 as due on 16 August 2022.

Upon non-payment, the bank initiated measures under Section 13(4) and applied to the District Magistrate, Purba Medinipur under Section 14.

By order dated 24 September 2025, the District Magistrate granted police assistance to enable the bank to take possession of the mortgaged property.

The petitioners challenged the bank’s SARFAESI action and the Section 14 order, contending that the original lender, being a non-banking financial company, could not invoke the SARFAESI Act because the secured debt was below the prescribed ₹20 lakh threshold.

Whether the Ministry of Finance notifications prescribing a minimum secured-debt threshold for specified non-banking financial companies applied to the respondent-bank, which was a “bank” under Section 2(1)(c) of the SARFAESI Act.

Whether an assignee bank entitled to invoke the SARFAESI Act could enforce a loan originally advanced by an institution that was allegedly ineligible to invoke the Act because the debt was below the prescribed threshold.

Whether the writ petition challenging SARFAESI proceedings and the Section 14 order was maintainable in view of the statutory remedy before the Debts Recovery Tribunal.

Section 2(1)(c) of the SARFAESI Act defines “bank,” while Section 2(1)(m) separately defines “financial institution,” including institutions or non-banking financial companies specified by the Central Government under Section 2(1)(m)(iv).

The Ministry of Finance notifications dated 24 February 2020 and 12 February 2021, issued under Section 2(1)(m)(iv), applied to specified non-banking financial companies and prescribed a minimum secured-debt threshold of ₹20 lakh; they did not apply to banks covered by Section 2(1)(c).

Relying on M.D. Frozen Foods Exports (P) Ltd. v. Hero Fincorp Ltd., (2017) 16 SCC 741, Indiabulls Housing Finance Ltd. v. Deccan Chronicle Holdings Ltd., (2018) 14 SCC 783, and Kotak Mahindra Bank Ltd. v. Trupti Sanjay Mehta, 2026 SCC OnLine SC 1744, the Court held that acquisition by a SARFAESI-covered bank can clothe a non-performing loan acquired from an otherwise ineligible entity with the attributes of a secured debt enforceable under the SARFAESI Act.

Under Phoenix ARC Private Limited v. Vishwa Bharati Vidya Mandir, (2022) 5 SCC 345, a writ petition challenging SARFAESI recovery action by a bank or private financial institution is ordinarily not maintainable where the borrower has an efficacious remedy under the SARFAESI Act before the Debts Recovery Tribunal.

The Court rejected the petitioners’ attempt to extend the ₹20 lakh threshold applicable to specified NBFCs to the respondent-bank.

The notifications were issued only under Section 2(1)(m)(iv) and therefore regulated the eligibility of specified financial institutions, not banks independently covered by Section 2(1)(c).

Since the respondent-bank fell within the statutory definition of “bank,” the notifications did not restrict its power to enforce the assigned secured debt.

Further, the Supreme Court’s reasoning in Kotak Mahindra Bank established that the subsequent acquisition of a non-performing secured loan by an institution already covered by the SARFAESI Act makes the Act available for recovery of that loan, even if the original lender could not have invoked the Act at the inception of the transaction.

The decision in Golam Sabir v. Piramal Capital and Housing Finance Ltd. was distinguished because that case concerned an entity falling within Section 2(1)(m)(iv), whereas the present proceedings were initiated by a bank under Section 2(1)(c).

Independently, the writ petition was declined because the petitioners had an efficacious statutory remedy before the Debts Recovery Tribunal and the bank’s recovery action did not constitute the performance of a public function warranting writ intervention.

The writ petition was not maintainable either on the merits of the statutory objection or in view of the alternative remedy under the SARFAESI Act.

WPA 7240 of 2026 was disposed of without granting the relief sought and without costs, while preserving the petitioners’ liberty to approach the appropriate forum, including the relevant Debts Recovery Tribunal, in accordance with law.