MP High Court says that Rs.20 Lakh limit for Loan Recovery does not apply to Housing Finance Companies

The Madhya Pradesh High Court has ruled that the minimum threshold of ₹20 lakh for loan recovery by Non-Banking Financial Companies (NBFCs) under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) does not apply to Housing Finance Companies (HFCs). The Court held that HFCs are allowed to invoke the SARFAESI Act to recover loans, even if the loan amount is below the ₹20 lakh minimum cap that is applicable to NBFCs.
The Court’s judgment stated that HFCs are a special genre of financial institutions/companies, created and regulated by the National Housing Bank Act, and cannot be considered as a sub-species of NBFCs. The Court concluded that the minimum pecuniary threshold of ₹20 lakhs does not apply to HFCs as prescribed for NBFCs.
The Court dismissed a petition challenging an HFC’s decision to invoke the SARFAESI Act to recover a loan of ₹8 lakh. The Court held that the petition was maintainable before the High Court since it raised an important question of law. It further ruled that the SARFAESI Act could be invoked by the HFC in a case where the loan amount was less than ₹20 lakh.
In summary, the Madhya Pradesh High Court has ruled that the ₹20 lakh minimum threshold for loan recovery under the SARFAESI Act does not apply to Housing Finance Companies (HFCs), allowing them to invoke the Act to recover loans even if the loan amount is below ₹20 lakh.
Loan