Calcutta High Court holds that Rs 20 lakh SARFAESI threshold for NBFCs does not apply to banks acquiring secured assets, upholding recovery proceedings.
Assignment of Loan Not Subject to NBFC SARFAESI Threshold
The Calcutta High Court ruled that the Rs 20 lakh threshold under Section 2(1)(t) of the SARFAESI Act—applicable to NBFCs—does not constrain banks that acquire secured loans from non-banking financial companies. The Court declined to entertain a writ petition challenging recovery actions initiated by the assignee bank.
The decision clarifies that once a secured asset is legally assigned to a bank, the SARFAESI rights are determined by the bank’s eligibility, not the originator’s (NBFC’s) limitations. This reinforces the fungibility of security interests in loan transfers and strengthens secondary market activity in distressed assets.
Practitioners must note the implications for securitization and loan assignment deals. The ruling supports the enforceability of SARFAESI actions post-transfer, even if the NBFC could not initiate them independently. Due diligence should confirm assignment compliance under applicable regulations.
Citations
- WPA 25935 of 2026