NBFC asset less than 100 crores is not a secured creditor for SARFAESI Act
As per the loan agreement dated 10.10.2017, the Respondent No.3 M/s. M.J.Shah Capital Private Ltd had given Rs.7.50 crores to the petitioner – partnership as against the mortgage of flat owned by the partnership.
RBI has issued Non-Banking Company certificate to the respondent no.3.
On failure to pay the loan, notice under Section 13(2) of the SARFAESI Act was issued. The petitioner objected to the said notice on the ground that the respondent no.3 had no authority to invoke said Act for recovery of its dues.
Thereafter, the respondent no.3 filed application under Section 14 for possession of the secured asset. This was challenged in the writ petition on the ground that the respondent no.3 is not a financial institution and only secured creditor can take assistance of Chief Judicial Magistrate for possession.
HELD that as on 31.3.2024, the asset of the respondent no.3 was Rs.16.30 crores less than Rs.100 crores stipulated in the Notification dated 24.2.2020. Thus, the respondent no.3 is not a financial institution and hence, cannot be a secured creditor for section 14 of the Act.
It is to be seen if the respondent no.3 qualifies as financial institution and the date when it invoked section 14, irrespective of the date of the loan agreement.
Judgment dated 21.2.2025 of the High Court of Bombay in Writ Petition No.4099 of 2024 (OS) of M/s. Pyramid Developers Vs. Union of India and others
