'Cannot Proceed Under SARFAESI If Dues Below ₹20 Lakhs': Punjab & Haryana High Court Protects Homeowners From Eviction, Issues Notice

"... since the recoverable amount is less than 20 lakhs, the respondent No. 1 could not have proceeded against the petitioners under the SARFAESI Act." Punjab and Haryana High Court, in a significant interim order dated August 11, 2026, restrained a Non-Banking Financial Company from dispossessing homeowners where the outstanding recoverable dues fell below the statutory threshold of twenty lakh rupees.

A division bench comprising Justice Jasgurpreet Singh Puri and Justice Sanjiv Berry observed that coercive measures under the stringent recovery law are legally barred when the debt amount fails to meet the mandated financial limit notified by the Central Government.

The petitioners, Pala Ram and another, approached the High Court challenging the invocation of recovery proceedings by Aadhar Housing Finance Limited. The respondent financial company had issued a demand notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, claiming an outstanding amount of ₹7,41,831. Faced with an imminent threat of physical dispossession from their residential property, the petitioners rushed to invoke the writ jurisdiction of the High Court.

The primary question before the court was whether a Non-Banking Financial Company could initiate recovery and enforcement proceedings under the SARFAESI Act when the total recoverable dues were less than the threshold limit of twenty lakh rupees. The court was also called upon to examine the applicability of the Ministry of Finance notification governing the jurisdictional limits of NBFCs under the enactment.

Statutory Threshold Limits

The counsel for the petitioners drew the attention of the bench to a notification dated February 12, 2021, issued by the Ministry of Finance, Department of Financial Services. This notification amended earlier directions by lowering the pecuniary threshold, substituting the words "rupees fifty lakh and above" with "rupees twenty lakh and above" for the applicability of the SARFAESI Act to NBFCs.

SARFAESI Act Application Barred

Building upon the statutory amendment, the petitioners argued that since their outstanding recoverable amount stood at ₹7,41,831, which is substantially lower than the statutory bar of twenty lakh rupees, the respondent financial institution lacked the legal competence to invoke coercive measures under the statute.

Precedent and Judicial Consistency

The bench took note of the legal submissions and observed that a similar substantial question of law was earlier entertained by the court in the case of Akash Kumar and Another Vs. Piramal Capital & Housing Finance Limited. Recognizing the prima facie merit in the challenge regarding jurisdictional competence, the court proceeded to issue a formal notice of motion.

Protection Against Dispossession

Taking urgent note of the apprehension expressed by the petitioners that the housing finance company was poised to take physical possession of their residential house on the very same day, the bench intervened to protect the possessory rights of the citizens pending further adjudication.

Interim Protection Granted

The High Court directed that until the next date of hearing, the petitioners shall not be dispossessd from their residential house by the respondent financial institution, thereby halting the execution of the impugned recovery measures.

Court Fixes Next Hearing

The matter has now been slated for further consideration before the bench on September 16, 2026, where the respondents are expected to respond to the statutory bar raised against the maintainability of the SARFAESI proceedings.

Date of Decision: 11 August 2026