Allowed

Siddhanath Collection through its proprietor Jitendra v. Waghmode v Edelweiss Asset Reconstruction Company Limited

DRT21 May 2026SA/155/2026

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal allowed an application by loan applicants challenging actions taken under the SARFAESI Act by an Asset Reconstruction Company (ARC). The Court held that as the ARC was a successor-in-interest to an NBFC handling a loan of less than Rs. 20 lakhs, it lacked the authority to enforce security interest under the Act. Consequently, the actions were quashed, and possession was

What did the court decide?

Securitisation Application allowed; all actions initiated under SARFAESI Act by Defendant ARC quashed and set aside; possession of suit property restored to applicants within two weeks.

Siddhanath Collection through its proprietor Jitendra v… — Specific Performance | DRT (2026)

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Presented on: 22.02.2026 Registered on: 25.02.2026 Decided on: 21.05.2026 Duration: Y M D - 2 30

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IN THE DEBTS RECOVERY TRIBUNAL AT PUNE (Before Shri Dilip G Murumkar, Presiding Officer)

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SECURITISATION APPLICATION No.155/2026

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Siddhanath Collection Through its Proprietor Jitendra Vasant Waghmode Age : 42 years, Occ: Business R/at : Sambhaji Colony, Timber Area, Sangli

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Jitendra Vasant Waghmode Age : 42 years, Occ: Business R/at : Sambhaji Colony, Timber Area, Sangli

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… Applicants

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Versus

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Edelweiss Asset Reconstruction Company Ltd., Address : Edelweiss House, Off CST Road, Kalina, Mumbai – 400 098.

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The Authorised Officer Edelweiss Asset Reconstruction Company Ltd., Address : Edelweiss House, Off CST Road, Kalina, Mumbai – 400 098.

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Poonam Jitendra Waghmode Age : 42 years, Occ: Business

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... Defendants

R/at : Sambhaji Colony, Timber Area, Sangli

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APPEARANCES

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For the Applicants Mr. Ratankumar Bhimrao Hude - Advocate For defendant Nos.1 and 2 Mr. Bhalchandra Palav i/b Mrs. Rinku Agarwal – Advocate

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JUDGMENT

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(Delivered on 21^st May, 2026)

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By the present Securitisation Application, the applicants have challenged the action taken by defendant ARC under The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act” for short) in respect of the mortgaged property i.e. All that piece and parcel of the Shop No.4 on Ground Floor, admeasuring 13.75 Sq.Mtr and super built-up area 15.34 Sq.Mtr in an Apartment known as Tulsi Apartment constructed over New Extension C.S. No.12312, situated at Gulmohar Colony, 100 feet Road, South Shivaji Nagar, Sangli, Taulka Miraj, District Sangli (for short ‘suit property’) and have claimed following main reliefs:

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(a) The Securitization Application may kindly be allowed. (b) The notice dated 23/09/2024 issued by the Defendants purporting to be as per the provisions of Section 13(2)

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of the SARFAESI Act, and any other if any, may kindly be quashed and set aside and all actions taken by the defendant Nos.1 and 2 in pursuance thereto be declared to illegal, null and void.

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(c) It may kindly be declared that the classification of the loan account in the name of the Applicant No.1 as NonPerforming Asset (NPA) as on 05/05/2022 is illegal and not as per the guidelines provided by the Reserve Bank of India.

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(d) It may kindly be declared that the alleged possession as taken by Defendants of the assets described in Para 5(B) is illegal and has been taken without following the procedure prescribed in the SARFAESI Act and Rules framed there under and the possession, if any, taken by the Defendant Nos.1 and 2 of the said assets be restored back to the Applicant.

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(e) It be declared that the alleged actions of taking possession of the alleged secured assets allegedly taken on 22/01/2026 is not as per the SARFAESI Act and Rules framed there under and therefore is illegal and the possession of the same be restored to the Applicant.

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(f) It be declared that the alleged Notice of Auction/Sale of the alleged secured assets allegedly issued on

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30/01/2026 is illegal as is not served as per the SARFAESI Act and Rules framed there under and the same be quashed and set aside.

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(g) It be declared that the alleged action of conducting auction on 06/03/2026, in view of the alleged Notice dated 30/01/2026, of the alleged secured assets is not as per the SARFAESI Act and Rules framed there under and therefore is illegal and the alleged auction may kindly be quashed and set aside.

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(h) The Defendant Nos.1 and 2 be directed to restore possession of the alleged secured assets to the Applicant.

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(i) All the actions taken by the defendants under the said Act be quashed and set aside and the status of the applicants regarding the said property be resorted.

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The case of the applicant in nutshell is as under:

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In the month of July, 2018, the applicant Nos.1 &2 and defendant No.3, borrowers had taken loan of Rs.8,00,000/- from HDB Financial Services Limited, Sangli Branch (hereinafter referred to as HDB) and executed loan documents and mortgaged the suit property.

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The applicants could not keep the loan account regular and

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committed default, therefore, the present defendant No.1 Edelweiss Asset Reconstruction Company Ltd. (hereinafter ARC) issued Demand Notice u/s 13(2) of the SARFAESI Act on 23^rd September, 2004. Thereafter took symbolic possession of the suit property and also took physical possession of the suit property on the basis of Order u/s 14 of the SARFAESI Act obtained from Ld. CJM, Sangli and put it for sale in auction.

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When applicants made inquiry they came to know that HDB has assigned the loan account to defendant ARC. However, HDB is Non-Banking Financial Company (NBFC) and by way of assignment of loan account, the defendant ARC stepped into shoes of HDB and thus, NBFC and therefore, defendant ARC is not secured creditor as per definition of Section 2(zd) of the SARFAESI Act as the applicants have never created security interest in the suit property for the said loan in favour of defendant ARC. Therefore, defendant ARC has no locus or right to proceed under the provisions of SARFAESI Act.

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Further, after having taken possession of the suit property the defendant ARC is going to sale the suit property in auction by violating Rules 8 and 9 of the Security Interest Enforcement Rules, 2002 and also going to sale the suit property at lesser price. Therefore, the applicants have claimed aforementioned

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reliefs.

The applicants have moved IA No.582/2026 on the same grounds to which the defendant ARC has filed Reply (Exhibit-6) and contested the grounds in that Interlocutory Application. Therefore, the defendant ARC by filing Pursis (Exhibit-7) adopted Reply filed to IA No.582/2026 as Statement of Objection for this Securitisation Application.

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The following points arise for my determination and I record my findings thereon as under:

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(1) Whether defendant ARC is entitled to take action under the SARFAESI Act against the applicants in view of assignment of loan account from HDB, a Non-Banking Financial Company?

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(2) Whether actions taken under SARFAESI Act by defendant ARC are legal?

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(3) What Order?

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Findings:

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Point No.1 – In the negative.

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Point No.2 – In the negative.

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Point No.3 – As per final order.

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Reasons

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Heard the learned Advocate for both the parties. They

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reiterated facts mentioned in the Application and Affidavit Cum Reply.

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The learned Advocate for the applicants relied upon the following Judgments:

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(1) Gupta Hardware Store and Others Vs. Union of India and Others reported in 2025:HHC:2294

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(2) Golam Sabir and Another Vs. Piramal Capital and Housing Finance Limited and Others reported in 2025 SCC OnLine Cal 10227.

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(3) Piramal Capital & Housing Finance Limited and Ors Vs. Golam Sabir & Others [F.M.A 161 of 2026 with CAN 1 of 2026 decided by Hon’ble High Court at Calcutta on 9^th April, 2026].

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The learned Advocate for defendant ARC relied upon the following Judgments:

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(1) M.D. Frozen Foods Exports Pvt. Ltd. & Ors Vs. Hero Fincorp Ltd. [Civil Appeal No.15147 of 2017 (Arising out of SLP (C) No.19559 of 2017) decided by Hon’ble Supreme Court on 21^st September, 2017].

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(2) Indiabulls Housing Finance Limited Vs. M/s. Deccan Chronicle Holdings Limited and Others [Civil Appeal No.18 of 2018 decided by Hon’ble Supreme Court on 23^rd February, 2018].

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(3) Virendra Rathore & Ors. Vs. Tehsildar Distt. Mandsaur & Ors. Reported in I.L.R. 2024 M.P. 2244 (DB).

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(4) Poorti Rent a Car and Logistics Pvt. Ltd. & Ors. Vs. Kotak Mahindra Bank Ltd., & Ors. [Writ Petition No.11371 of 2014

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decided by Hon’ble Bombay High Court on 24^th February, 2022].

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Point Nos.1 to 3

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Since all these points are interconnected with each other, I record my findings thereon simultaneously.

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Perused the record. According to applicants, the applicants and defendant No.3 had taken loan of Rs.8,00,000/- from HDB, a Non-Banking Financial Company in the year 2018 and later on committed default for repayment of loan. The HDB assigned loan account to defendant ARC. The defendant ARC initiated action under the SARFAESI Act and issued Demand Notice u/s 13(2) of the SARFAESI Act to the applicants and defendant No.3 for recovery of Rs.13,94,118.45Ps. Since defendant ARC is successor-in-interest of HDB (NBFC) and amount recoverable from applicants is less than Rs.20 lakhs, it cannot take action under the SARFAESI Act in view of Notification of Central Government issued in the month of February, 2020 and 2021.

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Per contra, according to defendant ARC though erstwhile lender was HDB, Non-Banking Financial Company, the loan account has been assigned to defendant ARC which is secured creditor as per Section 2(zd) of the SARFAESI Act. Therefore, it is entitled to take action under the provisions of SARFAESI Act.

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Admittedly, in the year 2018 applicants have taken loan of

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Rs.8,00,000/- from HDB (NBFC). Later on, the said loan account was assigned to defendant ARC. As applicants committed default in repayment of loan, the defendant ARC initiated action under the provisions of SARFAESI Act and issued Demand Notice, took symbolic possession and also physical possession on the basis of Order obtained u/s 14 of the SARFAESI Act and also put the suit property for auction.

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Though defendant ARC is contending that it is secured creditor and entitled to recover loan by invoking provisions of SARFAESI Act, it is to be noted that the erstwhile lender was HDB, a Non-Banking Financial Company and loan amount is Rs.8,00,000/-. Thereafter, the said loan account was assigned to defendant ARC. Thus, defendant ARC has become successor-ininterest of HDB (earlier lender).

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At this juncture, I reproduce Notifications of Central Government issued in the month of February, 2020 and 2021.

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“Ministry of Finance

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(Department of Financial Services) NOTIFICATION

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New Delhi, the 24^th February, 2020

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S.O. 856(E).—In exercise of the powers conferred by subclause (iv) of clause (m) of sub-section (1) of section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002), and in supersession of the notifications of the Government of India, Ministry of Finance numbers S.O. 2641(E), dated the

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5th August, 2016, S.O. 4176 (E) dated the 27th August, 2018, and S.O. 5391(E) dated 24th October, 2018, except as respects things done or omitted to be done before such supersession, the Central Government hereby specifies such non-banking financial companies as defined in clause (f) of section 45-I of the Reserve Bank of India Act, 1934 (2 of 1934), having assets worth rupees one hundred crore and above, which shall be entitled for enforcement of security interest in secured debts of rupees fifty lakh and above, as financial institutions for the purposes of the said Act. “

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And

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“Ministry of Finance

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(Department of Financial Services) NOTIFICATION

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New Delhi, the 12^th February, 2021

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S.O. 652(E). —In exercise of the powers conferred by subclause (iv) of clause (m) of sub-section (1) of section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002), the Central Government hereby makes the following amendment in the notification of the Government of India, Ministry of Finance (Department of Financial Services), number S.O. 856 (E), dated the 24th February, 2020, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (ii), dated the 25th February, 2020, namely:—

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In the said notification, for the words, “rupees fifty lakh and above” the words “rupees twenty lakh and above” shall be substituted.”

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On plain reading to said Notifications, it is manifest that NBFC

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will be entitled to enforce security interest in the secured debt of Rs.20 lakhs and above. In the present case, loan demanded in Demand Notice issued u/s 13(2) is Rs.13,94,118.45Ps which is less than Rs.20 lakhs. Since defendant ARC is successor-ininterest of HDB (NBFC) and loan amount recoverable is less than Rs.20 lakhs, it cannot enforce security interest and invoke provisions of SARFAESI Act.

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Resultantly, I hold that the applicants are entitled for reliefs as claimed.

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Before parting with Judgment, I, with great regards, mention that Authorities cited by defendant ARC are not applicable to the present case as facts in those cases are different than facts in the present case. At the same time, I say that Authorities cited by applicants are squarely applicable to the present case.

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Hence, by answering these points accordingly , I pass the following order:

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ORDER

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A. Securitisation Application No.155/2026 is allowed

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B. All actions initiated under the SARFAESI Act (Demand Notice, Possession Notice and Sale Notice) by defendant Edelweiss Asset Reconstruction Company Ltd. being illegal are quashed and set aside.

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