A SARFAESI Section 13(2) notice gives a borrower or guarantor 60 days to pay the full outstanding debt before the lender can take possession of the secured property without going to court. Those 60 days should be used for four things: checking whether the notice and the NPA classification are valid, filing a written representation under Section 13(3A), opening settlement talks with the lender, and preparing for the 45-day window to challenge any possession or sale measure before the Debt Recovery Tribunal. This post sets out that plan in order.
What a Section 13(2) notice is
The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) lets a secured creditor, such as a bank, a financial institution, an asset reconstruction company or certain non-banking finance and housing finance companies, enforce its security without a court decree. Before it can act, two conditions must be met:
- The loan account must be classified as a non-performing asset under the Reserve Bank of India’s norms, which for most loans means an instalment or interest overdue for more than 90 days.
- The lender must serve a written notice under Section 13(2) demanding the full amount within 60 days. Under Section 13(3), the notice must give details of the amount payable and the secured assets the lender intends to enforce against.
If the amount is not paid in 60 days, Section 13(4) allows the lender to take possession of the secured asset, take over management of the business, appoint a manager, or direct anyone who owes money to the borrower to pay the lender instead.
Days 1 to 10: check the notice
Read the notice against the loan papers. The questions we ask at this stage are:
- Date and service. When was the notice dated and when did it reach you? Write down the date the 60 days run out.
- NPA date. On what date does the lender say the account became an NPA? Does your account statement support it?
- Amount. Does the demand match the statement, or does it include penal interest, charges or entries you dispute?
- Secured assets. Is every property listed actually covered by a mortgage or hypothecation you signed?
- Parties. Has every borrower and guarantor been served?
- Exclusions. Is the property agricultural land, is the loan of one lakh rupees or less, or is less than 20 per cent of the principal and interest still due? Section 31 takes these cases out of SARFAESI.
Collect the sanction letter, loan agreement, mortgage and security documents, account statements for at least the last two years, and any correspondence about restructuring.
Days 10 to 40: file a Section 13(3A) representation
Section 13(3A) allows the borrower to make a representation or raise an objection after receiving the notice. The lender must consider it and, if it finds it unacceptable, must communicate its reasons within fifteen days of receiving it. Courts have held that this duty to consider and answer is mandatory, though the 15-day period itself has been treated as directory.
A useful representation is specific. It should:
- dispute particular entries or the NPA date, with the statement entries attached;
- point out any property wrongly included or any Section 31 exclusion;
- record any restructuring request or payment that the lender has not accounted for;
- propose a payment plan or settlement, if that is realistic.
File it in writing, keep proof of delivery, and keep it within the 60 days. One limit matters: under the proviso to Section 13(3A), the lender’s reply does not by itself give a right to apply to the DRT. The representation builds the record that a later Section 17 application relies on.
In parallel: settlement and one-time settlement
Most lenders would rather recover money than run an auction. Banks consider compromise proposals under their board-approved policies and the Reserve Bank of India’s framework for compromise settlements. A borrower has no legal right to a one-time settlement: in Bijnor Urban Co-operative Bank v. Meenal Agarwal (2021) the Supreme Court held that a court cannot order a bank to grant one.
A proposal is taken more seriously when it shows a real source of funds, offers an upfront payment, and is made before the lender has spent on possession and sale. Get any acceptance in writing, with the amount, the schedule and what happens to the security on full payment.
If you can pay the full dues, Section 13(8) lets you redeem the property by tendering the dues with costs and charges, but after the 2016 amendment that right lasts only until the auction notice is published. The Supreme Court confirmed this in Celir LLP v. Bafna Motors (2023).
Day 60 onwards: what Section 13(4) action looks like
If the dues are not paid, the lender usually:
- issues a possession notice under Rule 8 of the Security Interest (Enforcement) Rules, 2002, affixes it to the property and publishes it in newspapers;
- takes symbolic possession, and then physical possession, applying to the Chief Metropolitan Magistrate under Section 14 if possession is resisted;
- has the property valued and, for immovable property, gives the borrower a 30-day sale notice, with no first sale before 30 days from the public notice or the notice to the borrower;
- holds an e-auction and confirms the sale.
Each of these steps has its own requirements, and a defect at any of them can be a ground of challenge.
The 45-day Section 17 window
Under Section 17, any person aggrieved by a Section 13(4) measure, including a borrower or guarantor, may apply to the DRT within 45 days of the measure. No pre-deposit is required for this application. The DRT with jurisdiction is the one where the cause of action arose, where the property is, or where the branch maintaining the account is located. Whether a DRT can condone delay beyond 45 days has been contested, so treat that date as fixed.
Common grounds include an invalid NPA classification, a defective Section 13(2) notice, an unanswered representation, a Section 31 exclusion, and defective sale notices or valuation. If the DRT finds the measure unlawful, it can set it aside and restore possession. An appeal from the DRT’s order goes to the DRAT within 30 days, with a pre-deposit, as explained in our post on DRAT appeals and the pre-deposit.
A writ petition to the High Court is not an alternative in the ordinary case. In United Bank of India v. Satyawati Tondon (2010) the Supreme Court held that a High Court should not usually entertain a writ where the SARFAESI remedies are available. Our page on writ petitions in Delhi explains the narrow exceptions.
If the borrower is a company in insolvency
If the borrower company has been admitted to insolvency under the Insolvency and Bankruptcy Code, 2016, the Section 14 moratorium stops SARFAESI action against the company’s property. It does not protect a personal guarantor. See our page on NCLT matters in Delhi.
The 60-day plan at a glance
| When | What to do |
|---|---|
| Day of receipt | Note the date the 60 days end and gather the loan papers |
| Days 1 to 10 | Check NPA date, amount, secured assets, parties and Section 31 exclusions |
| Days 10 to 40 | File a written Section 13(3A) representation, with proof of delivery |
| Throughout | Open settlement talks, in writing |
| After day 60 | Watch for the possession notice and note its date |
| Within 45 days of a measure | File a Section 17 application before the DRT if there are grounds |
Talk to us
Our DRT lawyers in Delhi act for borrowers, guarantors and lenders in SARFAESI matters before the Debt Recovery Tribunals and the DRAT. Call 99115 44811 with the date of your notice. This post is general information and not advice on your case, and no lawyer can guarantee how a lender or a tribunal will respond.