Note: This blog only provides the views on the complicated issues under the Recovery Laws in India and no part of publication be reproduced or used without the expression persmission from the author and the views can not be taken as authoritative.


Points to be raised in a SARFAESI Appeal and getting relief?

It has almost settled and become like a regular practice for the borrowers to question the proceedings initiated by the Banks at the last stage under the provisions of “Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act)”. In fact, the law mandates that the aggrieved can approach the Debt Recovery Tribunal under section 17 of the SARFAESI Act, 2002 within 45 days from the date of issuance of notice under section 13 (4) of the Act. However, as the process of recovery of money do not end at the issuance of section 13 (4) of the Act and as it is likely that the Bank can commit mistakes in the process and process even after the issuance of notice under section 13 (4), it is settled that the borrower is entitled to question all steps initiated by the Bank under the provisions of SARFAESI Act, 2002. The borrowers have started questioning the Sale Process conducted by the Bank and also started questioning the order of the Magistrate under section 14 of the Act before the High Court regularly and as a result, the Courts have consistently held that the borrower is entitled to question all the steps initiated by the Bank under the provisions of SARFAESI Act, 2002. There is another point in this. If the borrower is silent even after the receipt of notice under section 13 (4) and do not prefer any appeal, there can be an argument from the Bank that there is nothing wrong in the proceedings initiated by the Bank till the notice under section 13 (4). If such an argument is accepted and if the borrower is silent even after the receipt of notice under section 13 (4) of the Act, then, the scope of Appeal preferred by the borrower at a subsequent stage gets narrowed-down. If the Borrower challenges the Sale Process only, the borrower may have to confine himself to the illegalities committed by the Bank in the Sale Process. However, if the borrower could offer some kind of explanation as to why he could not challenge the proceedings initiated by the Bank under section 13 (4) of the Act, then, he must be allowed to raise all the points in his Appeal under section 17 of SARFAESI Act, 2002.

When an Appeal is prepared or preferred under section 17 of the SARFAESI Act, 2002, there will be usual grounds with the intention of getting some time to repay the loan. The usual grounds are vague and are like:

  1. The borrower is not a willful defaulter.

  1. The classification of Account as ‘Non-performing Asset (NPA)’ is incorrect.

  1. The interested charged is exorbitant.

  1. No notice or caution is issued by the Bank before classifying the Account as ‘NPA’.

  1. The outstanding claimed by the Bank is incorrect.

  1. The value of the ‘secured asset’ mortgaged with the Bank is much more than the outstanding loan.

  1. The Bank has not issued any notice or demand notice under section 13 (2) or 13 (4) of the Act etc.

These are the usual grounds in any SARFAESI Appeal preferred by the borrower under section 17 of the Act. As the law is settled that the procedure prescribed under the provisions of SARFAESI Act, 2002 is mandatory, the Debt Recovery Tribunal has to give a serious thought to the averment made in the Appeal that no demand notice is received by the borrower under section 13 (2) or 13 (4). If that is established, then, the Appeal deserves to be allowed straight-away and without any further enquiry. But, for knowing this, the DRT may give notice to the Bank to file their counter and to ascertain the truth. This process will take time as there will be a procedure for the paper work done legally in any Public Sector Bank. At times, it may take few months also.  In view of the averments in the Appeal that no notice is issued under section 13 (2) or 13 (4), the DRT may consider granting relief to the Appellant or the borrower. While doing so, the Debt Recovery Tribunal will consider the outstanding payable, the security and the averments with regard to the value of security mortgaged with the Bank.  In view of these practical and procedural difficulties, the DRT may be forced to grant an interim-stay of further proceedings initiated by the Bank and the DRT may insist that the borrower remits some deposit and usually it can be from 10% to 30% depending upon the discretion of the DRT. It all depends upon the averments made in the Appeal. It would be extremely difficult for the DRT to ascertain the facts by looking at the averments in the Appeal and if the DRT refrains from granting any interim-order, then, there is a possibility that the Bank proceeds with the process and even can complete the Sale Process at times creating some third party interest which will further complicate issues.

But, when a borrower is serious in raising objections in his appeal under section 17, those objections to be in detail and specific. If the grounds in an Appeal under section 17 of SARFAESI Act, 2002 are mechanical and vague, then, it is very much possible for the DRT to come to an easy conclusion that the Appeal is preferred only to drag the proceedings and nothing more. In those circumstances, as soon as the Bank files its counter affidavit answering all the allegations in the Appeal preferred under section 17, the DRT may dismiss the Appeal. If the Appeal grounds are so vague and mechanical, it would be very difficult for the borrower to bring any new or additional facts in any further appeal proceedings before the DRAT or to the High Court subsequently. However, if the borrower chooses to file an appeal challenging the possession notice issued by the bank under section 13 (4) and while the Appeal is pending if the Bank goes ahead with further process with infirmities and illegalities, then, the Borrower is entitled to bring those further infirmities and illegalities in the form of an additional affidavit in the Appeal. As such, when the borrower is serious in his attempt to fight with the Bank challenging the SARFAESI proceedings under section 17 of the Act, pleadings to be detailed and perfect rather mechanical and vague. Even the DRT may not give much weight to the Appeal and the equities beyond a certain point if the grounds raised in the Appeal under section 17 are so vague and mechanical.

There may be instances where the borrower is not interested to fight with the Bank and instead may want to update the loan account and he must even have taken steps to do that. Under such circumstances, if the Bank is unreasonable and proceeds with their proceedings, then, the borrower can very well stick to his stand very firmly that he is not willful defaulter, has a fairly good track record in repayment issues, has the valuable security lying with the Bank and can continue to insist that the Bank is illegal in not agreeing to update the Account. It is a very interesting point if this stand is taken before the DRT. The DRT is empowered with certain powers under section 17 while entertaining an appeal from the borrower or any aggrieved person. Initially, the function of the DRT is to look into the procedural lapses committed by the Bank and nothing more. Later-on, the Courts have expanded the scope of powers of DRT and held that the DRT can look into the disputes pertaining to the outstanding claimed and all other issues and the DRT is even empowered to restore the possession back to the borrower if the physical possession of the property is taken by the Bank already. However, the DRT continues to exercise very limited powers and due this also; many Writ Petitions are filed to the High Court and even on SARFAESI issues, the High Courts issue directions to the Bank very frequently. While the DRT exercises some limited powers, there can not be any limitation on the powers or the power to issue directions by the High Court from time to time under Article 226 of Constitution of India.

Irrespective of the powers of the DRT under section 17 of SARFAESI Act, 2002, the borrowers should take-up all possible legal points in detail to the extent possible. Only due to the confusion with regard to the powers of DRT under section 17, the borrowers continue to approach Civil Courts at times and continue to approach the High Court very regularly. There can be a case where the borrower admits the minor default in repayment, he must have been other-wise good in repayment issues and must have expressed his willingness to update his account without raising any kind of litigation. If such is the attitude of the borrower, then, the borrower may prefer to approach the High Court seeking a suitable direction to allow him to get his account updated as even the RBI guidelines permit that and cautions against unnecessary harassment to the borrowers using technicalities. If this kind of cases are taken to DRT, then, apart from the expenses involved, the procedure before the DRT is different and the procedure delays the efforts of the borrower to get his account updated and the DRT may finally choose to look into the issue as to whether there is any procedural irregularity on the part of the Bank under the Act. An account which should have been updated very easily, may end-up as ‘Non-performing Asset’ forcibly and can lead to long litigation with the DRT, DRAT, High Court and Supreme Court and more interim applications in-between. It will not benefit either the borrower or the Bank and the Bank must be with the intention that they can recover the legal expenses incurred from the borrower finally.

As such, the borrowers should be very clear in their approach and should be careful in raising objections in their Appeal under section 17 of the SARFAESI Act, 2002.  

Note: the views expressed are my personal.


  1. The information given is very useful for the borrowers in fighting their cases in DRT. Borrower can challenge the action taken by the bank at the time of starting action for the sale of the property and include all objections in respect of notice of u/s 13(2) for which no appeal lies at that time with DRT and also for objection for notices u/s 13(4)and such other actions taken by the bank under the securitisation act. If some more contribution is placed by knowledgeable persons the position will further clear to safeguard the interest of the borrowers kkm

  2. I am confused. A lawyer at a forum advised me to appeal with DRT in response to bank's notice under section 13 [2]. The article says it can only be done after receipt of notice under section 13 [4].

    1. Yes. The borrower or guarantor can get remedy only after issue of Notice u/s 13(2) by the bank You can write a letter to the Bank stating your reasons for non- payment of loan, this is only remedy available to the borrower for the action of Bank u/s 13(2). But you can challenge the Possession Notice u/s 13(4) or Sale cum Auction Notice at DRT.- . .P.Marimuthu Advocate, Coimbatore

    2. Pls given ur number marimuthu sir.I am getting possession notice this week. What to do I don't number 9150527410

  3. An useful article for Bankers as well

  4. Nice posting, thanks for sharing with us. Your blog is great and helped me feel better knowing about the Best Home loan in Mumbai. Thanks again!

  5. If a Multi state Schedule Cooperative bank takes a possession of a property that does not include in the mortgage deed between the bank and the borrower. later the bank makes the sale deed of the property too that was not been mortgaged to them.
    In this case can the borrower and the owner of the property file an criminal complain against the bank?. And what can be the conciseness for both Bank and the Borrower if the criminal complain is admitted. Can the borrower file a criminal complain in the police station too?.

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  7. I want to inform you that, my father Sh. Ashok kumar took a loan
    from Punjab National Bank by mortage our house but owner of our house
    is my mother Smt Bimla devi. My father took loan by doing fake
    signature of my mother without informing of my mother and our family.
    Our family have proved in district court case that the signature on
    property papers was fake but Punjab national bank file a case under
    ADC of district Sangrur and Honourable ADC gave its decision against
    my mother under SARFAESI ACT 2002 by ignoring the district court
    decision. Bank gave us only 30 days notice for empty the home. My
    mother is a senior citizen whose age is 58 year old. we have only one
    home. If this house was taken by bank whole family is getting ruiend.
    Please gave me a feedback about this issue as soon as possible.