Bank Has Issued a SARFAESI Notice or Taken Possession? Challenging the Action Before the DRT Under Section 17
A SARFAESI notice allows a bank to take possession of a home, factory or shop and sell it without going to court first. The law does, however, give borrowers, guarantors and other affected persons a specific remedy: an application to the Debts Recovery Tribunal under Section 17, which must be filed within 45 days. This article explains each stage of SARFAESI action, what can be challenged and when, the defects tribunals examine, and why a writ petition to the High Court is usually not the first remedy.
The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (the SARFAESI Act) allows banks and other secured creditors to enforce a mortgage or other security without first obtaining a decree from a court. A bank can issue a demand notice, take possession of the secured property, and sell it by auction. For a borrower or guarantor, the speed of the process is often the greatest difficulty: by the time legal advice is sought, a statutory deadline may already be running.
The Act does not leave the borrower without a remedy. Section 17 provides that any person aggrieved by a measure taken by the secured creditor may apply to the Debts Recovery Tribunal (DRT). This article explains how the SARFAESI process works, at which stage the DRT can be approached, the defects the Tribunal examines, and the limits on approaching a civil court or the High Court instead. It reflects the law as verified on 13 October 2026.
HOW SARFAESI ACTION PROCEEDS
The process ordinarily moves through four stages. First, the borrower's loan account must be classified as a non-performing asset (NPA). Second, under Section 13(2), the secured creditor issues a written demand notice requiring the borrower to discharge the full liability within sixty days. Section 13(3) requires the notice to give details of the amount payable and the secured assets intended to be enforced.
Third, if the dues are not paid within the notice period, Section 13(4) permits the secured creditor to take one or more recovery measures: take possession of the secured assets (including the right to transfer them by lease, assignment or sale), take over the management of the business, appoint a manager, or require a person who has acquired any secured asset from the borrower to pay the secured creditor. Where physical possession is resisted, the creditor may apply to the Chief Metropolitan Magistrate or District Magistrate under Section 14 for assistance in taking possession.
Fourth, the secured asset is sold. Under Rule 9(1) of the Security Interest (Enforcement) Rules, 2002, a sale of immovable property cannot, in the first instance, take place before thirty days from the publication of the public notice of sale in newspapers or the service of the notice of sale on the borrower.
THE DEMAND NOTICE STAGE: REPRESENTATION UNDER SECTION 13(3A)
A borrower who disputes the demand notice should respond to it in writing within the notice period. Section 13(3A) permits the borrower to make a representation or raise an objection. The secured creditor must consider it, and if it finds the objection unacceptable, it must communicate the reasons for non-acceptance within fifteen days of receipt.
This requirement has its origin in Mardia Chemicals Ltd. v. Union of India, (2004) 4 SCC 311, where the Supreme Court held that the secured creditor must consider the borrower's objections and communicate its reasons for not accepting them. Parliament subsequently incorporated the requirement into the statute.
The proviso to Section 13(3A) states that the reasons communicated, or the likely action of the secured creditor at that stage, do not confer any right on the borrower to apply to the DRT under Section 17. In practical terms, the representation is the borrower's opportunity to place objections on record; the statutory application to the Tribunal arises once a measure under Section 13(4) is taken. A well-documented representation is nonetheless important, because the creditor's failure to consider it or to give reasons may later be raised before the DRT.
THE SECTION 17 APPLICATION: WHO, WHEN AND WHERE
Section 17(1) allows any person, including the borrower, who is aggrieved by a measure under Section 13(4) to apply to the DRT within forty-five days from the date on which the measure was taken. The words 'any person' are not confined to the borrower. In United Bank of India v. Satyawati Tondon, (2010) 8 SCC 110, the Supreme Court described the expression as one of wide import, and held that a guarantor aggrieved by action under Section 13(4) could avail the remedy under Section 17. Section 17(4A), inserted in 2016, also requires the Tribunal to examine claims of tenancy or leasehold rights over the secured asset.
The forty-five-day period should be treated as critical. A person who receives a possession notice or learns that possession has been taken should obtain the documents and legal advice immediately rather than waiting for the auction stage.
Action taken with the assistance of the Magistrate under Section 14 is also amenable to the Section 17 remedy. In Kanaiyalal Lalchand Sachdev v. State of Maharashtra, (2011) 2 SCC 782, the Supreme Court held that an action under Section 14 constitutes an action taken after the stage of Section 13(4), and that the remedy against it lies under Section 17.
Under Section 17(1A), the application may be filed before the DRT within whose local limits the cause of action arises, the secured asset is located, or the branch of the bank or financial institution maintaining the account is situated. Uttar Pradesh is served by Debts Recovery Tribunals including those at Prayagraj (Allahabad) and Lucknow, and appeals lie to the Debts Recovery Appellate Tribunal at Prayagraj. The territorial jurisdiction of each Tribunal is fixed by Central Government notification and should be confirmed for the particular district before filing.
The Section 17 application is not an appeal in the true sense. In Mardia Chemicals, the Supreme Court observed that, although described as an appeal, the proceeding is in substance an original proceeding in lieu of the civil suit barred by Section 34. The Court also struck down the original Section 17(2), which had required the borrower to deposit seventy-five per cent of the claimed amount before the application could be entertained, holding the condition to be unreasonable, arbitrary and violative of Article 14. No pre-deposit is now required to file a Section 17 application.
WHAT THE DRT EXAMINES
Under Section 17(2), the Tribunal considers whether the measures taken by the secured creditor are in accordance with the Act and the Rules. If they are not, Section 17(3) empowers it to declare the recourse to those measures invalid, direct restoration of possession or management of the secured assets to the borrower or other aggrieved person, and pass such other orders as it considers appropriate. If the measures are found lawful, Section 17(4) allows the secured creditor to proceed.
The questions commonly examined include whether the account was validly classified as an NPA; whether the Section 13(2) notice stated the amount payable and identified the secured assets; whether the sixty-day period was allowed to expire before action under Section 13(4); whether the borrower's representation was considered and reasons were communicated within fifteen days; whether the possession and sale notices complied with the Security Interest (Enforcement) Rules, 2002; and whether the sale was preceded by the thirty-day notice required by Rule 9(1).
The Tribunal will also consider whether the Act applies at all. Section 31 excludes certain cases from the SARFAESI Act, including any security interest securing a financial asset not exceeding one lakh rupees (clause (h)), any security interest created in agricultural land (clause (i)), and any case in which the amount due is less than twenty per cent of the principal amount and interest thereon (clause (j)). Whether land is agricultural is a question of fact, and evidence of its actual nature and use will be relevant.
Section 17(5) requires the DRT to dispose of the application as expeditiously as possible, ordinarily within sixty days, extendable for recorded reasons, with total pendency not exceeding four months from the date of filing. Under Section 17(6), if the application is not disposed of within that period, any party may approach the Appellate Tribunal for directions for expeditious disposal.
PAYING THE DUES: THE RIGHT OF REDEMPTION UNDER SECTION 13(8)
A borrower who is able to pay may prefer to stop the sale by clearing the dues. Section 13(8), as substituted by the 2016 amendment, provides that where the amount of dues, together with costs and expenses incurred by the secured creditor, is tendered before the date of publication of the notice for public auction, inviting quotations, tender from the public or private treaty, the secured assets shall not be transferred.
In Celir LLP v. Bafna Motors (Mumbai) Pvt. Ltd., 2023 INSC 838, decided on 21 September 2023, the Supreme Court held that under the amended Section 13(8) the borrower's right of redemption is available only until the date of publication of the auction notice, and not, as under the unamended provision, at any time before the date fixed for sale or transfer. A borrower intending to redeem the property must therefore act before the auction notice is published.
THE CIVIL COURT AND THE HIGH COURT
Section 34 bars civil courts from entertaining any suit or proceeding in respect of a matter which the DRT or the Appellate Tribunal is empowered to determine, and prohibits any court or authority from granting an injunction against action taken under the Act. In Mardia Chemicals, the Supreme Court indicated that a civil suit may lie only in very limited circumstances, such as where the action of the secured creditor is alleged to be fraudulent or the claim is so absurd and untenable as not to require probe.
Borrowers frequently consider filing a writ petition under Article 226 before the High Court. The Supreme Court has consistently held that the High Court will ordinarily not entertain such a petition when the remedy under Section 17 is available. In Satyawati Tondon, the Court held that this rule applies with greater rigour in matters involving the recovery of bank dues.
In PHR Invent Educational Society v. UCO Bank, 2024 INSC 297, decided on 10 April 2024, the Supreme Court reaffirmed this position (paragraphs 14 to 17 and 22) and set out the limited exceptions in which a writ petition may be entertained despite an alternative remedy: where the statutory authority has not acted in accordance with the provisions of the enactment; where it has acted in defiance of the fundamental principles of judicial procedure; where it has resorted to invoke provisions which are repealed; or where an order has been passed in total violation of the principles of natural justice (paragraph 29). Finding that none of these applied, the Court set aside the High Court's order entertaining the borrower's writ petition and imposed costs (paragraphs 31, 32 and 34).
The practical consequence is that the DRT is ordinarily the first forum. A writ petition should be considered only where the facts genuinely fall within one of the recognised exceptions.
APPEAL TO THE DRAT AND THE PRE-DEPOSIT
A person aggrieved by the order of the DRT under Section 17 may appeal to the Debts Recovery Appellate Tribunal under Section 18 within thirty days of receipt of the order. The provisos to Section 18(1) require the borrower to deposit fifty per cent of the amount of debt due, as claimed by the secured creditor or determined by the DRT, whichever is less, before the appeal is entertained. The Appellate Tribunal may, for reasons recorded in writing, reduce the deposit to not less than twenty-five per cent of the debt.
Because the pre-deposit can be substantial, the strength of the case presented before the DRT, where no deposit is required, carries particular practical importance.
DOCUMENTS TO GATHER
The following documents are usually relevant to assessing a SARFAESI challenge: the sanction letter and loan agreement; the mortgage or security documents; statements of account showing the alleged default; the Section 13(2) demand notice with proof of the date of service; the representation or objection made by the borrower and any reply from the bank; the possession notice and newspaper publications; any order passed under Section 14 by the Magistrate; the sale notice, valuation and reserve price details, if issued; records showing the nature and use of the land, where agricultural land is involved; and tenancy or lease documents, where a third party is in occupation.
PRACTICAL SUMMARY
A borrower who receives a Section 13(2) notice should respond in writing within the sixty-day period and keep proof of delivery. Once a measure under Section 13(4) is taken, including possession, the forty-five-day period for an application to the DRT under Section 17 begins to run. The Tribunal can examine whether the bank complied with the Act and the Rules, whether the case falls within the Section 31 exclusions, and whether third-party tenancy claims are genuine, and it can set aside the action and order restoration of possession. A borrower who intends to pay must tender the dues before the auction notice is published. A writ petition to the High Court is an exceptional remedy, and a civil suit is barred except in very limited circumstances. Each case turns on its documents and dates, and an early review of the record is the most effective safeguard.
This article is intended for general information and does not constitute legal advice. The applicable law and the facts of each case should be examined before any action is taken.
Key Authorities Cited
- Mardia Chemicals Ltd. v. Union of India — Supreme Court of India, April 8, 2004, (2004) 4 SCC 311
- United Bank of India v. Satyawati Tondon — Supreme Court of India, July 26, 2010, (2010) 8 SCC 110
- Kanaiyalal Lalchand Sachdev v. State of Maharashtra — Supreme Court of India, February 7, 2011, (2011) 2 SCC 782 (paras 20, 21)
- Celir LLP v. Bafna Motors (Mumbai) Pvt. Ltd. — Supreme Court of India, September 21, 2023, 2023 INSC 838
- PHR Invent Educational Society v. UCO Bank — Supreme Court of India, April 10, 2024, 2024 INSC 297 (paras 14, 15, 17, 22, 29, 31, 32, 34)
Statutory Provisions
- Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 — Section 13(2), 13(3) and 13(3A) (demand notice; representation by borrower; reasons for non-acceptance within fifteen days)
- Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 — Section 13(4) (measures available to the secured creditor, including taking possession)
- Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 — Section 13(8) (tender of dues before publication of auction notice)
- Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 — Section 14 (assistance of Chief Metropolitan Magistrate or District Magistrate in taking possession)
- Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 — Section 17 (application to the Debts Recovery Tribunal within forty-five days; powers and time limits of the Tribunal)
- Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 — Section 18(1) and provisos (appeal to the Appellate Tribunal; pre-deposit of fifty per cent, reducible to twenty-five per cent)
- Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 — Section 31, clauses (h), (i) and (j) (exclusions: financial asset not exceeding one lakh rupees; agricultural land; amount due less than twenty per cent of principal and interest)
- Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 — Section 34 (bar on civil court jurisdiction and injunctions)
- Security Interest (Enforcement) Rules, 2002 — Rule 9(1) (no first sale of immovable property before thirty days from publication or service of notice of sale)
- Constitution of India — Article 226 (writ jurisdiction of High Courts)
Frequently Asked Questions
Can I challenge a Section 13(2) demand notice directly before the DRT?
Ordinarily, no. The proviso to Section 13(3A) states that the reasons communicated by the bank in response to the borrower's representation, or the likely action at that stage, do not give the borrower a right to apply to the DRT under Section 17. The borrower should respond to the notice with a written representation within the sixty-day period. The application under Section 17 lies against a measure taken under Section 13(4), such as taking possession.
What is the time limit for filing a Section 17 application before the DRT?
Section 17(1) requires the application to be filed within forty-five days from the date on which the measure under Section 13(4) was taken. Because the period is short, documents and legal advice should be obtained as soon as a possession notice is received or possession is taken.
Can a guarantor or tenant file an application under Section 17?
Section 17(1) is available to any person aggrieved by a measure under Section 13(4), including the borrower. In United Bank of India v. Satyawati Tondon, the Supreme Court held that a guarantor could avail this remedy. Section 17(4A) requires the Tribunal to examine claims of tenancy or leasehold rights over the secured asset.
Do I have to deposit money to file an application before the DRT?
No pre-deposit is required to file an application under Section 17. The Supreme Court struck down the original requirement of a seventy-five per cent deposit in Mardia Chemicals Ltd. v. Union of India. A pre-deposit of fifty per cent of the debt, reducible to not less than twenty-five per cent, applies to a borrower's appeal to the Debts Recovery Appellate Tribunal under Section 18.
Until when can I pay the dues and stop the auction of my property?
Under Section 13(8), as amended in 2016, the dues together with the bank's costs and expenses must be tendered before the date of publication of the notice for public auction or other mode of sale. In Celir LLP v. Bafna Motors (Mumbai) Pvt. Ltd. (2023), the Supreme Court held that the right of redemption is available only until the publication of the auction notice.
Does the SARFAESI Act apply to agricultural land?
Section 31(i) provides that the Act does not apply to any security interest created in agricultural land. Whether a particular property is agricultural land is a question of fact, and evidence of its nature and actual use will be relevant before the DRT.
Can I file a writ petition in the Allahabad High Court against SARFAESI action?
The High Court will ordinarily not entertain a writ petition where the remedy under Section 17 is available. In PHR Invent Educational Society v. UCO Bank (2024), the Supreme Court held that a writ may be entertained despite an alternative remedy only in limited situations, such as where the authority has not acted in accordance with the statute, has acted in defiance of the fundamental principles of judicial procedure, has invoked repealed provisions, or has acted in total violation of the principles of natural justice.