Received a SARFAESI Notice from Your Bank? What to Do Next

ByBase Legal

Under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), a bank or financial company can take possession of a mortgaged property and sell it without going to court. This usually starts with a notice. Acting quickly is important.

Step 1: The demand notice – Section 13(2)

When a loan is classified as a Non-Performing Asset (NPA), the bank sends a demand notice under Section 13(2). It gives you 60 days to pay the amount claimed.

You can send written objections to the bank in this period under Section 13(3A). The bank must consider them and reply with reasons.

Step 2: Possession – Section 13(4)

If you do not pay, the bank can take symbolic or physical possession of the property. For physical possession, the bank often goes to the Chief Metropolitan Magistrate or District Magistrate under Section 14.

Step 3: Auction

The bank must give notice before selling the property. Under the law, you can still pay the full dues and save the property until the sale notice is published.

Your main remedy: Section 17 application

You can challenge the bank’s action before the Debts Recovery Tribunal (DRT) by filing a Section 17 application. It must be filed within 45 days of the action you are challenging. The DRT can stay the auction or set aside wrong action.

If the DRT rules against you, you can appeal to the Debts Recovery Appellate Tribunal (DRAT) under Section 18. An appeal needs a pre-deposit of 50% of the debt, which the DRAT may reduce to 25%.

Practical tips

  • Keep every notice, envelope and loan document.
  • Check if the loan was correctly classified as an NPA.
  • Check the valuation and the reserve price of the property.
  • Consider a One-Time Settlement (OTS) proposal. Many banks accept one even after recovery starts.

To speak to an advocate, call +91 63660 42792 or email contact@baselegal.in. You can also send us a message. Read more about our Banking, SARFAESI & DRT practice.

This article is for general information only. It is not legal advice. Please speak to an advocate about your own case.

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