Quick answer
- A bank or financial institution can enforce security without going to court under the SARFAESI Act, 2002, once the loan is a non-performing asset. It starts with a 60-day demand notice under Section 13(2).
- You can object in writing. The bank must reply with reasons within 15 days (Section 13(3A)).
- Against possession or other measures, apply to the Debts Recovery Tribunal under Section 17 within 45 days. An appeal to the DRAT needs a pre-deposit of 50% of the debt, reducible to 25% (Section 18).
- The right to redeem the property by paying the dues ends once the sale notice is validly published (M. Rajendran v. KPK Oils, 2025).
A SARFAESI notice is serious, but it is not the end of the road. Borrowers and guarantors have specific rights at each stage, and acting within time limits is critical.
In this article
- When can a bank use SARFAESI?
- Step 1: The Section 13(2) demand notice
- Step 2: Object under Section 13(3A)
- Step 3: Possession and sale
- How do you challenge it before the DRT?
- When does the right of redemption end?
- Can you settle with the bank?
- What about guarantors?
- Need help?
- Frequently asked questions
- Sources
When can a bank use SARFAESI?
- The loan must be secured (a mortgage or hypothecation) and classified as a non-performing asset under RBI norms
- The amount due should be at least ₹1 lakh and at least 20% of the principal and interest (Section 31(j))
- Agricultural land cannot be enforced under SARFAESI (Section 31(i))
Step 1: The Section 13(2) demand notice
The bank demands full payment within 60 days, giving details of the dues and the secured assets. Check the amount, the NPA date and the property described. Errors can be challenged.
Step 2: Object under Section 13(3A)
You can send a representation or objection during the notice period, for example disputing the NPA classification or the amount, or proposing a settlement. The bank must consider it and communicate reasons for rejecting it within 15 days.
Step 3: Possession and sale
If you do not pay, the bank can take possession under Section 13(4). For physical possession of residential or commercial property, it usually applies to the Chief Judicial Magistrate or District Magistrate under Section 14. The bank must then serve a sale notice and give at least 30 days before the auction.
How do you challenge it before the DRT?
File an application under Section 17 before the Debts Recovery Tribunal within 45 days of the measure taken under Section 13(4). The DRT can examine whether the NPA classification, notices and procedure were lawful, and can restore possession. The right DRT depends on where the property or the bank branch is located; Delhi has several DRT benches, and each Uttar Pradesh district is assigned to a DRT by government notification.
An appeal from the DRT lies to the Debts Recovery Appellate Tribunal under Section 18, within 30 days, after depositing 50% of the amount claimed (the DRAT can reduce this to 25%).
When does the right of redemption end?
Under Section 13(8), as amended in 2016, the borrower can stop the sale by paying the full dues before the sale notice is published. In M. Rajendran v. KPK Oils and Proteins India Pvt. Ltd., 2025 INSC 1137, the Supreme Court held that the right ends on valid publication of the notice of sale, following Celir LLP v. Bafna Motors, (2024) 2 SCC 1. Do not wait for the auction to try to settle.
Can you settle with the bank?
Yes. A one-time settlement (OTS) is often possible, especially before the auction. Get any settlement in writing on the bank’s letterhead with the amount, schedule and withdrawal of SARFAESI measures.
What about guarantors?
Guarantors receive notices too and can object and approach the DRT. A personal guarantor’s liability is co-extensive with the borrower’s, unless the guarantee says otherwise.
Need help?
We represent borrowers, guarantors and creditors before DRTs and DRATs. See our civil law practice, read about recovery options, or contact us.
For help with a SARFAESI notice, Section 17 application or DRAT appeal, see our DRT and SARFAESI page.
Frequently asked questions
How long do I have to reply to a Section 13(2) notice?
The notice gives 60 days to pay. You can send your objections during this period, and the bank must reply with reasons within 15 days.
What is the time limit to approach the DRT?
45 days from the date the bank takes a measure under Section 13(4), such as taking possession.
Can SARFAESI be used against agricultural land?
No. Section 31(i) excludes agricultural land from SARFAESI enforcement.
Can I stop the auction by paying the dues?
Only if you pay the full dues before the sale notice is validly published. After that, the right of redemption ends.
Sources
- Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 — Sections 13(2), 13(3A), 13(4), 13(8), 14, 17, 18 and 31
- Security Interest (Enforcement) Rules, 2002 — Rules 8 and 9
- M. Rajendran v. KPK Oils and Proteins India Pvt. Ltd., 2025 INSC 1137
- Celir LLP v. Bafna Motors (Mumbai) Pvt. Ltd., (2024) 2 SCC 1
This article is general legal information, not legal advice for your specific case. Law and procedure change; please consult an advocate before acting.
