SARFAESI Borrower Rights and Deadlines Explained

A notice from a bank under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) starts several clocks at once, and most of them run against the borrower. The Act allows a secured creditor to take possession of and sell secured assets without going to court, so the borrower’s protections are found mainly in time limits, notices and a limited right to approach the Debts Recovery Tribunal (DRT). Knowing SARFAESI borrower rights and deadlines in sequence is the difference between a meaningful challenge and one that arrives after the asset is gone.

This article walks through the stages in order: the demand notice, the objection, the measures, the DRT and appeal, the sale, the right of redemption, and the cases to which the Act does not apply at all.

Stage 1: the demand notice under Section 13(2)

Enforcement begins when the borrower’s account is classified as a non-performing asset and the secured creditor issues a written notice under Section 13(2). The notice calls upon the borrower to discharge the liabilities in full within sixty days from the date of the notice, failing which the creditor may exercise its powers under Section 13(4). The notice must give details of the amount payable and the secured assets intended to be enforced.

Under Rule 3 of the Security Interest (Enforcement) Rules, 2002, the notice may be served by hand, registered post with acknowledgement, speed post, courier, fax or email at the borrower’s address.

After receiving the notice, the borrower cannot transfer the secured assets referred to in it by sale, lease or otherwise (other than in the ordinary course of business) without the creditor’s prior written consent (Section 13(13)).

Stage 2: the objection and the 15-day reply

Section 13(3A) gives the borrower the right to make a representation or raise an objection to the demand notice. The secured creditor must consider it, and if it concludes that the objection is not acceptable or tenable, it must communicate the reasons for non-acceptance within fifteen days of receiving the representation.

The proviso to Section 13(3A) states that the reasons communicated, or the likely action of the creditor at that stage, do not by themselves give the borrower a right to approach the DRT under Section 17. The objection is a protection within the process, not a separate cause of action.

In ITC Ltd. v. Blue Coast Hotels Ltd., decided by the Supreme Court on 19 March 2018, the Court held that Section 13(3A) is mandatory: the word “shall” and the requirement to give reasons make it so. But the Court also held, on the facts of that case, that non-compliance with Section 13(3A) did not help the borrower, and it upheld the sale. Non-compliance does not automatically undo every later step; much depends on the borrower’s own conduct and how promptly it acts.

Practical points on the objection

• Raise specific objections: the amount claimed, the interest applied, the classification of the account as an NPA, or the description of the secured assets.
• Keep proof of delivery of the objection and note the date from which the fifteen days run.
• The objection does not stop time running for the next stage. Plan the next step on the assumption that the creditor will proceed.

Stage 3: measures under Section 13(4)

If the borrower does not pay within sixty days, the secured creditor may take one or more of the measures in Section 13(4):

• take possession of the secured assets, including the right to transfer them by lease, assignment or sale;
• take over the management of the business of the borrower, where a substantial part of the business is held as security;
• appoint a manager to manage the secured assets that have been taken over;
• require any person who has acquired any of the secured assets from the borrower and from whom money is due or may become due to the borrower to pay the secured creditor.

For immovable property, Rule 8(1) and (2) require the authorised officer to deliver a possession notice to the borrower, affix it on the outer door or at a conspicuous place of the property, and publish it in two leading newspapers, one in the vernacular language with sufficient circulation in the locality.

Where physical possession is resisted, the secured creditor may apply to the Chief Metropolitan Magistrate or the District Magistrate under Section 14 for assistance in taking possession.

Stage 4: the DRT within 45 days, and the DRAT

Section 17: the 45-day window

Any person, including the borrower, aggrieved by a measure under Section 13(4) may apply to the DRT within forty-five days from the date on which the measure was taken. This is the principal remedy, and it is the reason High Courts ordinarily decline to entertain writ petitions against SARFAESI measures.

The DRT is required to deal with the application as expeditiously as possible and dispose of it within sixty days, extendable for reasons recorded, so that total pendency does not exceed four months.

Section 18: appeal and pre-deposit

An appeal from the DRT’s order lies to the Debts Recovery Appellate Tribunal (DRAT) within thirty days from receipt of the order. No appeal by a borrower is entertained unless the borrower deposits fifty per cent of the amount of debt due, as claimed by the secured creditor or as determined by the DRT, whichever is less. The DRAT may, for reasons recorded in writing, reduce the deposit, but not below twenty-five per cent of the debt.

Stage 5: the sale

The Rules build in two separate thirty-day periods before a first sale of immovable property:

• Rule 8(6): the authorised officer must serve the borrower with a notice of thirty days for sale of the immovable secured assets.
• Rule 9(1): no sale of immovable property shall, in the first instance, take place before the expiry of thirty days from the date on which the public notice of sale is published in newspapers.

If a first sale fails and a fresh sale is attempted, the Rules permit a shorter notice of not less than fifteen days.

Stage 6: when the right to redeem ends

The most misunderstood deadline is the right of redemption under Section 13(8). Before the 2016 amendment, a borrower could tender the full dues with costs at any time before the date fixed for sale or transfer. Since the amendment, which took effect on 1 September 2016, the tender must be made before the date of publication of the notice for public auction, or for inviting quotations or tenders, or for sale by private treaty.

In Celir LLP v. Bafna Motors (Mumbai) Pvt. Ltd., 2023 INSC 838, decided on 21 September 2023, the Supreme Court held that after the amendment, the borrower’s right of redemption stands extinguished on publication of the auction notice. The Court set aside a Bombay High Court order that had permitted the borrower to redeem after the auction, and observed that the High Court should not have entertained the writ petition when the remedy under Section 17 was available.

In M. Rajendran v. KPK Oils and Proteins India Pvt. Ltd., 2025 INSC 1137, decided on 22 September 2025, the Supreme Court held that the amended Section 13(8) applies where the default occurred after 1 September 2016, even if the loan was taken earlier. The Court also noted an inconsistency between the amended Section 13(8) and the thirty-day sale periods in Rules 8 and 9, and urged the Government to amend the Rules to bring them in line with the Act.

The practical lesson is simple: the window to pay and keep the property closes when the auction notice is published, not when the sale takes place or the sale certificate is registered.

Cases outside the Act, and tenants

Where SARFAESI does not apply: Section 31

Section 31 lists cases to which the Act’s enforcement provisions do not apply. Three matter most in practice:

Each exclusion turns on the facts of the particular loan and security, so a borrower who relies on one should raise it at the earliest stage, in the objection to the demand notice and before the DRT.

Tenants in secured property

A tenant in mortgaged premises is not automatically displaced by SARFAESI proceedings. In Harshad Govardhan Sondagar v. International Assets Reconstruction Co. Ltd. (2014) 6 SCC 1, the Supreme Court held that a lease created before the mortgage, or created after it but in accordance with the mortgagor’s power to lease under Section 65A of the Transfer of Property Act, 1882, does not stand automatically determined when action is taken under Sections 13 or 14. A tenant with such a lease can place it before the Magistrate dealing with the Section 14 application.

The 2016 amendments added Section 17(4A), which allows the DRT, on an application by a person claiming a tenancy or leasehold right, to examine whether the lease or tenancy was created in violation of Section 65A of the Transfer of Property Act, contrary to the mortgage, or after the borrower received the Section 13(2) notice, among other grounds.

Frequently Asked Questions

How long does a borrower have after a Section 13(2) notice?

The notice gives sixty days to discharge the liability in full. During that period the borrower may file an objection under Section 13(3A), and the secured creditor must communicate reasons within fifteen days if it rejects the objection.

What is the time limit to approach the DRT under SARFAESI?

An application under Section 17 must be filed within forty-five days from the date on which the measure under Section 13(4) was taken. Possession is the most common measure that starts this period.

How much must be deposited to appeal to the DRAT?

Fifty per cent of the debt claimed by the secured creditor or determined by the DRT, whichever is less. The DRAT may reduce this, for recorded reasons, to not less than twenty-five per cent.

Until when can a borrower pay and save the property?

Under Section 13(8) as amended in 2016, the borrower must tender the full dues with costs before the auction notice is published. The Supreme Court confirmed this in Celir LLP v. Bafna Motors (Mumbai) Pvt. Ltd. (2023) and held in M. Rajendran v. KPK Oils and Proteins India Pvt. Ltd. (2025) that the rule applies where the default occurred after 1 September 2016.

Can a bank use SARFAESI for a small loan or agricultural land?

No. Section 31 excludes security interests securing financial assets not exceeding one lakh rupees, security interests in agricultural land, and cases where the amount due is less than twenty per cent of the principal and interest.

This article is for general information and is not legal advice.

This article is for general information only and is not legal advice or an invitation to engage the firm. Laws and judgments change; please obtain specific legal advice before acting.