SARFAESI, DRT and bank recovery

The SARFAESI sequence

1. NPA classification of the account under the RBI’s prudential norms — the precondition for the notice.
2. Section 13(2) demand notice — the secured creditor calls upon the borrower to discharge the liabilities in full within 60 days, specifying the amount and the secured assets.
3. Representation and reply — under Section 13(3A) the borrower may make a representation or objection; the creditor must consider it and communicate reasons for non-acceptance within 15 days. This reply is often the first place where errors in the amount, the security or the NPA classification are put on record.
4. Section 13(4) measures — after 60 days, taking possession of the secured asset (symbolic, then physical), taking over management, or appointing a manager; physical possession of immovable property is usually taken with the assistance of the Chief Metropolitan Magistrate or District Magistrate under Section 14.
5. Sale — the sale notice, valuation, reserve price, 30-day notice under Rules 8 and 9 of the Security Interest (Enforcement) Rules, 2002, the auction, and confirmation of sale.
6. Section 17 application — any person aggrieved by a measure under Section 13(4) may apply to the Debts Recovery Tribunal within 45 days. The DRT can examine whether each step complied with the Act and the Rules and can restore possession or set aside the sale. No pre-deposit is required at this stage.
7. Section 18 appeal — to the Debts Recovery Appellate Tribunal within 30 days, with a pre-deposit of 50% of the amount due (which the DRAT may reduce to not less than 25%).

The civil court has no jurisdiction over these matters (Section 34); a writ petition to the High Court is entertained only in exceptional cases.

For borrowers and guarantors

The chambers examines the loan and security documents, the NPA classification date, the demand notice and the account statements for defects — wrong or unexplained amounts, notice not served on all borrowers and guarantors, assets not covered by a valid security interest, breaches of the Rules in the sale process, undervaluation, and non-consideration of the representation. It drafts the Section 13(3A) representation, files the Section 17 application before the DRT with an application for interim stay of possession or sale, appears before the CMM in Section 14 proceedings, negotiates one-time settlements and restructuring where that is the client’s aim, and files DRAT appeals.

Guarantors face parallel exposure: the bank may proceed under SARFAESI against the guarantor’s secured asset, file an original application before the DRT under the RDB Act for a recovery certificate, and now also initiate personal-guarantor insolvency under Section 95 IBC — dealt with on the insolvency page.

For lenders

For banks, NBFCs, asset reconstruction companies and other secured creditors, the chambers advises on and defends the enforcement process — the notice, the Section 14 application, the sale — appears in Section 17 proceedings and DRAT appeals, and files and prosecutes original applications under the Recovery of Debts and Bankruptcy Act, 1993 for recovery certificates, including against guarantors and for attachment of assets.

Delhi forums

Debts Recovery Tribunals I, II and III at Delhi, and the Debts Recovery Appellate Tribunal, Delhi; Chief Metropolitan Magistrates and District Magistrates for Section 14 applications; the Delhi High Court for writ petitions in exceptional cases.

Documents to keep ready

• Sanction letter, loan agreement, mortgage or hypothecation deed, guarantee deed
• Account statements and the NPA classification communication
• Section 13(2) notice and proof of service; your representation and the bank’s reply
• Possession notice, sale notice, valuation report and auction documents
• Any earlier DRT, DRAT or court orders; OTS or restructuring correspondence

Frequently asked questions

Can the bank take physical possession without a court order?

The bank can take symbolic possession by notice, but for physical possession of immovable property it applies to the Chief Metropolitan Magistrate or District Magistrate under Section 14, whose role is largely ministerial. The borrower’s remedy is the Section 17 application before the DRT.

Is there a deposit required to file a Section 17 application?

No. Unlike the DRAT appeal, the Section 17 application before the DRT does not require a pre-deposit. The DRAT appeal requires a deposit of 50% of the amount due, reducible to 25%.

What if the 45-day period has passed?

The DRT can condone delay in a Section 17 application on sufficient cause, and each fresh measure by the bank (for example, a sale notice) gives a fresh cause of action. The position should be examined promptly rather than assumed lost.

Can I settle with the bank after possession has been taken?

Yes. One-time settlement and restructuring proposals can be made at any stage, and the Section 13(8) right to redeem the secured asset by paying the dues exists until the publication of the sale notice; the DRT proceedings and the settlement discussions often run together.

Can a guarantor challenge the notice?

A guarantor is a “borrower” under the Act and can file a Section 17 application in respect of measures against the guarantor’s property, and can raise defences such as discharge of the guarantee, variation of the contract without consent, or non-service of the notice.

This page is general information about the area of practice, not legal advice. Last reviewed: 2026-09-22