Received a SARFAESI Notice? What Borrowers in Kerala Can Do

A SARFAESI notice usually arrives after months of missed EMIs, phone calls from the bank and a growing sense of dread. It is a formal legal notice, and it means the bank intends to recover the loan by taking and selling the property you pledged, without going to a civil court first.

That sounds final, but it is not. The law gives borrowers and guarantors specific rights at each stage, and many cases end in a settlement, a restructuring or a successful challenge. What matters most is acting early, because several of those rights are tied to strict time limits.

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, known as the SARFAESI Act, lets banks and financial institutions enforce a security, such as a mortgaged house or land, without a court decree, once a loan has been classified as a non-performing asset (NPA).

It does not apply to every loan. Among other exceptions, it does not apply where the amount due is less than twenty per cent of the principal and interest, to agricultural land, or to loans below one lakh rupees. Whether your loan is covered is the first thing to check.

The process begins with a demand notice under Section 13(2). It states the amount due and gives you sixty days to pay. If you do not, the bank can take the measures listed in Section 13(4), including taking possession of the secured property.

Read the notice carefully. Check the amount claimed, the date of NPA classification, the details of the property and whether the notice has been sent to every borrower and guarantor. Errors are more common than people expect.

Within the sixty days, you can send a representation or objection to the bank under Section 13(3A), disputing the amount, the NPA classification or any other aspect of the notice, or proposing a repayment plan. The bank must consider it and communicate its reasons within fifteen days if it does not accept your objection.

A well-drafted objection creates a record, often brings the bank to the negotiating table, and lays the ground for any later challenge before the Debt Recovery Tribunal.

If the dues are not paid, the bank can issue a possession notice and take symbolic possession, usually by affixing a notice to the property and publishing it in newspapers. For physical possession, where the borrower does not hand over the property, the bank applies to the Chief Judicial Magistrate or the District Magistrate under Section 14.

Once the bank takes any measure under Section 13(4), a securitisation application can be filed before the Debt Recovery Tribunal (DRT) under Section 17, within 45 days. For Kerala, the DRT sits at Ernakulam. The Tribunal can stop or set aside the bank’s action if it was taken contrary to law.

Before selling the property, the bank must give the borrower a sale notice of at least thirty days under the Security Interest (Enforcement) Rules, 2002, and publish an auction notice. The property must be valued, and the reserve price fixed, before the sale.

The right of redemption. Under Section 13(8), the borrower can stop the sale by paying the full dues, with costs, before the auction notice is published. In Celir LLP v. Bafna Motors (2023), the Supreme Court confirmed that this right ends once the auction notice is published. That is why timing is everything.

Most banks prefer to recover money rather than sell property at a discount. A one-time settlement (OTS), a revised repayment schedule or a restructuring may be possible, particularly where the borrower can show a realistic plan. Negotiating from a position where your legal objections are clearly on record usually produces better terms.

Any settlement should be recorded in writing, with the bank’s confirmation that the SARFAESI proceedings will be withdrawn on compliance.

The Supreme Court has repeatedly held, including in United Bank of India v. Satyawati Tondon (2010), that where the SARFAESI Act provides a remedy before the DRT, a writ petition in the High Court should not ordinarily be entertained. The High Court of Kerala does intervene in exceptional cases, for example where the bank acts wholly without jurisdiction or the lender is not covered by the Act, but for most borrowers the DRT is the forum.

A guarantor’s liability is generally co-extensive with the borrower’s, and the bank can proceed against a guarantor’s pledged property too. Guarantors have the same right to object, to approach the DRT and to be heard, and should receive their own notices. If you signed as a guarantor for a relative or friend, take the notice as seriously as if the loan were yours.

Adv. K Rajesh Kannan, a High Court of Kerala advocate with over 24 years of practice, advises borrowers and guarantors across Kerala on SARFAESI notices, objections under Section 13(3A), the remedy before the Debts Recovery Tribunal, negotiations for settlement and restructuring, and High Court remedies where they are available. Securitisation applications before the DRT Ernakulam are also handled through the office. See the Banking Law page for the full scope of work.

Questions borrowers often ask

How many days do I have after a SARFAESI notice?
Sixty days from the Section 13(2) notice to pay or respond. An objection should be sent within that period.

Can the bank auction my house?
Yes, if the loan is covered by the Act, the notices are valid and the dues remain unpaid. The bank must follow the required steps, including valuation and a thirty-day sale notice, and you can stop the sale by paying the dues before the auction notice is published.

What is the time limit to approach the DRT?
Forty-five days from the date the bank takes a measure under Section 13(4), such as possession.

Can I negotiate after receiving the notice?
Yes. Settlement and restructuring are possible at almost every stage, and are often best pursued alongside a formal objection.

This guide gives general information about the law in Kerala. It is not legal advice on any particular case.