Received a SARFAESI Section 13(2) Notice? What It Means and What You Can Do
When a loan secured by property becomes a Non-Performing Asset (NPA), the bank or financial institution can recover it under the SARFAESI Act, 2002 without first going to court. The first formal step is a demand notice under Section 13(2). This guide explains what the notice means and what options a borrower or guarantor has.
What is a Section 13(2) notice?
It is a written demand asking the borrower to pay the full outstanding amount within 60 days. It names the borrower and guarantors, the amount claimed, the date the account became NPA, and the secured property (house, shop, plot or other asset) the bank intends to act against.
What happens if nothing is done within 60 days?
- The bank can take measures under Section 13(4): take possession of the secured property, take over management, or ask people who owe money to the borrower to pay the bank directly.
- For physical possession, the bank usually applies to the District Magistrate or Chief Judicial / Metropolitan Magistrate under Section 14.
- After possession, the property can be sold, usually by public auction after a sale notice.
Your options during the 60 days
- Pay or settle. Many accounts are closed through a One Time Settlement (OTS) or restructuring. Ask the bank in writing and keep copies.
- Send a representation or objection under Section 13(3A). If the amount is wrong, the NPA date is wrong, or the notice has defects, you can object in writing. If the bank does not accept your objection, it must tell you the reasons within 15 days.
- Check the notice carefully. Is the amount correct? Is every borrower and guarantor named? Is the property description correct? Is it signed by an authorised officer?
When SARFAESI does not apply
Under Section 31, SARFAESI action cannot be taken in some cases, for example:
- security over agricultural land;
- loans where the financial asset is ₹1 lakh or less;
- cases where the amount due is less than 20% of the principal and interest.
After the bank takes possession: Section 17 application in the DRT
Any person aggrieved by a measure under Section 13(4) can file a Securitisation Application (SA) under Section 17 before the Debts Recovery Tribunal (DRT) within 45 days of that measure. For most of Punjab, the DRTs sit at Chandigarh. The fee depends on the debt amount; you can estimate it with the DRT fee calculator on this website.
Keep these documents ready
- The notice with its envelope or postal receipt (the date of receipt matters).
- Loan sanction letter, loan account statement and repayment receipts.
- Copies of every letter you send to the bank, with proof of delivery.