SARFAESI notices — practical points on the Bombay side

A secured creditor under the SARFAESI Act, 2002 does not sue first and possess later. It serves a demand, waits, and then takes a measure. The borrower’s remedy is built around that sequence. A good deal of weak litigation starts by ignoring the sequence and filing a writ because a possession notice feels urgent.

The demand is a document, not a phone call

Section 13(2) requires a notice of the amount payable, with the particulars section 13(3) calls for. The borrower has sixty days. Service matters. A notice that never reached the address in the loan papers, or that does not state the debt as the section requires, is a different case from a notice the borrower chose not to open.

If the borrower represents or objects, section 13(3A) requires the secured creditor to consider the objection. Where the objection is not accepted, reasons are to be communicated within fifteen days of receipt. That communication does not, by itself, open the Tribunal. It does show whether anyone applied their mind. A missing or mechanical reply is the sort of point on which a writ court may look past the usual objection of an alternative remedy. It is not an invitation to bring every SARFAESI dispute on the writ side.

Where the challenge actually lies

Once a measure under section 13(4) is taken, the ordinary remedy is an application under section 17 before the Debts Recovery Tribunal, within forty-five days of the measure. The pre-deposit borrowers have heard of belongs, in the main, to an appeal under section 18, not to the first application under section 17. Advising a client to wait and file a writ “because of the deposit” confuses the two forums and often uses up the forty-five days.

Mardia Chemicals v. Union of India, (2004) 4 SCC 311, upheld the Act and struck down the then condition of a seventy-five percent deposit before the Tribunal would hear the borrower. Parliament recast the deposit later. Cite the judgment for what it decided, and then read the section as it now stands.

Points that still decide cases

• Agricultural land stands outside the Act by section 31(i). The revenue entry and the actual use are both argued. Read the record before you draft.
• The officer who signs has to be an authorised officer. A letterhead is not an authorisation.
• Symbolic possession is not physical dispossession. The pleadings should not pretend that it is.
• In Harshad Govardhan Sondagar, (2014) 6 SCC 1, the Supreme Court held that the Act is not a shortcut for removing a person in possession under a valid lease. Plead the lease. Do not assume every occupant is that tenant.
• A one-time settlement proposal does not suspend the Act, and it does not extend the forty-five days, unless a written standstill or an order says so.
• A guarantor who mortgaged property is inside the notice analysis. Do not leave the guarantor out.

The first conference

Ask for the section 13(2) notice, proof of service, the representation, the section 13(3A) reply, the section 13(4) notice, and any possession panchanama. Diary the forty-five days from the measure, not from the day the client felt the trouble begin. If the sequence is clean, say so. The Tribunal can still examine the debt and the measure. The High Court will usually ask why it should.