Banking and finance lawyers in Chennai

After a borrower defaults and the account is classified as a non-performing asset, the secured creditor sends a written notice under Section 13(2) of the SARFAESI Act, 2002 demanding payment in full within sixty days. The notice must give details of the amount payable and the secured assets intended to be enforced (Section 13(3)). If payment does not follow, the creditor can take any measure under Section 13(4), including taking possession of the secured assets and selling them.

The borrower can send a representation or objection to the secured creditor. Under Section 13(3A) of the SARFAESI Act, 2002, the creditor must consider it and, if it is not accepted, communicate its reasons within fifteen days of receiving it. At that stage the borrower cannot yet approach the Debts Recovery Tribunal; the right to apply under Section 17 arises only after a measure has been taken under Section 13(4).

By an application to the Debts Recovery Tribunal under Section 17 of the SARFAESI Act, 2002, within forty-five days of the measure taken under Section 13(4). The Tribunal can declare the measures invalid and restore possession under Section 17(3). No deposit is needed to file the application, since the Supreme Court struck down the pre-deposit provision in Mardia Chemicals Ltd. v. Union of India, (2004) 4 SCC 311. An appeal under Section 18 goes to the Debts Recovery Appellate Tribunal within thirty days, with a deposit of fifty per cent of the debt claimed by the secured creditor or determined by the Debts Recovery Tribunal, whichever is less, which the Appellate Tribunal can reduce to not less than twenty-five per cent.

Yes, if the full dues together with costs and charges are tendered before the sale notice is published. Section 13(8) of the SARFAESI Act, 2002 then bars any transfer of the secured assets and any further step towards sale. In CELIR LLP v. Bafna Motors (Mumbai) Pvt. Ltd., (2024) 2 SCC 1, the Supreme Court held that under the amended Section 13(8) the borrower's right to redeem ends once the sale notice is published. Rule 3(5) of the Security Interest (Enforcement) Rules, 2002 requires the notice under Section 13(2) to draw the borrower's attention to this right.

Section 31 of the SARFAESI Act, 2002 excludes liens, pledges of movables, security in aircraft or vessels, and properties not liable to attachment. The Act also does not apply to security for a financial asset not exceeding one lakh rupees, to security created in agricultural land, or to cases where the amount due is less than twenty per cent of the principal and interest.

Yes. Under Section 128 of the Indian Contract Act, 1872, the surety's liability is co-extensive with that of the principal debtor unless the contract provides otherwise. A person who has given a guarantee is also a borrower for the SARFAESI Act (Section 2(1)(f)). In Bhagyalaxmi Co-operative Bank Ltd. v. Babaldas Amtharam Patel (2026 INSC 205), the Supreme Court restated that a creditor need not exhaust his remedies against the principal debtor before proceeding against the sureties, and held that where the loan is varied without the sureties' consent they are discharged only for the amounts advanced after the variation (Section 133).

Recovery applications by banks and financial institutions go to the Debts Recovery Tribunal under Section 17 of the Recovery of Debts and Bankruptcy Act, 1993, with appeals to the Debts Recovery Appellate Tribunal. Civil courts cannot decide those matters, apart from the writ jurisdiction of the High Courts (Section 18 of that Act). The Tribunal hears claims of twenty lakh rupees or more; the threshold was raised from ten lakh rupees by a notification of 6 September 2018. For measures taken under the SARFAESI Act, 2002 the application goes to the Debts Recovery Tribunal under Section 17, and Section 34 bars civil court suits on those matters.

On an application under Section 14 of the SARFAESI Act, 2002, the Chief Metropolitan Magistrate or District Magistrate takes possession on the strength of the authorised officer's affidavit and passes orders within thirty days of the application. If the order cannot be passed in that time for reasons beyond the Magistrate's control, it can be passed within a further period, up to sixty days in aggregate.