Receiving a SARFAESI notice under Section 13(2) often causes panic among borrowers. Unfortunately, it is not the notice itself, but the mistakes made after receiving it, that usually result in loss of property and irreversible legal consequences.
This article highlights the most common mistakes borrowers commit after receiving a SARFAESI notice, and explains how such errors can be avoided.
Mistake 1: Ignoring the SARFAESI Notice
One of the most damaging mistakes is doing nothing after receiving the notice.
Borrowers often assume:
The notice is only a warning
The bank will give further opportunities
Court action will come later
⚠️ In reality, SARFAESI is a time-bound statutory process. Silence is treated as default, enabling the bank to proceed with possession.
Mistake 2: Not Checking Whether the Loan Is Properly Classified as NPA
Many borrowers fail to verify:
Whether the account was actually overdue for 90+ days
Whether payments made were properly accounted for
Whether RBI norms were followed
If NPA classification is illegal or premature, the entire SARFAESI proceeding can be challenged. Missing this opportunity early often proves fatal.
Mistake 3: Failing to File Objections Under Section 13(3A)
Borrowers have a statutory right to file objections to the demand notice.
Common errors include:
Not filing objections at all
Sending vague or emotional replies
Raising objections orally instead of in writing
A well-drafted objection often becomes the foundation of a successful DRT challenge later.
Mistake 4: Believing the Bank Can Act Arbitrarily
Many borrowers wrongly believe:
Banks can seize property overnight
SARFAESI action is beyond challenge
Courts will not help
This misconception leads to fear-driven inaction. In truth, procedural compliance is mandatory, and illegal actions are routinely set aside by tribunals.
Mistake 5: Waiting Until Physical Possession Is Taken
Borrowers frequently approach lawyers only after police arrive for possession.
By then:
Symbolic possession is already taken
Auction steps may have commenced
Limited interim relief is available
⚠️ SARFAESI litigation is stage-sensitive. Early legal intervention yields far better results.
Mistake 6: Approaching the Wrong Forum
Another common mistake is:
Filing civil suits
Approaching consumer forums
Filing writ petitions prematurely
In most cases, the Debt Recovery Tribunal (DRT) is the correct forum. Approaching the wrong forum wastes precious time and weakens the case.
Mistake 7: Assuming Agricultural Land Can Be Proceeded Against
Borrowers often do not verify whether:
The secured asset is agricultural land
The land is exempt under law
SARFAESI cannot be invoked against agricultural land. Failure to raise this issue early may result in unlawful possession.
Mistake 8: Ignoring Defects in Service of Notice
Banks must properly:
Serve the notice
Address the correct borrower
Mention correct loan details
Improper service is a serious legal defect, but borrowers often overlook it entirely.
Mistake 9: Relying on Verbal Assurances from Bank Officials
Borrowers often rely on:
Oral promises of settlement
Informal assurances of time
“Next month” assurances
⚠️ SARFAESI proceedings continue unless formally stayed or withdrawn. Verbal assurances have no legal value.
Mistake 10: Delaying DRT Filing Beyond Limitation
After action under Section 13(4):
Borrowers get only 45 days to approach DRT
Many borrowers lose their remedy due to:
Delay
Miscalculation of dates
Waiting for bank negotiations
Limitation is strictly enforced.
Practical Advice for Borrowers
After receiving a SARFAESI notice, borrowers should:
Act immediately
Verify NPA classification
File detailed objections
Preserve all documents
Seek legal advice early
Timely action often prevents possession and auction.
Role of an Advocate in SARFAESI Matters
An experienced advocate can:
Identify jurisdictional defects
Draft effective objections
File DRT applications within time
Obtain interim protection
Challenge illegal possession and auction
Conclusion
A SARFAESI notice is not the end of the road—but borrower mistakes often make it so. The SARFAESI Act provides clear safeguards, but they work only if exercised promptly and correctly. Awareness, timely response, and proper legal guidance are the keys to protecting borrower rights.
FAQs
Q. Is replying to a SARFAESI notice mandatory?
While not mandatory, failure to reply severely weakens the borrower’s case.
Q. Can mistakes be corrected later before DRT?
Some can, but many opportunities are lost if early stages are ignored.
Q. Can SARFAESI proceedings be stopped entirely?
Yes, if serious legal or procedural violations are established.