A notice under Section 13(2) of the SARFAESI Act, 2002 is the first formal legal step taken by banks to enforce security interests against defaulting borrowers. For borrowers, this notice is not merely a warning—it is a statutory opportunity to protect their rights and prevent further coercive action.
This article explains the legal meaning of a Section 13(2) notice, the rights of borrowers, and the remedies available at this stage.
What Is a Section 13(2) SARFAESI Notice?
A Section 13(2) notice is a demand notice issued by a secured creditor to a borrower whose loan account has been classified as a Non-Performing Asset (NPA).
Through this notice, the bank:
Demands repayment of the outstanding dues
Grants 60 days’ time to the borrower
Warns of enforcement action under Section 13(4) in case of non-payment
It is the statutory trigger for SARFAESI proceedings.
Pre-Conditions for Issuing a Section 13(2) Notice
A bank can issue a Section 13(2) notice only if:
The loan is a secured loan
The account is validly classified as NPA
The secured asset is not exempt (e.g., agricultural land)
If any of these conditions are absent, the notice is legally defective.
Mandatory Contents of a Section 13(2) Notice
A valid notice must clearly specify:
Total outstanding amount
Date of default
Details of the secured asset
Consequences of non-payment
Vague or incomplete notices are challengeable before the DRT.
Rights of Borrowers After Receiving Section 13(2) Notice
1. Right to Receive Proper Notice
Borrowers have the right to:
Proper service of notice
Clear disclosure of dues
Accurate loan and security details
Improper service or incorrect details vitiate proceedings.
2. Right to Make Representation / Objection – Section 13(3A)
This is the most important statutory right available to borrowers.
Borrowers may:
Dispute incorrect amounts
Challenge NPA classification
Raise legal objections
Point out procedural violations
3. Right to a Reasoned Reply from the Bank
The bank is legally bound to:
Consider borrower’s objections
Communicate reasons if objections are rejected
Non-consideration of objections amounts to violation of natural justice.
4. Right Against Premature Enforcement
During the 60-day period:
The bank cannot take possession
No enforcement action under Section 13(4) is permitted
Any action during this period is illegal.
What Borrowers Should Do Immediately
Upon receiving a Section 13(2) notice, borrowers should:
Verify NPA classification
Check correctness of dues
Examine exemption of secured asset
Prepare and submit detailed objections
Preserve proof of submission
This stage often decides the fate of the entire SARFAESI proceeding.
What Borrowers Cannot Do at This Stage
Borrowers cannot:
Directly approach DRT against Section 13(2) notice alone
File civil suits to stop the notice
Ignore the notice assuming no immediate action
DRT remedy becomes available only after action under Section 13(4).
Common Grounds to Challenge Section 13(2) Notice
No valid NPA classification
Unsecured loan wrongly proceeded against
Agricultural land included
Incorrect calculation of dues
Notice not served properly
What Happens After the 60-Day Period?
If the borrower:
Pays the dues → proceedings stop
Fails to pay → bank may take measures under Section 13(4)
These measures include possession, management takeover, or sale.
Role of an Advocate at Section 13(2) Stage
An advocate can:
Examine legality of the notice
Draft effective objections
Prevent illegal enforcement
Build a strong foundation for future DRT proceedings
Early legal intervention is strategically critical.
Conclusion
A Section 13(2) SARFAESI notice is not the end—but the beginning of borrower protection. It provides a vital opportunity to challenge illegal claims, procedural lapses, and jurisdictional defects before coercive action begins. Borrowers who understand and exercise their rights at this stage stand a far better chance of safeguarding their property.
FAQs
Q. Can a borrower ignore a Section 13(2) notice?
No. Ignoring it enables the bank to proceed with possession.
Q. Can SARFAESI action be stopped at Section 13(2) stage?
Yes, if dues are paid or serious legal defects are pointed out.
Q. Can DRT be approached immediately after receiving notice?
No. DRT remedy arises only after action under Section 13(4).