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shastibrata (technical head)     17 July 2012

Sarfaesi act - high court or drat?

Can someone shed some light on this Sarfaesi situation please. 

We have a loan with a national bank which has been classified as NPA which we are disputing.  We had moved our residence over 2  years ago and had informed the bank about it.  The bank, even while maintaining routine communication with us at the new address, had sent an 13(2) notice to the old address which was returned undelivered.  They did not serve 13(4) notice at all.  We came to know of this only when a ‘symbolic possession’ notice was being pasted on our premises.  This was followed by the Bank auctioning the property.  Our lawyer filed an SA before the DRT, Coimbatore, as well as IA’s calling for bid records etc., from the bank.  It was found that in addition to non attempt to serve 13(4) notice, the bank has also not served notices under 8(6) and 9(1).

Till date, all Sarfaesi related communications, including auction notices etc., bear the old address from 2 years ago.  The Tribunal meanwhile had ordered the Bank not to confirm the sale, giving us 15 days time to pay up the amount paid by the successful bidder plus interest, to the successful bidder; else sale would be confirmed.  In essence, this would amount to over 85 percent of the bank demanded amount.  In their counter the bank has also claimed that we cannot raise the issue of 13(4) since it is time barred as 45 days have passed. 

What are our options?  Would a writ before the High Court be possible?  Thanks much.


 24 Replies

R.K Nanda (Advocate)     18 July 2012

File appeal in DRAT.

shastibrata (technical head)     18 July 2012

Thanks R.K.Nandaji.  Would the DRAT even entertain an appeal when 13(2), 13(4) claim is time barred, and the merits of the case has not yet been decided by DRT and only interim orders have been passed?

Uday (Lawyer)     18 July 2012

Dear Shasti,

Pls comply with the order of the DRT first and prove your bonafide to the court and avoid eviction. When the case is taken up for hearing, you can prove your case by producing the documents which was sent by the bank to the present address and also say that the have deiberately not sent the demand notice to the present address. When doing so, the service becomes incomplete. When the bank is not in a position to serve the demand notice to the borrower, the bank has to affix the demand notice on the secured premises and also give paper publication in two dailies. If it is not done so, the service is not complete. This procedure is not applicable, when the demand notice is returned by the borrower with an endorsement "Refused to accept". However, the bank, cannot sell the property by violoating the process under rule 8(6) and 9(1).The viloations done by the bank will necessarily make the DRT to order for starting the process afresh.

shastibrata (technical head)     18 July 2012

Thank you Uday for your comprehensive reply!

The 13(2) notice sent to the old address was returned notated "not at address".  Nothing was affixed at the secured premises and the first time we came to know about Sarfaesi proceedings was when people arrived with symbolic possession notice to affix at the premises.  The paper advertisements were given, again with the old address, which we did not realise since the bank was carrying on with us separately with negotiations. 

We will take your advice and comply with the DRT order, but does this not defeat the purpose when the bank receives over 85% of the due amount without even the case being adjudicated?  And when prima facie violations of due process are evident?

You also state that "The viloations done by the bank will necessarily make the DRT to order for starting the process afresh."  What does this mean?  That the bank will now issue 8(6) and 9(1) for the balance of 12% due since 13(2) and 13(4) violations are beyond the 45 day limit and hence cannot be considered by the Tribunals? 

Can a bank unilaterally extend the time period for the bidder to pay the remaining 75% of the bid amount by another 15 days (total of a month)?

As of this writing, for whatever reason, all Sarfaesi related matters are sent only to the old address, even though we had brought this to the attention of the bank.

Perhaps it is worth mentioning that the value of the property is about 4 times the amount due and the bank had been pressuring us to sell it to a particular builder, which we had been opposing. 

I am truly thankful to this site and its members.  I only wish I had stumbled on this earlier.  I realize that just hiring a competent high court lawyer is not enough.  The individual has to be well versed in DRT matters also.  Thanks again. 

Uday (Lawyer)     18 July 2012

Dear Shasti,

I would be in a better position to answer you if I know the following.

1) Whether you have given any written communication to the bank regarding the change of address. If so, do you have the acknowledgement for this.

2) Date of symbolic possession (Affixture), date of sale notice and the date of filing the application before the DRT.

As far as the extension of time to the purchaser is concerned, the authorised officer can extend the period of 15 days from time to time. For you reference I'm reproducing the relevant portion of the Security Enforcement Rules "On every sale of immovable property, the purchaser shall immediately pay a deposit of twent-five percent of the amount of the sale price, to the authorised officer conducting the sale and in default of such deposit, the property shall forthwith be sold again.

The balance amount of purchase price payable shall be paid by the purchaser to the authorised officer on or before the fifteenth day of confirmation of sale of the immovable property or such extended period as may be agreed upon in writing between the"

Finally, when you are able to prove that the service of the demand notice under section 13(2) is not completed, there is no question of proceeding further. The bank has to start the proceedings afresh from issuing a demand notice again.

shastibrata (technical head)     18 July 2012

Dear Uday:

Thanks again.

1)Yes I had given written communication to the bank and have a copy on my file. Unfortunately, I did not send it by Registered post, just normal mail as with other communication.

2) Symbolic possession affixture date 3 July 2011. No sale notice was served. Only a paper ad of sale. Physical possession February 14, 2012. First application before DRT March 20, 2012. From the period of symbolic possession onwards there are communication from the bank to the correct new address, except for Sarfaesi matters.

Per the banks own records no notice has been served under 8(6) or 9(1).

Thanks for clarifying about extension of time to successful bidder to pay the remaining 75%.

Uday (Lawyer)     18 July 2012

Dear Shasti,

The DRTs do not have the powers of the Civil Court. They are just tribunals. Hence condone delay in filing the application may be ruled out. There were 2 opportunities given to you which were not utilised in the proper manner.

1) Challenging the possession within 45 days from the date of possession.

2) Challenging the sale notice within 45 days from the date of publication of sale notice.

Section 17 of the SARFAESI Act says that "any person aggrieved by any of the measures referred to in sub-section (4) of Section 13 taken by the secured creditor or his authorised officer under this chapter, may make an application to the DRT having jurisdiction in the matter wihtin 45 days from the date of which such measure had been taken. In this event, physical possession is also a measure under section 13(4). The limitation can be calculated from the date of physical possesion also. (This is my interpretation).

I presume that you have not challenged the sale notice. However, you can try your luck before the High Court by engaging an advocate who is well versed in the SARFAESI Act.


Section 19 of the SARFAESI Act says that "If the Debts Recovery Tribunal or the Court of District Judge, on application made under section 17 or 17-A, or the appellate Tribunal or the High Court on appeal preferred under 18 or Section 18-A, holds that the possession of the secured assets by the secured creditor is not in accordance with the provisions of this act and rules made thereunder and directs the secured creditors to return such secured assets to the concerned borrowers, such borrower shall be entitled to the payment of such  compensatiopn and costs as may be determined by such Tribunal or Court.


Section 29 of the SARFAESI Act provides for imprisonment of the person whoever contravenes the provisions of this act. You may please try your luck before the High Court.(The possibility of entertaining the writ petition in SARFAESI matter is very remote before the High Court)

shastibrata (technical head)     18 July 2012

Dear Uday:

Thank you very much sir, for all your efforts to clarify my situation!  What I have found out from here is much more than I ever did by reading the Act itself and through my lawyer. 

Since I am not sure how I go about find an advocate in the High Court well versed in Sarfaesi, and considering your comment that prevailing before the High Court is remote at best, I think we will go with your initial comment and comply with the DRT order and go from there.  For this, I may have a different question which I may be raising under a separate thread and would appreciate any input from you. 

Thanks again.

c.p.s. ramachary (1500)     20 July 2012

I agree with the opinion of Mr. Uday advocate in this matter. But I would like to add my opinion in this matter. 

Filing of writ petition is not advisable when there is alternative remedy is provided. Supreme Court in Satyavati Tondon's case (United Bank of India Vs. Satyavati Tondon & Ors.: III (2010) Banking Cases 495(SC)) expressed its serious concern over high courts for entertaining writs when alternative remedi is available. This self imposed restriction is not applicable when there is no alternative remedy available.  

As Mr.Uday said if the bank has not seved the demand notice in the manner prescribed in Rule 3A of S.I.(E) Rules the entire action of the bank stands vitiated (sublat fundamento opus cadit= means when foundation is removed super structure falls)

Regarding condonation of delay in filing application u/s17 of the Act  there are different views among high courts. Bombay High Court, Madras High Court and Allahabad High Court are of the common oinion that delay condonation is permissible by DRT. But Calcutta High Court and Kerala High Court are of the contrary view. Appeals on this subjec are pending before Supreme Court. Limitation is matter of public policy and is not meant to destroy the rights of the parties. Recently Supreme Court in L. K. Trust  vs. EDC Ltd. : 2011(2) D.R.T.C. 305 (S.C.) held that, right of redemption subsists as long as mortgage subsists and any law to prevent, evade or hamper redemption is void.

Any order including interim order is appelabe u/s 18 of the Act. Hence it would be appropriate to go in appeal and obtain stay subject to deposit of 25% of the debt amount (any how the borrower is supposed to pay the dues of the bank). Henc file appeal in DRAT as opined by Mr.R.K. Nanda advocate rather than prefering for writ. In the appeal you may raise all the points including non service of the demand notice according to law. Howevever Mr. Sastibrata should be sure of preserving evidence of service of intimation about change of address. Even otherwise if the bank does not produce evidence of affixture of demand notice befor publication then entire action of the bank shall not sustain as  opined by Mr.Uday advocate

RAJU O.F., (Advocate)     21 July 2012

Immediately prefer an Appeal under Sec.18 of the SARFAESI Act before DRAT within 30 days from the Interim Order of DRT.  DRAT can help you, but you must be prepared to deposit 50% of the amount claimed in Demand Notice, deducting the amounts remitted subsequent to date of Demand Notice. Engage an advocate conversant with DRT & SARFAESI Act and practicing in DRAT.

shastibrata (technical head)     17 August 2012

Thank you Shri.Raju, Shri.C.P.S.Ramachary, Shri.Uday and Shri.R.K.Nanda for your valuable suggestions as well as your support during a time when I was feeling helpless.  I apologize also for this delay in updating.  Just felt that I should post after I had some results.  Based on your inputs I proceeded with the DRAT option and have now gotten time to pay the 50% of the demand notice amount minus the amount already paid.  My new attorney also advises that we can move the High Court to have the amount reduced to 25% as well as attempt for a stay. 

Here is an interesting part:  The DRAT order was passed on the waiver application with the stay application to be heard later along with the compliance of the waiver application.  As such there is no stay or injunction on the Bank from going ahead and confirming sale.  However my attorney states that this is how it is usually done and the Bank will not go ahead with the confirmation.

My attorney also advises that the successful bidder has to deposit 75% of the money in 15 days unless the relaxed terms have been published in the auction notice, otherwise it is construed as a bias by the bank towards this bidder,and against the borrower since the relaxed timeframe might have gotten higher bids in the auction.  I have read the Act and I agree with Shri.Uday that it does state "as agreed upon by the parties".  My attorney seemed very confident but I am not sure if he is correct or not.

Again, thank you gentlemen for your valuable inputs. 

RAJU O.F., (Advocate)     18 August 2012

If Hon'ble DRAT passed order to deposit 50% of Demand Notice minus subsequent remittance, to allow the waiver under Sec.18 (1) of the Act, there would be simultaneous direction to bank to restrain further action, from the date of such compliance of the order. For reducing the amount from 50% you may try your luck before High Court.

shastibrata (technical head)     18 August 2012

Thanks Raju for your response and suggestion to take a chance with the High Court.  You state "there would be simultaneous direction to bank to restrain further action, from the date of such compliance of the order."  Does this mean that as it stands, in the time gap of 1 month in which the deposit of the money in the DRAT is due, the bank can go ahead and confirm the sale?  In which case perhaps there is urgent need to move the High Court for not just reducing the deposit amount but also to get a stay of sale confirmation?  Thanks.

RAJU O.F., (Advocate)     19 August 2012

If you are not in a position to deposit the money prescribed by DRAT, immediately approach High Court in your attempt to reduce the amount and also to seek Stay Order.

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