Section 13(2) SARFAESI Notice Reply: Important Points Every Borrower Should Know

Section 13(2) of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 popularly known as SARFAESI act allow the secured creditor to ask the borrower to discharge its secured debt within 60 days if its requirement are complied. On failure to cure such debt it may proceed as per section 13(4) SARFAESI. India Code

So a reply at Stage 13(2) of SARFAESI is not a mere formality.

It enables borrower to raise all such facts which it may want to bring before the secured creditor be it objection, facts about any payment, mismatch in account details etc. Which could be material. As per section 13(3A) if the borrower makes representation or objection then the same should be considered by secured creditor. And if it doesn't accept such representation it shall intimate within the stipulated time why the same is not acceptable. India Code

BK Singh Advocate would suggest borrower not to panic when they receive such notice and go through the notice with its legal and finance team.

This depends on various factors like your loan account, security documents created over it, amount paid by you till date, what is written in the notice and how far you went with discussions with bank.

What does Section 13(2) notice means to borrower in year 2026?

Loan Recovery cases are not limited to single instance of financial problem. You could lose your residence due to housing loan. May be your industrial property or factory that is helping your business or it could be commercial property which is used for earning revenue.

If you are running a business in Delhi/ Ghaziabad/ Noida/ Gurugram/ Faridabad/ Mumbai/ Pune/ Ahmedabad/ Bangalore/ Hyderabad/ Chennai/ Kolkata/ Lucknow and rest of the commercial hub in India this could impact your business too.

So section 13(2) notice is one of the crucial stages before bank takes action under SARFAESI against your secured asset.

As discussed above under section 13(2) the secured creditor can ask you to pay off its dues within 60 days from date of issue of notice. Further section 13(3) requires bank to mention amount to be paid off by borrower and property over which they intend to enforce in case amount is not paid. India Code

Hence read beyond the notice to know the demand amount asked from you by bank.

Know the date mentioned. Know the property mentioned in notice. Know your loan account number and if there has been any payment reflected in your account after default. Any mismatch in demand can also be important.

BK Singh Advocate would always suggest borrower to check with loan agreement and current statement before writing his representation.

The longer you take to understand your notice the less time you will have to work with your legal team.

Some Facts To Remember About Section 13(2) SARFAESI Notice

As per Section 13(2) SARFAESI the secured creditor can demand repayment of its dues from the borrower.

60 days is given to borrower to pay off its debt as per section 13(2) from date of issuance of notice. India Code

Section 13(3) allows secured creditor to intimate the amount which is due and payable from borrower along with the property which can be enforced on failure of borrower to pay the debt. India Code

You can raise your representation or objection against section 13(2) notice under section 13(3A) SARFAESI.

If bank finds your representation not acceptable or not tenable it can reject your objection and tell you its reason for doing the same within 15 days. India Code

Just because bank rejects your section 13(3A) it doesn't entitle you to approach DRT under section 17 of the SARFAESI act. India Code

As soon as secured creditor takes any action under Section 13(4) of the act you can approach DRT as per section 17 SARFAESI.

So what does section 13(2) SARFAESI Notice mean?

It means that bank has issued a demand on you under SARFAESI act and has asked you to pay off your debt which is stated in the notice.

It does not mean that bank has issued auction notice.

Or that your property will be auctioned soon.

As said before 13(2) comes before 13(4) steps which include taking possession of secured assets and exercise of other rights over it if requirements are complied under act. India Code

But just because bank hasn't taken possession of your security do not discount the notice.

If you write a shoddy reply to the notice or don't write any reply you may lose some facts which can help you in future.

Loan Settlement Agency would advise borrowers to think of it in 3 different ways.

These 3 points can go hand in hand or can be entirely different from each other depending on your loan.

What if bank doesn't accept your objection?

As we discussed above bank has to consider your objection as per section 13(3A) if it finds it unacceptable it can inform you the reason why its rejecting your objection within 15 days. India Code

But just because bank rejected your objection doesn't mean that you lost all your remedy.

One thing to note here is that just because bank informs you that it doesn't accept your objection under section 13(3A) or it might initiate step under section 13(4) will not give you right to approach DRT as per section 17 SARFAESI. India Code

BK Singh Advocate feels that this is an important distinction between two remedies because many a time borrower get confused between both these remedies and think that just because I have responded to Section 13(2) notice and bank rejected my objection i can approach DRT with my securitization application.

Which is not true.

When can you approach Debt Recovery Tribunal?

Debt Recovery Tribunal (DRT) becomes a remedy when someone who is aggrieved has been effected due to step taken by secured creditor under section 13(4) SARFAESI.

As per section 17 if any person (borrower can also apply) who feels aggrieved due to step taken by secured creditor under section 13(4) can file application before DRT with in 45 days from date such step has been taken. India Code

So Debt Recovery Tribunal can look into whether bank has acted as per law in taking such measure.

If the measure taken by bank is found illegal then as per section 17 the Tribunal can invalidate the measure and take such direction as may be provided by law. India Code

Therefore you can look at it as following.

So now you know at which point you can approach DRT and what you need to address before approaching DRT.

For additional information about the general support available for recovery proceedings, possession notices and tribunal-related matters, you can review DRT case support.

What should you go through before replying on a section 13(2) SARFAESI Notice?

There are lot of documents which you can rely on while preparing your reply.

It can include:-

• Demand Notice as per Section 13(2) SARFAESI
• Loan Agreement
• Loan Sanction
• Security created over property
• Mortgage Documents
• If you have given any Guarantee for the loan then it would also help
• Statement of Account from sanction to default
• Your EMI Payment
• If there are any receipts of payment you can make it part of your representation
• Correspondence you have had with bank till date.
• Any Restructuring Communication you may have had with bank.
• If you have discussed any settlement or OTS with bank make that correspondence a part of your representation too
• Any prior notice which you may have received before bank issued SARFAESI demand
• Documents of property over which security is created
• If you receive valuation report or auction document for property make them part of your reply as well
• If you are borrower company make sure your resolution or any communication which you may want to submit is available with you.

Above documents may help you while making a reply but it may vary from case to case. Do not submit bulk quantity of documents without knowing what you are proving by those documents.

BK Singh Advocate would recommend that you prepare a timeline of when you were sanctioned, payment you have made till date and when did bank defaulted and what communication you have had with bank. It will help you a lot in understanding any discrepancy in your account.

What not to do after receiving a section 13(2) SARFAESI Notice?

As discussed above one shouldn't ignore notice. Second mistake is writing emotional replies to such notice. Just because you feel that bank is harassing you or you lost your business don't just write that as reply.

Make sure you don't sign anything blindly and expect bank to give you more time. Don't hide information from your lawyer.

After you receive section 13(2) SARFAESI Notice you cannot sell your mortgaged property or lease it to anyone as per Section 13(13) SARFAESI unless it is day to day business transaction. And this will not be done without secured creditor permission. India Code

Loan Settlement Agency would advise borrower to maintain their correspondence with bank once such negotiation start.

Can borrower object to NPA of account?

There may be facts around account being made NPA which can be reviewed by you and your legal team. But you should not assume that if you find some discrepancy in account it will automatically defeat SARFAESI process.

As mentioned above if borrower has defaulted on paying his debt and loan has been made NPA bank can issue a section 13(2) demand. India Code

You can find any discrepancy regarding date of payment in your account and when loan was made NPA etc. But that also needs to be reviewed from documents which are present with you.

BK Singh Advocate would advise borrower to take up all the point which he can defend in front of court of law if it is ever needed in future. Copying and pasting response from another borrowers will do more harm than good.

Each loan is unique in itself.

What if I am guarantor to the loan?

Many a time people forget that if they have given guarantee to loan they can still be sued by bank if default has been made by borrower. Its best to go through your guarantee and see what kind of liability you have towards such loan.

Maybe you have also mortgaged your property towards such loan then your property can also be at stake.

Section 13 of the act allows secured creditor to take action against guarantor too without initiating any action against secured assets of the borrower. India Code

So in this scenario knowing what documents you have provided to bank and how your guarantee is drafted can play vital role.

Make sure you ask your legal advisor to get copy of your guarantee and other documents you have submitted while giving loan to bank.

Loan Settlement Agency can also help you in finding out whether you are being issued notice as guarantor, borrower or as a property owner on whom security is created.

For further reading about guarantor-related recovery issues, see the guidance on guarantor bank recovery notice and legal liability.

Is SARFAESI applicable on all type of Loan Defaults?

No SARFAESI is only used for enforcing security interest of eligible secured creditor. One cannot apply it on every type of loan which may have gone into default.

Its best to understand your security and loan before drafting a representation against Section 13(2) SARFAESI Notice. Don't just take any sample reply from internet and change your name and loan number.

This can create issues if your security is not created over property or it may differ from other properties.

BK Singh Advocate would advise that you look into applicability of SARFAESI if you feel there may be any issue with loan.

Borrowers can also learn about the differences between secured and unsecured borrowing through the loan settlement guidance for different loan types.

When should i talk to Lawyer about my Section 13(2) SARFAESI Notice?

Its recommended to talk to your lawyer if you have received large amount demand from bank and your security property is very important to you or you family. Or if you feel that bank has not credited some amount in your account or if bank has refused to settle your loan.

Also if you have found that property is wrongly described in your notice, your multiple loan accounts have been clubbed together to issue notice, guarantor is being served a demand notice, loan has been transferred to ARC etc. You can also speak to your lawyer if bank is asking for more than your outstanding balance.

You can talk to your lawyer if you think bank is going to take possession or they have already initiated step under section 13(4) or if you have received auction/sale notice from bank.

Once bank initiates any step under section 13(4) you may need to approach Debt Recovery Tribunal within 45 days so its wise to consult with your lawyer before that.

BK Singh Advocate would recommend borrower to bring all his loan documents with him when he wants to discuss his loan account and any representation he has received from bank.

How can Loan Settlement Agency help you after section 13(2) SARFAESI Notice?

Loan Settlement Agency can help you in understanding your loan recovery case. They can help you read your notice and deal with any query you have regarding settlement or any documents which can help you in your case.

Normally first we try to understand your situation. By looking at your Section 13(2) demand we can check your loan account and find if there is any discrepancy between demand notice and your loan statement. We can also look into your loan documents and any communication which you may have had with bank.

If you have any legal concern we can assist you with it by advising you through BK Singh Advocate on how you can represent against such notice.

If you wish to explore any settlement option we can help you draft that proposal as well. But remember no one can tell you that if you reply to bank you won't lose your property or that bank will offer you a OTS on your loan or your SARFAESI case will come to halt.

Borrowers dealing with business-related defaults may also find information about business loan settlement relevant when reviewing their repayment and settlement options.

For cash-flow difficulties involving working capital, overdue business accounts or cash credit facilities, see cash credit settlement guidance.

FAQs

Conclusion

So these are some of the point which you should know about Section 13(2) SARFAESI Notice. Always try to reply on it if you feel bank has made any mistake in issuing the demand on you. Or if you think you have not been credited for your payment in account.

Try not to over think your situation. But you have to act fast because you only have 60 days to sort out your loan issue. India Code

Remember that replying to bank will not protect you from losing your property nor will it give you right to settlement. Its best to talk to your lawyer about your situation and figure out how can you manage your finances or negotiate with bank.

If you face any situation where bank initiates action under Section 13(4) you can consult with us about approaching DRT.

BK Singh Advocate and Loan Settlement Agency help clients in understanding their Loan dispute, demand notice and any other queries regarding stressed loans in Delhi NCR region and rest of the country.

So next time you receive a demand on your loan ask yourself how can i manage my loan and what option are there in front of me as per law.

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