[SARFAESI Act] Limitation To Be Calculated From Date Of Last Action Against Which Aggrieved Party Approached DRT U/S 17: Allahabad High Court

The Allahabad High Court has held that limitation for filing securitization application under Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 has to be calculated from the date on which last action occurred against which the aggrieved approached the Debt recovery Tribunal under Section 17.

Justice Pankaj Bhatia held

“Section 14 is continuance of the proceedings under Section 13(4) of the SARFAESI Act and would give a cause of action to file an S.A. before the DRT. All the steps contemplated under Section 13(4), give a cause of action to the borrower of the person aggrieved to approach the DRT by filing a petition under Section 17 and are a continuous cause of action. The limitation has to be calculated from the date of the last action against which the person aggrieved had approached the DRT under Section 17.”

Section 17 of the SARFAESI Act provides that any person (including borrower), 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 Debts Recovery Tribunal having jurisdiction in the matter within 45 days from the date on which such measure had been taken.

Respondent no. 3 initiated loan recovery proceedings against the petitioners under the SARFAESI Act. Counsel for petitioners argued that no notice was given to the petitioners regarding the proceedings under the Act and they were only informed when notice was affixed at his property regarding possession being taken after 2 weeks.

Petitioners pleaded that only after obtaining a copy of the order and other details from the ADM they approached the DRT under Section 17 of the Act. Along with the securitisation application, petitioner filed an application for condonation of delay and one for grant of interim relief. After the interim relief was rejected, petitioner approached the High Court. The High Court remanded the matter stating that the rejection was without application of mind.

Subsequently, both the application for interim relief and delay condonation were rejected. DRT held that the application was hopelessly barred as notice for possession under Section 13(4) was duly served on 18.05.2023 and the limitation started from that date. This order was again challenged before the High Court.

In Hindon Forge Private Limited and another vs The State of Uttar Pradesh and another, the Apex Court held that affixing notice for possession in one of the ways in which possession is taken, thereby giving rise to cause of action under Section 17. It was held that the object of the SARFAESI Act was to enable the borrower to have recourse against any action of the creditor which was not in conformity with the Act while pursuing remedy under Section 13(4).

In Manglesh Champaklal Gandhi vs Aditya Birla Finance Ltd., the Supreme Court held that

“..The statutory scheme therefore is that once possession is taken under Rule 8(1) and 8(2) read with Section 13(4)(a), Section 17 gets attracted, as this is one of the measures referred to in Section 13(4) that has been taken by the secured creditor under Chapter III. ….. Therefore, if the judgement of Mardia Chemicals (supra) and Hindon Forge (supra) are read together what emerges is that a borrower's right to approach the Tribunal under Section 17 of the Act gets attracted the moment possession notice under Rules 8(1) and 8(2) of the 2002 Rules are issued..”

Further, the Allahabad High Court in Naveen Kumar Dwivedi vs DRT had held that publication of notices for sale property (proposed auction) was a fresh cause of action giving benefit of limitation to the borrower for filing application under Section 17 of the Act.

Following the aforesaid judgments, the Court held that all steps mentioned in Section 13(4) gave rise to cause of action for the borrower to approach the DRT under Section 17 of the Act. Remanding the matter back to DRT, the Court ordered status quo till the application for grant of interim relief was decided.

Case Title: Vimla Kashyap and Ors v. Union of India and Ors [MATTERS UNDER ARTICLE 227 No.3953 of 2025]

Counsel for petitioner: Sri Alok Saxena & Sri Paras Pradhan

Counsel for respondent: A.S.G.I., C.S.C. & Sri Abhishek Khare

Click Here To Read/Download Order