DRT, Section 13, Bank Auction & How to Stop an Auction

Section 13(2) of the SARFAESI Act allows the bank to issue a 60-day demand notice to the borrower after the loan account is classified as an NPA. If the borrower fails to repay, the bank may take possession of the secured asset under Section 13(4) and proceed with auction.

The borrower may challenge the bank’s action before the Debt Recovery Tribunal (DRT) under Section 17 of the SARFAESI Act. The DRT can examine whether the bank followed the statutory procedure and may stay or set aside the auction if violations are found.

Supreme Court Guideline

In Celir LLP v. Sumati Prasad Bafna, the Supreme Court held that after publication of the auction notice, the borrower’s right of redemption under Section 13(8) stands extinguished under the amended SARFAESI Act.

Therefore, a borrower should approach the DRT and seek relief before the auction process reaches that stage.