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.
Frequently Asked Questions
No. Before an auction, the bank must first send a 60-day notice under Section 13(2) once your loan account becomes an NPA. Only if you don’t repay within that time can the bank move ahead with possession and auction.
You can challenge the bank’s action before the Debt Recovery Tribunal (DRT) under Section 17. The DRT will check if the bank followed the correct legal process, and can stop or cancel the auction if it finds any violations.
Once the auction notice is published, your right to redeem (get back) the property is removed under the amended law, based on a Supreme Court ruling in Celir LLP v. Sumati Prasad Bafna. This makes timing very important.
You should approach the DRT and ask for relief as early as possible, ideally before the auction process reaches the final stage, since your legal options become limited once the auction notice is published.