A borrower gets 60 days to repay the dues mentioned in the Section 13(2) notice and 15 days to file objections or a representation against the notice under Section 13(3A) of the SARFAESI Act.
Understanding the timelines associated with a Section 13(2) notice is crucial for any borrower whose loan account has slipped into the Non-Performing Asset (NPA) category. The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) prescribes a very clear structure and timeline for both banks and borrowers. Once a bank issues a Section 13(2) notice, a specific time window begins, within which the borrower can either repay, negotiate, restructure, or legally challenge aspects of the notice.
This article explains the detailed timelines, legal rights, response procedures, consequences of delay, judicial interpretations, and essential steps a borrower must take after receiving a 13(2) notice. This is a complete, exhaustive guide for borrowers and legal practitioners dealing with loan NPAs and SARFAESI proceedings.
1. What Is a Section 13(2) Notice? A Brief Recap
A Section 13(2) notice is a statutory 60-day demand notice issued when a loan account becomes a Non-Performing Asset (NPA). This notice calls upon the borrower to discharge all liabilities within 60 days, failing which the bank is entitled to take possession, sell the secured asset, or take other enforcement actions under Section 13(4).
The notice must contain:
- Total amount due
- Classification of the account as NPA
- Complete description of the secured asset
- Warning of further action
- Borrower’s right to submit objections
Once the notice is issued, two important timelines begin:
- 60 days to repay the dues
- 15 days to file objections
Both are equally important but serve different purposes.
2. The Two Critical Timelines After Receiving a 13(2) Notice
To answer the question accurately and fully, the following statutory timelines apply:
A. 60 Days to Repay the Dues Under Section 13(2)
The borrower gets a full 60 days to:
- Pay the entire outstanding amount
- Rectify the default
- Bring the loan back to standard status
- Propose restructuring or settlement
The bank cannot initiate any coercive action before these 60 days expire.
This 60-day notice period is mandatory, and courts have held that non-compliance will invalidate the entire SARFAESI action.
B. 15 Days to File Objections or Representation Under Section 13(3A)
While the repayment period is 60 days, the time to reply or raise objections is 15 days.
After receiving the notice, the borrower may:
- Dispute the amount claimed
- Challenge incorrect NPA classification
- Point out errors in the security description
- Demand restructuring
- Highlight flaws in the bank’s process
The borrower must file this objection in writing within 15 days.
Legal Basis
Section 13(3A) clearly states:
- Borrower has the right to submit objections within a reasonable time
- Banks must consider them
- Banks must respond with reasons within 15 days
Thus, practically and judicially, 15 days is the accepted response window.
3. Why Two Different Timelines? Understanding the Distinction
The difference between the 60-day and 15-day periods is often misunderstood.
60 Days: Opportunity to Pay
This relates to the borrower’s right to cure the default.
15 Days: Opportunity to Object
This relates to the borrower’s right to raise disputes on:
- Amount claimed
- NPA classification
- Valuation of assets
- Legality of notice
- Procedural irregularities
Why is the reply time shorter?
The objective of the 15-day window is to ensure:
- Quick communication
- Fast clarification
- Smooth functioning of the SARFAESI process
Once objections are filed, the bank cannot move forward without replying in writing.
4. What Happens After the Borrower Files a Reply Within 15 Days?
After receiving an objection or representation, the bank must:
A. Consider the objection
The authorised officer must evaluate:
- Accuracy of amount
- Validity of borrower’s claims
- Supporting documents
B. Respond with written reasons within 15 days
The bank must issue:
- A reasoned order
- A written explanation
- A formal reply
This is mandatory. If the bank ignores the objection or fails to reply, courts may invalidate all further recovery measures.
C. Cannot take SARFAESI action during this time
Until a written reply is issued, the bank cannot proceed to:
- Take possession
- Attach assets
- Publish auction notice
This protects the borrower from arbitrary action.
5. What If the Borrower Misses the 15-Day Deadline?
If the borrower fails to reply within 15 days:
- They lose the right to raise objections under Section 13(3A).
- The bank may proceed with the next steps after the 60-day deadline.
- The borrower cannot demand a reasoned reply from the bank.
- The bank may treat silence as acceptance of the claims.
However, the borrower still has 60 days to repay.
But missing this 15-day window weakens the borrower’s defence later.
6. What If the Borrower Replies After 15 Days But Before 60 Days?
This is a common scenario.
The law does not explicitly bar late objections, and several courts have held that:
- If objections are raised before the 60-day window expires, the bank should consider them in the interest of natural justice.
But practically:
- Banks often refuse to consider late replies.
- Borrowers lose the statutory right to a written reply.
Thus, replying within 15 days is crucial.
7. Why Is Timely Response So Important? Practical and Legal Reasons
Borrowers who respond within 15 days enjoy many advantages:
1. They create a legal record
This record becomes useful if the matter goes to DRT.
2. They prevent banks from taking early action
Banks must freeze the process until they reply.
3. They force banks to explain NPA classification
Often, NPA classification is faulty.
4. They gain leverage for settlement or restructuring
Timely response shows seriousness and may lead to restructuring.
5. They preserve the right to challenge further action
DRT will examine whether:
- Objections were raised
- Reply was given
- Principles of natural justice were followed
Failure to reply weakens the borrower’s case before DRT.
8. What Should the Borrower Include in the 15-Day Reply?
A strong reply must:
A. Dispute the quantum of dues
Highlight:
- Excess interest
- Illegal charges
- Incorrect penal interest
B. Challenge incorrect NPA classification
NPA must follow RBI norms.
C. Assert violation of lending norms
Banks must follow:
- Special Mention Account (SMA) norms
- Restructuring guidelines
- Viability assessment
D. Seek restructuring under RBI policies
E. Demand fresh valuation of property
F. Highlight improper service of notices
G. Request time extension with valid reasons
Medical issues, business slowdown, natural calamity, etc.
This reply must be comprehensive and backed by documents.
9. Consequences If the Borrower Does Nothing After Receiving a 13(2) Notice
If no action is taken:
- After 60 days, the bank will issue a possession notice under Section 13(4).
- The bank can proceed with symbolic or physical possession.
- The bank may publish the possession notice in newspapers.
- The bank can initiate auction by issuing a 30-day sale notice.
- The borrower’s credit score worsens further.
- Property can be sold without court intervention.
Borrower still has a remedy to approach the DRT, but losing the early response stage is a strategic disadvantage.
10. Judicial Interpretations of the 15-Day and 60-Day Timelines
Courts have repeatedly clarified these deadlines.
A. Mardia Chemicals v. Union of India (2004)
Upheld the validity of 60-day notice.
B. Indian Overseas Bank v. Ashok Saw Mill (2009)
Held: Reply under Section 13(3A) must be considered before further action.
C. ITC Ltd. v. Blue Coast Hotels (2018)
Held: Non-consideration of objections makes subsequent action illegal.
D. Transcore v. Union of India (2006)
Bank must strictly comply with the timelines.
Judgments clearly favour borrowers who act within the statutory time.
11. Practical Tips for Borrowers Responding to a 13(2) Notice
1. Do not ignore the notice
It is a final warning before possession.
2. Respond within 15 days
This preserves all legal rights.
3. Consult a legal professional
A detailed reply requires legal and financial analysis.
4. Attach all supporting documents
5. Ask for restructuring or OTS if appropriate
6. Keep proof of dispatch
Always use:
- Speed post
- Registered post
- Email to the authorised officer
7. Preserve all bank communication
This becomes evidence later.
Conclusion
A borrower gets 60 days to repay the dues mentioned in the Section 13(2) notice and 15 days to file objections or representations against the notice under Section 13(3A). While the 60-day period is meant to provide relief to the borrower to rectify the default, the 15-day reply period is a mandatory statutory opportunity to dispute the bank’s claims and force the bank to justify its actions in writing. Timely response not only protects the borrower’s rights but also creates a strong foundation for future defence if the bank proceeds under Section 13(4). Borrowers who understand and use these timelines effectively often succeed in delaying, negotiating, or even defeating illegal SARFAESI actions.
Disclaimer: This information is intended for general guidance only and does not constitute legal advice. Please consult with a qualified lawyer for personalized advice specific to your situation.
Advocate J.S. Rohilla (Civil & Criminal Lawyer in Indore)
Contact: 88271 22304