SARFAESI Possession Before the Sixty-Day Period and the Agricultural-Land Objection
An engineering company borrowed ₹1.20 crore from a public sector bank against a mortgage of a 2-acre plot with a farmhouse. After default, the bank classified the account NPA on 31 December and issued a demand notice under Section 13(2) of SARFAESI on 5 January, demanding payment in 60 days. On 20 January the company submitted a representation offering ₹30 lakh and requesting restructuring. The bank rejected it on 28 January by a one-line letter. On 15 February the bank took symbolic possession under Section 13(4) and published a possession notice in two newspapers. The company says the land is agricultural, that its representation was not considered, and that the bank acted before the 60-day period expired. The bank says the farmhouse makes it commercial and that it can proceed because the account is NPA.
1. Was the bank entitled to take possession on 15 February? Examine the Section 13(2) timeline and the duty to consider the borrower's representation.
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No. Section 13(2) gives the borrower 60 days from the demand notice to discharge the secured debt. The notice was issued on 5 January; the 60-day period would end on 6 March (26 days left in January + 28 in February + 6 in March). Possession on 15 February was therefore premature, and a measure under Section 13(4) before expiry is vulnerable. There is a second defect: under Section 13(3A), if the borrower makes a representation, the bank must consider it and communicate reasons for rejection. The bank did reject within 15 days, but a one-line letter without reasons does not satisfy the statutory duty. The NPA classification does not dispense with the 60-day period. The bank could have proceeded after 6 March and after a reasoned consideration of the ₹30 lakh offer/restructuring request. As things stand, the possession is likely to be set aside.
2. Does the agricultural character of the land affect the bank's power? How should the bank establish the nature of the property?
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Agricultural land is excluded from SARFAESI. Section 31(1)(i) protects any security interest in agricultural land, so if the 2-acre plot is genuinely agricultural, the bank cannot enforce the mortgage under Section 13(4). The presence of a farmhouse does not automatically convert the land into commercial property; the test is the actual use and character of the land, supported by revenue records, land-use classification, crop records, and local inspection. If only a small portion is used for the farmhouse and the rest is cultivated, the bank must confine action to the non-agricultural portion, if legally possible, and cannot sell the whole. The bank should obtain a fresh title and revenue report and a valuer's opinion. If the borrower's own documents describe it as agricultural, the bank's 'commercial' argument is weak.
3. What remedies does the company have, and what is the limitation?
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The company can apply to the Debt Recovery Tribunal under Section 17 of SARFAESI within 45 days from the date of the Section 13(4) measure, i.e., from 15 February. The DRT can examine whether the action was in accordance with the Act, and can restore possession if the measure was premature or the land is exempt. An appeal against the DRT order lies to the DRAT under Section 18 within 30 days, with a possible condonation. A writ petition is also possible, but courts usually insist on the statutory remedy unless the action is wholly without jurisdiction or violates natural justice. Because the 60-day period and the agricultural-land objection go to jurisdiction, the company has a strong Section 17 case. It should also seek stay of auction and produce revenue records.