The Allahabad High Court, in a significant ruling, has held that the various measures taken by a secured creditor under Section 13(4) and Section 14 of the SARFAESI Act, 2002, constitute a continuous cause of action. The court clarified that the 45-day limitation period for a borrower to approach the Debts Recovery Tribunal (DRT) under Section 17 must be calculated from the date of the last action taken by the creditor.
In a judgment delivered on August 6, 2025, Justice Pankaj Bhatia set aside an order of the DRT, Lucknow, which had dismissed a borrower’s application as “hopelessly barred by limitation.” The High Court ruled that the DRT’s approach was “utterly erroneous” and remanded the matter for a fresh decision on merits.
Background of the Case
The case, Vimla Kashyap and Ors vs. Union of India and Ors, was brought before the High Court under Article 227 of the Constitution. The petitioners had challenged a DRT order dated June 17, 2025, that rejected their application for interim relief.
The facts state that the petitioners had taken a credit facility, which was later assigned to respondent no. 3. The respondent initiated recovery proceedings under The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).
The petitioners contended they were never served with the mandatory notices under Section 13(2) and Section 13(4) of the Act. They claimed to have learned of the proceedings only on April 15, 2025, when a notice was affixed on their property. This notice indicated that physical possession would be taken on or after May 2, 2025, pursuant to an order passed by the Additional District Magistrate (ADM), Lucknow, under Section 14 of the SARFAESI Act.
Subsequently, the petitioners obtained copies of the ADM’s order and filed a Securitisation Application (S.A.) before the DRT on April 21, 2025. The DRT dismissed their plea for interim relief, holding that the S.A. was barred by limitation, calculating the period from the date of the possession notice under Section 13(4), which was dated May 18, 2023.
Arguments Before the High Court
The petitioners, represented by Sri Alok Saxena, argued that the DRT erred in its calculation of the limitation period. They asserted that the steps under Section 13(4) and Section 14 are a “continuous cause of action,” enabling them to challenge the proceedings from the date of any of these actions. They also highlighted the legal inconsistency in the DRT’s order, which, while dismissing the case on limitation, also proceeded to comment on the merits of the respondents’ actions.
The respondent, represented by Sri Abhishek Khare, defended the DRT’s order, stating that a finding of fact had been recorded regarding the service of the Section 13(4) notice. It was also argued that the petitioners had an alternative remedy of appeal under Section 18 of the Act.
Court’s Analysis and Legal Precedents
Justice Pankaj Bhatia, analysing the legal framework, found the DRT’s finding on limitation to be “ex-facie, … utterly erroneous.” The court observed that the DRT had incorrectly taken the starting point of limitation as the date of the Section 13(4) notice, ignoring the petitioners’ pleaded case that they only gained knowledge of the proceedings when the Section 14 order was affixed.
The High Court relied on several landmark Supreme Court judgments to elaborate on the scheme of the SARFAESI Act.
- Mardia Chemicals Ltd. and others vs Union of India and others (2004): The court recalled that the Supreme Court had established that a borrower’s right to approach the DRT under Section 17 accrues only after measures are taken under Section 13(4). It termed the Section 17 proceeding as “the initial action which is brought before a forum … in lieu of a civil suit.”
- Kanaiyalal Lalchand Sachdev and others vs State of Maharashtra and others (2011): The High Court cited this judgment to affirm that an action under Section 14 is a step taken after the Section 13(4) stage and therefore falls within the ambit of a challenge under Section 17. The Supreme Court had held, “It is manifest that an action under Section 14 of the Act constitutes an action taken after the stage of Section 13(4), and therefore, the same would fall within the ambit of Section 17(1) of the Act.”
- Hindon Forge Private Limited and another vs The State of Uttar Pradesh and another (2019): This judgment was referenced to show that the statutory scheme allows a borrower to approach the DRT as soon as possession is taken under Rules 8(1) and 8(2) read with Section 13(4)(a), providing “instant recourse to a quasi-judicial body in case of wrongful action taken by the secured creditor.”
Based on these precedents, the High Court concluded that the DRT had made a fundamental error. The judgment stated:
“In view of the said judgments quoted hereinabove, it is clear that 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.”
The court also criticized the DRT for delving into the merits of the case after having declared the application to be barred by limitation, terming it an additional ground for interference.
Final Decision
The High Court allowed the writ petition and quashed the impugned DRT order dated June 17, 2025. The matter has been remanded to the DRT for a fresh decision on the petitioners’ application, to be decided in accordance with the law.
As an interim measure, the court directed both parties to “maintain status quo with regard to the title and possession of the property in question” until the DRT disposes of the interim application. The DRT has been directed to decide the application expeditiously, preferably within one month.
