ENFORCEMENT OF SECURITY INTERESTCentral

Section 17 of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002

17. 1[Application against measures to recover secured debts].-- (1) Any person (including borrower), aggrieved by any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor or his authorised officer under this Chapter, 2[may make an application along with such fee, as may be prescribed,] to the Debts Recovery Tribunal having jurisdiction in the matter within fortyfive days from the date on which such measure had been taken: 3[Provided that different fees may be prescribed for making the application by the borrower and the person other than the borrower.] 4[Explanation.--For the removal of doubts, it is hereby declared that the communication of the reasons to the borrower by the secured creditor for not having accepted his representation or objection or the likely action of the secured creditor at the stage of communication of reasons to the borrower shall not entitle the person (including borrower) to make an application to the Debts Recovery Tribunal under this sub-section.] 5[(1A) An application under sub-section (1) shall be filed before the Debts Recovery Tribunal within the local limits of whose jurisdiction--

(a)the cause of action, wholly or in part, arises;
(b)where the secured asset is located; or
(c)the branch or any other office of a bank or financial institution is maintaining an account in which debt claimed is outstanding for the time being.] 6[(2) The Debts Recovery Tribunal shall consider whether any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor for enforcement of security are in accordance with the provisions of this Act and the rules made thereunder. 7[(3) If, the Debts Recovery Tribunal, after examining the facts and circumstances of the case and evidence produced by the parties, comes to the conclusion that any of the measures referred to in sub-section (4) of section 13, taken by the secured creditor are not in accordance with the provisions of this Act and the rules made thereunder, and require restoration of the management or restoration of possession, of the secured assets to the borrower or other aggrieved person, it may, by order,--
(a)declare the recourse to any one or more measures referred to in sub-section (4) of section 13 taken by the secured creditor as invalid; and
(b)restore the possession of secured assets or management of secured assets to the borrower or such other aggrieved person, who has made an application under sub-section (1), as the case may be; and
(c)pass such other direction as it may consider appropriate and necessary in relation to any of the recourse taken by the secured creditor under sub-section (4) of section 13.]

(4)If, the Debts Recovery Tribunal declares the recourse taken by a secured creditor under sub-section (4) of section 13, is in accordance with the provisions of this Act and the rules made thereunder, then, notwithstanding anything contained in any other law for the time being in force, the secured creditor shall be entitled to take recourse to one or more of the measures specified under sub-section (4) of section 13 to recover his secured debt. 8[(4A) Where--
1. (i)any person, in an application under sub-section (1), claims any tenancy or leasehold rights upon the secured asset, the Debt Recovery Tribunal, after examining the facts of the case and evidence produced by the parties in relation to such claims shall, for the purposes of enforcement of security interest, have the jurisdiction to examine whether lease or tenancy,--
2. (a)has expired or stood determined; or
3. (b)is contrary to section 65A of the Transfer of Property Act, 1882 (4 of 1882); or
4. (c)is contrary to terms of mortgage; or
5. (d)is created after the issuance of notice of default and demand by the Bank under subsection (2) of section 13 of the Act; and
  1. (ii)the Debt Recovery Tribunal is satisfied that tenancy right or leasehold rights claimed in secured asset falls under the sub-clause (a) or sub-clause (b) or sub-clause (c) or sub-clause (d) of clause (i), then notwithstanding anything to the contrary contained in any other law for the time being in force, the Debt Recovery Tribunal may pass such order as it deems fit in accordance with the provisions of this Act.]
(5)Any application made under sub-section (1) shall be dealt with by the Debts Recovery Tribunal as expeditiously as possible and disposed of within sixty days from the date of such application: Provided that the Debts Recovery Tribunal may, from time to time, extend the said period for reasons to be recorded in writing, so, however, that the total period of pendency of the application with the Debts Recovery Tribunal, shall not exceed four months from the date of making of such application made under sub-section (1).
(6)If the application is not disposed of by the Debts Recovery Tribunal within the period of four months as specified in sub-section (5), any part to the application may make an application, in such form as may be prescribed, to the Appellate Tribunal for directing the Debts Recovery Tribunal for expeditious disposal of the application pending before the Debts Recovery Tribunal and the Appellate Tribunal may, on such application, make an order for expeditious disposal of the pending application by the Debts Recovery Tribunal.
(7)Save as otherwise provided in this Act, the Debts Recovery Tribunal shall, as far as may be, dispose of the application in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) and the rules made thereunder.]

Summary

Any person, including the borrower, can file an application to the Debts Recovery Tribunal if they feel wronged by a creditor's recovery measures.
This application must be filed within forty-five days from the date the creditor took the action, and a prescribed fee must be paid.
The Tribunal must examine if the creditor's actions followed the law, and if they did not, the Tribunal can declare the actions invalid and restore the property or management to the borrower.
The Tribunal must try to resolve the application within sixty days, but can extend this up to a maximum of four months if they write down the reasons.
If the Tribunal takes longer than four months, either party can ask the Appellate Tribunal to order a faster decision.

Practical examples

1On March 1, a bank takes possession of Vikram's warehouse to recover an unpaid loan. Vikram believes the bank did not give him the required legal notice. He has forty-five days, until April 15, to file an application with the Debts Recovery Tribunal to challenge the bank's action.

2Sunita rents a shop in a building that a bank seizes from the landlord. Sunita files a claim to the Debts Recovery Tribunal stating she has a valid lease. The Tribunal examines her tenancy rights to see if her lease is legally valid or if it was created improperly just to avoid the bank's takeover.

FAQ

1. How long do I have to challenge a bank's action to take my property?

You must file your application to the Debts Recovery Tribunal within forty-five days from the date the bank took the action.

2. Do I have to pay to file this application?

Yes, an application requires a prescribed fee, and the fee amount might be different for the borrower compared to an outside person like a tenant.

3. Can I apply to the Tribunal just because the bank rejected my initial written objection to their notice?

No, simply receiving a communication that your objection was rejected does not give you the right to apply to the Tribunal. You can only apply after the bank actually takes recovery measures.

4. What happens if the Tribunal decides the bank broke the rules?

The Tribunal will declare the bank's actions invalid and order the bank to return the management or possession of the property to you.

Test yourself

Q1.Under Section 17 of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, what is the initial deadline for the Debts Recovery Tribunal to dispose of an application?

Q2.According to Section 17 of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, what is the absolute maximum time an application can be pending before the Debts Recovery Tribunal?

Q3.Under Section 17 of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, what can a party do if the Debts Recovery Tribunal does not resolve the case within the four-month limit?

Q4.Section 17 of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 allows a person to challenge measures taken by a secured creditor. These measures are specifically authorized under which other provision of the Act?

Q5.Based on the relationship between Section 13 and Section 17 of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, what must happen under Section 13 before a borrower can file an application under Section 17?

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