Borrowers and guarantors are protected from potentially arbitrary actions by banks and financial institutions by Section 17 of SARFAESI Act, also known as the right to appeal under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The SARFAESI Act makes it possible for secured creditors to enforce security interests without the court's help. This makes it easier to get back non-performing assets (NPAs). By allowing appeals to the Debts Recovery Tribunal (DRT), Section 17 of SARFAESI Act adds a layer of judicial oversight. This part makes sure that creditors can act quickly but that borrowers also have a fair chance to fight actions like asset auctions or notices of possession. Through judicial interpretations and amendments, Section 17 of SARFAESI Act has changed to strike a balance between debtor protections and the effectiveness of creditors. You can't say enough good things about it especially since NPAs are still a problem in India's growing banking sector.
Unlock new career opportunities with The Legal School’s Certification in Bankruptcy & Insolvency Law: Corporate Restructuring & Debt Resolution, in collaboration with IndusLaw. This six-month program, led by industry experts, equips you with critical skills in insolvency litigation, financial distress management, and corporate rescue strategies. Earn a prestigious certificate and elevate your expertise in a rapidly evolving field!
Key Provisions of Section 17 of SARFAESI ACT, 2002
Any person (including borrowers, guarantors or third parties) who is unhappy with the actions taken under Section 13(4) may file an appeal with the DRT according to Section 17 of SARFAESI Act. The main parts stress the importance of quick resolution, deposit requirements and the tribunal's power. Here's how it works
Right to Appeal: Any aggrieved party can file an application challenging the creditor's actions, such as issuing a demand notice, taking symbolic or physical possession or appointing a receiver.
Time Limit: Appeals must be filed within 45 days from the date of the creditor's action, though the DRT may condone delays for sufficient cause.
Deposit Requirement: For borrowers appealing against possession or sale, a deposit of 50% of the debt amount (or less, as decided by the DRT) is mandatory with ensuring serious intent.
Tribunal Powers: The DRT can stay enforcement actions, direct restoration of possession or award compensation if the creditor's actions are found wrongful.
Interim Relief: Section 17 of SARFAESI Act allows for interim orders to prevent irreparable harm such as halting auctions.
These provisions make Section 17 of SARFAESI Act a balanced tool, promoting accountability while not hindering recovery efforts. Violations of natural justice principles, like inadequate notice, often form the basis for successful appeals under Section 17 of SARFAESI ACT.
Subsection Breakdown of Section 17
Section 17 of SARFAESI Act, 2002 is divided into seven subsections and each one of them addresses specific aspects of the process of appeal. Below is a detailed overview of these subsections
Section 17(1): Grants the right to any aggrieved person to approach the DRT against measures under Section 13(4). This includes challenging possession, transfer or management of secured assets.
Section 17(2): Mandates that applications be filed in the prescribed format, accompanied by fees and served on all parties involved.
Section 17(3): Empowers the DRT to examine whether the creditor complied with the Act's procedures. If non-compliance is found, the tribunal can order restoration or compensation.
Section 17(4): Allows the DRT to pass interim orders, including stays, to maintain status quo during proceedings.
Section 17(5): Requires disposal of applications within 60 days, extendable to four months with reasons recorded.
Section 17(6): Provides for appeals against DRT orders to the Debts Recovery Appellate Tribunal (DRAT) within 30 days.
Section 17(7): Stipulates that no court or authority (except the Supreme Court or High Court under writ jurisdiction) can interfere with DRT proceedings.
This granular structure ensures procedural clarity, making Section 17 of SARFAESI Act accessible for legal practitioners.
Learn more about Corporate Insolvency Resolution
Eligibility and Grounds for Appeal
Eligibility under Section 17 of SARFAESI Act extends to borrowers, guarantors, tenants or any person claiming interest in the secured asset. Grounds for appeal typically include
Procedural lapses, such as improper demand notices under Section 13(2).
Valuation disputes in asset auctions.
Violation of natural justice, like not providing a hearing opportunity.
Wrongful classification of accounts as NPAs.
Actions exceeding the secured interest.
To qualify, the appellant must demonstrate aggrievement directly linked to the creditor's actions. Courts have interpreted Section 17 of SARFAESI Act broadly, allowing appeals even from third parties if their rights are affected. However, frivolous appeals may attract costs, reinforcing the need for genuine grounds.
Procedure to File an Appeal Under Section 17
Filing an appeal under Section 17 of SARFAESI Act, 2002 involves a structured process in order to ensure efficiency and adhering to this procedure under minimizes delays and enhances success rates
Prepare the Application: Draft in Form I (as per DRT rules), detailing facts, grounds and relief sought. Include supporting documents like loan agreements and notices.
Pay Fees and Deposit: Submit the prescribed fee (₹500-₹1,000) and, if applicable, deposit 50% of the claimed amount (waivable to 25% by DRT).
File with DRT: Submit to the jurisdictional DRT within 45 days. Serve copies to the creditor and other parties.
Hearing and Orders: The DRT issues notice, hears arguments and disposes of the matter expeditiously.
Further Appeal: If dissatisfied, appeal to DRAT with a 25% deposit of the DRT-ordered amount.
Also read about Section 12A of IBC, 2016.
Important Case Laws on Section 17 of SARFAESI ACT, 2002
Judicial precedents have also shaped Section 17 of SARFAESI Act significantly. These case laws illustrate the evolving jurisprudence around Section 17 of SARFAESI ACT along with promoting equitable enforcement
Mardia Chemicals Ltd. v. Union of India (2004): The Supreme Court upheld the Act's constitutionality but struck down the 75% deposit requirement reducing it to 50% for fairness.
United Bank of India v. Satyawati Tondon (2010): Emphasized that alternative remedies under Section 17 of SARFAESI Act must be exhausted before approaching High Courts.
Authorized Officer, Indian Overseas Bank v. Ashok Saw Mill (2009): Clarified that DRT can examine all aspects of creditor actions, not just procedural ones.
Standard Chartered Bank v. Noble Kumar (2013): Ruled that tenants can appeal under Section 17 if their lease predates the mortgage.
Phoenix ARC Pvt. Ltd. v. Vishwa Bharati Vidya Mandir (2022): Reinforced DRT's power to grant stays against auctions if prima facie case exists.
Amendments and Recent Updates to Section 17
Section 17 of SARFAESI Act has seen amendments to enhance efficacy. Stakeholders should monitor legislative notifications for future changes to Section 17 of SARFAESI Act
2016 Amendment: Introduced timelines for DRT disposal and allowed electronic filing.
2019 Amendment: Expanded ARC roles and clarified deposit waivers.
As of 2025, no major amendments post-2019, but the Insolvency and Bankruptcy Code (IBC) integration has influenced overlaps, with courts prioritizing SARFAESI for secured creditors.
Recent updates include digital portals for DRT filings, reducing physical barriers.
Summary
Section 17 of the SARFAESI Act is an important appeals section that makes sure there are checks and balances in place for asset recovery. It gives people who are upset the power to get justice through DRT, and this includes both mistakes in the process and real wrongs. Section 17 of SARFAESI Act keeps the Act's main goal of effective NPA management while still upholding fairness with its emphasis on prompt resolution and deposit safety. Everyone involved in secured transactions needs to understand its nuances.
Related Posts
Section 17 of SARFAESI ACT, 2002: FAQs
Q1. What is Rule 17 of the SARFAESI Act?
Rule 17 of the SARFAESI Act outlines the procedure for the Debts Recovery Tribunal (DRT) to handle applications challenging actions taken by secured creditors under the Act.
Q2. What is Section 17 of the DRT Act?
Section 17 of the DRT Act (Recovery of Debts Due to Banks and Financial Institutions Act, 1993) empowers the Debts Recovery Tribunal to adjudicate applications from banks or financial institutions for debt recovery.
Q3. What is Section 17 in a bank?
Section 17 of SARFAESI ACT, 2002 allows borrowers to appeal to the DRT within 45 days against actions taken by a bank under Section 13(4) for enforcing security interests
Q4. Who can file an appeal under Section 17 of SARFAESI ACT?
Any aggrieved person, including borrowers, guarantors, or third parties with interest in the asset.
Q5. What is the time limit for filing under Section 17 of SARFAESI ACT?
45 days from the creditor's action, with possible condonation for delays.
