SARFAESI Act’ 2002 and Allied Laws and Rules During COVID-19

May 2, 2026
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The present article is being written in view of the prevailing surge in the Covid-19 Pandemic and its adverse impact on Litigants among other stake holders.

Since the onset of the pandemic, the Hon’ble Courts have passed necessary Orders and Directions from time to time addressing the difficulties being faced by Litigants and Advocates and providing necessary relief(s) as and where necessary, for instance in providing relief w.r.t. Limitation, parole for prison inmates, loan moratoriums / interest thereof and in the process upholding the Constitutional mandate of the Hon’ble Supreme Court of India in providing necessary protection to the Citizens of India.

The aspect of relief on the Limitation part was closed w.e.f. 15.3.2021 vide Order dated 8.3.2021 and further extended vide Order dated 27.4.2021. Also, all the Hon’ble High Courts across the Country have been issuing Orders and Directions both on the judicial side as also on the administrative side protecting interests of Litigants and Advocates during these unprecedented times.

During these times, the general public is facing unprecedented hardships and difficulty. In general, protection against adverse Orders and quae Limitation has been provided and which are in essence directly pertaining to actual cases pending or cases about to be filed.

There is another aspect which needs pertinent attention. Due to the effect of the Pandemic, businesses and industries have suffered losses beyond comprehension and the country’s economy overall has declined significantly. The Finance Ministry (GoI), Reserve Bank of India from March’ 2020 onwards issued various new norms protecting the businesses and industry from the Force Majure event of the pandemic. The various protections included even protection from the rigours of the Insolvency and Bankruptcy Code’ 2016.

However, barring a few Judgments in between, there is no protection for businesses and industry from adverse actions under the SARFAESI Act’ 2002. This Act virtually provides draconian powers to the Banks and Financial Institutions to attach, sell and auction mortgaged assets in the manner they deem fit and at any price they deem fit.

The specific issues that have arisen include:

  • There is no authoritative guideline for declaring an account as NPA (non-performing asset) during the Pandemic.
  • There is no relaxation on the 60-day time limit for submitting objections to a demand notice under Section 13 (2) by the borrowers.
  • There is no restriction on the Banks and Financial Institutions from taking steps under Section 13 (4) and Section 14 and further attach, sell and auction the mortgaged properties / assets.
  • Though permission for physical possession is accorded by the Court of Ld. CMMs / DMs under Section 14, and even if they deny physical possession in these times keeping in view ‘no adverse Orders’ guidelines issued by various Hon’ble High Courts, still, there is no embargo on the Banks and F.I.s to take symbolic possession under Section 13(4) and instead of taking physical possession under Section 14, sell and / or auction the mortgaged property / asset without even taking any physical possession.
  • There are also instances wherein Orders under Section 14 had been granted earlier / passed during time where no protective guidelines of Hon’ble High Courts were in place and the Banks and F.I.s take physical possession at any time.

Whenever any adverse action is taken such as symbolic possession, physical possession, sale, auction etc., the borrower has the remedy to approach the jurisdictional Debt Recovery Tribunal or in some cases, the jurisdictional High Court in a Writ remedy however since functioning of Courts and Tribunals is impaired to varying degrees of extent from place to place, the borrower may be left helpless and virtually remedy less.

Any adverse action on businesses and industry which includes small scale industry, MSME Sector, sole-proprietor businesses, individuals and not just big corporates, big businesses / industry affects the overall economy of the country and directly / indirectly affects the common man as well as jobs are lost, incomes, wages and salaries are reduced or stopped etc.

The administrative Orders issued by Hon’ble High Courts apply to District Courts falling under their jurisdiction but not to Tribunals such as DRT / DRAT. Even the Debt Recovery Appellate Tribunal (DRAT) has no protective Orders in place which the DRTs may follow.

Only a few select High Courts such as Hon’ble High Court of Judicature at Allahabad, Hon’ble High Court of Punjab and Haryana and Hon’ble High Court of Madhya Pradesh have passed a slew of directions which include protection of sale / auction of mortgaged assets.

In my humble view, comprehensive and uniform Rules and guideline(s) are needed on the afore stated issue(s) and that the Hon’ble Supreme Court of India being the torch bearer of all Courts and Tribunals in the Country, the guardian of the Constitution and supreme protector of the Litigants, Advocates and all concerned citizens may kindly take up the issue(s) raised in this Article.

BY: MAREESH PRAVIR SAHAY, ADVOCATE

The Author is an Advocate-on-Record with the Supreme Court of India. The views expressed are personal.