DRAT Chennai: Omission of NPA Date in Section 13(2) Notice Is Curable Defect, Not Ground to Set Aside SARFAESI Action

February 2, 2026 : The Debts Recovery Appellate Tribunal (DRAT), Chennai has held that failure to mention the exact date of classification of a loan account as a Non-Performing Asset (NPA) in a demand notice issued under Section 13(2) of the SARFAESI Act is a mere technical defect and does not invalidate recovery proceedings, unless the borrower demonstrates resulting prejudice.

The ruling was delivered by Justice G. Chandrasekharan (Chairperson) in an appeal filed by Satyam Educational Trust and others challenging the order of the Debts Recovery Tribunal (DRT), Madurai, which had dismissed their securitisation application against possession proceedings initiated by Bank of Maharashtra.

The Tribunal, after examining the record, noted that although the demand notice dated 18 December 2013 did not explicitly mention the date of NPA classification, it clearly indicated that the account had been classified as NPA and specified the outstanding dues. It observed that a demand notice under Section 13(2) is not expected to be exhaustive in nature and omission of such detail, by itself, does not vitiate the proceedings.

Rejecting the borrowers’ contention that the notice was defective, the Tribunal held that such omission was only a technical lapse arising from oversight. It emphasised that SARFAESI measures cannot be set aside on technicalities unless the borrower is able to establish actual prejudice caused by the defect.

On facts, the Tribunal found that the borrowers had availed multiple loan facilities and had admitted restructuring of the loan. The record demonstrated irregular repayment and continued default even after rescheduling, leading to classification of the account as NPA upon non-payment for over 90 days.

The Tribunal also upheld the validity of the equitable mortgage created through deposit of title deeds, relying on documentary evidence including memoranda and confirmation letters establishing creation of security interest over all the secured properties.

Addressing objections regarding discrepancies in property description, the Tribunal noted that such inconsistencies were subsequently corrected in the possession notice and did not cause any legal infirmity. It further held that the borrowers failed to substantiate their claim that certain properties were agricultural land exempt under Section 31(i) of the SARFAESI Act, as no evidence of agricultural operations was produced.

The Tribunal also accepted additional evidence demonstrating proper service, publication, and affixture of the possession notice, thereby confirming compliance with statutory requirements.

Finding no merit in the appeal, the DRAT upheld the order of the DRT Madurai and confirmed the SARFAESI proceedings initiated by the bank.