Fresh Cause of Action for Each SARFAESI Enforcement Step Extends Limitation, Rules Allahabad High Court
- REEDLAW
- Aug 27
- 4 min read
REEDLAW Legal News Network reports: In a significant interpretation of the SARFAESI Act, the Allahabad High Court ruled that every enforcement action taken under Sections 13(4) and 14 creates a fresh cause of action. Consequently, the limitation period for filing a Securitisation Application must be calculated from the date of the last impugned measure, rather than being restricted to the initial demand notice.
The Allahabad High Court Single-Judge Bench of Justice Pankaj Bhatia, while adjudicating Matters Under Article 227 No. 3953 of 2025, held that each enforcement measure undertaken under Sections 13(4) and 14 of the SARFAESI Act constitutes a distinct cause of action. The Court clarified that the limitation period for initiating a Securitisation Application should commence from the date of the last challenged enforcement step and not from the original notice, thereby granting borrowers the right to contest subsequent actions within a renewed limitation window.
The petition was filed under Article 227 of the Constitution of India, challenging the order dated 17.06.2025, passed by the Debts Recovery Tribunal, Lucknow, whereby the petitioner’s application for interim relief was dismissed on the ground that the Securitisation Application (S.A.) was hopelessly barred by limitation. The petitioners had availed credit facilities from the assignor of respondent no. 3, which were later assigned to respondent no. 3. The secured creditor initiated proceedings under the SARFAESI Act, 2002. The petitioners claimed that they were not served any notice under Sections 13(2) and 13(4) of the Act and became aware of the proceedings only on 15.04.2025, when an information notice was affixed on their property indicating that physical possession would be taken on 02.05.2025 pursuant to an order dated 10.03.2025 passed under Section 14 of the Act.
Upon obtaining copies of the proceedings, the petitioners filed an S.A. on 21.04.2025 along with a delay condonation application, though they asserted that the application was within the limitation from the date of the Section 14 order. The interim relief application was initially rejected on 02.05.2025, leading the petitioners to approach the High Court under Article 227. By order dated 16.05.2025, this Court quashed the rejection order, finding it devoid of reasoning, and directed the Ministry of Finance to take corrective steps for judicial training. After rehearing, the DRT again dismissed the interim relief application and held the S.A. barred by limitation, considering 18.05.2023 (the date of possession notice under Section 13(4)) as the starting point. The DRT also observed compliance with Rule 8 of the 2002 Rules and held that minor errors in the demand notice did not materially prejudice the borrower.
The High Court found the DRT’s view erroneous, holding that the limitation should not be computed merely from the date of service of Section 13(4) notice but must take into account subsequent actions, including steps under Section 14, which are in continuation of Section 13(4) proceedings. Referring to judgments in Mardia Chemicals Limited, Etc. Etc. v. Union of India and Others Etc. Etc, REEDLAW 2004 SC 04201; Hindon Forge Private Limited and Another v. The State of Uttar Pradesh Through District Magistrate Ghaziabad and Another, REEDLAW 2018 SC 11001, and Kanaiyalal Lalchand Sachdev v. State of Maharashtra, the Court reiterated that each action under Section 13(4) and Section 14 gives rise to a fresh cause of action and that S.A. can be filed within 45 days from the last impugned action. The Court also noted its earlier ruling in Naveen Kumar Dwivedi v. DRT, where similar principles were affirmed.
Accordingly, the High Court quashed the DRT’s order dated 17.06.2025 and remanded the matter for reconsideration on merits. It directed the parties to maintain the status quo regarding the property till the decision of the interim application and instructed the DRT to decide the application expeditiously, preferably within one month.
Mr. Alok Saxena and Mr. Paras Pradhan, Advocates, represented the Petitioners.
A.S.G.I., C.S.C. and Mr. Abhishek Khare, Advocate, appeared for the Respondents.
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