Action Under Section 14 of SARFAESI Act Is a Continuous Cause of Action: Allahabad High Court

In a significant ruling providing much-needed clarity on the procedural rights of borrowers, the Lucknow Bench of the Allahabad High Court has ruled that actions taken under Section 14 of the SARFAESI Act are a continuation of the proceedings under Section 13(4), establishing a "continuous cause of action." The judgment serves as a stern reminder to the Debts Recovery Tribunal (DRT) regarding the proper interpretation of limitation periods in banking disputes.

Background: The Procedural Impasse

The case ( Vimla Kashyap and Ors v. Union of India and Ors ) originated from a dispute involving credit facilities assigned to respondent no. 3. The respondent initiated recovery proceedings under the SARFAESI Act. The petitioners challenged the DRT's dismissal of their application for interim relief, which had been rejected on the grounds that the Securitisation Application (S.A.) was "hopelessly barred by limitation."

The DRT had argued that the limitation period began from the date of the notice under Section 13(4) (May 18, 2023), ignoring the subsequent order passed by the Additional District Magistrate (ADM) under Section 14 on March 10, 2025. The petitioners only became aware of these proceedings when an information notice was affixed to their property on April 15, 2025.

The Legal Tug-of-War

The petitioners argued that the DRT acted in a contradictory manner: on one hand, it claimed the S.A. was time-barred; on the other, it engaged in an analysis of the merits of the Section 14 order. They contended that Section 14 is a step in furtherance of Section 13(4), and therefore, the entire process creates a rolling, continuous cause of action.

The respondents maintained that the finding regarding the service of the Section 13(4) notice was conclusive and the S.A. was indeed filed far beyond the permissible window, justifying the DRT’s decision.

Analyzing the "Continuous Cause of Action"

Justice Pankaj Bhatia, relying on the Supreme Court’s landmark judgment in Mardia Chemicals Ltd. vs Union of India , clarified that proceedings under Section 17 are not mere appellate proceedings but the initial stage of seeking justice.

The Court emphasized that the legislative scheme of the SARFAESI Act aims to protect borrowers from arbitrary actions. Drawing from Hindon Forge Private Limited vs The State of Uttar Pradesh , the Court underscored that the right to approach the Tribunal is triggered by actions taken under Section 13(4), and subsequently, Section 14 acts as an extension of this coercive process.

Key Observations

The Court articulated its stance with several key remarks:

* "Section 14 is a continuance of the proceedings under Section 13(4) of the SARFAESI Act and would give a cause of action to file an S.A. before the DRT."

* "The limitation has to be calculated from the date of the last action against which the person aggrieved had approached the DRT under Section 17."

* "The DRT had erred in recording on one hand that S.A. was hopelessly barred by limitation and on the other hand, has gone into the correctness of the orders passed as well as compliances done by the respondents."

The Court’s Decision: A Clean Slate

The Allahabad High Court quashed the DRT's order dated June 17, 2025, and remanded the matter back to the Tribunal for a fresh decision on merits. Crucially, the Court ordered that the status quo regarding the title and possession of the property be maintained until the interim application is disposed of—a process the DRT is now tasked to complete within one month.

This ruling reinforces the principle that procedural shortcuts cannot be used to deny borrowers their right to contest banking recovery actions. By establishing that Section 14 challenges are not inherently time-barred if related to ongoing actions, the Court has provided a vital safeguard for parties facing asset possession.