Delay in SARFAESI Applications Can Be Condoned – Borrower Has a Right to Be Heard

Delay in SARFAESI Applications Can Be Condoned – Borrower Has a Right to Be Heard

Delay in SARFAESI Applications Can Be Condoned – Borrower Has a Right to Be Heard: Madhya Pradesh High Court Clears Legal Confusion on DRT’s Power

Here’s a concise summary of the Madhya Pradesh High Court’s recent rulings (from MP Nos. 6432 of 2023 & 4104 of 2023 with R.P. No. 453 of 2024, decided on 3 Nov 2025 – and MP No. 3698 of 2025, decided on 16 Jul 2025**) that clarified the Debt Recovery Tribunal’s power to condone delay in SARFAESI applications and reaffirmed the borrower’s right to be heard:

Holding (MPHC, Division Bench – 3 Nov 2025)

Case: M.P. Nos. 6432 of 2023 & 4104 of 2023 with R.P. No. 453 of 2024
Neutral Citation: 2025:MPHC-IND:31730

1. DRT can condone delay in filing an application under Section 17(1) of the SARFAESI Act, 2002 by applying Section 5 of the Limitation Act, 1963, if sufficient cause is shown.

2. The Court held that SARFAESI Act does not expressly exclude the application of Sections 4 to 24 of the Limitation Act; therefore, Section 29(2) brings them into play.

3. Section 17(1) provides the first and only remedy for a borrower or aggrieved person to seek restoration of possession or challenge creditor actions under Section 13(4). Denying this remedy on technical delay would defeat natural justice.

4. The DRT, being a statutory forum exercising original jurisdiction, must examine the borrower’s cause for delay and cannot dismiss the application mechanically.

5. Earlier contrary views (such as Seth Banshidhar Kedia Rice Mills v. State of M.P., AIR 2011 MP 205) were expressly overruled.

6. The Court relied on several Supreme Court decisions, including Transcore v. Union of India (2008 1 SCC 125), Baleshwar Dayal Jaiswal, M.P. Steel Corporation, and Consolidated Engineering Enterprises, to underline that in absence of exclusion, Limitation Act principles apply to special statutes.

Result: Orders of DRTs dismissing securitisation applications (SAs) as time-barred were set aside. DRTs directed to hear them on merits after considering condonation pleas.

Supporting Ruling (MP No. 3698 of 2025, 16 Jul 2025)

Case: Anil Agrawal v. State of M.P. & Ors.
Neutral Citation: 2025:MPHC-IND:18693

1. The Court reaffirmed that borrowers have a right to challenge all measures taken under Section 13(4) — including demand notices, possession actions, auctions, or District Magistrate orders — before the DRT under Section 17.

2. Once a main Securitisation Application (SA) is admitted, subsequent borrower applications or amendments challenging later measures cannot be rejected as time-barred.

3. The High Court directed DRTs not to adopt a technical approach and to hear such applications together to ensure full adjudication.

4. This prevents injustice and avoids multiplicity of proceedings — protecting both borrower’s rights and judicial efficiency.

Principles Emerged

• Right to be heard: Borrower’s right under Section 17 is substantive, not procedural; tribunals must enable a fair hearing.

• Condonation power: DRTs can exercise discretion to condone delay where justice demands.

• No express exclusion: Since the SARFAESI Act doesn’t bar Limitation Act provisions, DRTs may invoke Section 5 for condonation.

• Purpose of SARFAESI: Facilitate debt recovery while ensuring fairness to borrowers — not to deny remedies on procedural grounds.

Practical Effect

• Borrowers can seek condonation of delay in filing Section 17 applications.

• DRTs must record reasons for accepting/rejecting such requests.

• Banks and financial institutions must expect DRT scrutiny on all creditor measures, even if borrower filings are slightly delayed.

The Madhya Pradesh High Court has recently resolved legal confusion regarding the power of Debt Recovery Tribunals (DRTs) to condone delays in filing applications under Section 17 of the SARFAESI Act. In a landmark judgment dated November 3, 2025, a Division Bench ruled that delays in filing such applications can be condoned under Section 5 of the Limitation Act, 1963, as the SARFAESI Act does not expressly exclude the application of the Limitation Act to these cases. This means the DRTs have full authority to consider and condone delays if sufficient cause is shown by the borrower.

The Court emphasized that the right of borrowers to approach the DRT is a statutory right and cannot be denied merely due to procedural delays, especially when reasons such as the COVID-19 pandemic, unavailability of DRT benches, or ongoing One Time Settlement talks justify the delay. The judgment highlights that banks are allowed to seek condonation of delay, so borrowers must be equally entitled to this right under the principle of equality before the law.

The Court set aside various DRT orders that dismissed applications as time-barred and directed fresh hearings on the condonation of delay applications on their merits, reaffirming the judicial nature of Section 17 applications under SARFAESI. This ensures that substance prevails over mere formality, protecting borrowers’ access to justice and statutory remedies without being unfairly deprived on technical grounds of delay.

This decision aligned with Supreme Court precedents and provides much-needed clarity and relief to borrowers, reiterating that DRTs must apply discretion fairly and justly when deciding on delay condonation applications under SARFAESI Act cases.