That ominous notice from your bank stating “Demand Notice under Section 13(2)” is the first formal step in a legal process that could lead to losing your mortgaged property without court intervention. Having guided numerous clients through this critical juncture, I want to share what every borrower needs to know.
What exactly is a Section 13(2) notice?
When your loan account is classified as a Non-Performing Asset (NPA), banks can issue this notice under the SARFAESI Act, demanding full repayment of outstanding dues within 60 days. This empowers banks to bypass lengthy court proceedings and directly move toward taking possession of your secured assets if you fail to comply.
Your rights and obligations upon receiving this notice:
1. You have the right to verify all loan details and outstanding amounts mentioned in the notice
2. You can submit a formal representation/objection to the bank within 60 days of receiving the notice
3. The bank must respond to your representation within 15 days
Critical timeline to remember:
The 60-day period from notice receipt is your window to either repay in full or submit valid objections. Once this period expires, the bank can proceed with possession actions under Section 13(4).
Common mistakes borrowers make:
Partial payments aren’t enough. Making a few installment payments after receiving the notice won’t prevent enforcement action. The law requires discharge of “full liabilities” to halt proceedings.
Ignoring the notice. Silence is interpreted as acceptance.
Missing the representation deadline. Your right to object expires after 60 days.
Assuming the account will be automatically upgraded. Once Section 13(2) notice is issued, partial payments won’t typically result in NPA status being lifted.
Pro tip:
Document everything. If negotiating with your bank for restructuring or one-time settlement, ensure all communications are in writing. When filing objections, detail any calculation errors, procedural lapses, or disputed amounts with supporting evidence.
Remember: This notice is serious but not the end of the road. Prompt, strategic action can protect your assets and create pathways to resolution.