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Sarfeasi Act Section 36 Limitations

Feb 12 2026

When it comes to debt recovery under the SARFAESI Act, 2002, time is not just important — it is legally decisive. Section 36 of the Act acts as a statutory safeguard, ensuring that secured creditors cannot exercise recovery powers indefinitely.

This provision links the SARFAESI Act directly to the Limitation Act, 1963, making limitation compliance mandatory before initiating enforcement measures.

What Does Section 36 of the SARFAESI Act Say?

Section 36 clearly provides:

“No secured creditor shall be entitled to take any of the measures under Section 13(4) unless the claim in respect of the financial asset is made within the period of limitation prescribed under the Limitation Act, 1963.”

In simple terms, if the debt is time-barred under the Limitation Act, the bank cannot initiate SARFAESI proceedings.

The Act does not revive an extinguished or time-barred claim.

The 12-Year Limitation Rule Explained

For secured debts involving mortgages:

  • Article 62 of the Limitation Act prescribes a limitation period of 12 years

  • The 12-year period generally begins from:

    • The date the money becomes due, or

    • The date of default, or

    • The date the account is classified as NPA (depending on facts)

If 12 years lapse without valid enforcement action, the right to enforce the mortgage becomes time-barred.

Once barred:

  • SARFAESI action under Section 13(4) cannot be initiated

  • Issuing a demand notice under Section 13(2) after limitation may render the entire proceedings invalid

Does Filing Before DRT Extend Limitation?

A common misconception is that pendency of proceedings before the Debt Recovery Tribunal (DRT) automatically extends limitation for SARFAESI action.

However:

  • SARFAESI is an independent remedy

  • It must independently satisfy limitation requirements

  • Mere pendency before DRT does not automatically extend the 12-year limitation period

Each action must fall within the legally prescribed timeframe.

Why Section 36 Is Crucial

Section 36 ensures:

 Protection Against Stale Claims

Borrowers are protected from indefinite enforcement actions decades after default.

Legal Certainty

Creditors must act diligently and within statutory timelines.

 Financial Discipline

It promotes responsible lending and timely enforcement.

What Happens If SARFAESI Is Initiated After Limitation?

If a demand notice under Section 13(2) is issued after expiry of the limitation period:

  • The borrower can challenge it before the DRT under Section 17

  • Proceedings may be quashed

  • Courts have consistently held that SARFAESI cannot be used to enforce time-barred debts

This is because SARFAESI provides a recovery mechanism — not a fresh cause of action.

Key Legal Principles to Remember

  • SARFAESI does not create a new right to recover

  • It only enforces a pre-existing, legally enforceable debt

  • Limitation must be checked before issuing 13(2) notice

  • A time-barred mortgage cannot be revived through SARFAESI

FAQs on Section 36 and Limitation

1. What is the limitation period for enforcing a mortgage under SARFAESI?

Generally 12 years under Article 62 of the Limitation Act.

2. From when does the limitation period start?

It typically begins from the date the money becomes due or the date of default/NPA classification, depending on facts.

3. Can SARFAESI revive a time-barred debt?

No. Section 36 expressly prevents enforcement of time-barred claims.

4. Can a borrower challenge time-barred SARFAESI action?

Yes. The borrower can file an application under Section 17 before the DRT.

5. Does filing a DRT case automatically extend limitation?

No. Limitation must independently be satisfied for SARFAESI action.

Section 36 of the SARFAESI Act serves as a statutory time barrier against stale debt enforcement. It balances the strong recovery powers granted to banks with the protections available to borrowers under the Limitation Act, 1963.

For creditors, the message is clear: act within limitation.
For borrowers, understanding this provision can be a powerful defense against unlawful recovery action.