Section 36 SARFAESI: Limitation and the Enforcement of Security

SARFAESI is a powerful remedy, but it cannot be used to revive a dead debt. Section 36 ties the Act to the general law of limitation: a secured creditor may take the enforcement measures only if its claim is within the period prescribed under the Limitation Act 1963. So the creditor must act while the underlying debt is still legally recoverable. This note sets out the Section 36 bar, which limitation periods apply, and the effect of a time-barred debt.

1. The Section 36 Bar

Figure 1: Enforcement only within limitation

• The bar, s.36. No secured creditor may take the s.13(4) measures unless its claim in respect of the financial asset is made within the period of limitation.
• Limitation Act 1963 applies. The period is that prescribed under the Limitation Act 1963, so SARFAESI does not escape the ordinary law of limitation (Topic 28)
• The debt must be live. Enforcement rests on a debt that is still legally recoverable; a debt barred by limitation cannot be enforced under the Act.
• Not a self-contained escape. Although SARFAESI is a special code, s.36 expressly ties it to limitation, so the creditor cannot sidestep the clock by using the Act.

2. Which Limitation Applies

Figure 2: The period depends on the nature of the claim

• A simple money claim. A claim on the debt as a money debt is ordinarily governed by the three-year period from when the debt fell due.
• Enforcing a mortgage. A claim to enforce a mortgage over immovable property is governed by Article 62 of the Limitation Act, a twelve-year period from when the money became due.
• Acknowledgement extends it. A written acknowledgement of the debt, or a part payment, within the period starts a fresh period, so the limitation can be extended lawfully.
• Measure within the period. The s.13(4) measure must be taken while the underlying claim is within its period, which is the practical effect of s.36.

3. The Effect of a Time-Barred Debt

Figure 3: A dead debt cannot be revived by the Act

• A time-barred debt. A debt beyond its limitation period is no longer legally recoverable, even though it may still be morally owed.
• Cannot be enforced. Section 36 bars the s.13(4) measures on such a claim, so an enforcement begun on a time-barred debt is open to challenge before the DRT (Topic 35)
• NPA does not revive it. Classifying a dead debt as an NPA does not revive the right to recover it; the limitation bar applies regardless of the classification (Topic 9)
• The creditor's discipline. The creditor must watch the clock, keep acknowledgements, and act in time, because the Act gives no relief from a limitation that has already run.

4. Frequently Asked Questions

Does the law of limitation apply to enforcement under the SARFAESI Act?

Yes. Section 36 provides that no secured creditor shall be entitled to take any of the measures under Section 13(4) unless its claim in respect of the financial asset is made within the period of limitation prescribed under the Limitation Act 1963. SARFAESI is therefore not a self-contained escape from limitation; the creditor must take the enforcement measures while the underlying debt is still legally recoverable. The applicable period depends on the nature of the claim: broadly three years for a simple money debt, and twelve years under Article 62 of the Limitation Act for the enforcement of a mortgage over immovable property. A written acknowledgement or part payment within the period starts a fresh period of limitation.

Can a secured creditor enforce a debt that has become time-barred?

No. A debt beyond its limitation period is no longer legally recoverable, and Section 36 bars a secured creditor from taking the Section 13(4) measures on such a claim. An enforcement begun on a time-barred debt is therefore open to challenge before the Debt Recovery Tribunal. Importantly, the classification of the account as a non-performing asset does not revive a time-barred debt; the limitation bar applies regardless of the NPA classification. The creditor must watch the limitation period, rely on any valid written acknowledgements to extend it, and act in time, because the SARFAESI Act gives no relief from a period of limitation that has already expired.

5. Related Topics

• Topic 9: Non-Performing Asset. Classification does not revive a dead debt.
• Topic 28: Section 13(4) Measures. The measures Section 36 conditions on limitation.