Sarfeasi

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THE SECURITISATION AND RECONSTRUCTION OF FINANCIAL ENFORCEMENT OF SECURITY INTEREST ACT 2002

Definition 

Borrower any person who has been granted financial assistance by bank or who has given guarantee or created mortgage or pledge as security to the bank in respect of any loan, who becomes borrower of a securitisation company or the reconstruction company consequent to acquisition by it.

Property (i) Immovable property (ii) movable property (iii) any debit or right to receive payments of money whether secured or unsecured (iv) receivables whether existing or future (v) intangible assets being knowhow, patent copyright,trade mark, license,franchise or any other business or commercial right of similar nature.

 
Authroised Officer As per SARFAESI rules Authorised Officer means an officer not less than a Chief manager (Scale IV) of the bank.

Appropriate Authority  The controlling authority from whom permission is to be obtained by a branch for proceeding under SARFAESI Act is mentioned as Appropriate Authority.

Secured Creditor Secured creditor means the bank. In case of consortium accounts secured creditors means the consortium or group of Banks / Financial institutions

Security Interest Security Interest means right, title and interest of any kind upon property created in favour of the secured creditor and includes any mortgage, charge, hypothecation or assignment.

Demand Notice Section 13(2)

Before initiating action under SARFAESI Act it is to be ensured that the secured assets are properly identified. Once permission from Appropriate Authority is obtained the Authorised officer can initiate action under SARFAESI Act.

While initiating action under SARFAESI act against borrower a notice in writing (demand Notice) to discharge in full his liabilities within sixty days from the date of notice to be issued under Sec.13(2) by secured creditor or Authorised officer endorsing copies to guarantor/co-obligant / third party mortgagor.

When there is more than once borrower or guaranto notices mentioned herein above shall be served on each of them.

Objection to Demand Notice Section 13 (3A)

Borrower /guarantor /mortgager can make representation or raise objection to the bank against the demand notice issued under Sec 13 (2) of SARFAESI Act on receipt of such representation objection, the secured creditor (bank) has to scrutinize the same and if the objection or representation is not acceptable or tenable, the Authorised Officer has to communicate the reasons for not accepting the same to the borrower/guarantor /mortgager within once week. The Bank shall not proceed against the borrower/guarantor/ mortgager without giving reply to the representation or objection raised by them.

Recourse available to the Secured Creditor Section 13 (4)

If the borrower fails to discharge his liability in full within 60 days from the date of (receipt of ) demand notice , the bank can take one or more of the following recourses to recover its secured debts.

1. Take possession of the secured assets of the borrower including right to transfer by way of lease assignment or sale for realizing secured asset. 2. Take over the management of the business of the borrower including the right to transfer by way of lease assignment or sale for realizing the secured asset. 3. Affixing the possession notice on the outer door or at such conspicuous place of the property. 4. Publish the possession notice in two leading newspapers out of which one should be in vernacular language having sufficient circulation in the locality.

Completion of the above procedural aspects by itself without taking actual or constructive possession will not amount to taking possession of secured assets.

After taking actual possession the authorized officer has to keep the property in his custody or with any other person authorized by him and to take as much care as that a man of ordinary prudence will take care of his...
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