Through sarfaesi act, secured creditors banks or financial institutions have many rights for enforcement of security interest under section of this act. Secured creditor cannot invoke section 14 of sarfaesi act. If borrower of financial assistance makes any default in repayment of loan or any installment and his account is classified as non performing asset by secured creditor,then secured. Sarfaesi securitisation and reconstruction of financial assets and enforcement of security interest act, 2002 is an act which came in 2002 to allow banks and other financial institutions to recover their nonperforming assets npas or bad loans without the intervention of the court the act provides three alternative methods for recovery of nonperforming assets, namely. Time limit of 45 days provided in section 17 of sarfaesi act with in which the effected party has to approach the drt challenging the measures taken under section 4 of the act cannot be extended by taking the aid of section 5 of the limitation act. Sarfaesi act 2002 section 8 section 9 section 10 section part a part 6. This act makes courts intervention unnecessary in case of secured loans. If borrower of financial assistance makes any default in repayment of loan or any installment and his account is classified as nonperforming asset by secured creditor, then secured. In a criminal proceeding the suit is launched by the state against the defendant whereas the sarfaesi act empower the secured lenders to enforce security interests by nonjudicial means, the proceedings of the two are completely different. The supreme court last month in a decision in itc limited v.
They also warned us of taking over all the properties mortgaged with them in case of nonpayment in the given time. As no payment was forthcoming, a possession notice under section 4 of the sarfaesi act was issued on 18. Securitisation and reconstruction of financial assets and. Summary of sarfaesi act amendments introduced in 2016. Section 4 in the securitisation and reconstruction of financial assets and enforcement of security interest act, 2002 4 in case the borrower fails to discharge his liability in full within the period specified in subsection 2, the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely. We received a notice under section 2 of sarfaesi act to make repayment of amount within 60 days. It is the securitisation and reconstruction of financial assets and enforcement of security interest act 2002. In exercise of the powers conferred by sub section 1 and clause b of sub section 2 of section 38 read with subsections 4, 10 and 12 of section of the securitisation and reconstruction of financial assets and enforcement of security interest 2 act, 2002, the central government hereby makes the following rules, namely. The appeal under section 18 of the sarfaesi act is permissible. The high court observed that the intent of legislature, while introducing sub section 3a was to ensure that objectionsrepresentations of a borrower against any action for enforcement of security interest are considered before a secured creditor proceeds to take possession of the secured assets in terms of section 4 of the sarfaesi act. Section 4 of the sarfaesi act allows a secured creditor to take possession of the secured assets of a borrowerindefault, including the right.
Now, under section of the sarfaesi act 2002, the provision states as undernotwithstanding anything contained under section 69 and 69a of the transfer of property act 1882 a secured creditor can enforce his interest in case of default by the borrower in repayment of loan without the intervention of court. Securitisation act debt recovery appellate tribunal, chennai. Shreesh chadha 4 th year ballb student, jindal global law school sonipat. Courts have dealt with the issue of limitation to approach the debt recovery tribunal under section 17 of sarfaesi act, 2002 and according me, it is the wonderful interpretation by courts in giving the borrower a right to challenge the banks action on all measures pursuant to section 4 of the act. Important points of sarfaesi act, 2002 debt recovery. In view of the clear provision in the act about the time limit to file an appeal under section 17, the borrower is normally advised to file an appeal under section 4 within the. The first asset reconstruction company arc of india, arcil, was set up under this act. In exercise of powers conferred by sub section 1 and clause b of sub section 2 of section 38, read with sub section 4 10 and 12 of section of the securitisation and asset reconstruction of financial assets and enforcement of security interest act. A fivemember bench of the national company law appellate tribunal nclat will soon decide if action taken by a financial institution under section 4 of the sarfaesi act qualifies as a proceeding before a court of law for the purpose of excluding its duration under section 142 of the limitation act for an insolvency proceeding. The sale will be done by the undersigned through eauction platform provided at the website.
The borrowermortgagor in particular and the public in general is hereby cautioned not to deal with the property and any dealings with the property will be. Physical possession notice to that effect was published in the newspapers as provided under rule 81, 82, and 9 of the rules. Section in the securitisation and reconstruction of. Is the period of 15 days stipulated under section 3a. In the statement of object and reasons of the securitization and reconstruction of financial assets and enforcement of security interest act,2002hereinafter sarfaesi,2002 or act,2002, it is stated that the recovery of loans was a slow process which consequently resulted in the.
Sarfaesi act enables and empowers the secured creditors to take possession of their securities, to deal with them without the intervention of the court and also alternatively to authorize any securitization or reconstruction company to acquire financial assets of any bank or financial institution fi. Banks and financial institutions act, 1993 51 of 1993, shall mutatis. Sarfaesi amendment act, 2016 a new life for banks and. Under this act secured creditors banks or financial institutions have many right for enforcement of security interest under section of sarfaesi act, 2002. This means that the act was framed to address the problem of. You have to wait for appeal before the drt us 17 of the act till the bank takes any action under the provisions as prescribed by section 4 of the act. An act to regulate securitisation and reconstruction of financial assets and enforcement of security interest and to provide for a central database of security interests created on property rights, and for matters connected therewith or incidental thereto. The securitization and reconstruction of financial assets. Security interest enforcement amendment rules, 2018. The petitioner filed a writ petition to set aside the reply dated october 14, 2018 from the sbi issued under section 3a of the sarfaresi act the said reply was in response to the representation made by the company against the notice issued by the sbi under section 2 of the sarfaesi act, which was received by the company after expiry of the.
Sarfaesi, section 3a sarfaesi section 2 delay of 14 days in filing application drt declined to condone the delay appellant approached the high court who relegated the appellant to debt recovery appellate tribunal high court also directed the appellant to deposit 25% of the amount covered by the 2. Security interest enforcement rules, 2002 bare acts live. Important case law on securitisation act high court. Procedure under the sarfaesi act, 2002 aishmghrana. An act to regulate securitisation and reconstruction of financial assets and. Sir if reply by debtor is filed in 68 days instead of 15 days what happens as in the case of blue coast hotels judgement by hon.
Notice under section 4 of sarfaesi act, 2002 banking. It is true that section 19 of the sarfaesi act, 2002 provides an authority to the debt recovery tribunal to order compensation against the bank in. Section 38 read with subsections 4, 10 and 12 of section of the securitisation. Section 4 in the securitisation and reconstruction of financial. Authorized officer of abfl had taken possession of the following propertyies pursuant to the notice issued under sec 2 of the securitization and reconstruction of financial assets and enforcement of security interest act, 2002 sarfaesi act 2002 in the following loan accounts with right to sell the same on as ls where is basis. Sarfaesi act 2002 section enforcement of security. Akshat commercial pvt ltd vs kalpana chakraborty and other 20102 drtc 362 calcutta. The securitization and reconstruction of financial assets and enforcement of security interest sarfaesi act, 2002 is a legislation that helps financial institutions to ensure asset quality in multiple ways. Arc, the first asset reconstruction company, was established under this act. There is a question before me that if the borrower has knowledge that the bank has prepared the notice under section 4 of the sarfaesi act, 2002 and the borrower also seen the same when he went to bank to give a request letter for granting time for 40 45 days for the entire payment.
Sarfaesi act or securitisation and reconstruction of financial assets and enforcement of securities interest act, 2002 lets the banks as well as other financial institutions of india auction commercial or residential properties for the purpose of loan recovery. The submission made by the learned counsel for the respondents that section 14 cannot be read in isolation and has to be viewed in the context of all other provisions of the act, such as sections 4 68, 15, 17, 18 rule 89 of sarfaesi rules and section 55 of the transfer of property act is acceptable. Contract act, 1872 9 of 1872 or the transfer of property act, 1882 4 of 1882 or the companies act, 1956 1 of 1956 or the securities and exchange board of india act, 1992 15 of 1992 shall have the same meanings respectively assigned to them in those acts. The borrower gets a right to question the notice under section 4 and all subsequent measures initiated by the bank under section 17 of sarfaesi act, 2002. Important information about sarfaesi act free download pdf. In mardia chemicals case, the supreme court held that under section 2 of the sarfaesi act, it is incumbent upon the secured creditor to serve sixty days notice before proceeding to take action under sub section 4 of section of the sarfaesi act. In the principal act, in section 2, in sub section 1, i after clause b, the following clause shall be inserted, namely.
Can action taken by a financial institution under sarfaesi. As matters stood thus, an application was filed by. Basic meaning section enforcement of security interest it already ask also. The securitisation and reconstruction of financial assets and enforcement of security interests act, 2002 or sarfaesi act amendments have been made in 2016 because of enforcement of security interest and recovery of debts laws and miscellaneous provisions amendment act, 2016. Ministry of finance department of financial services notification new delhi, the 17th october, 2018. The securitisation and reconstruction of financial assets and enforcement of security interest amendment act, 2016 was introduced to amend the securitisation and reconstruction of financial assets and enforcement of security interest act, 2002 sarfaesi act,the recovery of debt due to banks and financial institutions act, 1993, the indian stamp act. Section 4 in the securitisation and reconstruction of. Dear sir, our export credit account was declared npa with a total outstanding of rs. Full text of supreme court judgement on sarfaesi act. Enforcement of security interest under sarfaesi the. Section 4 in the securitisation and reconstruction of financial assets and enforcement of security interest act, 2002.
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