Sarfaesi Act 2002

Sarfaesi Act 2002 in India

1. SARFAESI ACT
2002
Presented by,
AbinashKr. Mandilwar
Chief Manager & Faculty Member,
Staff Training College, Bhopal

2. WHAT IS SARFAESI ACT?
TheActenablesthesecured
creditors(Banks)toenforcesecurity
interestforrecoveryofitsdues
withoutinterventionoftheCourt
providedthatsecurityinteresthas
beenproperlychargedinfavourof
thebank.

3. SARFAESI ACT 2002
SARFAESIActwasnotifiedinDec.2002.Itwas
amendedin2004,2012andDec.2016.
ProvisionsinAct:U/s13(4),intheeventofdefault
byaborrower,asecuredcreditor(bank/FI)will
havethefollowingrights.
Takepossession,sellorleasesecuredassets,
Takeoverthemanagementofthebusiness,
Appointamanager,
Recoverybymoneypayableby3
rd
partiestothe
borrower.

4. CRITERIA FOR INVOKING THE
PROVISIONS OF THE SARFAESI ACT
Thecontractualduesintheaccountshouldbe
morethanRs.1.00lakh.
Thedefaultmusthaveoccurredi.e.theaccount
shouldhavebecomeNPAasperRBInorms.
ThesecuritychargedtotheBankmustbespecific,
clearandavailabletotheBank.
Thesecuritydocumentsintheadvanceaccount
shouldbeinfullforceonthedateofservingthe
60daysnotice.
Thesecuritydocumentsshouldbedulyfilledin
andnocolumnshouldbekeptblank.

5. SARFAESI ACT 2002
Incaseofconsortiumfinancingormultiplelending
arrangements,if75%ofsecuredcreditorsinvalue,
agreetoinviterecoveryaction,thesamewillbe
bindingonallsecuredcreditors.
ActioncanbeinitiatedunderSARFAESIActinDRT
pendingcase.
UndersecuritiesInterest(Enforcement)Rules2002
lendershavebeenpermittedtodisposedoffthe
assetswhicharechargedtothebankwhere
possessionoftheassethasbeentakenbythebank.
Thesalecanbethroughprivatetreatyand/orpublic
auctionorbids.

6. SARFAESI ACT 2002
NPA A/c not eligible under SARFAESI Act
I.LoanswherecontractualduesarebelowRs.1
lakh,
II.Agriculturelandchargedagainstagriculture
purposeloancannotbesold,
III.Theamountdueislessthan20%ofprincipal&
interest(80%ormorealreadyrecovered),
IV.Bankshallnotbeabletoinvoketheprovisionof
theSARFAESI Act,unlessthechargedis
registeredwithinthetimeframewithCERSAI.
V.LoanSecuredbypledge,lien&bysecurityof
bankdeposits,
VI.LimitationhasexpiredasperLimitationact,
VII.Wheresecurityisnotchargedtobank.

7. PROCEEDING UNDER OF SARFAESI ACT 2002
IdentifyalltheeligibleaccountsundertheAct,
DueDiligenceStudyoftheaccounts,
PuttheproposalbeforetheCompetentAuthorityfor
approvalforactionundertheAct.asperprescribed
format,
AppointmentofAuthorisedOfficer,
Issueof60daysDemandNoticeu/s13(2)oftheAct
shouldbesentunderthesignatureofAuthorisedOfficer.
Noticeshouldbeintheprescribedformat.
FormatsforDemandNoticeandallotherannexuresare
availableinHOBC110/180Dt.19/12/2016.

8. ISSUE OF NOTICES
Serviceofpropernoticeisapre-requisitefor
enforcementofsecurityinterest.
Theauthorityforapprovingproposalforissuing
noticeandtakingactionunderActareasunder:
Authority AmountRs.(inlakh)
MD,ED&GM(HO/NBG/ZO) FullPowers
Dy.GeneralManager 5000
Asst.GeneralManager 2500
ChiefManager 1000
SeniorManager(LargeBranch) 200
Note:TheofficialapprovingissueofNoticeshouldnot
havesanctionedthecreditproposal.Insuchcase,it
shouldbesubmittedtonexthigherauthority.

9. DEMAND NOTICE
PeriodofNotice–60days–Continuousfollowup,
Noticescanbeissuednotonlytotheprincipalborrowerbutalso
totheguarantorifsecurityinterestiscreatedbytheguarantor.
Ifmorethanoneborrower,DemandNoticeservetoeach
borrower,
TheserviceofthenoticeistobemadebyRegd.Post/A.D.,Speed
Post,Courier,E-mail,UPC,Faxetc.Proofofacknowledgements
shouldbekeptinrecord.
AsperrecentamendmentinDec.2016,thedemandnoticecan
beserved/deliveredbyhanddeliveryalso,apartfromtheother
prescribedmode.
Incaseofnondeliveryofservice,theserviceistobeaffectedby
affixingthenoticeontheconspicuouspartofbuildingwherethe
borrower/guarantorresidesorcarriesbusiness.

10. PROCEEDING UNDER OF SARFAESI ACT 2002
SimultaneousactioninSuitFiled/DRTcasescanbe
taken.
Afterissuanceofnoticeu/s13(2)bythebank,ifany
borrower/guarantormakesanyrepresentationor
raiseanyobjection,thenthebankhastoconsider
suchobjectionandservearevisednoticeorpasssuch
othersuitableordersasdeemednecessary,orIfbank
feelsthatobjectionisnotacceptableortenable,he
shallcommunicatethejustificationforpossession
withinfifteendays(Afteramendmentitwas
enhancedfromsevendaystofifteendays)fromthe
dateofreceiptoftherepresentationorobjection.
TheborrowermaymakeanapplicationtoDRT
withinaperiodof45days.

11. AUTHORISED OFFICER
AuthorisedOfficer”meansanofficernotlessthan
aChiefManagerofaPublicSectorBankor
equivalentasspecifiedbytheBoardofDirectorsof
thesecuredcreditor.
AuthorisedOfficerenjoysimmunityforallActions
doneingoodfaithandwithoutnegligencewhile
exercisingtherightonthesecuritiescreated.
AthreememberZonalCommitteeheadedby
ZonalManagerwillfinalizethereplyinallcases
irrespectiveofanyamount.

12. HOW TO GO ABOUT APPLYING
SARFAESI ACT
Iffullpaymentisreceivedduring60daysnotice
period,nofurtheractioniscalledfor.Ifthe
borrowermakespartpayment,theBankretains
therighttoclaimthebalanceamount.
Incasepaymentisnotreceivedwithin60days,
AuthorisedOfficercantakepeacefulpossession
ofthesecuredassets.
Priorthesaleofsecuredassets,anauthorised
officerofthelenderwouldhavetotake
possessionofthesamebyserviceofa60days
possessionnotice.

13. POSSESSION OF THE PROPERTY
Incasepeacefulpossessionisnotpossible,Bankhastomakean
applicationtotheDistrictMagistrate(D.M.)orChiefMetropolitan
Magistrate(C.M.M.).
30daysnoticeshouldbegivenbeforetakingpossessionofsecured
assets.
TheapplicationbeforetheDM/CMMforphysicalpossessionofthe
chargedpropertymustbedisposedofwithinaperiodof30days
fromthedateofapplication.
DuplicateofPossessionNoticeshouldbeaffixedontheproperty
whichshouldbevisible.
PossessionNoticeshouldalsobepublishedinleading2
newspapers,oneofthemvernacular.
Assetsseizedshouldbevaluedfrompanelvaluer.

14. POSSESSION OF ASSETS
MovablesAssets:-
Panchnamaintheprescribedformat–Two
IndependentWitnesses;
Inventoryintheprescribedformat-Copy
shouldbegiventotheborrower;
Custodyoftheassets;
Preservationandprotection;
Assetssubjecttospeedydecaytobe
immediatelysold;
ValuationoftheAssets.

15. POSSESSION OF ASSETS
ImmovableAssets:
BydeliveryofPossessionNotice–Affixation;
Possessionnoticetobepublishedwithin7days;
NoprescribedformatofPanchnamabutitberecorded
givingbriefdetails;
Incasebothmovablesandimmovablesarecharged,
inventoryasperformatformovables.
Themovablesnotchargediffoundtobereturnedto
therightfulowner;
ValuationoftheAsset.

16. AUCTION NOTICE
TheGovernmenthasintroducednewsite
www.eprocure.gov.inforuploadingtenders
videtheircommunicationRef.No.
10/1/2011-PDDDated17.05.2016.
Nodalofficerofthebankwillbeableto
createnewuserIDandissueloginpassword.
Allthebranches/zoneshavetosendthe
auctionnoticetotheirrespectiveNBG.

17. AUCTION NOTICE
Inaddition,allthebranches/zoneshavetosend
auctionnoticetoITDept.atHOforuploadingthe
noticeonbank’swebsite.
Thebranchesareadvisedtoensurethatournoticeis
publishedinourwebsite.
Pleasenotethatthisshallnotdispensewiththe
noticemandatorilytobepublishedinthenewspapers
arerequiredundertheAct.
Thedateofauctionwhichisshowninthenoticebeing
publishedinthewebsiteaswellasinthenewspaper
shouldbeoneandthesameandensurethatnosale
shouldtakeplacebeforeexpiryof30daysfromthe
dateonwhichthenoticeisgivennewspaperandthe
website.

18. SALE OF SECURED ASSETS
ModeofSale
a.byobtainingquotationsfromthepersons
dealingwithsimilarpropertyorotherwise
interestedinbuyingsuchproperty,or
b.byinvitingtendersfromthepublic,
c.byholdingpublicauction,or
d.byprivatetreaty.

19. SALE OF THE PROPERTY
ReservePrice:-ReservePriceshouldbefixed
beforesalewhichshouldbereasonable.Bothfor
themovableandimmovableassetsthelender
wouldhavetomakepropervaluationpriorto
sale.Thereservepricetobearrivedonlyafter
thevaluationexercise.
OfferPrice:Ifthepriceequaltothereserveprice
cannotbeobtained,theassetcanbedisposed
offatalowerpricewiththeconsentofboth
borrowerandlender.Ifthefirstsaleunder
SARFAESIdoesnotmaterialize,theBankcan
purchasetheproperty.

20. SALE OF THE PROPERTY
Propertyissoldtothebuyerofferinghighestprice.
Oneverysaleofimmovableproperty,Salewillbeconfirmed,ifthe
purchasershallimmediatelyormax.nextworkingdaydeposit25%
ofsaleprice.Indefaultsuchdeposit,thepropertyshallbesold
again.
Paymentofbalance75%ofsalepriceshallbepaidbythepurchaser
totheAuthorisedOfficeronorbefore15
th
daysofsaleconfirmation
orsuchextendedperiodasmaybeagreedinwriting,inanycase
notexceeding3months.
SaleCertificatedulysignedbytheAuthorisedOfficerisissuedto
thebuyerofthepropertywhichtheprimafacieevidenceoftitleof
thebuyeroftheproperty.
SaleCertificatespecifiessecuredassetssold,Buyer’sname&the
pricepaid.

21. SARFAESI ACT 2002
Action Period
Notice for possession 60 days
Replybybanktoborrower’srepresentationor
objectionfromdateofreceiptofsuch
representationorobjection
15 days
Borrower can approach DRT against Possession
Notice from date of acknowledgement
45 days
Appeal to DRAT against decision of DRT 30 days
Notice before sale of the immovable secured
asset
30 days
Period ofbalance payment of 75% amount by
the buyer of the secured assets
15 days

22. NEW CHANGES IN SARFAESI ACT IN 2016
Subrule(1)of(3):-Thedemandnoticecanbeserved/deliveredby
handdeliveryalso,apartfromtheotherprescribedmode.
Section14:-TheapplicationbeforetheDM/CMMforphysical
possessionofthechargedpropertymustbedisposedofwithina
periodof30daysfromthedateofapplicationandinanycasenot
laterthan60days.
Section3A:Timeprescribedformakingchangeormodification,if
any,tothesection13(2)noticeonthebasisofrepresentationofthe
borrowertothesaidnoticeortoreplytotherepresentationofthe
borrowerhasbeenenhancedto15days.
Sec.26E:SARFAESIActfirsttimeintroducedpriorityofchargeof
banksduesoveranyotherdueofCentral/StateGovernment.It’sa
landmarkamendment.Onlyexceptionisthatitissubjectto
insolvency&bankruptcycode2016.
Sec30AofDRTACT:-Anappealagainstanyorderofrecovery
officerundersection30shallnotbeentertainedunless50%ofthe
amountdueisdepositedwithDRT.
to the