SARFAESI Act 2002December 15, 2013 44 CommentsThe full form of SARFAESI Act as we know is Securitisation and Reconstruction Financial Assets and Enforcement of Security Interest Act, 2002. Banks utilize this act an effective tool for bad loans (NPA) recovery. It is possible where non-performingassets are backed by securities charged to the Bank by way of hypothecationmortgage or assignment.Upon loan default, banks can seize the securities (except agricultural land)intervention of the court.SARFAESI is effective only for secured loans where bank can enforce the underlyingsecurity eg hypothecation, pledge and mortgages. In such cases, court interventionis not necessary, unless the security is invalid or fraudulent. However, if the asset question is an unsecured asset, the bank would have to move the court to file civilcase against the defaulters.Contents [hide]How it works?Background of the actRights of BorrowersPre-conditionsMethods of RecoveryPowers of Debt Recovery TribunalRole of Chief Metropolitan Magistrate or District MagistrateRole of High Court:Proposed amendments to the ActHow it works?The SARFAESI Act, 2002 gives powers of seize and desist to banks. Banks can give notice in writing to the defaulting borrower requiring it to discharge its liabilities60 days. If the borrower fails to comply with the notice, the Bank may take recourse one or more of the following measures:Take possession of the security for the loanSale or lease or assign the right over the securityManage the same or appoint any person to manage the sameFebruary 2015January 2015 |December 2014 |November 2014|October 2014|September 2014 |August 2014 |July 2014 |June 2014 |May 2014 |April 2014 |March 2014 |February 2014 |January 2014 |Current Affairs 2013Current Affairs 2012Current Affairs 2011National Current AffairsState Current AffairsInternational AffairsBusiness & EconomyBanking Current AffairsScience & TechonlogyEnvironment Current AffairsCURRENT AFFAIRSCURRENT AFFAIRS CATEGORYGKToday Current Affairs EBooksDownloads GS Manual 2014Test Series (Prelims) 2015Login / RegisterHOME CURRENT AFFAIRS CURRENT AFFAIRS QUIZ GENERAL KNOWLEDGE QUIZThe SARFAESI Act also provides for the establishment of Asset ReconstructionCompanies (ARCs) regulated by RBI to acquire assets from banks and financialinstitutions. The Act provides for sale of financial assets by banks and financialinstitutions to asset reconstruction companies (ARCs). RBI has issued guidelines banks on the process to be followed for sales of financial assets to ARCs.Background of the actThe previous legislation enacted for recovery of the default loans was Recovery of Debtsdue to Banks and Financial institutions Act ,1993. This act was passed after recommendations of the Narsimham Committee I were submitted to the government.This act had created the forums such as Debt Recovery Tribunals and Debt RecoveryAppellate Tribunals for expeditious adjudication of disputes with regard to everincreasing non-recovered dues. However, there were several loopholes in the act these loopholes were mis-used by the borrowers as well as the lawyers. This led to government introspect the act and this another committee under Mr. Andhyarujinaappointed to examine banking sector reforms and consideration to changes in the legalsystem .This committee recommended to enact a new legislation for the establishment securitisation and reconstruction companies and to empower the banks financial institutions to take possession of the Non performing assets.Thus, via the Sarfaesi act, for the first time, the secured creditors were empowered recover their dues without the intervention of the court.However, as soon as the act was passed, its implementation was challenged in court and this delayed its coming into force for 2 years. In the Mardia Chemicals Union of India, the Supreme Court upheld the validity of the SARFAESI act wasupheld.Rights of BorrowersThe above observations make it clear that the SAFAESI act was able to provide effective measures to the secured creditors to recover their long standing dues from Non performing assets, yet the rights of the borrowers could not be ignored, and havebeen duly incorporated in the law.The borrowers can at any time before the sale is concluded, remit the dues andavoid loosing the security.In case any unhealthy/illegal act is done by the Authorised Officer, he will be liablefor penal consequences.The borrowers will be entitled to get compensation for such acts.For redressing the grievances, the borrowers can approach firstly the DRT thereafter the DRAT in appeal. The limitation period is 45 days and 30 daysrespectivelyPre-conditionsThe Act stipulates four conditions for enforcing the rights by a creditor.The debt is securedThe debt has been classified as an NPA by the banksThe outstanding dues are one lakh and above and more than 20% of the principalloan amount and interest there on.Bills and ActsDefence Current AffairsPersons in NewsPlaces in NewsAwards & HonoursSports Current AffairsArt & Culture in Current AffairsQuiz ArchiveAncient Indian HistoryMedieval Indian HistoryModern Indian HistoryIndian Polity and ConstitutionIndian EconomyGeneral ScienceGeographySynonymsHaryanaRajasthanTamil NaduKarnatakaMaharashtraKeralaOdishaGENERAL KNOWLEDGE QUIZENGLISHSTATES GENERAL KNOWLEDGEThe security to be enforced is not an Agricultural land.Methods of RecoveryAccording to this act, the registration and regulation of securitization companies reconstruction companies is done by RBI. These companies are authorized to raisefunds by issuing security receipts to qualified institutional buyers (QIBs), empoweringbanks and Fls to take possession of securities given for financial assistance and sell lease the same to take over management in the event of default.This act makes provisions for two main methods of recovery of the NPAs as follows:Securitisation: Securitisation is the process of issuing marketable securities backedby a pool of existing assets such as auto or home loans. After an asset is convertedinto a marketable security, it is sold. A securitization company or reconstructioncompany may raise funds from only the QIB (Qualified Institutional Buyersforming schemes for acquiring financial assets.Asset Reconstruction: Enacting SARFAESI Act has given birth to the AssetReconstruction Companies in India. It can be done by either proper management the business of the borrower, or by taking over it or by selling a part or whole of business or by rescheduling of payment of debts payable by the borrowerenforcement of security interest in accordance with the provisions of this Act.Further, the act provides Exemption from the registration of security receipt. This meansthat when the securitization company or reconstruction company issues receipts, holder of the receipts is entitled to undivided interests in the financial assets and there not need of registration unless and otherwise it is compulsory under the Registration 1908.However, the registration of the security receipt is required in the following cases:There is a transfer of receiptThe security receipt is creating, declaring, assigning, limiting, extinguishing any righttitle or interest in a immovable property.Is Mortgaged House exempted?The Sarfaesi act covers any asset, movable or immovable, given as security whether way of mortgage, hypothecation or creation of a security interest. There are someexceptions in the act such as personal belongings. However, only that property given security can be proceeded under the provisions of SARFAESI Act. If the property of borrower is his own mortgaged residential house, it is also NOT exempted from Sarfaesi act.Powers of Debt Recovery TribunalThe debt Recovery Tribunals have been empowered to entertain appeals against misuse of powers given to banks. Any person aggrieved, by any order made by the DebtsRecovery Tribunal may go to the Appellate Tribunal within thirty days from the date receipt of the order of Debts Recovery Tribunal.Role of Chief Metropolitan Magistrate or District MagistrateThe Chief Metropolitan Magistrate or District Magistrate has been mandated to assistsecured creditor in taking possession of secured asset. These officers will make surethat once the creditor has given him in writing that all other formalities of the act havebeen done, the CMM or DM will take possession of such asset and documents relatingthereto; and forward such assets and documents to the secured creditor. Now, here,AdvertisementAnonymous August 30, 2009 Replylaudable presentation of topic..hats off to GK today team.have to note that such an act of the CMM or DM can not be called in question in court or before any authority.Role of High Court:The act allows taking the matter to high courts only in some matters related to implementation of the act in Jammu & Kashmir. However, High Courts have beenentertaining writ petitions under article 226 (Power to issue writs) of the constitution India.Proposed amendments to the ActThe government had approved bill to amend the act. The Enforcement of SecurityInterest and Recovery of Debts Laws (Amendment) Bill, 2011, amends two Acts Sarfaesi Act 2002, and Recovery of Debts Due to Banks and Financial Institutions Act,1993 (DRT Act). Via these amendments:Banks and asset reconstruction companies (ARCs) will be allowed to convert part of the debt of the defaulting company into equity. Such a conversion wouldimply that lenders or ARCs would tend to become an equity holder rather than beinga creditor of the company.The amendments also allows banks to bid for any immovable property they have out for auction themselves, if they do not receive any bids during the auction. such a scenario, banks will be able to adjust the debt with the amount paid for thisproperty. This enables the bank to secure the asset in part fulfillment of defaulted loan.Banks can then sell this property to a new bidder at a later date to clear off the debtcompletely.However lenders will be able to carry this property on their books only for seven years,as per the Banking Regulation Act, 1949.CommentsSANGAMESWARA RAO DHUPAM May 9, 2011 ReplyI have got doubt whether under SARFAESI Act can the Bank/financialInstitutions execute a Sale Certificate under Section 89 of the RegistrationAct, 1908 as the section provides to execute a Sale Certificate only to Courtsunder C.P.C. or by Revenue Officials or by Debt Recovery Tribunal. Under Act a Bank/Financial Institution, in my opinion, is not a court to execute same. Please enlighten me in this regard.anil September 9, 2011 ReplyWHAT TYPE OF NEWS PAPERS THESE NOTICES SHOULD BE PUBLISHED?kishor vig, advocate February 4, 2014any two local leading news papers; one in english and othervernacularrohit khajuria January 3, 2014 ReplyCan we enforce this act for NPA car loans and other personal loans.kishor vig, advocate February 4, 2014the recovery amount should be more than Rs. 1.00 lacs and below the 20% of total disbursed loan. the car sought to enforced should form security whilst disbursing the loan.secondly, you cannot enforce this act for recovery of personalloans as there is no any security offered in such loans.nash January 26, 2014 Replyi think the new papers is Business line.R.K.Menon February 21, 2014 ReplyI have till date paid all my installments on time fir a home loan taken fromidbi bank never defaultedI have only outstanding of 2.26 lacs against loan of 19 lacs I had taken 2002Bank has sent me documents which state sarfesi act and asking me to signand give it to themShould I sign and give ? Will it be misused by the bank ?Santosh June 22, 2014No, As per law only applicable on those loan account which is NPA(i.e. no repayment within 90 days).SAMUEL ANAND KUMAR May 11, 2014 ReplyThe Bank failed to reply to my objections and sold away the property 18.10.2012 violating Section 13-3A of the Sarfaesi Act 2002.Limitation period exceeded as I did not proceed due to paucity of funds.Can I challenge this now?Sridhar June 12, 2014In corrupted India, all acts are on paper only. Practically nothingwill workout. Discussing about banking and RBI policies is value. It is waste.KSVPrasad October 13, 2014Approach OmbudsmenNishant June 20, 2014 ReplyThank you GK todayVaibhav Agarwal June 20, 2014 ReplyIs a Barren Land SARFAESI Complaint?? Can a Bank Make commercial loanson the Barren Land.Santosh June 22, 2014 ReplyAs per Act what is the area covered by this law.Is the Act applicable on all banks(i.e RRBs, Co-OP Banks,Foreign banks etc. in all states ?Pl. clarify the issue.kalyan maheshwari June 26, 2014 ReplyCan Banks sale any property security at a price much below the marketprice? A house property which is worth Rs. 200.00 lacs as per the marketprice but bank proposed to sale it for Rs. 120.00 lacs. Is there any optionavailable to the borrower.S. Iliyas December 9, 2014No. U can challenge it before high court n obtain stay till u sell at own to market price n discharge the loan.sumit July 2, 2014 ReplyDear sir plz tell me that any person (owner of property) can challenge thatsale deed which had done by bank/NBFC to the third person ( new owner) sarfaesi act.thanksALOKKUMAR KASLIWAL July 6, 2014 ReplySome Banks & Financial Institutions themselves create loopholes safeguard interest of the creditors who are paid handsomely under the table.When a corporate takes loan and mortgages ones property to one bank when the same corporate appears another bank and mortgages the sameproperty previously mortgaged to the previous bank, then why does the latterbank give loan against the already mortgaged property and when disputearises, both the banks do not give noc to each other and the culprits continueto enjoy. Is this not a conspiracy between banks and the corporate takingloans against same property from two or more banks. SKUMARSSHRIALOKKUMAR KASLIWAL 9820081968Parminder Singh November 20, 2014On the time of loan borrower has to submit the original registry the bankhow can 2 copies of one property.bank does nt accept photocopies of of registery,,,anil November 29, 2014actually rbi created central registry to overcome this loophole,banks need to provide those mortage asset details to that registryso if a person approach any other bank with same mortage detailsthey can caught ..nitish pandey July 11, 2014 Replythank you GK today good informationKSVPrasad October 13, 2014 ReplySirMy self and my brother staying in two portions side by side in the first floorof a residential house.Owner resides in the 1st floor.Because our land lord defaultborrower bank got 14(1) section permission on the house.Vacating house will take three months.Whom we have to approach to safeguardourselves.Very urgent suggestion is requiredThanking youKSVPrasadCell:9440276121Nalluru Ravikumar October 13, 2014 ReplyRespected sirLand lord of 15 portioned apartment is not repaying the loan to the bank.Thebank collection agents threatening the tenants to vacate the portions sincethe bank got the physical possession pemission from District Magistrate.Theauction sale was not performed.How the DM pass the possessionpermission to the bank before auction sale.Please suggest a solutionThanksNRavikumarnaren November 4, 2014 Replyafter publishing in newspaper how many days after will the bank post sarfaesi sticker to house. And after posting the sarfaesi sticker on wall whatare the legal things done by banks and duration of each. PlzAshwani November 14, 2014 ReplyAlthough the article is commendable, but the website authors mentality damn poor, you have locked the whole webpage so that no one is able copy or print the content here, what type of sharing of knowledge is this? Youare a really sick person.!B.N.Chandra sekhar November 21, 2014 ReplyThis is regarding a legal question on bankers who have done an e auctionafter proper notices to the defaulters and done through adv. We have beendeclared as the successful bidder by the bankers after auction.later on defaulter has gone to hon court and got a stay and time to pay balance..we the official bidders who were declared officially and now bankers are colliding with the other party and rendering time to defaulters showing the court orders.pls suggest the ways to move on bankers in a legal wayand the rights of the successful bidder G V B MURTY November 30, 2014 ReplyIf any bank finances, construction of Building and furniture in the newbuilding, if that a/c becomes NPA, what is the position of the Banker.Because Sarfaesi act is applicable only for Immovable goodsdeepak kumar December 1, 2014 Replyhow to recive order to d.m in fast actionAshim December 7, 2014 ReplyI have invested in a apartment in Bangalore , when apartment is 80 complete , Builder asked for 40% escalation charges , Due to whichconsumers put a case in consumer court , While case was going builderdefaulted the bank loan , Now bank is acquriring the property under sarfaesiact 2002 , In case bank is successful in acquiring the property from builder.what is the safe gaurd for the 1000 + appartment owners , what will be theirstatus.SUBRATA DUTTA December 8, 2014 ReplyWHETHER SARFAESI ACT APPLICABLE TO URBAN COOPERATIVE BANKsubrata dutta December 8, 2014WHETHER SARFAESI ACT APPLICABLE TO URBAN COOPERATIVEBANKRaja December 13, 2014 ReplyI have availed home loan from nationalised bank.My account classified NPA and sarfeasi notice issued than I have paidoverdue amount completly..account has been regular.After one year same sarfeasi notice again sent me I am unable to repay the amountThan possesion notice sent to me by the banktill now unable to pay amount ..so how to appeal tribunal court such amount reduce my accountthan I wish to OTS scheme..Pls give suggesionRAJA December 23, 2014 ReplyWhile SA cases are supposed to be disposed within 6 months, cases dragged by filing IAs by defaulters. What is the remedial action to be takenby creditors?BABU January 1, 2015 ReplyOne of the property is leased to a private Bank which is unregistered for period of 10 years and is under mortgage in other bank by the landlord. Canit be enforceable when the borrower defaulted!Manojkumar G January 11, 2015Yes!! Whene ever it was mortgaged, the rights of property vested with the bank. So it can take any type of decision.vicky January 5, 2015 Replyi got the possession notice from the bank. and cmm ordered and appointeda advocate to take possession .. can i still pay half or full amount and comeover this trouble? please suggest the best way.. the circle rate of the propertyis five times higher then the loaned amount and market value is 10 timeshigherManojkumar G January 11, 2015Yes.. U can still repay and stop all the processes no need to the entire amount even. Regularise the account first and thencontinue by repaying EMIsG.R.Krishna January 10, 2015 ReplyIs it safe to buy a auctioned flat were the borrower has absconded and I the lesse of the flat since 9 years. What are the implications.r c garg January 12, 2015 Reply1.can the appeal before d.r.t. be filed after the date of auction for sale undersarfaesi act2002 ? 2. can d.r.t. cancel the sale deed already registeredsarfaesi act ?hemant khadke January 30, 2015 ReplySir, if memorandum of deposdeposits title is not executed in that case bank issue a demand notice and further action like physical possessionunder SARFAESI Act . please reply on mail idMahaveer February 2, 2015 ReplyI am pursuing a property which was purchased from the bank under surfaceact now there was a typographical error while issuing the sale certificate the survey number was wrongly mentioned on it . Now after six yearsfighting with the bank they are finally ready to give an addendum but basedon the rules the sale certificate needs to be registered within 120 days nowsince there was this typographical error the sub registrar refused to registerthe same. Now my doubts area.can this document still be registered..????b.What if the said document couldnt be registered how can i posses same. what would be the procedure to follow.c.Will there be any complications as the property is not yet transferred to rightful owners due to the negligence of the bank, also the bank is not readyto issue a fresh certificate they said they can just issue an addendum.I am desperately in need of the property but need to follow the rules and thenacquire please helprishi raj February 2, 2015 Replyin year 2002 i had given a guarantee to a company for the value of propertyworth 30cr . it was a continuing guarantee , in year 2009 given notice to bankto withdraw my guarantee ,on the day of notice bank didnt apply CLYTONrule and adamant that a continuing guarantee cannot be revoked . later inspection of documents in the bank it was discovered that my signature guarantee deed yr 2009 and some other concerned documents were foundto be forged . forgery also proven by govt lab . FIR against the bank officialsalso lodged and investigation in process. year 2013 CDR package proposedand i didnt participate and sign . case in DRT . we also approached civil court. recently bank given auction notice in newspaper to sell property withoutinforming me . please comment . what is jurisdiction of court ?rj February 12, 2015 ReplyIn case of assets sold under the ACT what happens to the employeesworking in the asset (immovable property) prior to the sale?NameEmailCommentAdd CommentBank PO Study MaterialGovernment Schemes in IndiaMarketing Aptitude for Bank POComputer AwarenessBlocked byContentKeeper!URLBlocked googleads.g.doubleclick.net/pagead/adsCategory Advertising (Global)Username 161905/tatasteelGKTODAY'S GS TEST SERIES 2015FOLLOW GKTODAYBANKING EXAMS MATERIALGeneral Studies Prelims Mock Test Series2015GK Today2,900 Copyright 2009-2015 GKToday | All Rights Reserved | About Us | Terms & Condition, Disclaimer | Contact Us || ' ' ||Privacy & Shipping Policy | Cancellation & Refund Policy | Jobs@GKToday