Whether an appeal can be filed in the Debts Recovery Appellate Tribunals against orders of the Debts Recovery Tribunals?

Answer: An appeal can be filed in the Debts Recovery Appellate Tribunal against orders of the Debts Recovery Tribunal. Section 18(1) of Sarfaesi Act, 2002

Who can file an appeal to the Debts Recovery Appellate Tribunals against orders of Debts Recovery Tribunals?

Answer: Any person aggrieved by any order passed by the Debts Recovery Tribunal under Section 17 of the Sarfaesi Act, 2002 may file an appeal to the Debts Recovery Appellate Tribunal. Section 18(1) of Sarfaesi Act, 2002

Whether an appeal can be filed to Debts Recovery Appellate Tribunals against an interim or interlocutory order of Debts Recovery Tribunals?

Answer: An appeal can be filed to Debts Recovery Appellate Tribunals against an interim or interlocutory order of Debts Recovery Tribunals and also against the final order of the Debts Recovery Tribunal.

What is the prescribed period for filling an appeal to the Debts Recovery Appellate Tribunals against the order of Debts Recovery Tribunals?

Answer: The prescribed period for filling an appeal to the Debts Recovery Appellate Tribunals is thirty days from the date of receipt of the order of filling an appeal to the Debts Recovery Tribunals. For practical purposes, the period of thirty days is calculated from the date of the order excluding the period taken in obtaining the certified copy of the order.

Whether Debts Recovery Appellate Tribunal can admit an appeal filed after the limitation period of thirty days after condoning the delay in filing the appeal?

Answer: The Debts Recovery Appellate Tribunal has the power to condone the delay in filing the appeal against order passed by Debts Recovery Tribunals in appropriate cases where sufficient cause has been shown for condonation of delay in filing the appeal and thus, Debts Recovery Appellate Tribunal can admit an appeal filed after the limitation period of thirty days.

Whether for the purpose of filling an appeal to the Debts Recovery Appellate Tribunal against an order of Debts Recovery Tribunal, the Borrower has to make any pre-deposit?

Answer: T

Who can file an application in the Debts Recovery Tribunal Section 17 of Sarfaesi Act, 2002?

Answer : The borrower, that is, the principal debtor, the guarantor and the mortgagor and any other person aggrieved by the measures under Section 13(4) of Sarfaesi Act, 2002 (for example Tenant) may move the Debts Recovery Tribunal under Section 17 of Sarfaesi Act, 2002.

Whether an auction purchaser can file an application under Section 17 of the Sarfaesi Act, 2002?

Answer : It has been held by Supreme Court of India in the case of Agarwal Tracom Pvt. Ltd. Versus Punjab National Bank, reported in (2018)1 D.R.T.C Page 169(Supreme Court) that if the auction purchaser is aggrieved by any of the steps and measure taken by the secured creditor like forfeiture of earnest money, can file an application under Section 17 Of Sarfaesi Act, 2002.

Whether a third party, who is neither a Borrower nor guarantor nor mortgagor, can file an application under Section 17 of Sarfaesi Act, 2002 in the Debts Recovery Tribunal?

Answer : A third party, who is neither a Borrower nor guarantor nor mortgagor, can file an application under Section 17 of Sarfaesi Act, 2002 in the Debts Recovery Tribunal, provided he is aggrieved by the steps and measures taken by the secured creditor under Section 13(4) of Sarfaesi Act, 2002.

There are many Debts Recovery Tribunals in India. How to select the Debts Recovery Tribunal in which your application under Section 17 of Sarfaesi Act, 2002 should be filed?

Answer : The borrower including guarantor or mortgagor and any other aggrieved person may file the application under Section 17(1) of the Sarfaesi Act, 2002 before the Debts Recovery Tribunal within the local limits of whose jurisdiction:
(a) the cause of action, wholly or in part, arises;
(b) where the secured asset is located; or
(c) the branch or any other office of a bank or financial institution is maintaining an account in which debt claimed is outstanding for the time being. Section 17(1A) of Sarfaesi Act, 2002.

What is the power of Debts Recovery Tribunals after receiving the application under Section 17 of Sarfaesi Act, 2002?

Answer : After an application under Section 17(1) of Sarfaesi Act, 2002 is filed in Debts Recovery Tribunal, the Debts Recovery Tribunal is to consider whether any of the measures taken by the secured creditor under Section 13(4) of Sarfaesi Act, 2002 for enforcement of security interest are in accordance with the provisions of Sarfaesi Act, 2002 and the rules made thereunder or not. Section 17(2) of Sarfaesi Act, 2002.

If the Debts Recovery Tribunal find that the steps and measures taken by the Secured Creditor are not in accordance with law, what reliefs can be given to the Borrower?

Answer: If the Debts Recovery Tribunal finds that any of the measures taken by the secured creditor under Section 13(4) of the Sarfaesi Act, 2002 and the Rules thereunder, are not in accordance with law, the Debts Recovery Tribunal may declare such measures to be illegal and invalid and direct restoration of possession to the borrower or to the other aggrieved person who had filed the application under Section 17(1) of the Sarfaesi Act, 2002. Section 17(3) of Sarfaesi Act, 2002.

If the Debts Recovery Tribunal does not find any illegality in the steps and measures taken by the Secured Creditor, what order can be passed by the Debts Recovery Tribunal?

Answer : If the Debts Recovery Tribunal finds that the measures taken by the secured creditor under Section 13(4) of the Sarfaesi Act, 2002 are in accordance with law, it shall make such a declaration and secured creditor will be entitled to take further Sarfaesi action in the matter. Section 17(4) of Sarfaesi Act, 2002.

Whether Sarfaesi Act, 2002 provides any time limit for disposal of the application under Section 17(1) of Sarfaesi Act, 2002?

Answer : An application under Section 17(1) of Sarfaesi Act, 2002 is to be dealt with by the Debts Recovery Tribunal as expeditiously as possible and disposed of within sixty days. The period can be extended but should not exceed four month. Section 17(5) of Sarfaesi Act, 2002.

If the Debts Recovery Tribunal is not able to dispose of the application under Section 17(1) of Sarfaesi Act, 2002 within the time limit fixed by Section 17(5) of Sarfaesi Act, 2002, what will be its effect?

Answer: As a matter of fact, the effect is nil. On the ground of non-disposal of Section 17(1) application within a period of four months, the said application can neither be dismissed nor allowed.

Whether Debts Recovery Appellate Tribunals can direct Debts Recovery Tribunals to dispose of application under Section 17(1) of Sarfaesi Act, 2002 expeditiously?

Answer: If any party to the application under Section 17(1) of the Sarfaesi Act, 2002 makes any application to Debts Recovery Appellate Tribunal for expeditious disposal of Section 17(1) application, the Debts Recovery Appellate Tribunal may direct Debts Recovery Tribunal to dispose of Section 17(1) application expeditiously. Section 17(6) of Sarfaesi Act, 2002.

What procedure should be followed by Debts Recovery Tribunals while disposing of application under Section 17(1) of Sarfaesi Act, 2002?

Answer : The Debts Recovery Tribunal should follow the procedure laid down in Sarfaesi Act, 2002 and the Security Interest (Enforcement) Rules 2002 for disposal of application under Section 17(1) of Sarfaesi Act, 2002. If any procedure has not been laid down in Sarfaesi Act, 2002 and the Rules thereunder, Debts Recovery Tribunal shall follow the provisions of Recovery of Debts and Bankruptcy Act 1993 and the Rules made thereunder. Section 17(7) of Sarfaesi Act, 2002.

Whether Sarfaesi Action can be taken in respect of any Security Interest created in agricultural land?

Answer: Under Section 31 of Sarfaesi Act, 2002, Sarfaesi Action cannot be taken in respect of any Security Interest created in agricultural land.

What is the meaning of agricultural land for the purpose of Sarfaesi Act, 2002?

Answer: The expression agricultural land has not been defined in Sarfaesi Act, 2002. We have to rely on judgements about the meaning of ‘agricultural land’ in connection with other Acts

In CWT Versus Officer In-charge (Court of Wards) reported in (1976)3 Supreme Court Cases Page 864, Supreme Court held as follows:-

“We agree that the determination of the character of land, according to the purpose for which it is meant or set apart and can be used, is a matter which ought to be determined on the facts of each particular case. What is really required to be shown is the connection with an agricultural purpose and user and not the mere possibility of user e of land, by some possible future owner or possessor, for an agricultural purpose. It is not the mere potentiality, which will only affect its valuation as part of “assets”, but its actual condition and intended user which has to be seen for purposes of exemption from wealth tax. One of the objects of the exemption seemed to be to encourage cultivation or actual utilisation of land for agricultural purposes. If there is neither anything in its condition, nor anything in evidence to indicate the intention of its owners or possessors, so as to connect it with an agricultural purpose, the land could not be “agricultural land” for the purposes of earning an exemption under the Act. Entries in revenue records are, however, good prima facie evidence.”

In the case of Kunjaukutty Sahib Versus State of Kerala reported in (1972)2 Supreme Court Cases Page 364, Supreme Court held as follows:-

“We suppose that something or other can be, and often is, grown on any vacant land, but that would not necessarily make it agricultural land for our purposes. To give an example the possibility of cultivating, or even the actual cultivation of, what is essentially a building site in the heart of a town would not make it agricultural land. It is the purpose for which it is held that determines its character and the existence of a few coconut trees or a vegetable patch on the land cannot alter the fact that it is held for purposes of building and not for purposes of agriculture.”

In the case of ITC Limited Versus Blue Coast Hotels Limited reported in (2018)15 Supreme Court Cases Page 99, the question of agricultural land under Sarfaesi Act, 2002, was directly involves. In this case the Supreme Court held inter alia as follows:-

“The purpose of enacting Section 31(i) and the meaning of the term “agricultural land” assume significance. This provision, like many others is intended to protect agricultural land held for agricultural purposes by agriculturists from the extraordinary provisions of this Act, which provides for enforcement of security interest without intervention of the Court. The plain intention of the provision is to exempt agricultural land from the provisions of the Act. In other words, the creditor cannot enforce any security interest created in his favour without intervention of the court or tribunal, if such security interest is in respect of agricultural land. The exemption thus protects agriculturists from losing their source of livelihood and income i.e. the agricultural land, under the drastic provision of the Act.”

Whether Sarfaesi Action can be taken in a case in which the amount due in less than twenty per cent of principal amount and interest thereon?

Answer: Under Section 31 of Sarfaesi Act, 2002, Sarfaesi Action cannot be taken in a case in which the amount due in less than twenty per cent of principal amount and interest thereon.

Whether Sarfaesi Action can be taken in respect of a lien on any goods, money or security given by or under the Indian Contract Act, 1872 or Sale of Goods Act, 1930 or any other law for the time being in force?

Answer: Under Section 31 of Sarfaesi Act, 2002, Sarfaesi Action cannot be taken in respect of a lien on any goods, money or security given by or under the Indian Contract Act, 1872 or Sale of Goods Act, 1930 or any other law for the time being in force.

Whether Sarfaesi Action can be taken in respect of a pledge of movables within the meaning of Section 172 of the Indian Contract Act, 1872 ?

Answer: Under Section 31 of Sarfaesi Act, 2002, Sarfaesi Action cannot be taken in respect of creation of any security in any aircraft as defined in clause(1) of Section 2 of Aircraft Act, 1934.

Whether Sarfaesi Action can be taken in respect of creation of any security in any aircraft as defined in clause(1) of Section 2 of Aircraft Act, 1934?

Answer: Under Section 31 of Sarfaesi Act, 2002, Sarfaesi Action cannot be taken in respect of creation of any security in any aircraft as defined in clause(1) of Section 2 of Aircraft Act, 1934.

Whether Sarfaesi Action can be taken in respect of creation of Security interest in any vessel as defined in clause (55) of Section 3 of Merchant Shipping Act, 1958?

Answer: Under Section 31 of Sarfaesi Act, 2002, Sarfaesi Action cannot be taken in respect of creation of Security interest in any vessel as defined in clause (55) of Section 3 of Merchant Shipping Act, 1958.

Whether Sarfaesi Action can be taken in respect of any Rights of unpaid seller under Section 47 of Sale of Goods Act, 1930?

Answer: Under Section 31 of Sarfaesi Act, 2002, Sarfaesi Action cannot be taken in respect of any Rights of unpaid seller under Section 47 of Sale of Goods Act, 1930.

Whether Sarfaesi Action can be taken in respect of any properties not liable to attachment (excluding the properties specifically charged with the debt recoverable under Sarfaesi Act, 2002) or Sale under the first proviso to sub section 1 of Section 60 of the Code of Civil Procedure, 1908?

Answer: Under Section 31 of Sarfaesi Act, 2002, Sarfaesi Action cannot be taken in respect of any properties not liable to attachment (excluding the properties specifically charged with the debt recoverable under Sarfaesi Act, 2002) or Sale under the first proviso to sub section 1 of Section 60 of the Code of Civil Procedure, 1908.

Whether Sarfaesi Action can be taken in respect of any security interest for securing repayment of any financial asset not exceeding one lakh rupees?

Answer: Under Section 31 of Sarfaesi Act, 2002, Sarfaesi Action cannot be taken in respect of any security interest for securing repayment of any financial asset not exceeding one lakh rupees.

What is the duty of secured creditor after the secured creditor receives representation and/or objection against the notice under Section 13(2) of Sarfaesi Act , 2002 ?

Answer: The secured creditor must consider the representation or objection of the borrower against the notice under Section 13(2) of Sarfaesi Act , 2002 and if the Secured Creditor finds that the representation or objection is not acceptable or tenable, he shall communicate within 15 days (7 days before 15.01.2013) the reasons for non – acceptance of the representation or objection to the borrower. The Supreme Court in the case of Mardia Chemicals Limited –Versus- Union of India, reported in (2004)4 Supreme Court Cases page 311, has held that there should be some meaningful consideration of the objection raised rather than to ritually reject them and proceed to take drastic measure under Sub Section 4 of Section 13 of the Sarfaesi Act , 2002.

If the Secured Creditor does not send any reply to the representation or objection of the borrower what consequences will follow?

Answer: A Secured Creditor cannot take any further steps and measures if he has not sent any reply to the representation or objection of the borrower. In the case of Amarnath Banerjee –versus- Central Bank of India (2013)1 Bankers Journal page 50, Bank was directed not to give effect to the possession notice till representation or objection is considered.

If the Secured Creditor gives reply to the representation or objection of the borrower beyond the period of 15 days (earlier 7 days) of the receipt of representation or objection, as mentioned in Section 13(3A) of the Sarfaesi Act , 2002 but gives a belated reply what will be the consequences?

Answer: It has been held that the period prescribed in Section 13(3A) of the Sarfaesi Act, 2002 for giving a reply to the representation or objection of the borrower is merely directory and not mandatory and Sarfaesi proceedings cannot be quashed on the ground of delay in giving reply to the representation or objection of the borrower. See Clarity Gold (P) Ltd. Limited – Versus – State Bank of India AIR 2011 Bombay page 42

If the Secured Creditor rejects the representation or objection of the borrower without due consideration, what will be its effect ?

Answer: If the Debts Recovery Tribunals finds that the representation or objection of the borrower was rejected without due consideration, it can set aside the steps taken under Section 13(4) of Sarfaesi Act, 2002. See the case of Suchanda Chowdhury –Versus- UCO Bank reported in AIR 2011 Calcutta Page 3

If the Secured Creditor rejects the representation or objection of the borrower without assigning any reason, what will be its effect?

Answer: If the Secured Creditor gives a reasonless reply rejecting the representation or objection of the borrower, the Bank may be restrained from taking any further action in the matter. See the case of Raja Associates –Versus- Union of India reported in AIR 2008 Karnataka page 136.

Whether the borrower can move Debts Recovery Tribunal under Section 17 of Sarfaesi Act, 2002 against the reply of the Secured Creditor rejecting the representation or objection of the borrower?

Answer: The Proviso to Sub-Section 3A of Section 13 of Sarfaesi Act, 2002 provides that the reasons communicated by the secured creditor in its reply to the borrower does not confer any right on the borrower to move DRT under Section 17 of Sarfaesi Act, 2002. However, it has been held in the case of Prime Timbers –Versus- State Bank of India reported in AIR 2010 Calcutta page 40, that the rejection of a representation or objection can be challenged in Debts Recovery Tribunal under Section 17 of Sarfaesi Act, 2002. In other words, the rejection of a representation or objection can be challenged by the borrower at an appropriate stage, when he moves DRT under Section 17 of Sarfaesi Act, 2002 against any subsequent steps or measures like taking over of possession of the mortgaged assets or issuance of sale advertisement.

If a borrower in his representation against the notice under Section 13(2) of Sarfaesi Act, 2002 proposes restructuring, and the Bank reject such representation, can the borrower challenge the same under Section 17 of Sarfaesi Act, 2002 ?

Answer: It has been held by the Calcutta High Court in the case of Prime Trimbers –Versus- State Bank of India reported in AIR 2010 Calcutta page 40 that if the borrower, in his representation proposes restructuring and the Bank rejects the proposal, the borrower can challenge the same under Section 17 of Sarfaesi Act, 2002 at the appropriate stage.

What is the time limit for making representation or objection by the borrower against the notice under Section 13(2) of Sarfaesi Act, 2002 ?

Answer: It has been held by the Calcutta High Court in the case of Prabir Chakraborty –Versus- State of West Bengal reported in AIR 2011 Calcutta page 118, that the representation or objection by the borrower against the notice under Section 13(2) of Sarfaesi Act, 2002 must be made within 60 days from the date of the said notice.

What is the meaning of enforcing Security Interest without intervention of any Court or Tribunal ?

Answer: The Secured Creditor can take possession of secured assets and sell the same without filing any case in any Court or Tribunal. However the secured creditor cannot act as per its own sweet will.

In the case of Mathew Varghese Versus M. Amrita Kumar reported in (2014)5 Supreme Court Cases Page 610, Supreme Court held that whatever may be the extent of borrowing, the secured creditor acts as a Trustee and the power under Sarfaesi Act, 2002 cannot be exercised arbitrarily, whimsically to the utter disadvantage of the borrower.

Whether a Secured Creditor can enforce Security Interest without intervention of Court or Tribunal ?

Answer: The Secured Creditor can enforce the Security Interest created in favour of the Secured Creditor without the intervention of any Court or Tribunal, that is, without filing a case in a Court or Tribunal. Section 13(1) of Sarfaesi Act, 2002

When can a Secured Creditor take action under Sarfaesi Act, 2002?

Answer: A secured Creditor can take action under the Sarfaesi Act, 2002 only if a Borrower, who is under a liability to a Secured Creditor and if Security Interest has been created in respect of his property in favour of the Secured Creditor, makes default in repayment of the Secured Debts and his loan account is classified as non-performing asset. If these conditions are not satisfied, Sarfaesi action cannot be taken. See Section 13(2) of Sarfaesi Act, 2002

Whether Sarfaesi steps and measures can be taken if mortgage or hypothecation has not been created or has not been legally created?

Answer: Sarfaesi steps and measures cannot be taken if Security Interest (mortgage, hypothecation, etc) has not been created in favour of the secured creditor as security for the loan. Similarly, even if the Security Interest has been created but has not been created in accordance with law and is therefore invalid, Sarfaesi action cannot be taken. See Section 13(2) of Sarfaesi Act, 2002.

What is the meaning of security interest ?

Answer: Security interest, inter alia, means mortgage, charge, hypothecation, assignment or any other right , title or interest of any kind on tangible assets retained by the secured creditor. Section 2(1)(zf) of Sarfaesi Act, 2002.

Whether action under Sarfaesi Act, 2002 can be taken in respect of property of the Borrower which has not been mortgaged or Hypothecated ?

Answer: Action under Sarfaesi Act, 2002 cannot be taken in respect of property of the Borrower which has not been mortgaged or Hypothecated.

Whether action under Sarfaesi Act, 2002 can be taken in respect of personal property of the guarantor , which has not been mortgaged or Hypothecated?

Answer: Action under Sarfaesi Act, 2002 cannot be taken in respect of personal property of the guarantor , which has not been mortgaged or Hypothecated

Whether action under Sarfaesi Act, 2002 can be taken in respect of personal property of the directors of the Borrower Company which has not been mortgaged or Hypothecated?

Answer: Action under Sarfaesi Act, 2002 cannot be taken in respect of personal property of the directors of the Borrower Company which has not been mortgaged or Hypothecated

Whether action under Sarfaesi Act, 2002 can be taken in respect of personal property of the partners of the Borrower firm which has not been mortgaged or Hypothecated?

Answer: Bank and Financial Institution cannot take action under Sarfaesi Act, 2002 in respect of personal property of the partners of the Borrower firm which has not been mortgaged or Hypothecated.

Whether action under Sarfaesi Act, 2002 can be taken in respect of personal property of the owner of the sole proprietorship business of the borrower, which has not been mortgaged or Hypothecated?

Answer: Action under Sarfaesi Act, 2002 cannot be taken in respect of personal property of the owner of the sole proprietorship Borrower Company which has not been mortgaged or Hypothecated

Whether action under Sarfaesi Act, 2002 can be taken in respect of personal property of the relatives of the Borrower, like husband, wife, father, mother, Son, daughter, etc., which has not been mortgaged or Hypothecated?

Answer: Action under Sarfaesi Act, 2002 cannot be taken in respect of personal property of the relatives of the Borrower, like husband, wife, father, mother, Son, daughter, etc., which has not been mortgaged or Hypothecated.

Whether Sarfaesi Action can be taken in respect of a flat in a cooperative society?

Answer: Sarfaesi Action can be taken in respect of a flat in a cooperative society.

In the case of Hill Properties Limited Versus Union Bank of India reported in (2014)1 DRTC Page 155, Supreme Court held that Multi-storeyed flats are being constructed and sold by Companies registered under the Companies Act as well as the Co-operative Societies registered under the Registration of Co-operative Societies Act etc. Flats are being purchased by people by either becoming members of the Co-operative Society or shareholders of the Company and the flat owners have an independent right as well as the collective right over the flat complex. Flat owners’ right to dispose off its flat is also well recognized, and one can sell, donate, leave by Will or let out or hypothecate his right. However, the Supreme Court while holding that a flat in a cooperative society can be sold under Sarfaesi Act, 2002, gave a valuable right to the owner of the flat by observing as follows:-

“We may reiterate that the Appellant will certainly have the right of pre-emption, but not at any value lesser than the market value of the Suit flat at the time of the sale.”

Whether Sarfaesi steps and measures can be taken if there is no default in the loan account?

Answer: The banks and Financial Institution cannot take Sarfaesi steps and measures if there is no default in the loan account. For example, there may be default as per the original repayment schedule of the loan. However, if the loan account has been restructured and fresh repayment schedule has been fixed and if the borrower is making payment as per the fresh repayment schedule, it cannot be said that the borrower has committed default in repayment of the loan and hence Sarfaesi action cannot be taken.

Whether Sarfaesi steps and measures can be taken if the loan account has not been classified as NPA or has not been legally classified as NPA ?

Answer: Banks and Financial Institutions cannot take Sarfaesi steps and measures unless the loan account has become NPA and has been classified as NPA. Moreover, if the Banks and Financial Institutions have classified a loan account as NPA even though the loan account has not actually become NPA, Sarfaesi action cannot be taken.

Whether the secured creditor can take Sarfaesi Action after obtaining a certificate in Original Application under the Recovery of Debts and Bankruptcy Act, 1993 ?

Answer: It has been held by Madras High Court in the case of Kirubanandum Versus State Bank of India reported in (2013)1 DRTC page 117, Madras High Court that Sarfaesi Action can be taken after Certificate has been issued in Original Application filed by the secured creditor under the Recovery of Debts and Bankruptcy Act, 1993.

A person has given guarantee but has not himself borrowed any money from the bank. Whether action can be taken under Sarfaesi Act,2002 against a mere guarantor ?

Answer: Sarfaesi Action can be taken against a mere guarantor who is not the borrower. However, the guarantor must have mortgaged/ hypothecated his personal assets as security for the loan taken by the borrower. Under Section 2(1)(f) of Sarfaesi Act,2002 , the expression borrower includes a person who has given a guarantee as security for the financial assistance granted by any bank or financial institution. Hence, under Sarfaesi Act, 2002, borrower includes a guarantor and Sarfaesi Action can be taken against a guarantor, if he has mortgaged his personal property for the loan taken by another person.

A person has not borrowed any money from the bank. He has also not given any guarantee. However he has mortgaged a property belonging to him in favour of the bank. Whether action can be taken under Sarfaesi Act, 2002 against a mere mortgagor?

Answer: Sarfaesi Action can be taken against a person who has mortgaged and hypothecated his personal property for the loan taken by another person.

Under Section 2(1)(f) of Sarfaesi Act,2002 , the expression borrower includes a person who has created any mortgage as security for the financial assistance granted by any bank or financial institution. Hence under Sarfaesi Act, 2002, borrower includes a mortgagor and Sarfaesi Action can be taken against a mortgagor, if he has mortgaged his personal property for the loan taken by another person.

Whether Chief Metropolitan Magistrate or District Magistrate can take possession of a residential premises by ousting a tenant who is living there with his family?

Answer : Chief Metropolitan Magistrate or District Magistrate can take possession of a residential premises by ousting a tenant who is living there with his family.

Whether a tenant can be evicted by Secured Creditor under Sarfaesi Act, 2002?

Answer : In appropriate cases, a tenant can be evicted by Secured Creditor under Sarfaesi Act, 2002

Whether a tenant can get any relief by filing an application in Debts Recovery Tribunal under Section 17 of the Sarfaesi Act, 2002

Answer : Previously, there was some confusion as to whether a tenant can file an application in Debts Recovery Tribunal under Section 17 of the Sarfaesi Act, 2002 to protect his tenancy rights. However, Sub- Section 4A was inserted in Section 17 Sarfaesi Act, 2002 in the year 2016. Section 17(4A) of Sarfaesi Act, 2002 provides that on an application filed by a tenant under Section 17 of Sarfaesi Act, 2002, the Debts Recovery Tribunals shall have jurisdiction to examine whether lease or tenancy –

• has expired or stood determined; or
• is contrary to section 65A of the Transfer of Property Act, 1882 (4 of 1882); or
• is contrary to terms of mortgage; or
• is created after the issuance of notice of default and demand by the Bank under sub-section.

What is status of a tenant under Sarfaesi Act, 2002?

Answer : There are a number of decisions of the Supreme Court of India about the status of a tenant under Sarfaesi Act, 2002. In the case of Bajrang Shyam Sunder Agarwal Versus Central Bank of India reported in (2019)9 Supreme Court Cases Page 94, Supreme Court made a detailed discussion about the subject and held as follows :-

Page 103 Para12 – Issuance of Section 13(2) notice extinguishes the right of the mortgagor to lease the property under Section 65A of Transfer of Property Act.

Page 107 Para 24.1 – If a valid tenancy under law is in existence even prior to the creation of the mortgage, the tenant’s possession cannot be disturbed by the secured creditor by taking possession of the property. The lease has to be determined in accordance with Section 111 of Transfer of property Act for determination of leases. In the case of a pre-mortgage tenancy, it will be presumed that the Bank has knowingly taken the risk. In such a situation, the rights of a rightful tenant cannot be compromised under the Sarfaesi Act proceedings.

Page 107 Para 24.2 – Tenancy after mortgage but just before Section 13(2) has to satisfied the conditions of Section 65A of Transfer of property Act.

Page 107 Para 24.3- If a tenant claims that he is entitled to possession for more than one year, it has to be supported by a registered instrument. If the tenant relies on unregistered instrument or an oral agreement, the tenant is not entitled to possession for more than the period prescribed under Section 107 of Transfer of Property Act.

What are the aims and objects of Sarfaesi Act, 2002?

Answer: Sarfaesi Act, 2002 gives power to Banks And Financial Institutions to take possession of mortgaged and hypothecated assets and sell the same without filing a case in a Court or Tribunal. However, under Sarfaesi Act, 2002, the Banks and Financial Institutions can not take possession of assets of the borrower and guarantors, which are not mortgaged and hypothecated.

Whether Sarfaesi Act, 2002 is constitutionally valid ?

Answer: Supreme Court of India has held that Sarfaesi Act, 2002 is constitutionally valid. In the case of Mardia Chemicals Limited – versus – Union of India reported in (2004)4 Supreme Court Cases page 341, the Supreme Court upheld the validity of Sarfaesi Act, 2002 except Sub-Section 2 of Section 17, which was declared ultra vires. The said Sub-Section provided for deposit of 75% of the amount claimed by the Secured Creditor before entertaining an application under Section 17 of the Sarfaesi Act, 2002 by Debts Recovery Tribunal

Whether Cooperative Banks are entitled to take action under Sarfaesi Act, 2002?

Answer: Previously, there was some confusion as to whether Cooperative Banks can take Sarfaesi Action. Now the controversy has been settled by Supreme Court of India holding that Cooperative Banks are entitled to take action under Sarfaesi Act, 2002. It was held by a 5 Judge Bench of the Supreme Court of India in the case of Pandurang Ganpati Chaugule Versus Vishwasrao Patil Murgud Sahakari Bank Limited reported in (2020)9 Supreme Court Cases Page 215 , that the Cooperative Banks under the State Legislation and multi state Cooperative Banks are Banks under Section 2(1)( c) of the Sarfaesi Act, 2002. Thus, they are entitled to take action under Sarfaesi Act, 2002.

Whether a borrower can file a suit challenging the steps and measures taken by the Secured Creditor under Sarfaesi Act, 2002 ?

Answer: In the case of Mardia Chemicals Ltd. –Versus- Union of India reported in (2004)4 Supreme Court Cases page 311, the Supreme Court held as follows:-

“To a very limited extent, jurisdiction of the civil court can also be invoked, where for example, the action of the secured creditor is alleged to be fraudulent or his claim may be so absurd and untenable which may not require any probe whatsoever or to say precisely to the extent the scope is permissible to bring an action in the civil court in the cases of English mortgages.”

However, practically a borrower is never allowed to file a suit on the ground of fraud holding that pleadings are not sufficient to establish fraud. In a number of cases, Supreme Court has not allowed filing of suit on the ground of fraud.

Jagdish Singh -versus- Heeralal reported in (2014)1 Supreme Court Cases page 479

Sree Anandakumar mills limited -versus- Indian overseas Bank reported in (2019)14 Supreme Court Cases page 788

Electrosteel Castings Limited -versus- U.V.Asset Reconstruction Co. Ltd. reported in (2022)2 Supreme Court Cases page 573

Whether a borrower can challenge Sarfaesi steps and measures in Consumer Forum?

Answer: It has been held in the case of HDFC Bank –Versus- Consumer Forum (2011)2 Bank. Journal page 320 that Sarfaesi action cannot be challenged in Consumer Forum.

If there are many Secured Creditors , whether a minor Secured Creditor can take Sarfaesi Action without the consent of major Secured Creditor ?

Answer: A Secured Creditor can not take Sarfaesi action unless the taking of Sarfaesi action is agreed upon by Secured Creditors representing not less than sixty percent in value of outstanding amount and such action shall be binding on all the Secured Creditor. Section 13(9) of Sarfaesi Act, 2002

Whether after sale of the Secured Assets , the Secured Creditor can take Recovery Action for balance outstanding dues ?

Answer: The Secured Creditor is entitled to file an application in Debts Recovery Tribunal or a competent Court as the case may be for recovery of the balance amount from the borrower. Section 13(10) of Sarfaesi Act, 2002

Whether the Borrower has a right to receive compensation and costs from the Secured Creditor and whether Borrower can get back possession of the property , if the Secured creditor had illegally taken possession of the property from the Borrower ?

Answer: Section 19 of Sarfaesi Act, 2002 provides that if the Debts Recovery Tribunal holds that possession of the secured assets was not taken by the secured creditor in accordance with law and if the Debts Recovery Tribunal directs the secured creditor to return back the possession of the secured asset to the borrower or to any other aggrieved person, who had file the application under section 17 of the Sarfaesi Act, 2002, the borrower or any other aggrieved person shall be entitled to the payment of such compensation or costs as may be determined by the Debts Recovery Tribunal.

Whether Civil Court has any Jurisdiction to entertain any suit or proceeding in respect of the steps and measures taken or to be taken under Sarfaesi Act, 2002?

Answer: Section 34 of Sarfaesi Act, 2002 provides that no civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which a Debts Recovery Tribunal or the Appellate Tribunal is empowered by or under this Act to determine and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act or under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.

Whether Limitation Act 1963 applies to Sarfaesi Act, 2002?

Answer: Section 36 of Sarfaesi Act, 2002 provides no secured creditor shall be entitled to take all or any of the measures under sub-section (4) of section 13, unless his claim aim in respect of the financial asset is made within the period of limitation prescribed under the Limitation Act, 1963.

What would happen to the excess amount in case of surplus after sale of Secured Asset?

Answer: After sale of the secured assets and after liquidation of in entire claim of the secured creditor, if any surplus is left, the same should be refunded to the borrower or mortgager, as the case maybe

What is the meaning of Authorised Officer?

Answer: According to Rule 2(a) of the Security Interest (Enforcement) Rules 2002, Authorised Officer means an officer not less than a chief manager of a public sector bank or equivalent, as specified by the Board of Directors or Board of Trustees of the secured creditor or any other person or authority exercising powers of superintendence, direction and control of the business or affairs of the secured creditor, as the case may be, to exercise the rights of a secured creditor under the Act.

What is the meaning of Approved Valuer?

Answer: According to Rule 2(d) of the Security Interest (Enforcement) Rules 2002, Approved Valuer means a person registered as a valuer under Section 34AB of Wealth Tax Act, 1957 and approved by the Board of Directors or Board of Trustees of the secured creditor, as the case may be:

What is the basic definition of Non-Performing Assets (NPA)?

Answer: Non-performing asset is a loan account which is in default. In other words, a loan account, on which instalments of principle and/or interest is overdue and has not been paid.

Answer: Non-performing Asset means a loan account which has been classified as Non-performing asset by a bank or financial institution in accordance with the directions and guidelines issued by Reserve Bank of India. If a bank or financial institution is regulated by some other authority or body, then by the directions and guidelines issued by such authority. Section 2(1)(o) of Sarfaesi Act, 2002

Answer: In the case of Keshavlal Khemchand & Sons Pvt. Ltd. Versus Union of India reported in (2015)4 Supreme Court Cases Page 770, Supreme Court has held that under the various circulars of Reserve Bank of India and also other Regulators, NPA is an asset which ceases to generate income for the creditors (banks or financial institutions) i.e. a loan or advances made by the banks on which interest and/or instalment of principal amount is overdue for a specified period depending upon the nature of the loan or advance—whether the loan or advance is a term loan or agricultural loan, money advanced on bill discounting, etc.

Whether the provisions about Non-Performing Assets (NPA), as contained in Sections 2(1)(o) of Sarfaesi Act, 2002, are legally valid?

Answer: Supreme Court of India has held that the provisions about Non-Performing Assets (NPA), as contained in Section 2(1)(o) of Sarfaesi Act, 2002 are legally valid. This was held in the case of Keshavlal Khemchand versus Union of India reported in (2015)4 Supreme Court Cases page 770.

Which is the relevant circular of Reserve Bank of India about Non-performing Asset (NPA)?

Answer: Reserve Bank of India’s Master Circular No. RBI/2022-23/15 == DOR.STR.REC.4/21.04.048/2022-23 dated 01.04.2023 on Prudential norms on Income Recognition, Asset classification and Provisioning pertaining to Advances

What is the definition of Non-performing Asset according to the circular of Reserve Bank of India?

Answer: According to the circular of Reserve Bank of India about Non-performing Assets (NPA), an asset, including a leased asset, becomes non-performing when it ceases to generate income for the bank. The said circular of Reserve Bank of India further provides that—

• Answer: interest and/or instalment of principal remains overdue for a period of more than 90 days in respect of a term loan,
• Answer: the account remains ‘out of order’ in respect of an Overdraft/Cash Credit (OD/CC),
• Answer: the bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted,
• Answer: the instalment of principal or interest thereon remains overdue for two crop seasons for short duration crops,
• Answer: the instalment of principal or interest thereon remains overdue for one crop season for long duration crops,
• Answer: the amount of liquidity facility remains outstanding for more than 90 days in respect of a securitisation transaction,
• Answer: overdue receivables representing positive mark-to-market value of a derivative contract remain unpaid for a period of 90 days from the specified due date.

When the Overdraft/Cash credit loan account becomes out of order and thus, becomes NPA?

Answer: An Overdraft/Cash Credit loan account is treated as ‘out of order’ if:

• Answer: The outstanding balance in the CC/OD account remains continuously in excess of the sanctioned limit/drawing power for 90 days, or
• Answer: There are no credits continuously for 90 days, or
• Answer: The credits are not enough to cover the interest debited during the previous 90 days period.

According to the circular of Reserve Bank of India about Non-performing Assets, there are how many kinds of Non-performing Assets?

Answer: According to the RBI circular, there are three categories of Non-performing Assets:

• Answer: Substandard Assets
• Answer: Doubtful Assets
• Answer: Loss Assets

What is the meaning of Substandard Assets?

Answer: A substandard asset is one which has remained NPA for a period less than or equal to 12 months.

What is the meaning of Doubtful Assets?

Answer: An asset is classified as doubtful if it has remained in the substandard category for a period of 12 months.

What is the meaning of Loss Assets?

Answer: A loss asset is one where loss has been identified by the bank or internal or external auditors or RBI inspection, but the amount has not been written off wholly. It is considered uncollectible and of little value, though it may have some salvage or recovery value.

Whether a loan account with temporary deficiency can be classified as Non-performing Assets?

Answer: No. The classification of an asset as NPA should be based on the record of recovery. Temporary deficiencies such as non-availability of stock statements, non-renewal of limits on due dates, or minor excess over limits do not warrant NPA classification.

Whether NPA loan account can be updated?

Answer: A loan classified as NPA can be upgraded to ‘standard’ only if all overdue interest and principal are fully repaid. If the borrower has multiple credit facilities, all overdue amounts across all facilities must be paid for reclassification as standard asset.

Whether the loan account is classified as NPA borrower-wise or facility-wise?

Answer: Classification is borrower-wise. All facilities and investments of a borrower must be treated as NPA if one account becomes irregular.

What is the procedure for taking possession of the movable secured assets?

Answer: According to Rule 4(1) of the Security Interest (Enforcement) Rules 2002, where the possession of the secured assets to be taken by the secured creditor are movable property in possession of the borrower, the authorised officer shall take possession of such movable property in the presence of two witnesses after a Panchnama drawn and signed by the witnesses.

What is the procedure for sale of movable secured assets?

Answer: According to Rule 6(1) of the Security Interest (Enforcement) Rules 2002, the Authorised Officer may sell the movable secured assets taken possession under sub-rule (1) of rule 4 in one or more lots by adopting any of the following methods to secure maximum sale price for the assets, to be so sold— obtaining quotations from parties dealing in the secured assets or otherwise interested in buying such assets; or inviting tenders from the public; or holding public auction including through e-auction mode; or by private treaty.

Whether advertisement in newspapers is necessary for sale of movable secured assets?

Answer: According to proviso to Rule 6(2) of the Security Interest (Enforcement) Rules 2002, if the sale of movable secured asset is being effected by either inviting tenders from the public or by holding public auction, the secured creditor shall cause a public notice in the Form given in Appendix II-A to be published in two leading newspapers, including one in vernacular language having wide circulation in the locality.

Whether before selling movable secured assets, a notice is required to be given to the borrower?

Answer: According to Rule 6(2) of the Security Interest (Enforcement) Rules 2002, the Authorised Officer has to serve to the borrower a notice of thirty days for sale of the movable secured assets. However, the second proviso to Rule 6(2) of Security Interest (Enforcement) Rules 2002 provides that if sale of movable property by any one of the methods specified under sub-rule (1) fails and the sale is required to be conducted again, the authorised officer shall serve, affix and publish notice of sale of not less than fifteen days to the borrower for any subsequent sale.

When the Authorised Officer issues a sale certificate in respect of the sale or auction of movable secured assets?

Answer: According to Rule 7(2) of the Security Interest (Enforcement) Rules 2002, on payment of sale price, the authorised officer shall issue a certificate of sale in the prescribed form as given in Appendix III to Security Interest (Enforcement) Rules 2002, specifying the movable secured assets sold, price paid and the name of the purchaser and thereafter the sale shall become absolute. The certificate of sale so issued shall be prima facie evidence of title of the purchaser.

What is the procedure for taking possession of immovable secured assets?

Answer: According to Rule 8(1) of the Security Interest (Enforcement) Rules 2002, where the secured asset is an immovable property, the authorised officer shall take or cause to be taken possession, by delivering a possession notice prepared as nearly as possible in Appendix-IV to the said rules, to the borrower and by affixing the possession notice on the outer door or at a conspicuous place of the property.

Whether after taking possession of immovable secured assets, the Authorised Officer is required to make any publication in newspapers?

Answer: According to Rule 8(2) of the Security Interest (Enforcement) Rules 2002, the possession notice shall also be published, as soon as possible but in any case not later than seven days from the date of taking possession, in two leading newspapers, one in vernacular language having sufficient circulation in that locality, by the authorised officer.

What should the Authorised Officer do, if he take actual possession of the immovable secured assets?

Answer: According to Rule 8(3) of the Security Interest (Enforcement) Rules 2002, in the event of possession of immovable property is actually taken by the authorised officer, such property shall be kept in his own custody or in the custody of any person authorised or appointed by him, who shall take as much care of the property in his custody as an owner of ordinary prudence would, under the similar circumstances, take of such property. According to Rule 8(4) of the Security Interest (Enforcement) Rules 2002, the authorised officer shall take steps for preservation and protection of secured assets and insure them, if necessary, till they are sold or otherwise disposed of.

Whether a borrower can challenge Sarfaesi steps and measures in Consumer Forum?

Answer: It has been held in the case of HDFC Bank –Versus- Consumer Forum (2011)2 Bank. Journal page 320 that Sarfaesi action cannot be challenged in Consumer Forum.

In how many ways, possession of the secured assets can be taken by the secured creditor?

Answer: It has been held by the Supreme Court of India in the case of Standard Chartered Bank Versus V. Noble Kumar reported in (2013)9 Supreme Court Cases Page 620, that a secured creditor can take possession in three ways –

By directly taking possession under Rule 8(1) of Security Interest ( Enforcement) Rules, 2002

By approaching Magistrate under Section 14 of Sarfaesi Act, 2002 if resistance is offered

By directly approaching Magistrate under Section 14 of Sarfaesi Act, 2002 without making attempt to take possession of its own.

Whether Sarfaesi Act and Sarfaesi Rules provide any guidelines as to when symbolic possession may be taken or when physical possession may be taken?

Answer: Sarfaesi Act and Sarfaesi Rules do not provide any guidelines as to when symbolic possession may be taken or when physical possession may be taken.

Is there any case law which lays down as to when symbolic possession may be taken or when physical possession may be taken?

Answer: In the case of Transcore –Versus- Union of India reported in AIR 2007 Supreme Court page 712 (at page 736), the Supreme Court of India held as follow:-

“Till the time of issuance of sale certificate, the authorised officer is like a court receiver under Order XL, Rule 1, CPC. The court receiver can take symbolic possession and in appropriate cases where the court receiver finds that a third party interest is likely to be created overnight, he can take actual possession even prior to the decree. The authorized officer under Rule 8 has greater powers than even à court receiver as security interest in the property is already created in favour of the banks/FIs. That interest needs to be protected.”

Whether secured creditor can himself obtain physical possession of the secured asset without obtaining an order under Section 14 of the Sarfaesi Act, 2002?

Answer: It is not mandatory for the secured creditor to obtain an order under Section 14 of the Sarfaesi Act, 2002. It is open to the secured creditor to take physical possession of the secured assets without obtaining an order under Section 14 of the Sarfaesi Act, 2002. However, while taking physical possession of the secured assets the secured creditor cannot use force, cannot take the help of musclemen and the secured creditor cannot get the help of police for taking possession of the secured assets.

What are the power of Debts Recovery Appellate Tribunals in an appeal under Section 18 of Sarfaesi Act, 2002?

Answer: The Debts Recovery Appellate Tribunals, in an appeal under Section 18 of Sarfaesi Act, 2002, may confirm or set aside or modify the impugned order passed by the Debts Recovery Tribunal or may pass any other order which could have been passed by the Debts Recovery Tribunal.

Whether Borrower has any right of redemption and can he get back his property free of mortgage, hypothecation or charge?

Answer: A borrower has a right of redemption and he can get back his property free of mortgage, hypothecation or charge. At any time after the principal money has become due, the borrower or the mortgagor on payment or tender of entire claim of the secured creditor has a right to get back the mortgage deed and all documents relating to the mortgage property and to get back its possession if the possession is with the secured creditor and to get a document executed by the secured creditor that the right of the secured creditor has been extinguished. See Section 60 of the Transfer of Property Act, 1882.

Whether the borrower can exercise his right of redemption at any time or is there a time limit for doing so?

Answer: Ordinarily (not applicable to Sarfaesi Act,2002 as it stands today), the right of redemption can be exercised till the sale of the secured assets is complete by registration of the sale deed. However, the provision applicable to Sarfaesi Act, 2002 has changed after the amendment of Section 13(8) of Sarfaesi Act, 2002 in the year 2016. Before its amendment in the year 2016, Section 13(8) of Sarfaesi Act, 2002 was as follows :-

“13(8) If the dues of the secured creditor together with all costs, charges and expenses incurred by him are tendered to the secured creditor at any time before the date fixed for sale or transfer, the secured asset shall not be sold or transferred by the secured creditor, and no further step shall be taken by him for transfer or sale of that secured asset.”

The Supreme Court in the case of Mathew Varghese –Versus– M. Amritha Kumar reported in (2014)5 Supreme Court Cases page 610, interpreted unamended Section 13(8) of the Sarfaesi Act, 2002 and held that a borrower can exercise his right of redemption till the completion of sale by registration of sale deed or sale certificate.

By the 2016 Amendment Act, Section 13(8) of the Sarfaesi Act, 2002 was amended and it now reads as follows:

“13(8) Where the amount of dues of the secured creditor together with all costs, charges and expenses incurred by him is tendered to the secured creditor at any time before the date of publication of notice for public auction or inviting quotations or tender from public or private treaty for transfer by way of lease, assignment or sale of the secured assets,—

1. the secured assets shall not be transferred by way of lease, assignment or sale by the secured creditor; and
2. in case, any step has been taken by the secured creditor for transfer by way of lease or assignment or sale of the assets before tendering of such amount under this sub-section, no further step shall be taken by such secured creditor for transfer by way of lease or assignment or sale of such secured assets.”

It has now been held by the Supreme Court in the case of Celir LLP. Versus Bafna Motors (Mumbai) (P) Ltd. reported in 2023 SCC online SC1209 that after the amendment of Section 13(8) of the Sarfaesi Act, 2002 in the year 2016, the right of redemption can be exercised at any time before the date of publication of notice for public auction or inviting quotations or tender from public or private treaty for transfer by way of lease, assignment or sale of the secured assets. In other words, right of redemption cannot be exercised after a sale advertisement is published in newspaper.

Whether any Register of Securitisation, Reconstruction and Security Interest Transactions is to be maintained under Sarfaesi Act, 2002?

Answer: Section 22(1) of Sarfaesi Act, 2002 provides that a record called the Central Register shall be kept at the head office of the Central Registry for entering the particulars of the transactions relating to—securitisation of financial assets; reconstruction of financial assets; and creation of security interest.

Whether the Transactions of Securitisation, Reconstruction and Creation of Security Interest are to be filed with the Central Registrar under the Sarfaesi Act, 2002?

Answer: Section 23(1) of Sarfaesi Act, 2002 provides that the particulars of every transaction of securitisation, asset reconstruction or creation of security interest shall be filed, with the Central Registrar in the manner and on payment of such fee as may be prescribed.

Whether modification of the Security Interest is to be filed with the Central Registrar under the Sarfaesi Act, 2002?

Answer: Section 24 of Sarfaesi Act, 2002 provides that whenever the terms and conditions of any security interest is modified, it shall be the duty of the secured creditor to send to the Central Registrar, the particulars of such modification.

Whether Asset Reconstruction Company or Secured Creditor is to report satisfaction of Security Interest to the Central Registrar under the Sarfaesi Act, 2002?

Answer: Section 25(1) of Sarfaesi Act, 2002 provides that whenever the secured creditor including Asset Reconstruction Company receives payment or satisfaction in full of any secured interest, the secured creditor shall give intimation of such payment or satisfaction to the Central Registrar within thirty days from the date of such payment or satisfaction.

What is the effect of registration of Transactions of Securitisation, Reconstruction and Creation of Security Interest under the Sarfaesi Act, 2002?

Answer: Section 26C(1) of Sarfaesi Act, 2002 provides that the registration of transactions of creation, modification, or satisfaction of security interest or filing of attachment orders by a secured creditor with the Central Registrar shall be deemed to constitute a public notice from the date and time of filing of particulars of such transaction with the Central Registry for creation, modification or satisfaction of such security interest or attachment order, as the case may be.

Section 26C(2) of Sarfaesi Act, 2002 provides that upon the registration of security interest or attachment order upon any property in favour of secured creditor or any other creditor, the claim of such secured creditor or other creditor holding attachment order shall have priority over any subsequent security interest created upon such property or any transfer by way of sale, lease or assignment or licence of such property or attachment order subsequent to such registration shall be subject to the claim covered by such registration.

Whether steps and measures under the Sarfaesi Act, 2002 can be taken if Security Interest have not been registered with the Central Registry under Sarfaesi Act, 2002?

Answer: Section 26D of Sarfaesi Act, 2002 provides that no secured creditor shall be entitled to take any steps and measures under the Sarfaesi Act, 2002 unless the security interest created in its favour by the borrower has been registered with the Central Registry.

Whether Secured Creditor has any priority over other Debts including Government taxes if the Security Interest is registered with the Central Registry under Sarfaesi Act, 2002?

Answer: Section 26E of Sarfaesi Act, 2002 provides that after the registration of security interest, the debts due to any secured creditor shall be paid in priority over all other debts and all revenues, taxes, cesses and other rates payable to the Central Government or State Government or local authority.

If a Secured Creditor wants to take over the management of business of a Borrower, what will be the manner of taking over of management?

Answer: The asset reconstruction company may take over management of business of a Borrower under Section 9(1)(a) of the Sarfaesi Act, 2002 and any other secured creditor may take over the management of business of a Borrower under Section 13(4)(b) of Sarfaesi Act, 2002.

If a Secured Creditor takes over the management of business of a Borrower, what will be its effect?

Answer: If a Secured Creditor takes over the management of business of a Borrower, the directors of the borrower company vacate their office and are replaced by new directors or administrator appointed by the secured creditor.

Whether Secured Creditor can take the help of Chief Metropolitan Magistrate or District Magistrate in taking physical possession of the Secured Assets?
Answer: The secured creditor may request in writing the Chief Metropolitan Magistrate or District Magistrate within whose jurisdiction such secured asset is found to take possession of such secured asset and forward such secured asset to the secured creditor. Section 14(1) of Sarfaesi Act, 2002

Whether the secured creditor can request Chief Metropolitan Magistrate or District Magistrate to take possession of an asset which is not secured asset or over which, no security interest has been created?
Answer: A secured creditor cannot request Chief Metropolitan Magistrate or District Magistrate to take possession of an asset which is not secured asset or over which, no security interest has been created.

Whether Additional Chief Metropolitan Magistrate can pass an order under Section 14 of the Sarfaesi Act, 2002 for taking over possession of the secured asset?
Answer: Supreme Court of India, in the case of R.D Jain & Company Versus Capital First Ltd. and others reported in (2023)1 Supreme Court Cases Page 675, has held that the expression Chief Metropolitan Magistrate includes Additional Chief Metropolitan Magistrate (ACMM) and hence Additional Chief Metropolitan Magistrate can pass an order under Section 14 of the Sarfaesi Act, 2002 for taking over possession of the secured asset.

Whether Additional District Magistrate can pass an order under Section 14 of the Sarfaesi Act, 2002 for taking over possession of the secured asset?
Answer: Supreme Court of India, in the case of R.D Jain & Company Versus Capital First Ltd. and others reported in (2023)1 Supreme Court Cases Page 675, has held that the expression District Magistrate includes Additional District Magistrate (ADM) and hence Additional District Magistrate can pass an order under Section 14 of the Sarfaesi Act, 2002 for taking over possession of the secured asset.

Whether Chief Judicial Magistrate can pass an order under Section 14 of the Sarfaesi Act, 2002 for taking over possession of the secured asset?
Answer: Supreme Court of India has held in the case of Authorised Officer, Indian Bank Versus D. Visalakshi reported in (2019)20 Supreme Court Cases Page 47 that the powers and functions of CMM and CJM are equivalent and similar in relation to matters specified in CrPC and these expressions (CMM and CJM) are interchangeable and synonymous to each other. Hence, Chief Judicial Magistrate is equally competent to deal with the applications filed by the secured creditor under Section 14 of the Sarfaesi Act, 2002.

Whether an order can be passed under Section 14 of the Sarfaesi Act, 2002 appointing an advocate commissioner to take possession of the secured assets and hand over the same to secured creditor?
Answer: It has been held in the case of NKGSB Co. Op. Bank Limited Versus Subir Chakraborty reported in (2022)10 Supreme Court Cases page 286 that advocate commissioner can be appointed to take possession of the secured assets and hand over the same to secured creditor.

If the secured asset are situated in one district, can the Chief Metropolitan Magistrate or District Magistrate of another district pass an order under Section 14 of the Sarfaesi Act, 2002?
Answer: Section 14(1) of Sarfaesi Act, 2002 clearly provides that an application under Section 14 of the Sarfaesi Act, 2002 has to be made before the Chief Metropolitan Magistrate or District Magistrate, within whose jurisdiction, the secured assets may be situated.