(Also see Frequently Asked Questions (FAQ) about Sarfaesi Act and Sarfaesi Rules)
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Preamble — Object of Sarfaesi Act, 2002
An Act to regulate securitisation and reconstruction of financial assets and enforcement of security interest and to provide for a Central database of security interests created on property rights, and for matters connected therewith or incidental thereto.
Asset Reconstruction — Section 2(b) of Sarfaesi Act,2002
Section 2(b) Asset reconstruction means acquisition by any asset reconstruction company of any right or interest of any bank or financial institution in any financial assistance for the purpose of realisation of such financial assistance;
Asset Reconstruction Company — Section 2(ba) of Sarfaesi Act,2002
Section 2(ba) Asset reconstruction company means a company registered with Reserve Bank under section 3 for the purposes of carrying on the business of asset reconstruction or securitisation, or both;
Bank — Section 2(c) of Sarfaesi Act,2002
Section 2(c) Bank means–
(i) a banking company; or
(ii) a corresponding new bank; or
(iii) the State Bank of India; or
(iv) a subsidiary bank; or
(iva) a multi-State co-operative bank; or
(v) such other bank which the Central Government may, by notification, specify for the purposes of this Act;
Banking Company — Section 2(d) of Sarfaesi Act,2002
Section 2(d) Banking company shall have the meaning assigned to it in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949);
Borrower — Section 2(f) of Sarfaesi Act,2002
Section 2(f) Borrower means any person who, or a pooled investment vehicle as defined in clause (da) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) which has been granted financial assistance by any bank or financial institution or who has given any guarantee or created any mortgage or pledge as security for the financial assistance granted by any bank or financial institution and includes a person who, or a pooled investment vehicle which, becomes borrower of an asset reconstruction company consequent upon acquisition by it of any rights or interest of any bank or financial institution in relation to such financial assistance or who has raised funds through issue of debt securities;
Debt — Section 2(ha) of Sarfaesi Act,2002
Section 2(ha) Debt shall have the meaning assigned to it in clause (g) of section 2 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993). According to Section 2(g) of Recovery of Debts Due to Banks and Financial Institutions Act, 1993, (now known as the Recovery of Debt and Bankruptcy Act 1993, the expression “ Debt” has been defined as under :-
“debt” means any liability (inclusive of interest) which is claimed as due from any person by a bank or a financial institution or by a consortium of banks or financial institutions during the course of any business activity undertaken by the bank or the financial institution or the consortium under any law for the time being in force, in cash or otherwise, whether secured or unsecured, or assigned, or whether payable under a decree or order of any civil court or any arbitration award or otherwise or under a mortgage and subsisting on, and legally recoverable on, the date of the application and includes any liability towards debt securities which remains unpaid in full or part after notice of ninety days served upon the borrower by the debenture trustee or any other authority in whose favour security interest is created for the benefit of holders of debt securities or;
Default — Section 2(j) of Sarfaesi Act,2002
Section 2(j) Default means–
(i) non-payment of any debt or any other amount payable by the borrower to any secured creditor consequent upon which the account of such borrower is classified as non-performing asset in the books of account of the secured creditor; or
(ii) non-payment of any debt or any other amount payable by the borrower with respect to debt securities after notice of ninety days demanding payment of dues served upon such borrower by the debenture trustee or any other authority in whose favour security interest is created for the benefit of holders of such debt securities;
Financial Assistance — Section 2(k) of Sarfaesi Act, 2002
Section 2(k) Financial Assistance means any loan or advance granted or any debentures or bonds subscribed or any guarantees given or letters of credit established or any other credit facility extended by any bank or financial institution [including funds provided for the purpose of acquisition of any tangible asset on hire or financial lease or conditional sale or under any other contract or obtaining assignment or licence of any intangible asset or purchase of debt securities;
Financial Asset— Section 2(l) of Sarfaesi Act,2002
Section 2(l) Financial Asset means debt or receivables and includes
(i) a claim to any debt or receivables or part thereof, whether secured or unsecured; or
(ii) any debt or receivables secured by, mortgage of, or charge on, immovable property; or
iii) a mortgage, charge, hypothecation or pledge of movable property; or ( (iv) any right or interest in the security, whether full or part underlying such debt or receivables; or
(v) any beneficial interest in property, whether movable or immovable, or in such debt, receivables, whether such interest is existing, future, accruing, conditional or contingent; or
[(va) any beneficial right, title or interest in any tangible asset given on hire or financial lease or conditional sale or under any other contract which secures the obligation to pay any unpaid portion of the purchase price of such asset or an obligation incurred or credit otherwise provided to enable the borrower to acquire such tangible asset; or
(vb) any right, title or interest on any intangible asset or licence or assignment of such intangible asset, which secures the obligation to pay any unpaid portion of the purchase price of such intangible asset or an obligation incurred or credit otherwise extended to enable the borrower to acquire such intangible asset or obtain licence of the intangible asset; or
(vi) any financial assistance;
Financial Institution — Section 2(m) of Sarfaesi Act,2002
Section 2(m) Financial institution means–
(i) a public financial institution within the meaning of section 4A of the Companies Act, 1956 (1 of 1956);
(ii) any institution specified by the Central Government under sub-clause (ii) of clause (h) of section 2 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993);
(iii) the International Finance Corporation established under the International Finance Corporation (Status, Immunities and Privileges) Act, 1958 (42 of 1958);
(iiia) a debenture trustee registered with the Board and appointed for secured debt securities;
(iiib) asset reconstruction company, whether acting as such or managing a trust created for the purpose of securitisation or asset reconstruction, as the case may be;
(iv) any other institution or non-banking financial company as defined in clause (f) of section 45-I of the Reserve Bank of India Act, 1934 (2 of 1934), which the Central Government may, by notification, specify as financial institution for the purposes of this Act;
Hypothecation — Section 2(n) of Sarfaesi Act,2002
Section 2(n) Hypothecation means a charge in or upon any movable property, existing or future, created by a borrower in favour of a secured creditor without delivery of possession of the movable property to such creditor, as a security for financial assistance and includes floating charge and crystallization of such charge into fixed charge on movable property;
Non-Performing Asset — Section 2(o) of Sarfaesi Act,2002
Section 2(o) Non-performing asset means an asset or account of a borrower, which has been classified by a bank or financial institution as sub-standard, doubtful or loss asset,
(a) in case such bank or financial institution is administered or regulated by any authority or body established, constituted or appointed by any law for the time being in force, in accordance with the directions or guidelines relating to assets classifications issued by such authority or body;
(b) in any other case, in accordance with the directions or guidelines relating to assets classifications issued by the Reserve Bank;
Property — Section 2(t) of Sarfaesi Act,2002
Section 2(t) Property means–
(i) immovable property;
(ii) movable property;
(iii) any debt or any right to receive payment of money, whether secured or unsecured;
(iv) receivables, whether existing or future;
(v) intangible assets, being know-how, patent, copyright, trade mark, licence, franchise or any other business or commercial right of similar nature as may be prescribed by the Central Government in consultation with Reserve Bank;
Securitisation — Section 2(z) of Sarfaesi Act,2002
Section 2(z) securitisation means acquisition of financial assets by any asset reconstruction company from any originator, whether by raising of funds by such asset reconstruction company from qualified buyers by issue of security receipts representing undivided interest in such financial assets or otherwise;
Secured Asset — Section 2(zc) of Sarfaesi Act,2002
Section 2(zc) Secured Asset means the property on which security interest is created;
Secured Creditor — Section 2(zd) of Sarfaesi Act,2002
Section 2 (zd) Secured Creditor means–
(i) any bank or financial institution or any consortium or group of banks or financial institutions holding any right, title or interest upon any tangible asset or intangible asset as specified in clause (l);(ii) debenture trustee appointed by any bank or financial institution; or
(iii) an asset reconstruction company whether acting as such or managing a trust set up by such asset reconstruction company for the securitisation or reconstruction, as the case may be; or
(iv) debenture trustee registered with the Board and appointed for secured debt securities; or
(v) any other trustee holding securities on behalf of a bank or financial institution, in whose favour security interest is created by any borrower for due repayment of any financial assistance.
Secured Debt — Section 2(ze) of Sarfaesi Act,2002
Section 2(ze) Secured Debt means a debt which is secured by any security interest;
Security Interest — Section 2(zf) of Sarfaesi Act,2002
Section 2(zf) Security Interest means right, title or interest of any kind, other than those specified in section 31, upon property created in favour of any secured creditor and includes–
(i) any mortgage, charge, hypothecation, assignment or any right, title or interest of any kind, on tangible asset, retained by the secured creditor as an owner of the property, given on hire or financial lease or conditional sale or under any other contract which secures the obligation to pay any unpaid portion of the purchase price of the asset or an obligation incurred or credit provided to enable the borrower to acquire the tangible asset; or
(ii) such right, title or interest in any intangible asset or assignment or licence of such intangible asset which secures the obligation to pay any unpaid portion of the purchase price of the intangible asset or the obligation incurred or any credit provided to enable the borrower to acquire the intangible asset or licence of intangible asset;
Acquisition of financial assets by Asset Reconstruction Company — section 5(1) of of Sarfaesi Act, 2002
Section 5(1) Notwithstanding anything contained in any agreement or any other law for the time being in force, any asset reconstruction company may acquire financial assets of any bank or financial institution–
(a) by issuing a debenture or bond or any other security in the nature of debenture, for consideration agreed upon between such company and the bank or financial institution, incorporating therein such terms and conditions as may be agreed upon between them; or
(b) by entering into an agreement with such bank or financial institution for the transfer of such financial assets to such company on such terms and conditions as may be agreed upon between them.
Assets Reconstruction Company becomes lender in place of Bank — Section 5(2) of of Sarfaesi Act, 2002
Section 5(2) If the bank or financial institution is a lender in relation to any financial assets acquired under sub-section (1) by the asset reconstruction company, such asset reconstruction company shall, on such acquisition, be deemed to be the lender and all the rights of such bank or financial institution shall vest in such company in relation to such financial assets.
Assets Reconstruction Company becomes Secured Creditor in place of Bank — Section 5(3) of Sarfaesi Act, 2002
Section 5(3) Unless otherwise expressly provided by this Act, all contracts, deeds, bonds, agreements, powers of-attorney, grants of legal representation, permissions, approvals, consents or no-objections under any law or otherwise and other instruments of whatever nature which relate to the said financial asset and which are subsisting or having effect immediately before the acquisition of financial asset under sub-section (1) and to which the concerned bank or financial institution is a party or which are in favour of such bank or financial institution shall, after the acquisition of the financial assets, be of as full force and effect against or in favour of the asset reconstruction company, as the case may be, and may be enforced or acted upon as fully and effectually as if, in the place of the said bank or financial institution, asset reconstruction company, as the case may be, had been a party thereto or as if they had been issued in favour of asset reconstruction company, as the case may be.
Assets Reconstruction Company may continue suit, appeal or other proceedings — Section 5(4) of of Sarfaesi Act, 2002
Section 5(4) If, on the date of acquisition of financial asset under sub-section (1), any suit, appeal or other proceeding of whatever nature relating to the said financial asset is pending by or against the bank or financial institution, save as provided in the third proviso to sub-section (1) of section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) the same shall not abate, or be discontinued or be, in any way, prejudicially affected by reason of the acquisition of financial asset by the asset reconstruction company, as the case may be, but the suit, appeal or other proceeding may be continued, prosecuted and enforced by or against the asset reconstruction company, as the case may be.
Steps and measures which may be taken by Asset Reconstruction Company — Section 9(1)(a) of Sarfaesi Act, 2002
Section 9(1)(a) Without prejudice to the provisions contained in any other law for the time being in force, an asset reconstruction company may, for the purposes of asset reconstruction, provide for any one or more of the following measures, namely:–
(a) the proper management of the business of the borrower, by change in, or take over of, the management of the business of the borrower;
(b) the sale or lease of a part or whole of the business of the borrower;
(c) rescheduling of payment of debts payable by the borrower;
(d) enforcement of security interest in accordance with the provisions of this Act;
(e) settlement of dues payable by the borrower;
(f) taking possession of secured assets in accordance with the provisions of this Act;
(g) conversion of any portion of debt into shares of a borrower company:
Provided that conversion of any part of debt into shares of a borrower company shall be deemed always to have been valid, as if the provisions of this clause were in force at all material times.
Secured Creditor may enforce security interest without intervention of Court –Section 13(1) of Sarfaesi Act, 2002
Section 13(1) Notwithstanding anything contained in section 69 or section 69A of the Transfer of Property Act, 1882 (4 of 1882), any security interest created in favour of any secured creditor may be enforced, without the intervention of the court or tribunal, by such creditor in accordance with the provisions of this Act.
Demand Notice by Secured Creditor — Section 13(2) of Sarfaesi Act, 2002
Section 13(2) Where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any instalment thereof, and his account in respect of such debt is classified by the secured creditor as non-performing asset, then, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under sub-section (4).
Provided that—
(i) the requirement of classification of secured debt as non-performing asset under this sub-section shall not apply to a borrower who has raised funds through issue of debt securities; and
(ii) in the event of default, the debenture trustee shall be entitled to enforce security interest in the same manner as provided under this section with such modifications as may be necessary and in accordance with the terms and conditions of security documents executed in favour of the debenture trustee.
What should be the contents of a notice under section 13 (2) of Sarfaesi Act, 2002 — Section 13 (3) of Sarfaesi Act, 2002
Section 13(3) The notice referred to in sub-section (2) shall give details of the amount payable by the borrower and the secured assets intended to be enforced by the secured creditor in the event of non-payment of secured debts by the borrower.
Representation or objection by borrower against the notice under Section 13(2) of SARFAESI Act, 2002 — Section 13(3A) of Sarfaesi Act, 2002
Section 13(3A) If, on receipt of the notice under sub-section (2), the borrower makes any representation or raises any objection, the secured creditor shall consider such representation or objection and if the secured creditor comes to the conclusion that such representation or objection is not acceptable or tenable, he shall communicate within fifteen days of receipt of such representation or objection the reasons for non-acceptance of the representation or objection to the borrower:
Provided that the reasons so communicated or the likely action of the secured creditor at the stage of communication of reasons shall not confer any right upon the borrower to prefer an application to the Debts Recovery Tribunal under section 17 or the Court of District Judge under section 17A.
Power of Bank and Secured Creditor to sell the secured assets — Section 13(4) of Sarfaesi Act,2002.
Power of Bank and Secured Creditor to take possession of the secured assets —- Section 13(4) of Sarfaesi Act,2002
Power of Bank and Secured Creditor to lease or assign the secured assets. — Section 13(4) of Sarfaesi Act,2002
Power of Bank and Secured Creditor to take over the management of the business of the Borrower — Section 13(4) of Sarfaesi Act,2002
Power of Bank and Secured Creditor to require any person who is liable to pay any amount to the borrower, to pay such amount to the Secured Creditor — Section 13(4) of Sarfaesi Act,2002
Section 13(4) In case the borrower fails to discharge his liability in full within the period specified in sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely:–
(a) take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset;
(b) take over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset:
Provided that the right to transfer by way of lease, assignment or sale shall be exercised only where the substantial part of the business of the borrower is held as security for the debt:
Provided further that where the management of whole of the business or part of the business is severable, the secured creditor shall take over the management of such business of the borrower which is relatable to the security for the debt;
(c) appoint any person (hereafter referred to as the manager), to manage the secured assets the possession of which has been taken over by the secured creditor;
(d) require at any time by notice in writing, any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower, to pay the secured creditor, so much of the money as is sufficient to pay the secured debt.
Whether Secured Creditor can purchased a property at the auction — Section 13(5A) of Sarfaesi Act, 2002
Section 13(5A) Where the sale of an immovable property, for which a reserve price has been specified, has been postponed for want of a bid of an amount not less than such reserve price, it shall be lawful for any officer of the secured creditor, if so authorised by the secured creditor in this behalf, to bid for the immovable property on behalf of the secured creditor at any subsequent sale.
Purchaser from Secured Creditor to get all rights as if the sale is by the owner — Section 13(6) of Sarfaesi Act, 2002
Section 13(6) Any transfer of secured asset after taking possession thereof or take over of management under sub-section (4), by the secured creditor or by the manager on behalf of the secured creditor shall vest in the transferee all rights in, or in relation to, the secured asset transferred as if the transfer had been made by the owner of such secured asset.
Right of the borrower to stop the auction by tendering the amount claimed by the bank — Right of the borrower to redeem the property — Section 13 (8) of Sarfaesi Act, 2002
Section 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,–
(i) the secured assets shall not be transferred by way of lease assignment or sale by the secured creditor; and
(ii) 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.
Secured Creditor cannot take action under SARFAESI Act, 2002 unless holds 60% of the total amount outstanding to Secured Creditors — Section 13 (9) of Sarfaesi Act, 2002
Section 13(9) Subject to the provisions of the Insolvency and Bankruptcy Code, 2016, in the case of financing of a financial asset by more than one secured creditors or joint financing of a financial asset by secured creditors, no secured creditor shall be entitled to exercise any or all of the rights conferred on him under or pursuant to sub-section (4) unless exercise of such right is agreed upon by the secured creditors representing not less than sixty per cent. in value of the amount outstanding as on a record date and such action shall be binding on all the secured creditors:.
Secured Creditor may file application for recovery of balance amount, which is not recovered by sale of secured assets — section 13 (10) of Sarfaesi Act, 2002
Section 13(10) Where dues of the secured creditor are not fully satisfied with the sale proceeds of the secured assets, the secured creditor may file an application in the form and manner as may be prescribed to the Debts Recovery Tribunal having jurisdiction or a competent court, as the case may be, for recovery of the balance amount from the borrower.
Automatic Statuary injunction against the borrower or mortgagor on receipt of the notice under section 13(2) of Sarfaesi Act, 2002— Section 13(13) of Sarfaesi Act, 2002
Section 13(13) No borrower shall, after receipt of notice referred to in sub-section (2), transfer by way of sale, lease or otherwise (other than in the ordinary course of his business) any of his secured assets referred to in the notice, without prior written consent of the secured creditor.
Secured Creditor may take assistance of Chief Metropolitan Magistrate or District Magistrate in taking Possession of Secured assets —- Section 14(1) of Sarfaesi Act, 2002
Secured Creditor has to file affidavit before Chief Metropolitan Magistrate or District Magistrate — Section 14(1) of Sarfaesi Act, 2002
What should be the contents of affidavit to be filed by Secured Creditor before Chief Metropolitan Magistrate or District Magistrate —- Section 14(1) of Sarfaesi Act, 2002
Where the possession of any secured assets is required to be taken by the secured creditor or if any of the secured assets is required to be sold or transferred by the secured creditor under the provisions of this Act, the secured creditor may, for the purpose of taking possession or control of any such secured assets, request, in writing, the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction any such secured asset or other documents relating thereto may be situated or found, to take possession thereof, and the Chief Metropolitan Magistrate or as the case may be, the District Magistrate shall, on such request being made to him–
(a) take possession of such asset and documents relating thereto; and
(b) forward such asset and documents to the secured creditor:
Provided that any application by the secured creditor shall be accompanied by an affidavit duly affirmed by the authorised officer of the secured creditor, declaring that—
(i) the aggregate amount of financial assistance granted and the total claim of the Bank as on the date of filing the application;
(ii) the borrower has created security interest over various properties and that the Bank or Financial Institution is holding a valid and subsisting security interest over such properties and the claim of the Bank or Financial Institution is within the limitation period;
(iii) the borrower has created security interest over various properties giving the details of properties referred to in sub-clause (ii)above;
(iv) the borrower has committed default in repayment of the financial assistance granted aggregating the specified amount;
(v) consequent upon such default in repayment of the financial assistance the account of the borrower has been classified as a non-performing asset;
(vi) affirming that the period of sixty days notice as required by the provisions of sub-section (2) of section 13, demanding payment of the defaulted financial assistance has been served on the borrower;
(vii) the objection or representation in reply to the notice received from the borrower has been considered by the secured creditor and reasons for non-acceptance of such objection or representation had been communicated to the borrower;
(viii) the borrower has not made any repayment of the financial assistance in spite of the above notice and the Authorised Officer is, therefore, entitled to take possession of the secured assets under the provisions of sub-section (4) of section 13 read with section 14 of the principal Act;
(ix) that the provisions of this Act and the rules made thereunder had been complied with:
Provided further that on receipt of the affidavit from the Authorised Officer, the District Magistrate or the Chief Metropolitan Magistrate, as the case may be, shall after satisfying the contents of the affidavit pass suitable orders for the purpose of taking possession of the secured assets within a period of thirty days from the date of application:
Provided also that if no order is passed by the Chief Metropolitan Magistrate or District Magistrate within the said period of thirty days for reasons beyond his control, he may, after recording reasons in writing for the same, pass the order within such further period but not exceeding in aggregate sixty days.
Provided also that the requirement of filing affidavit stated in the first proviso shall not apply to proceeding pending before any District Magistrate or the Chief Metropolitan Magistrate, as the case may be, on the date of commencement of this Act.
Who can take possession under section 14 of SARFAESI Act, 2002 — Section 14 ( 1A) of Sarfaesi Act, 2002
Section 14(1A) The District Magistrate or the Chief Metropolitan Magistrate may authorise any officer subordinate to him,–
(i) to take possession of such assets and documents relating thereto; and
(ii) to forward such assets and documents to the secured creditor.
Chief Metropolitan Magistrate or District Magistrate may use or cause to be used such force as may be necessary — Section 14 (2) of Sarfaesi Act, 2002
Section 14(2) For the purpose of securing compliance with the provisions of sub-section (I), the Chief Metropolitan Magistrate or the District Magistrate may take or cause to be taken such steps and use, or cause to be used, such force, as may, in his opinion, be necessary.
No Act of CMM or DM or any officer authorised by them to be called in questions — Section 14 (3) of Sarfaesi Act, 2002
Section 14(3) No act of the Chief Metropolitan Magistrate or the District Magistrate any officer authorised by the Chief Metropolitan Magistrate or District Magistrate done in pursuance of this section shall be called in question in any court or before any authority.
Taking over management of the business of the borrower – Manner and effect of —- Sections 15(1) and 15(2) of Sarfaesi Act, 2002
Section 15(1) When the management of business of a borrower is taken over by a asset reconstruction company under clause (a) of section 9 or, as the case may be, by a secured creditor under clause (b) of sub-section (4) of section 13, the secured creditor may, by publishing a notice in a newspaper published in English language and in a newspaper published in an Indian language in circulation in the place where the principal office of the borrower is situated, appoint as many persons as it thinks fit–
(a) in a case in which the borrower is a company as defined in the Companies Act, 1956 (1 of 1956), to be the directors of that borrower in accordance with the provisions of that Act; or
(b) in any other case, to be the administrator of the business of the borrower.
Section 15(2) On publication of a notice under sub-section (1),–
(a) in any case where the borrower is a company as defined in the Companies Act, 1956 (1 of 1956), all persons holding office as directors of the company and in any other case, all persons holding any office having power of superintendence, direction and control of the business of the borrower immediately before the publication of the notice under sub-section (1), shall be deemed to have vacated their offices as such;
(b) any contract of management between the borrower and any director or manager thereof holding office as such immediately before publication of the notice under sub-section (1), shall be deemed to be terminated;
(c) the directors or the administrators appointed under this section shall take such steps as may be necessary to take into their custody or under their control all the property, effects and actionable claims to which the business of the borrower is, or appears to be, entitled and all the property and effects of the business of the borrower shall be deemed to be in the custody of the directors or administrators, as the case may be, as from the date of the publication of the notice;
(d) the directors appointed under this section shall, for all purposes, be the directors of the company of the borrower and such directors or as the case may be, the administrators appointed under this section, shall alone be entitled to exercise all the powers of the directors or as the case may be, of the persons exercising powers of superintendence, direction and control, of the business of the borrower whether such powers are derived from the memorandum or articles of association of the company of the borrower or from any other source whatsoever.
Power of borrower or other aggrieved person to file application in Debts Recovery Tribunal to challenge the steps and measures taken under Section 13(4) of Sarfaesi Act, 2002 by the Secured Creditor — Sections 17 (1) of Sarfaesi Act, 2002
Section 17(1) Any person (including borrower), aggrieved by any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor or his authorised officer under this Chapter, may make an application along with such fee, as may be prescribed, to the Debts Recovery Tribunal having jurisdiction in the matter within forty five days from the date on which such measure had been taken:
Provided that different fees may be prescribed for making the application by the borrower and the person other than the borrower.
Explanation: For the removal of doubts, it is hereby declared that the communication of the reasons to the borrower by the secured creditor for not having accepted his representation or objection or the likely action of the secured creditor at the stage of communication of reasons to the borrower shall not entitle the person (including borrower) to make an application to the Debts Recovery Tribunal under this sub-section.
Application under Section 17(1) of Sarfaesi Act, 2002 should be filed in which Debts Recovery Tribunal — Section 17(1A) of Sarfaesi Act, 2002
Section 17(1A) An application under sub-section (1) shall be filed 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.
After filing of a Sarfaesi application, what should be consider by Debts Recovery Tribunal — Section 17 (2 ) of Sarfaesi Act, 2002
Section 17(2) The Debts Recovery Tribunal shall consider whether any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor for enforcement of security are in accordance with the provisions of this Act and the rules made thereunder.
What reliefs can be granted by Debts Recovery Tribunal under Section 17 of Sarfaesi Act, 2002— Section 17 (3 ) of Sarfaesi Act, 2002
Section 17(3) If, the Debts Recovery Tribunal, after examining the facts and circumstances of the case and evidence produced by the parties, comes to the conclusion that any of the measures referred to in sub-section (4) of section 13, taken by the secured creditor are not in accordance with the provisions of this Act and the rules made thereunder, and require restoration of the management or restoration of possession, of the secured assets to the borrower or other aggrieved person, it may, by order,–
(a) declare the recourse to any one or more measures referred to in sub-section (4) of section 13 taken by the secured creditor as invalid; and
(b) restore the possession of secured assets or management of secured assets to the borrower or such other aggrieved person, who has made an application under sub-section (1), as the case may be; and
(c) pass such other direction as it may consider appropriate and necessary in relation to any of the recourse taken by the secured creditor under sub-section (4) of section 13.
If the Debts Recovery Tribunal finds that the action taken by the secured creditor is in accordance with law, what order can be passed by Debts Recovery Tribunal — Section 17 (4) of Sarfaesi Act, 2002
Section 17(4) If, the Debts Recovery Tribunal declares the recourse taken by a secured creditor under sub-section (4) of section 13, is in accordance with the provisions of this Act and the rules made thereunder, then, notwithstanding anything contained in any other law for the time being in force, the secured creditor shall be entitled to take recourse to one or more of the measures specified under sub- section (4) of section 13 to recover his secured debt.
Power of the Debts Recovery Tribunal to give relief to a tenant of the Secured Asset — Section 17 (4A) of Sarfaesi Act, 2002
Section 17(4A) Where–
(i) any person, in an application under sub-section (1), claims any tenancy or leasehold rights upon the secured asset, the Debt Recovery Tribunal, after examining the facts of the case and evidence produced by the parties in relation to such claims shall, for the purposes of enforcement of security interest, have the jurisdiction to examine whether lease or tenancy,–
(a) has expired or stood determined; or
(b) is contrary to section 65A of the Transfer of Property Act, 1882 (4 of 1882); or
(c) is contrary to terms of mortgage; or
(d) is created after the issuance of notice of default and demand by the Bank under subsection (2) of section 13 of the Act; and
(ii) the Debt Recovery Tribunal is satisfied that tenancy right or leasehold rights claimed in secured asset falls under the sub-clause (a) or sub-clause (b) or sub-clause (c) or sub-clause (d) of clause (i), then notwithstanding anything to the contrary contained in any other law for the time being in force, the Debt Recovery Tribunal may pass such order as it deems fit in accordance with the provisions of this Act.
Is there any time limit for disposal of the Sarfaesi Application — Section 17 (5) of Sarfaesi Act, 2002
Section 17(5) Any application made under sub-section (1) shall be dealt and disposed of within sixty days from the date of such application: Provided that the Debts Recovery Tribunal may, from time to time, extend the said period for reasons to be recorded in writing, so, however, that the total period of pendency of the application with the Debts Recovery Tribunal, shall not exceed four months from the date of making of such application made under sub-section (1).
Procedure of DRTs while disposing of an application under Section 17 of Sarfaesi Act, 2002 — Section 17(7) of Sarfaesi Act, 2002
Section 17(7) Save as otherwise provided in this Act, the Debts Recovery Tribunal shall, as far as may be, dispose of the application in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and the rules made thereunder.
Any Person aggrieved by an order passed by Debts Recovery Tribunal may appeal to Debts Recovery Tribunal — Section 18(1) of Sarfaesi Act, 2002
A borrower cannot prefer an appeal to Debts Recovery Appellate Tribunal before making pre deposit —- Section 18(1) of Sarfaesi Act, 2002 (Second Proviso)
Section 18(1) Any person aggrieved, by any order made by the Debts Recovery Tribunal under section 17, may prefer an appeal along with such fee, as may be prescribed, to the Appellate Tribunal within thirty days from the date of receipt of the order of Debts Recovery Tribunal.
Provided that different fees may be prescribed for filing an appeal by the borrower or by the person other than the borrower:
Provided further that no appeal shall be entertained unless the borrower has deposited with the Appellate Tribunal fifty per cent. of the amount of debt due from him, as claimed by the secured creditors or determined by the Debts Recovery Tribunal, whichever is less:
Provided also that the Appellate Tribunal may, for the reasons to be recorded in writing, reduce the amount to not less than twenty-five per cent. of debt referred to in the second proviso.
Right to lodge a caveat — Section 18C (1) of Sarfaesi Act, 2002
Section 18C (1) Where an application or an appeal is expected to be made or has been made under sub-section (1) of section 17 or section 17A or sub-section (1) of section 18 or section 18B, the secured creditor or any person claiming a right to appear before the Tribunal or the Court of District Judge or the Appellate Tribunal or the High Court, as the case may be, on the hearing of such application or appeal, may lodge a caveat in respect thereof.
Procedure of DRATs while disposing of an appeal under Section 18 of Sarfaesi Act, 2002 — Section 18(2) of Sarfaesi Act, 2002
Section 18(2) Save as otherwise provided in this Act, the Appellate Tribunal shall, as far as may be, dispose of the appeal in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) and rules made thereunder.
Right of borrower to receive compensation and costs in certain cases — Section 19 of Sarfaesi Act, 2002
Section 19. Right of borrower to receive compensation and costs in certain cases.– If the Debts Recovery Tribunal or the Court of District Judge, on an application made under section 17 or section 17A or the Appellate Tribunal or the High Court on an appeal preferred under section 18 or section 18A, holds that the possession of secured assets by the secured creditor is not in accordance with the provisions of this Act and rules made thereunder and directs the secured creditors to return such secured assets to the concerned borrowers or any other aggrieved person, who has filed the application under section 17 or section 17A or appeal under section 18 or section 18A, as the case may be, the borrower or such other person shall be entitled to the payment of such compensation and costs as may be determined by such Tribunal or Court of District Judge or Appellate Tribunal or the High Court referred to in section 18B.
Central Registry — Section 20(1) of Sarfaesi Act, 2002
Section 20(1) The Central Government may, by notification, set up or cause to be set up from such date as it may specify in such notification, a registry to be known as the Central Registry with its own seal for the purposes of registration of transaction of securitisation and reconstruction of financial assets and creation of security interest under this Act.
Registration of securitisation , reconstruction and security interest transactions — Section 22(1) of Sarfaesi Act, 2002
Section 22(1) For the purposes of this Act, 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—
(a) securitisation of financial assets;
(b) reconstruction of financial assets; and
(c) creation of security interest.
Filing of transactions of security interest — Section 23(1) of Sarfaesi Act, 2002
Section 23(1) 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
Provided that the Central Government may, by notification, require registration of all transactions of securitisation, or asset reconstruction or creation of security interest which are subsisting on or before the date of establishment of the Central Registry under sub-section (7) of section 20 within such period and on payment of such fees as may be prescribed.
Modification of security interest — Section 24 of Sarfaesi Act, 2002
Section 24 Whenever the terms or conditions, or the extent or operation of any security interest registered under this Chapter are or is asset reconstruction company or the secured creditors, as the case may be, to send to the Central Registrar, the particulars of such modification, and the provisions of this Chapter as to registration of a security interest shall apply to such modification of security interest.
Satisfaction of security interest — Section 25(1) of Sarfaesi Act, 2002
Section 25(1) The asset reconstruction company or the secured creditors as the case may be, shall give intimation to the Central Registrar of the payment or satisfaction in full, of any security interest relating to the asset reconstruction company or the secured creditors and requiring registration under this Chapter, within thirty days from the date of such payment or satisfaction.
Effect of registration of security interest — Section 26C(1) of Sarfaesi Act, 2002
Section 26C(1) Without prejudice to the provisions contained in any other law, for the time being in force, any registration of transactions of creation, modification or satisfaction of security interest by a secured creditor or other creditor or filing of attachment orders under this Chapter 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.
Claim of registered secured creditor to have priority — Section 26C(2) of Sarfaesi Act, 2002
Section 26C(2) Where security interest or attachment order upon any property in favour of the secured creditor or any other creditor are filed for the purpose of registration under the provisions of Chapter IV and this Chapter, the claim of such secured creditor or other creditor holding attachment order shall have priority over any subsequent security interest created upon such property and 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 such claim:
Provided that nothing contained in this sub-section shall apply to transactions carried on by the borrower in the ordinary course of business.
No Enforcement of Security Interest unless registered with Central Registry — Section 26D of Sarfaesi Act, 2002
Section 26D. Right of enforcement of securities.–Notwithstanding anything contained in any other law for the time being in force, from the date of commencement of the provisions of this Chapter, no secured creditor shall be entitled to exercise the rights of enforcement of securities under Chapter III unless the security interest created in its favour by the borrower has been registered with the Central Registry.
Priority to Secured Creditor even over Government debts — Section 26E of Sarfaesi Act, 2002
Section 26E. Priority to secured creditors.–Notwithstanding anything contained in any other law for the time being in force, 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.
Sarfaesi Act, 2002 not to apply to —
- a) Lien
- b) Pledge
- c) Security in any Aircraft
- d) Security in any vessels
- e) Rights of unpaid seller
- f) Any properties not liable to attachment
- g) Any Security interest for securing repayment financial asset not exceeding one lakh rupees
- h) Any Security interest created in agricultural land
- i) Any case in which the amount due is less than twenty per cent of the principal amount and interest thereon
—— Section 31 of Sarfaesi Act, 2002
Section (31) The provisions of this Act shall not apply to–
(a) a lien on any goods, money or security given by or under the Indian Contract Act, 1872 (9 of 1872) or the Sale of Goods Act, 1930 (3 of 1930) or any other law for the time being in force;
(b) a pledge of movables within the meaning of section 172 of the Indian Contract Act, 1872 (9 of 1872);
(c) creation of any security in any aircraft as defined in clause (1) of section 2 of the Aircraft Act, 1934 (24 of 1934);
(d) creation of security interest in any vessel as defined in clause (55) of section 3 of the Merchant Shipping Act, 1958 (44 of 1958);
(f) any rights of unpaid seller under section 47 of the Sale of Goods Act, 1930 (3 of 1930);
(g) any properties not liable to attachment (excluding the properties specifically charged with the debt recoverable under this Act)]or sale under the first proviso to sub-section (1) of section 60 of the Code of Civil Procedure, 1908 (5 of 1908);
(h) any security interest for securing repayment of any financial asset not exceeding one lakh rupees;
(i) any security interest created in agricultural land;
(j) any case in which the amount due is less than twenty per cent. of the principal amount and interest thereon.
Civil Court not to have jurisdiction — Section 34 of Sarfaesi Act, 2002
Section (34) 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 (51 of 1993).
Sarfaesi Act to override other laws — Section 35 of Sarfaesi Act
Section 35. The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.
No Sarfaesi action can be taken unless the claim of the Secured Creditor is within the period of limitation — Section 36 of Sarfaesi Act, 2002
No secured creditor shall be entitled to take all or any of the measures under sub-section (4) of section 13, unless his claim in respect of the financial asset is made within the period of limitation prescribed under the Limitation Act, 1963 (36 of 1963)
Application of other laws not barred — Section 37 of Sarfaesi Act, 2002
Section 37. The provisions of this Act or the rules made thereunder shall be in addition to, and not in derogation of, the Companies Act, 1956 (1 of 1956), the Securities Contracts (Regulation) Act, 1956 (42 of 1956), the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) or any other law for the time being in force.
IMPORTANT PROVISIONS of Security Interest (Enforcement) Rules, 2002
(Also see Frequently Asked Questions (FAQ) about Sarfaesi Act and Sarfaesi Rules)
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Authorised Officer — Rule 2(a) of The Security Interest (Enforcement Rules), 2002
Rule 2(a) “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.
Demand notice means notice Under Section 13(2) Of Sarfaesi Act, 2002 — Rule 2(b) of The Security Interest (Enforcement) Rules, 2002
Rule 2(b) demand notice means the notice in writing issued by a secured creditor or authorised officer, as the case may be, to any borrower pursuant to sub-section (2) of section 13 of the Act;
Approved Valuer — Rule 2(d) of The Security Interest (Enforcement) Rules, 2002
Rule 2(d) “approved valuer” means a valuer as approved by the Board of Directors or Board of Trustees of the secured creditor, as the case may be;
Service of Notice under Section 13(2 ) of SARFAESI Act, 2002 — Rule 3 of The Security Interest (Enforcement) Rules, 2002
Rule 3(1) The service of demand notice as refereed to in sub-section (2) of section 13 of the 1[Act] shall be made by delivering or transmitting at the place where the borrower or his agent, empowered to accept the notice or documents of behalf of the borrower, actually and voluntarily resides or carries on business or personally works for gain, by registered post with acknowledgement due, addressed to the borrower or his agent empowered to accept the service or by Speed Post or by courier or by any other means of transmission of documents like fax message or electronic mail service: Provided that where authorised officer has reason to believe that the borrower or his agent is avoiding the service of the notice or that for any other reason, the service cannot be made as aforesaid, the service shall be effected by affixing a copy of the demand notice on the outer door or some other conspicuous part of the house or building in which the borrower or his agent ordinarily resides or carries on business or personally works for gain and also by publishing the contents of the demand notice in two leading newspapers, one in vernacular language, having sufficient circulation in that locality.
Rule 3(2) Where the borrower is a body corporate, the demand notice shall be served on the registered office or any of the branches of such body corporate as specified under sub-rule (1).
Rule 3(3) Any other notice in writing to be served on the borrower or his agent by authorised officer, shall be served in the same manner as provided in this rule.
Rule 3(4) Where there are more than one borrower, the demand notice shall be served on each borrower.
Rule 3 (5) The demand notice may invite attention of the borrower to provisions of sub- section (8) of section 13 of the Act, in respect of time available to the borrower, to redeem the secured assets.
Decision on representation/ objection of Borrower and communication of such decision to Borrower — Rule 3A of the Security Interest (Enforcement) Rules, 2002
Rule 3A. Reply to Representation of the borrower
(a) After issue of demand notice under sub-section (2) of section 13, if the borrower makes any representation or raises any objection to the notice, the Authorized Officer shall consider such representation or objection and examine whether the same is acceptable or tenable.
(b) If on examining the representation made or objection raised by the borrower, the secured creditor is satisfied that there is a need to make any changes or modifications in the demand notice, he shall modify the notice accordingly and serve a revised notice or pass such other suitable orders as deemed necessary, within [fifteen days] from the date of receipt of the representation or objection.
(c) If on examining the representation made or objection raised, the Authorized Officer comes to the conclusion that such representation or objection is not acceptable or tenable, he shall communicate within ‘[fifteen days] of receipt of such representation or objection, the reasons for non-acceptance of the representation or objection, to the borrower.]
Taking Possession of movable assets — Rule 4 the Security Interest (Enforcement) Rules, 2002
Rule 4. Procedure after issue of notice.—If the amount mentioned in the demand notice is not paid within the time specified therein, the authorised officer shall proceed to realise the amount by adopting any one or more of the measures specified in sub-section (4) of section 13 of the Ordinance for taking possession of movable property, namely:—
(1) 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 as nearly as possible in Appendix I to these rules.
(2) After taking possession under sub-rule (1) above, the authorised officer shall make or cause to be made an inventory of the property as nearly as possible in the form given in Appendix II to these rules and deliver or cause to be delivered, a copy of such inventory to the borrower or to any person entitled to receive on behalf of borrower.
Sale of movable secured assets — Rule 6(1) of the Security Interest (Enforcement) Rules, 2002
Rule 6 (1) 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—
(a) obtaining quotations from parties dealing in the secured assets or otherwise interested in buying such assets; or
(b) inviting tenders from the public; or
(c) holding public auction; or
(d) by private treaty.
Notice to the borrower before sale of movable secured assets — Rule 6(2) of the Security Interest (Enforcement) Rules, 2002
Rule 6(2) The authorised officer shall serve to the borrower a notice of thirty days for sale of the movable secured assets, under sub-rule (1):
[PROVIDED that if the sale of such secured assets 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:
PROVIDED FURTHER 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.
Terms and conditions of sale of movable secured assets — Rules 6 (4) of the Security Interest (Enforcement) Rules, 2002
Rule 6(4) The authorised officer shall upload the detailed terms and conditions of the sale of the movable secured assets on the web-site of the secured creditor, which shall include,-
(a) details about the borrower and the secured creditor;
(b) complete description of movable secured assets to be sold with identification marks or numbers, if any, on them;
(c) reserve price of the movable secured assets, if any, and the time and manner of payment:
(d) time and place of public auction or the time after which sale by any other mode shall be completed; (e) deposit of earnest money as may be stipulated by the secured creditor;
(f) any other terms or conditions which the authorised officer considers it necessary for a purchaser to know the nature and value of movable secured assets.]
Sale Certificate about movable secured assets — Rule 7(2) the Security Interest (Enforcement) Rules, 2002
Rule 7(2) On payment of sale price, the authorised officer shall issue a certificate of sale in the prescribed form as given in Appendix III to these rules 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.
Taking Possession of immovable secured assets — Rule 8(1) the Security Interest (Enforcement) Rules, 2002
Rule 8(1) 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 these rules, to the borrower and by affixing the possession notice on the outer door or at such conspicuous place of the property.
Publication of possession notice about immovable secured assets — Rule 8(2) the Security Interest (Enforcement) Rules, 2002
Rule 8(2) The possession notice as referred to in sub-rule (1) shall also be published in two leading newspapers, one in vernacular language having sufficient circulation in that locality, by the authorised officer.
Taking Physical possession of secured immovable property — Rules 8(3) and 8(4) the Security Interest (Enforcement) Rules, 2002
Rule 8(3) 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 a owner of ordinary prudence would, under the similar circumstances, take of such property.
Rule 8(4) 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.
- Valuation of Secured immovable assets
- Sale of secured immovable assets
- Rule 8(5) the Security Interest (Enforcement) Rules, 2002
Rule 8(5) Before effecting sale of the immovable property referred to in sub-rule (1) of rule 9, the authorised officer shall obtain valuation of the property from an approved valuer and in consultation with the secured creditor, fix the reserve price of the property and may sell the whole or any part of such immovable secured asset by any of the following methods:—
(a) by obtaining quotations from the persons dealing with similar secured assets or otherwise interested in buying the such assets; or
(b) by inviting tenders from the public;
(c) by holding public auction; or
(d) by private treaty.
Notice to the borrower before sale of secured immovable assets — Rule 8(6) the Security Interest (Enforcement) Rules, 2002
Rule 8(6) The authorised officer shall serve to the borrower a notice of thirty days for sale of the immovable secured assets, under sub-rule (5): Provided that if the sale of such 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 two leading newspapers one in vernacular language having sufficient circulation in the locality by setting out the terms of sale, which shall include,—
(a) The description of the immovable property to be sold, including the details of the encumbrances known to the secured creditor;
(b) the secured debt for recovery of which the property is to be sold;
(c) reserve price, below which the property may not be sold;
(d) time and place of public auction or the time after which sale by any other mode shall be completed;
(e) depositing earnest money as may be stipulated by the secured creditor;
(f) any other thing which the authorised officer considers it material for a purchaser to know in order to judge the nature and value of the property.
Affixation of sale notice and uploading terms and condition — Rule 8(7) the Security Interest (Enforcement) Rules, 2002
Rule 8(7) Every notice of sale shall be affixed on a conspicuous part of the immovable property and the authorised officer shall upload the detailed terms and conditions of the sale, on the web-site of the secured creditor, which shall include –
(a) the description of the immovable property to be sold, including the details of the encumbrances known to the secured creditor;
(b) the secured debt for recovery of which the property is to be sold;
(c) reserve price, below which the property may not be sold;
(d) time and place of public auction or the time after which sale by any other mode shall be completed;
(e) depositing earnest money as may stipulated by the secured creditor;
(f) any other thing which the authorised officer considers it material for a purchaser to know in order to judge the nature and value of the property.
No sale of immovable property before the expiry of thirty days or fifteen days from the date of public notice for sale in newspaper — Rule 9(1) the Security Interest (Enforcement) Rules, 2002
Rule 9(1) No sale of immovable property under these rules shall take place before the expiry of thirty days from the date on which the public notice of sale is published in newspapers as referred to in the proviso to sub-rule (6) or notice of sale has been served to the borrower.
Confirmation of sale of secured immovable assets — Rule 9(2) the Security Interest (Enforcement) Rules, 2002
Rule 9(2) The sale shall be confirmed in favour of the purchaser who has offered the highest sale price in his bid or tender or quotation or offer to the authorised officer and shall be subject to confirmation by the secured creditor:
Provided that no sale under this rule shall be confirmed, if the amount offered by sale price is less than the reserve price, specified under sub-rule (5) of rule 9:
Provided further that if the authorised officer fails to obtain a price higher than the reserve price, he may, with the consent of the borrower and the secured creditor effect the sale at such price.
Deposit of 25% of the sale price — Rule 9(3) the Security Interest (Enforcement) Rules, 2002
Rule 9(3) On every sale of immovable property, the purchaser shall immediately pay a deposit of twenty-five per cent. of the amount of the sale price, to the authorised officer conducting the sale and in default of such deposit, the property shall forthwith be sold again.
Deposit of the balance 75% of the sale price — Rule 9(4) the Security Interest (Enforcement) Rules, 2002
Rule 9(4) The balance amount of purchase price payable shall be paid by the purchaser to the authorised officer on or before the fifteenth day of confirmation of sale of the immovable property or such extended period as may be agreed upon in writing between the parties.
Re-auction if balance sale price is not deposited — Rule 9(5) the Security Interest (Enforcement) Rules, 2002
Rule 9(5) In default of payment within the period mentioned in sub-rule (4), the deposit shall be forfeited and the property shall be resold and the defaulting purchaser shall forfeit all claim to the property or to any part of the sum for which it may be subsequently sold.
Sale Certificate about secured immovable assets — Rule 9(6) the Security Interest (Enforcement) Rules, 2002
Rule 9(6) On confirmation of sale by the secured creditor and if the terms of payment have been complied with, the authorised officer exercising the power of sale shall issue a certificate of sale of the immovable property in favour of the purchaser in the form given in Appendix V to these rules.
Sale of secured immovable assets subject to encumbrances — Rule 9(7) the Security Interest (Enforcement) Rules, 2002
Rule 9(7) Where the immovable property sold is subject to any encumbrances, the authorised officer may, if the thinks fit, allow the purchaser to deposit with him the money required to discharge the encumbrances and any interest due thereon together with such additional amount that may be sufficient to meet the contingencies or further cost, expenses and interest as may be determined by him.
Delivery of possession of the property to purchaser — Rule 9(9) the Security Interest (Enforcement) Rules, 2002
Rule 9(9) The authorised officer shall deliver the property to the purchaser free from encumbrances known to the secured creditor on deposit of money as specified in sub-rule (7) above.
Sale certificate to mention whether sale is free from any encumbrances or not — Rule 9(10) of the Security Interest (Enforcement) Rules, 2002
Rule 9(10) The certificate of sale issued under sub-rule (6) shall specifically mention that whether the purchaser has purchased the immovable secured asset free from any encumbrances known to the secured creditor or not.
