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QUESTIONNAIRE ON SARFAESI ACT, 2002 1. Whether security interest on movable properties is enforceable under SARFAESI Act? - Yes.

Security interest on movable assets or immovable assets is enforceable under SARFAESI Act. Section 13(2) provides that 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. 2. Under which section of the Act, notice can be issued to the debtor asking him to repay the debt? What is the precaution to be taken? Under Section 13(2) of the Act. The notice must specifically superscribed with Notice issued under Section 13(2) of SARFAESI Act. 3. Who is authorised to issued notice under SARFAESI Act in our Bank? Any officer of SMG Scale IV and above is authorised to issued notice under SARFAESI Act. If the branch is headed by an officer below that rank, any notice from the branch must be issued through an official of the specified rank who is available at the nearby branch or administrative office. 4. What is the time limit within which, the borrower must repay the dues, to avoid further action from the Financial Institution under SARFAESI Act? The borrower must repay the loan within 60 days from the date of notice to avoid further complications. 5. Can a borrower represent to the FI / Bank or raise any objection to stop the proceedings, giving any reasons? Yes. Within the time permitted (i.e. 60 days from the date of notice) the borrower can represent to the Bank or raise objection to stop the proceedings under SARFAESI Act. 6. Shall the FI ./ Bank accede to the request / objection of the borrower to stop the proceedings under SARFAESI Act? The FI / Bank at its discretion either accede to the request / objection of the borrower or proceed under the SARFAESI Act. The decision of the Bank must be communicated to the borrower within 7 days from the date of receipt of request / objection. 7. What are the actions that a secured debtor can take, if the borrower did not pay the amount due within 60 days from the date of notice under Section 13(2) of SARFAESI Act?

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) takeover 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: 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. 8. Can we proceed against the assets of the guarantor under SARFAESI Act? Yes. borrower under SARFAESI Act means any person who 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 becomes borrower of a securitisation company or reconstruction company consequent upon acquisition by it of any rights or interest of any bank or financial institution in relation to such financial assistance. 9. Shall we have to exhaust our remedies towards borrower, before proceeding against Guarantor under SARFAESI Act? No. Not necessarily. Section 13(11) of the Act provides that without prejudice to the rights conferred on the secured creditor under or by this section, the secured creditor shall be entitled to proceed against the guarantors or sell the pledged assets without first taking any of the measures specified in clauses (a) to (d) of sub-section (4) in relation to the secured assets under this Act. "(Item No.s (a) to (d) under question No. 8 above) 10. Can we take the help of any Government Officials in enforcing the rights under SARFAESI Act? The Act provides under Section 14(1) that the secured creditor may, for the purpose of taking possession or control of an such secured asset, 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. 11. What is the recourse available to the borrower / guarantor once the Bank takes possession of the assets? The borrower / guarantor can appeal to the DRT within 45 days from the date action of the Bank paying appropriate fee praying for intervention of the DRT.

12. Within which period the DRT has to dispose the application filed by the borrower / guarantor in normal course? Within 60 days from the date of such application. (The DRT, may extend this upto 4 months, by recording the reasons thereof in writing.) 13. Is there any remedy, if the DRT does not decide about the plaint within 4 months as mentioned above? Yes. Either party can make an application to the Appellate Tribunal, for directing the DRT to expeditious disposal of the application. On such occasion, the Appellate Tribunal will give direction to the DRT to expeditiously dispose the application. 14. Is there any remedy, if the DRT gives a decision which is detrimental to the interest to the Bank? Yes. Bank / FI can file an appeal with the Appellate Authority within 45 days from the date of receipt of the order of the DRT along with such fees as prescribed by the DRT from time to time. 15. What is the course of action, if the DRT gives a decision in favour of the Bank / FI? If the DRT upholds the action of the Bank / FI, notwithstanding anything contained in any other law for the time being in force, the secured creditor shall be entitled to take recourse to sell the property to recover the dues from the borrower. 16. What is the additional precaution we have to take, when we take possession of the immovable property? We have to deliver a notice of possession to the borrower. One copy of the same has to be affixed on the outer door, or at a conspicuous place of the property. We have to publish the possession notice in two leading news papers (one of which will be a local vernacular paper). 17. What is the course of action we have to follow to sell the property taken possession under SARFAESI Act? We have to serve a notice to the borrower/ guarantor to repay the dues within 30 days. If we want to sell the property by holding public auction or by sealed tenders from the public, we have the publish the sale notice in two leading news papers(one of which will be a local vernacular paper). 18. What are the different types of methods we can adopt to sell the property taken possession under SARFAESI Act? (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. 19. Which type of property the provisions of SARFAESI Act will not be applicable? 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) any conditional sale, hire-purchase or lease or any other contract in which no security interest has been created; d) any security interest for securing repayment of any financial asset not exceeding one lakh rupees e) any security interest created in agricultural land; f) any case in which the amount due is less than twenty per cent of the principal amount and interest thereon. 20. Can we recover a time barred loan through the provisions of SARFAESI Act? No. 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). 21. If, the decision of the DRT in upholding the action of the Bank / FI is not to the satisfaction of the borrower/ guarantor, can he stop the proceedings of the Bank to sell the assets? Yes. If the borrower/ guarantor is aggrieved with the decision by the DRT, he can file an appeal to the Appellate Tribunal, within 30 days. However in normal course the borrower / guarantor has to deposit minimum 50% of the amount of debt due from him, with the Appellate Tribunal. But the Appellate Authority at their discretion reduce this amount to 25% of the amount of debt due from him. 22. What is the course of action, if the borrower is avoiding to take the Demand Notice?

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 can not 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. (Similar procedure can be adopted, for any notice to be served to the borrower / guarantor under this Act). 23. TIME FRAME FOR DIFFERENT ACTIVITIES UNDER SARFAESI Act
Sl.No. 1. Action Time to be allowed to the borrower / guarantor in demand notice to repay the dues Time within which the borrower can submit representation / objection to the above notice Time within which the Bank has to convey its decision against the above representation / objection Time within which Borrower can file a petition in the DRT against Bank for having taken possession of property Maximum time within which DRT has to pass the order for the above Time within which the Bank / Borrower can file appeal with the Appellate Tribunal against the order of the DRT Minimum Time Bank has to permit for the borrower to repay the debt, while issuing the sale Notice Time limit 60 days from the date of notice

2.

60 days from the date of notice

3.

7 days from the date of receipt of the representation / objection. within 45 days from the date of action of the Bank

4.

5. 6

within4 months from the date of application in the DRT within 45 days from the date of receipt of the order of the DRT

7.

30 days from the date of notice.

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