SARFAESI Act, 2002 Remedies

Best DRT Advocate Chandigarh, SARFAESI, Bank Advocate

Best DRT Advocate Chandigarh, SARFAESI, Bank Advocate

Remedies for Borrowers & Guarantors under SARFAESI Act, 2002

What is SARFAESI Act, 2002 and its object?

It is an Indian Law passed on 17.12.2002.  It allows banks and other financial institution to auction residential or commercial properties (of Defaulter) to recover loans. Under this act secured creditors (banks or financial institutions) have many right for enforcement of security interest under section 13 of SARFAESI Act, 2002. If borrower of financial assistance makes any default in repayment of loan or any installment and his account is classified as Non performing Asset by secured creditor, then secured creditor may require before expiry of period of limitation by written notice. Before this Act took effect, financial institutions had to take recourse to civil suits in the courts to recover their dues, which is a lengthy and time-consuming process.

SARFAESI, Best DRT Advocate Chandigarh, Advocate Anoop Verma, Criminal and Banking Advocate Punjab and Haryana High Court Chandigarh

Procedure adopted by Financial Institutions under SARFAESI:

  • Person (Borrower) avails the loan from the Bank and mortgages his property with the Financial Institution.
  • Borrower fails to deposit the Installments to the Bank consecutively for 90 days.
  • Bank declares the borrower as defaulter and classify the account as NPA i.e. Non Performing Asset.
  • Bank initiates the recovery proceedings and issues a demand notice u/s 13(2) of SARFAESI Act, 2002, making a demand of outstanding dues within 60 days, else it will proceed further.
  • If the borrower fails to deposit the outstanding dues within said 60 days, the Bank issues the possession notice u/s 13(4) of SARFAESI Act, 2002, whereby it takes the Symbolic possession of the mortgaged property.
  • Now, the Bank u/s 14 of SARFAESI Act, 2002, approaches the District Magistrate to take permission to take physical possession of the mortgaged property.
  • Bank takes the physical possession of the mortgaged property and issues the 30 days sale notice and put the mortgages property on auction and thereby recover its due amount after selling the mortgaged properties of Borrowers & Guarantors.

However, there are some prescribed rules under law and RBI Guidelines that have to be followed mandatorily by Financial Institution.

Remedies available to Borrower/Guarantor before Debt Recovery Tribunal (DRT):

  • Whenever the Bank initiates the proceedings under SARFAESI Act, 2002 and issues a demand notice u/s 13(2), the notice recipient has the right to give reply of said notice to Bank u/s 13(3) and the Bank is under obligation to decide the same before proceeding further under section 13(4) of the Act.
  • As soon as the Bank initiates any proceeding u/s 13(4) of the Act, the borrower/guarantor has the remedy of appeal u/s 17 of the SARFAESI Act, whereby the borrower/guarantor can approach before the Debt Recovery Tribunal and put his/her grievance before the Debt Recovery Tribunal (DRT) and the Tribunal is under obligation to decide the Securitization appeal and to provide justice to the parties.

Remedy to Tenants under SARFAESI Act, 2002

Under the New Amendment in SARFAESI Act, 2002, Tenants have a right to approach DRT under S. 17(4-A) of SARFAESI Act

Debt Recovery Appellate Tribunal (DRAT).

If any of the party is aggrieved by any of the order passed by Debt Recovery Tribunal, then the party has the statutory right of appeal before the Debt Recovery Appellate Tribunal (DRAT) u/s 18 of the SARFAESI Act, 2002 subject to the compliance of the mandatory provision.

Best DRT Advocate Chandigarh, SARFAESI, Bank Advocate

Best DRT Advocate Chandigarh, SARFAESI, Bank Advocate

If you have any financial dispute with the Secured Creditors (Financial Institutions, Banks, Cooperative Banks, NBFC, etc.), then you are at right place. Verma Law Associates have wide experience in SARFAESI matters, whether these may be before High Court or before Debt Recovery Tribunal (DRT) or Debt Recovery Appellate Tribunal (DRAT).