Answer By law4u team
The process under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 for recovering secured loans involves the following steps: 1. Issue of Demand Notice (Section 13(2)): Initiation of Recovery: If the borrower defaults in repayment of the loan, the lender (bank or financial institution) issues a demand notice to the borrower under Section 13(2) of the SARFAESI Act. Notice Content: The notice specifies the amount due and demands payment within 60 days. Consequence: If the borrower fails to repay within the 60 days, the lender can take further action under the Act. 2. Possession of Secured Asset (Section 13(4)): Action for Possession: If the borrower does not pay the dues after the demand notice, the lender has the right to take possession of the mortgaged property (secured asset) under Section 13(4). Possession Notice: The lender must send a possession notice to the borrower informing them of the intention to take possession of the asset. Possession Methods: The lender may take physical possession of the asset or appoint a receiver to manage it. Public Notice: The lender can also notify the possession in the local newspaper. 3. Sale of Secured Asset (Section 13(4)(a)): Sale Procedure: After taking possession of the property, the lender may proceed to sell the secured asset. Methods of Sale: The asset can be sold through public auction, private treaty, or through a securitisation process by selling to an Asset Reconstruction Company (ARC). Sale Proceeds: The proceeds from the sale are used to recover the outstanding loan amount. If the sale proceeds exceed the loan amount, the surplus is returned to the borrower. 4. Appointment of Receiver: If the borrower refuses to cooperate, the lender may appoint a receiver to take control of the secured asset, maintain its value, and ensure it is properly sold. 5. Appeal to Debt Recovery Tribunal (DRT) (Section 17): Right to Appeal: The borrower has the right to appeal against the lender’s actions by approaching the Debt Recovery Tribunal (DRT). Timeframe: The borrower must file the appeal within 45 days of receiving the possession notice. DRT's Role: The DRT will examine the case and may issue an order to stay the lender’s action or uphold it. 6. Assistance from District Magistrate or Chief Metropolitan Magistrate (Section 14): Forceful Possession: If the borrower refuses to hand over the possession of the secured asset, the lender can approach the District Magistrate or Chief Metropolitan Magistrate for assistance in taking possession by force. Court Order: The Magistrate can issue orders to assist in the possession of the asset, ensuring the recovery process proceeds without hindrance. 7. Recovery of Deficiency: If the sale proceeds from the secured asset are insufficient to cover the dues, the lender may recover the shortfall by filing a civil suit or through other legal means as per the provisions of the Civil Procedure Code (CPC). 8. No Court Involvement: The SARFAESI Act provides a mechanism for the lender to recover the secured loan without the need for court intervention at the initial stages. However, if the borrower challenges the lender's actions, the case may go to the DRT or other courts for adjudication. 9. Final Settlement: Once the loan is recovered or the secured asset is sold, the lender provides the borrower with a no dues certificate and returns any surplus amount after deducting the outstanding loan dues. Conclusion: The SARFAESI Act allows lenders to recover defaulted loans efficiently by taking possession and selling the secured assets without going through lengthy court procedures. However, the process ensures that the borrower has avenues to appeal and protect their rights during the recovery process.
