Check List for SARFAESI proceedings

Introduction
When we discuss about SARFAESI act the various question asked by our collegue such as
1. What is SARFAESI ACT , 2. Where applicable?
3. Where not applicable? 4. What is process of issue notice?
5. Who is authorized to issue notice? 6. Notice to be issued whom?
7. Process of possession of property ? 8. Procedure of sale to property?
What is SARFAESI act
It is Securitization And Reconstruction of Financial Assets & Enforcement of Security
Interest act 2002.It is an act for recovery power given to the bank. It is applicable in whole
India including state of J& K wef21.06.2002 in this act the amendment taken place on
11.11.2004,02/02/07,21/08/07,26/10/07.
Where applicable
• NPA accounts only
• A secured creditor can take possession of the secured asset and sell the same
without recourse to the court
• If the sale proceed are not adequate the bank can file a suit with DRT for the
recovery of the dues.
• Consortium advances.In joint loans by bank at least 75% of the advance should
agree to serve the notice and the financial asset can be sold.
Where not applicable
• Lien on any goods
• A pledge of movables
• Any conditional sale, hire purchase or lease
• Any security interet for securing repayment of any financial asset up to 1 lacs
• Any security nterest creted n agricultural land
• Any case in which the amount due is less than 20% of the principal amount
and interest thereon

Compiled by: K H GUPTA , CHIEF MANAGER(TRG), SBLC, KANPUR 1

TIMEFRAME
SN PROCESS TIMEFRAME
1 Notice before possession 60 Days
2 Borrower can submit representation/objection to the above notice 60 days
3 Reply to objection by borrower 7 Days)
4 Borrower can approach DRT against possession notice 45 Days
5 Maximum time within which DRT has to pass the order for above 4 months
6 Appeal to DRAT against decision of DRT 30 Days
7 Notice before sale to repay the loan 30 Days
8 Period of balance payment 75% by the buyer of asset 15 days

what is process
Stage. 01
Notices under S.13 (2) to the Borrower /guarantor shall be sent by registered post
with acknowledgement due.

In case of deceased borrower guarantor, 13(2) notice to be sent to the legal heirs.

Acknowledgment card to be obtained and kept on record.

Ensure that 13(2) notice contains particulars of the property mortgaged

/hypothecated to the Bank. Ensure that all the documents on record are in order in
all aspects.

If the notices are returned un-served, a copy of the notice shall be affixed on the
outer door or some other conspicuous part of the mortgaged property of
borrower/guarantor and notice shall be published in TWO leading newspapers, one
in vernacular language.

The objections raised against the notice shall be thoroughly examined and
suitable reply shall be sent within SEVEN (7) days from the date of receipt of the
objection.
Stage No.02
Immovable Security

Compiled by: K H GUPTA , CHIEF MANAGER(TRG), SBLC, KANPUR 2

 The genuineness of the title deeds shall be re-verified from the Bank’s empanelled
advocate.The Encumbrance Certificate shall be obtained to confirm any
encumbrance created over the immovable security.

The possession notice under S.13 (4) has to be affixed on the outer door or at
such prominent place of the mortgaged property. The possession notice shall also
be delivered to the borrower/guarantor against acknowledgement or sent by
registered post with acknowledgment

The possession notice shall be published in TWO leading newspapers, one being
vernacular, within SEVEN days from the date of possession.

If physical possession is taken, preserve the property by posting security guards.

The Reserve Price has to be obtained from the Valuation Committee based on the
report of the Bank’s approved valuer.

A clear 30 days notice shall be given to the borrower/guarantor about the

proposed sale of their secured assets against acknowledgement.
If the sale is by inviting tenders from the public or by holding public auction, sale
notice must be published in TWO newspapers (one vernacular).

The sale notice is required to be affixed on the conspicuous part of the mortgaged
property. Sale shall be conducted only after expiry of the 30 days period from the
date of publication of sale notice in newspapers or date of service of notice to the
borrower/guarantor.

Movable Security
Take possession in the presence of two witnesses and Panchnama of possession
of movables to be drawn up and signed by two witnesses. Inventory of movables to
be prepared and a copy of such inventory to be delivered to the borrower/guarantor
against acknowledgment.

The Reserve Price has to be obtained from the Valuation Committee based on the
report of the Bank’s approved valuer. Movable properties taken possession of
should be covered by proper insurance immediately.

Compiled by: K H GUPTA , CHIEF MANAGER(TRG), SBLC, KANPUR 3

 A clear 30 days notice shall be given to the borrower/guarantor about the
proposed sale of their movable assets against acknowledgement.

If the sale is by inviting tenders from the public or by holding public auction, sale
notice must be published in TWO newspapers (one vernacular). Sale shall be
conducted only after expiry of the 30 days period from the date of service of notice to
the borrower/guarantor.
Stage No.03
The sale shall be confirmed in favour of the purchaser who has offered the highest
sale price in his bid or tender or quotation.

The successful bidder shall deposit 25% of sale price on striking the bid and in
default of such deposit; the property shall be sold again.

The balance amount of purchase price shall be paid by the purchaser on or before
the fifteenth day of confirmation of sale or such extended period as agreed by the
parties in writing.

In default of payment of the balance amount within the stipulated time by the
purchaser, the deposit shall be forfeited and the property shall be resold and the
defaulting purchaser shall forfeit all claims to the property or to any part of the sum
for which it may be subsequently sold.

On confirmation of sale by the secured creditor and if the terms of payment have
been complied with, sale certificate shall be issued in favour of the purchaser.

The certificate of sale shall specifically mention whether the purchaser has
purchased the immovable property free from encumbrances known to the secured
creditor or not.

In cases, where the auction results in shortfall of the amount of debt, an application for
recovery of such shortfall shall be filed before DRT or Civil Court. The application shall be
filed within the period of limitation.
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Compiled by: K H GUPTA , CHIEF MANAGER(TRG), SBLC, KANPUR 4