IntroductionThe President of India put into effect the law for “Securitisation and Reconstruction of Finance Assets and Enforcement of Security Interest Act 2002” on August 23, 2002.
ProvisionsIf a borrower has not repaid, the banks have following powers:
- Take possession, sell or lease the assets
- Take over the management
- Appoint a manager
- Accept any money by 3rd parties for the borrowers
Sale Of Charged Securities
- Ministry of Finance notified the rules that the lenders have the permission to dispose off the assets which are charged to the bank and where possessions have been taken by the bank.
- The sale can be through private treaty or public auction.
Application by The Borrower To DRT Against Possession
- The borrower may make an application to the Debts Recovery Tribunal (DRT) along with certain fees as prescribed by it.
Action by DRT
- If DRT comes to the conclusion that the creditors have not done any measures according to the act, it may order or declare the assets has invalid and restore it to the borrower.
- If DRT comes to the conclusion that the creditor has abode by the act, it may secure the creditor shall do any measures to recover his debt.Appeal To DRAT Against DRT Decision
- The appeal will be attended within 30 days when the borrower has deposited 50% of the debt amount.
- The Appellate Tribunal may reduce the amount to 25% of the debt.
Loans Not Eligible Under SARFAESI ACT 2002There are certain restrictions in which a banker can use SARFAESI act against the assets:
- Loans with outstanding up to Rs. 1 Lac
- Agriculture land cannot be sold
- When the 80% of the money is recovered
- Where security is not charged to bank
Sale of Assets
- Sale by public tender or public auction has to be put in at least two newspapers
- A minimum time period of 30 days to be given to the owner
- A designated officer has to be put by the bank board
- A reserve price have to be put by banks after proper evaluation
- Offer price have to be equal to reserve price if it is not met it can be disposed of at lower price with consent of both borrower and lender
- Sale of the asset is confirmed after deposit of 25% by the highest bidder remaining by 15 days
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