When a Bank or a financial institution has to recover any debt from any person, it can file an application before the Debts Recovery Tribunal for recovery against such person. However, with the passage of time, the Debts Recovery Tribunal now deals with two different Acts, namely the Recovery of Debts Due to Banks and Financial Institutions (RDDBFI) Act, 1993 as well as the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interests (SARFAESI) Act, 2002. Under the RDDBFI Act, 1993, banks and financial institution approaches DRT whereas, under SARFAESI Act, 2002, borrowers, guarantors, and other any other person aggrieved by any action of the bank or financial institution, can approach the DRT. Here, we can see that what are the Compliance under SARFAESI Act 2002 (“securitization act”) & “security interest (enforcement) rules, 2002″(“rules”)
CHECK LIST FOR ENFORCEMENT OF SECURITY INTEREST IN CASE OF IMMOVABLE ASSETS I Compliance under SARFAESI Act 2002
| SR. NO. | Compliance under SARFAESI Act 2002 | RELEVANT PROVISIONS |
| 1 | Bank/FI to give a Power of Attorney/ Letter authorizing its concerned official to take steps under the Act. | Sec 13 (12) read with Rule 2(a) |
| 2 | Sending of Demand Notice for enforcement of Security Interest. | Sec 13(2) read with Rule 2(b) & 3 |
| 3 | Notice can be sent by Registered Post or Speed Post or Courier or Fax or E-mail | Rule 3(1) |
| 4 | If Borrower avoids notice, service shall be made by affixing the notice in some conspicuous place of his residence/ business and by publishing the notice in two leading newspapers, one in a vernacular language having sufficient circulation | Proviso to Rule 3 (1) |
| 5 | If more than one Borrower (which includes guarantor), individual notice to be served on each of them. | Rule 3(4) |
| 5A | In case any reply/representations are received, the Bank to suitably adjudicate upon and decide. | Section 13(3A) |
| 5B | Issue Notice for taking possession of Secured Asset u/s 13(4) of Act . | Sec 13(4) |
| 5C | Take symbolic possession of the Secured Assets | Sec 13(4) |
| 6 | File an application before the Chief Metropolitan Magistrate or District Magistrate for taking actual possession of the property | Sec 14(1) |
| 7 | Comply with the order of the Chief Metropolitan Magistrate or District Magistrate | Sec 14(2) |
| 8. | Liaisoning with the Court Receiver, Police authorities, etc. | |
| 9. | Deposit of fee with Police authorities, if any, in case the police force is to be made available by police station in Utter Pradesh | |
| 10 | After taking the possession a notice in terms of Appendix IV will be sent to the Borrower, which will also be affixed on the Property. | Rule 8(1) |
| 11 | The said notice will also be published in two leading newspapers one in vernacular language within 7 days. | Rule 8(2) |
| 12 | Name of Bank/FI to be displayed on the Property. | Rule 8(1) |
| 13 | Insurance cover to be arranged | Rule 8(4) |
| 14 | Take Photographs | Not specified |
| 15 | Security Guards to be deployed at the site of the Property. | Rule 8(4) |
| 16 | Valuation of property by an approved valuer before effecting the sale | Rule 8(5) |
| 16A | Serve on the Borrower a notice of 30 days for sale. | Rule 8(6) |
| 17 | Obtaining Quotations/Inviting tenders/Holding Public Auctions/ Signing Private Agreement for sale of the property. | Rule 8(5) |
| 18 | If sale is by way of inviting tenders from public or holding of public auction, a public notice to be published in two leading news papers one in vernacular language, having sufficient circulation, setting out the terms of the sale. | Proviso toRule 8(6) |
| 19 | Notice and Publications to be affixed on conspicuous part of the property and put on the website of the Bank. | Rule 8(7) |
| 20 | Sale other than public auction/tender to be on terms settled between the parties in writing. | Rule 8(8) |
| 21 | Sale to be confirmed in favour of highest bidder | Rule 9(2) |
| 22 | No sale to be confirmed on less than reserve process. However sale at less than Reserve price can be made with the consent of Borrower | Proviso to Rule 9(2 |
| 23 | 25% of the sale price to be deposited forthwith and balance within 15 days | Rule 9(3) and (4) |
| 24 | If balance is not deposited the deposit would be forfeited and the property be resold. | Rule 9(5) |
| 25 | Sale of Property to be made effective from execution of Sale Deed | Not specified |
| 26 | If the terms of payment have been complied with, the Bank/FI shall issue a certificate of sale in favour of the purchaser | Rule 9(6) |
| 27 | The certificate of sale to specify whether the property is free from encumbrances known to the Bank | |
| 28 | Acknowledgement from buyer of having taken over the physical possession of property to be obtained by the Bank/FI. | Not specified |
| 29 | In case the dues of the Bank/FI are not fully met with the sale proceeds of the property, Bank/FI may file an application before Debt Recovery Tribunal or Court having jurisdiction, for recovering the balance amount. | Sec 13(10)Read with Rule 11 |
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Very Good explanation on SRFAESI act.