Modified Day 1-S5-SARFAESI.pptx

SARFAESI 2002
SECURITISATION AND RECONSTRUCTION OF FINANCIAL
ASSETS AND ENFORCEMENT OF SECURITY INTEREST 2002
ENFORCEMENT OF SECURITY INTEREST
GREAT WEAPON
A SECURED CREDITOR CAN ENFORCE SECURITY
INTEREST WITHOUT INTERVENTION OF THE
COURT(SECTION 13-1)

SARFAESI 2002
HISTORICAL BACKGROUND
-Time consuming, expensive legal process and mounting bad debts.
-Demand of Banks and Financial Institutions.
-Liberalization.
-Financial Sector Reforms Committee I (Narasimhan Committee I, 1991-
92, IRAC,PROVISIONING, DRT).

SARFAESI 2002
- Financial Sector Reforms Committee II (Narasimhan Committee II, 1997-
98,)
(Reviewed the DRT- Results not encouraging)
RECOMMENDED LEGISLATION TO SALE DEFAULTING BORROWERS
ASSETS WITHOUT INTERVENTION OF THE COURT)
- ANDHYARUJINA COMMITTEE ON LEGAL REFORMS
2000.(RECOMMENDED THE NEW ACT AND AMENDMENT TO DRT
ACT.)

SARFAESI 2002
OBJECT:-
THE ACT WAS ENACTED FOR EXPEDITIOUS
RECOVERY OF LOANS OF BANKS AND FINANCIAL
INSTITUTIONS (W.E.F. 21ST JUNE 2002)

SARFAESI 2002
• BORROWER: means any person who has been granted financial
assistance by any bank or fin. inst. or who has given any
guarantee or created any mortgage or pledge as security for
financial assistance granted by the bank or fin.inst. and includes a
person who becomes borrower of ARC consequent upon
acquisition by it of any rights or interest of any bank or fin.inst. in
relation to such financial assistance(or who has raised the funds
through the debt securities).(u/s 2f)
• DEBT: shall have the meaning assigned to it in Clause (g) of
Section 2 of RDDBF act 1993 and includes unpaid portion of
purchase price of any tangible asset given on hire
purchase/lease/conditional lease/conditional sale any right/ title or
interest on any intangible asset and debt securities.(u/s 2 (ha)

SARFAESI 2002
DEFAULT:
Non payment of any debt or any other amount payable by the
borrower to any Secured Creditor consequent up on which the
account of such borrower is classified as NPA
Non payment of any debt or any other amount payable by the
borrower with respect of debt securities after notice of 90 days
demanding payment of the dues served upon such borrower by the
debenture trustee or any other authority in whose favour security
interest is created for the benefit of holders of such debt
securities.(u/s 2(j)(i)(ii).

SARFAESI 2002
FINANCIAL ASSET:
Debt/receivable/claim/secured/unsecured asset, secured by
hypothecation/ mortgage/pledge/movable/immovable/rights/title/
interest in any intangible/assignment/ (u/s 2(l)(i to vb)
SECURITY INTEREST :
Means right/title or interest of any kind (other than those specified in
section 31) upon property created in favour of any secured
credtitor(u/s zf(i)to (zj))

SARFAESI 2002
CONSORTIUM
 LEADER- LARGEST EXPOSURE BANK SHOULD BE DESIGNATED AS
SECURED CREDITOR FOR TAKING ACTION.
 CONSENT FROM BANKERS WITH TOTAL MINIMUM EXPOSURE OF 60
% MUST.(SECTION 13(9)AMENDED W.E.F.03.04.2013)

SARFAESI 2002
 AUTHORITY STRUCTURE
 AUTHORISED OFFICER – SCALE IV & ABOVE.
 BANKS BOARDS HAVE DISCRETION TO DELEGATE AND AUTHORISE
ANY OFFICER, BUT IF ANY OFFICER LESS THAN SCALE IV IS
AUTHORISED THEN THAT OFFICER SHOULD HAVE COPY OF BOARD
RESOLUTION AUTHORISING HIM/HER.(R2(a))

SARFAESI 2002: STEP BY STEP ACTIONS POINTS
 CONDITIONS NEEDS TO BE FULFILLED BEFORE ISSUE OF NOTICE13(2)
 NPA.(S13(2)) as per RBI Guidelines.
 Outstandings (including unapplied interest up to the date of notice ) –
Rs.1 lac & above (S31(h)).
 Outstandings should be minimum 20% or more of Principal and Interest
thereon(S31(j))
 Secured by Mortgage / Hypothecation etc.

 ACT NOT APPLICABLE TO:(SECTION 31 (A) TO (J)) .
 The exercise of lien and rights under pledge are excluded.
 ANY SECURITY INTEREST CREATED IN AGRICULTURAL LAND.
 Creation of any security in any aircraft, creation of security interest in
any vessel.

 Cases where legal action is pending/ not pending
 Simultaneous action is allowed (after Mardia Chemicals Ltd. v/s Union
of India - SC2371 - case as per amending the Act 30 of
2004(SARFAESI) w.e.f. 11.11.2004 and which effected changes to the
Section 19 of DRT act).
• SUPREME COURT - TRANSCORE v/s UNION OF INDIA SC 712: 2007
 SC RULED THAT “THE WITHDRAWL OF ORIGINAL APPLICATION PENDING BEFORE
THE DRT/COURT UNDER THE DRT ACT IS NOT PRECONDITION FOR TAKING
RECOURSE TO SEC 13(4) OF SARFAESI”.

 Verify Documents (Limitation) ( S 36) (serving of 13(2) Notice within
Limitation must)
 Particulars of Security.
 CERSAI Registration is done and copy is available in the file.
 Verify the assets and do the Cost Benefit Analysis of taking
possession & other exp.
 IF EXPENSES ARE VERY HIGH ISSUE 13(2) & TAKE ONLY SYMBOLIC
POSSESSION.

 Try to meet the borrower and counsel. (You may take post dated
cheque if he/she promises to pay within reasonable time)
 Notice to Borrower/s & copy to the Guarantor/s. section 13(2)
 If Guarantor’s property is mortgaged then 13(2) to Guarantor (13(11))
duly modified and to the Borrower/s – 60 days (if expired then serve
to legal heirs, various modes (R3(1 to 5), exact particulars of NPA date,
documents, security charged & correct overdues (further interest and
charges (s13(7)), reference to 13(8)). (copy of all letters to Guarantor
must)

SARFAESI 2002: STEP BY STEP ACTION POINTS
SERVING OF NOTICE:
 Registered post with acknowledgement due, addressed to the borrower or his
agent empowered to accept the service OR
 Speed Post OR
 Courier OR
 Hand Delivery (added vide Govt. Notification dated 03.11.16) OR
 Any other means of transmission of documents, like fax message or electronic mail
service.
For the completion of the first step of service of demand notice, and to thwart
borrowers’ tactics, there is need to ensure that these notices are:
 Addressed properly
 Sent on all the available addresses and
 More particularly at the most current addresses of the borrower / guarantor /
mortgagor
 Simultaneously by more than one mode i.e by Registered/Courier/E-mail etc

• NOTICE U/S 13(2) IS FUNDAMENTAL DOCUMENT FOR ALL FURTHER
LEGAL FIGHTS IN DRT/DRAT/HC/SC WITH THE BORROWER
THEREFORE MORE THAN ORDINARY CARE IS REQUIRED, WHILE
PREPARING THIS NOTICE TO PROTECT THE SELF AND THE BANK.
 If there is tenant in the premises copy of 13(2) to be sent to tenant.
 There are number of persons as borrower/guarantor, partner, directors
etc and legal heirs of one of the borrower and 13(2) was served to few
people and it has became difficult for the bank to serve to all people
and bank is not sure exactly whether reached to all the persons. In this
situation it is advisable to paste the 13(2) on last available address
with the bank and publish it in to two news papers and count the 60
days from the publication of the 13(2).

 REPLY TO OBJECTIONS WITHIN 15 DAYS: STATUTORY&
MANDATORY – Most important - Please ensure reply sent to the
borrower within time frame. REPLY ALL LETTERS QUICKLY WITHIN 15
DAYS. (keep record of reply sent) (R3(a to c)). No Right to Borrower to
prefer an appeal to DRT/HC (S13(3a)). OBJECTION LETTER TO 13(2)
NOTICE CONFIRMS SERVING OF THE NOTICE.
 What to do? if after reading the objection letter you realised that, the
13(2) notice is defective? either send modification memo or fresh
13(2)) serving must. DO NOT GO AHEAD WITH DEFECTIVE NOTICE.

 What is to be done if objection letter to 13(2) is received by the bank
from the borrower’s advocate?
 Reply to the borrower & not to the advocate.
Please check whether advocate has attached authority letter from the
borrower/guarantor to authorise him/her to send the letter, if not the
reply to objection letter by the advocate is not binding on the bank,
please refer to the
MADHYA PRADESH HIGH COURT: WP NO.21803/2021
M/S INDISON AGRO FOODS PVT. VS STATE OF BANK OF INDIA DECIDED ON 8
NOVEMBER, 2021

REPRESENTATION /OBJECTIONS REPLY OF THE BANK
Denial that account has been NPA Explain how account has been classified as NPA as per
extant guidelines of RBI/Bank.
Denial of loan To deny and refer to Loan application and loan
documents executed supported with proof of end
utilization, and particulars of specific release etc
Denial of execution of Loan documents Loan documents executed supported with other
correspondence, if any, Registrations if any.
Denial of creation of charge / mortgage Loan /Security documents like hypothecation
agreements/Mortgage charge created and If these are
registered/ filed with statutory authorities-Sub
Registrar, like ROC, RTO and Central Registry under
SARFAESI Act, etc., be referred to.
Denial of Guarantee by Guarantors and resort to
borrowers securities first.
The liability of the guarantors is joint, several, and co-
extensive with that of the borrower and bank can
resort to any security.
Claim Barred by limitation To deny and refer to operations made in the account
(debit and credit transactions made or last installment
deposited, loan documents executed, Recall Notice
served, Invocation of guarantee, Balance Confirmation
Letter executed or the Balance Sheet of the party, if
available.etc).

REPRESENTATION /OBJECTIONS REPLY OF THE BANK
Rate of interest has not been correctly charged, Penal
interest has been wrongly charged, rate of interest is
high and not charged as per guidelines of RBI.
To explain that rate of interest has been charged as
per Sanction letter, loan documents and various
circulars and is not contrary to RBI guidelines/Bank’s
policy.
Statement of account not furnished / received. To state that Statement of account furnished from
time to time. However furnish a copy of Statement of
account again to the borrower.
Bank can’t take action without filing suit or can’t take
possession without order of the court etc.
No such bar is prescribed under SARFAESI Act. In fact
Civil Court has no jurisdiction at all for steps taken
under this Act.
Simultaneous action under SARFAESI cannot be
resorted to as Civil Case/DRT case is pending.
Supreme Court vide its judgment dt.29.11.2006 in the
matter of Transcore v/s Union of India has decided
that remedies under DRT Act & Securitization Act can
be simultaneously resorted to. As such the
controversy stands decided and both the actions can
be taken simultaneously.
Requests for some time, Tagging/ Restructuring/
Reschedulement / Rephasement / OTS.
Consider the same on merits as per extant Guidelines
and decision be taken quickly at the appropriate level
and borrower be informed accordingly, subject to
executing a Supplementary Agreement to keep
further action under SARFAESI in abeyance.

 Notice to the borrower for handing over of the assets peacefully
voluntarily 13(4) (Rule 8(1) along with covering letter.
 (REFER SUPREME COURT JUDGEMENT DATED 22.08.2013
BEFORE SUBMITTING THE APPLICATION UNDER SECTION 14,
THE SECURED CREDITOR MUST MAKE EFFORT FOR PEACEFUL
POSSESION BY GIVING NOTICE UNDER RULE 8(1), IF MEETS
WITH RESISTANCE FROM BORROWER THEN ONLY TO
APPROACH CMM/DMM. Standard Chartered Bank V/s. Noble
Kumar).
 Useful in future in DRT (NATURAL JUSTICE) and when we
approach to DM/CMM for physical possession.
(WOMEN REPRESENTATIVE & VIDEO SHOOTING MUST.)

 Here banker (Secured Creditor can take SYMBOLIC POSSESSION. (if
taken Symbolic Possession, Panchnama, affixing of possession notice
on the asset & Publication of Possession Notice within 7 days must
Rule 8(2)).
 (The borrower has right to go to DRT under section 17 within 45 days)
(Secured Creditor can ask for Police Escort to local police station, In
this advertisement of possession notice in the news paper please also
give notice to the borrower guarantor as per SIE Rule 8(6) sale notice
of 30 days (please refer amended 13(8), Rule 8(6) & 9 together) & send
the copy of this advertisement to the borrower and guarantor.
 BUT NO BREAK OPENING OF THE LOCKS IN THIS PROCESS.

 Suppose the AO taken symbolic possession and afterwards realised
that, mistake has happened in the post symbolic possession process
(pasting of possession notice, particulars, panchnama, non publishing
of he possession notice within 7 days of possession etc.) The solution
is cancel the earlier symbolic possession and take fresh symbolic
possession and this time follow the act and rules meticulously.

• AFTER SYMBOLIC POSSESSION
• SALE OF ASSETS WHERE POSSESSION IS SYMBOLIC?
• You can sale the assets under symbolic possession.
• RIGHTS OF SECURED CREDITOR
• SECTION 13(4) d, Rule 4 (5), a,b,c,I,ii,iii,iv
• In case the secured asset is tenanted (legally or illegally) issue letter
to the tenant for depositing the rent from possession date in the loan
account of the borrower.
• Send letter to the debtors to pay to bank directly.

 If Symbolic Possession has taken then immediately file the
CMM/DM/CJM application and affidavit for Physical Possession under
Section 14.

• SARFAESI SECTION 14: NOT ONLY DM BUT CJM(Chief Judicial
Magistrate) is also equally competent to deal with application under
Section 14 moved by Secured Creditor.
 DM/CMM/CJM will pass orders and will authorise his/her subordinate
officer (SDO/Tahsildar/N.Tahsildar/CO) or appoint Advocate
Commissioner (AC) to take possession and hand it over to the
Secured Creditor.
 Now DM can appoint Advocate Commissioner for taking possession
under Section 17(Refer:SUPREME COURT OF INDIA:SLP©30240 OF
2019
NKGSB COOP BANK V/S. SUBIR CHAKRAVORTY
DECIDED ON 25.02.2022)

 DM/CMM/CJM to pass orders and take possession now within 30days
maximum 60 days (Amendment to Section 14(1)(i)(ii) 2016). no
challenge to the act of CMM/DM(S14(3))
 Once you get the CMM’s/DM’s/CJM’s order once again contact the
borrower and counsel him that still handing over of the assets
peacefully to the bank is in his/her interest.
 CMM?DM/CJM ORDER DELAY:FOLLOWUP BY A.O., CONTROLLING
AUTH., DLBC,REQ. TO COMM., SLBC, RTI, WRIT. IN HC.
 Contact to Police Authorities for escort.
 Arrangements for D day, eleventh hour difficulties, copies of all
formats etc., briefing and coordination of CMM/DM rep/AC., police
people / EA., video shooting, women representatives, etc.


 CHECK INSURANCE POLICY OF ASSETS TO BE TAKEN U/S13(4)
 Simultaneous proactive readiness for filing Caveat in DRT/HC. MUST FOR
CRITICAL BORROWERS.
 D Day Action (brief to borrower, oral attention to S13(8)) . Possession and
Panchnama (independent witnesses). Inventory, Video Recording,
Women Rep. etc
 Possession notice to be published within 7 days, if not done at the time of
symbolic possession. In this advertisement of possession notice in the
news paper please also give notice to the borrower guarantor as per SIE
Rule 8(6) sale notice of 30 days& send the copy of this advertisement to
the borrower and guarantor.
 While taking possession, use of muscle power by borrower is a
Cognizable Offence.

TENANTS
 TENANTS:AUTHORISED/UNAUTHORISED/CONTRARY TO
Transfer of Property Act(S 48 & 65(a) 1 to 3)/ contrary to terms of
Mortgage / Tenancy or Lease created after Execution of
Mortgage.(Section 17(4-a)(i)(ii))

• CLAUSE IN THE MORTGAGE DEED
• I/We will not Let out, Rent, Licence, Lease, Sale, Assign, Mortgage or
Charge or any way Encumber or Alienate said
Flat/House/Bunglow/Land/Plot.or any part thereof so long as I/We are
indebted to the Bank in the said loan account without prior permission
of the Bank in writing.
• If above clause is there in Bank’s Mortagage Deed, then Bank’s
interest is fully protected. TP Act 1882 Section 48 and Section 65-a(1)
and (3)

• Copies of Possession Notice, Panchnama, Inventory (two separate for
assets charged to the bank & not charged to the bank) to borrower
Protection & Insurance of assets.
• Paper publication of Possession Notice within 7 days of possessin
n(Rule8(2)) is must.(Regional/Vernacular must :STATUTORY &
MANDATORY) if already published at the time of symbolic possession
then not required now
• Immediately advise the insurance company about the possession,
Possession and sale of Perishable Assets? can be sold
immediately(R4(3)) and assets where preservation cost will be more
than the value of the asset. (PRACTICAL APPRACH & PRECAUTIONS)

SECTION 17
BORROWER NOW CAN APPROACH DRT WITHIN 45 DAYS (EITHER FROM
SYMBOLIC OR FROM PHYSICAL POSSESSION) FOR STAY OF FURTHER
ACTION OR REPOSSESSION. (SECTION 17(1))
• DRT TO VERIFY WHETHER MEASURES TAKEN BY SECURED CREDITOR ARE
IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. SECTION 17(2).
• MOST IMPORTANT : OUR ADVOCATE NEEDS TO BE COUNSELLED FOR THE
PROACTIVE READINESS WITH DOCUMENTS PERTAINING TO FOLLOWING
POINTS AND SHOULD BE SHOWN TO THE PRESIDING OFFICER OF DRT
INSTANTLY WHENEVER REQUIRED.
• 1.LOAN APPLICATION.
• 2.DOCUMENTATION.
• 3.TERMS & CONDITIONS LETTER.
• 4.CERSAI REGISTRATION
• 5.ACCOUNT STATEMENT.

• 6.NPA STATUS(CLASSIFIED AS NPA CORRECTLY AS PER RBI GUIDLINES
• 7.OUTSTANDINGS NORMS(20% & Rs.1.00 LAKH & ABOVE)
• 8.13(2) ISSUED AND SERVED CORRECTLY WITHIN LIMITATION PERIOD.
• 9.REPLY TO BORROWER’S OBJECTION WITHIN(15 DAYS) TIME (EVIDENCE)
• 10. 13(4) ACTION AS PER ACT
• 11. PUBLISHED POSSESSION NOTICE PROPERLY WITHIN 7 DAYS IN TWO
NEWS PAPERS CORRECTLY.
• COPIES OF CORRESPONDENCE WHERE WE CAN PROVE THAT HE/SHE IS
HABITUAL DEFAULTER AND NEVERKEEPS HIS/HER PROMISE
• MOST IMPORTANT : BRING TO THE NOTICE OF THE HON. PRESIDING
OFFICER OF THE DRT FALSE PROMISES GIVEN BY THE
BORROWER/GUARANTOR IN THE PAST OR ANY OTHER EVIDENCES WHICH
PROVES THAT, HE/SHE IS TRYING TO THWATER THE BANK’S RECOVERY
PROCEEDINGS AND NOT INTRESTED IN PAYING THE DUES.

• PLEASE ENSURE THAT FOR FIRST & SUBSEQUENT HEARING OUR
ADVOCATE REMAINS PRESENT WITHOUT FAIL.
• Any prayer for stay to further recovery proceedings by the borrower’s
advocate must be with the condition that he she deposits 75%, 50%,
25%. In this situation counsel the advocate to bring to the notice of the
Hon PO Supreme Court Judgment (C. Bright v/s. District Collector,
Dated 05.11.2020, advising that, stays should not be granted without
hearing the secured creditor))

• DRT TO DECIDE IN 2 MONTHS. SECTION 17(5)
• Submit our say.
• Pendency beyond 4 months, approach DRAT to order DRT for early
disposal. Section 17(6)

 FURTHER PROCESS AFTER SYMBOLIC OR PHYSICAL POSSESSION
FOR SALE OF SECURED ASSETS
 SALE OF SECURED ASSETS
 Sale of Assets where possession is Symbolic? You can sale
the assets under symbolic possession and then apply to
CMM/DM/CJM for physical possession. Please mention clear
cut in auction document?

 Valuation by Approved Valuer
Market Value 100%
Realisable Sale Value(Reserve Price) 90%
Distress Sale Value 80%
 Valuation challenged by the borrower or guarantor ?

Competent Authority For Fixation of Reserve Price and Confirmation of
Sale of Individual IP/ Plant & Machinery in NPA
account (Realizable Value in Rs. Crores)
Circle SASTRA Committee (CSCO) Headed by CM - Upto Rs 2.00 Cr
Headed by AGM -Upto Rs. 4.00 Cr
Circle Office Compromise Committee
(COCC)
Headed by AGM - Upto Rs. 6.00 Cr
Headed by DGM - Upto Rs. 8.00 Cr
Zonal SASTRA Committee (ZSCO) Headed by AGM -Upto Rs. 8.00 Cr
Headed by DGM - Upto Rs. 10.00 Cr
Zonal Office Compromise Committee
(Headed by CGM/GM)
Above Rs. 8.00 Cr/10.00 Cr/15.00 Cr – For
cases of Zonal SASTRA Centre headed by
AGM/DGM/GM respectively
For the cases of NPA accounts under Branch Purview, the proposal for Fixation of
Reserve Price/ Confirmation of Sale/Reduction in Reserve Price shall be
considered by COCC/ZOCC within their vested powers.

Competent Authority For Fixation of Reserve Price and Confirmation of
Sale of Individual IP/ Plant & Machinery in NPA
account (Realizable Value in Rs. Crores)
First reduction upto 10% in the reserve
price fixed on the basis of recent
valuation
Circle SASTRA Committee (CSCO)
Further second reduction upto 10% in the
reserve price of last failed e-auction
Circle Office Compromise Committee
(COCC)
Further third reduction upto 10% in the
Zonal SASTRA Committee (ZSCO)
Further fourth reduction upto 10% in the
Zonal Office Compromise Committee
(ZOCC)
If due to non-response of bidders, fall in the price etc., the reserve price is to be
downwardly revised, then powers for reduction in Reserve Price fixed on the basis
of valuation report not older than one year, shall be as under:-

• ACTIONS POINTS FOR UNCLAIMED ASSETS, HOUSEHOLD ARTICLES ETC.
WHICH HAVE COME IN PHYSICAL POSSESSION OF THE SECURED
CREDITOR AND SECURITY INTEREST IS NOT CREATED ON THOSE ASSETS.
• 1. As far as possible ask the owner of the assets to take out
the assets at the time of possession, if not possible take an
undertaking from him/her that he/she will take it within 2
days in the presence of the bank representative, if not bank
to send.
• 2. If no body was present send a notice by letter to the
borrower owner to take out the assets within 7 days , if no
response then send second reminder, if still there is no
reponse.

• 3. Send last notice stating that, if he/ she fails to take out the assets
then after 7 days the bank will do the valuation of the assets and sale
the assets at his/her risk and responsibility and he/she will be reponsible
for the loss if any sufferred success rate 90%.
IF, INSPITE OF ABOVE MEASURES NO RESPONSE CALL THE VALUER DECIDE
RESERVE PRICE CONTACT THE SCRAP TRADERS TAKE 3 QUOTATIONS AND
SALE AND CREDIT THE AMOUNT TO THE SUNDRY DEPOSITS ACCOUNT
OR SUSPENSE ACCOUNT TO BE REFUNDABLE TO THE OWNER OF THE
ASSETS.

 SALE OF SECURED ASSETS AFTER SYMBOLIC OR PHYSICAL
POSSESSION.
 Immediately after possession send Sale Notice to borrower 30
days(R8(6)).(with specific reference to the amended Section
13(8))ensure delivery and keep the record.)
 IF SECURED ASSETS VALUE IS VERY HIGH AS COMPARED TO THE
DUES, THEN SALE ONLY PARTIAL ASSETS TO COVER THE DUES,
DO NOT SALE ALL THE ASSETS.
 File caveat in DRT& High Court to ensure the borrower will not get
stay for sale.(MUST WHEREVER YOU THINK THE BORROWER IS
EXTRA SMART).

 AUCTION: SERVE, AFFIX & PUBLISH
 Upload the auction notice on the bank’s site (R 8(7)) & publish in two
newspapers
 Send the auction notice to the borrower/guarantor (with request to
bring the bidders if any he/she has). 30 days period (to be published
only after 30 days are over after giving the borrower sale notice of 30
days under Rule 8(6), opening of bids on 31st day), ( notice to be
affixed on asset, keep the evidence by way of 2 photographs of the
assets after pasting the auction notice.) This is to be followed for all
future auctions.

 Subsequent auction notices can be with min. 15 days for
auction (opening of bids on 16th day)same procedure to be
followed for second and subsequent auctions, pasting on
assets (sale as is where is).(the borrower can pay all the
dues before publication of the auction notice.13(8)) (notice
to be affixed on asset)(letter to borrower along with auction
notice and advise him/her to bring bidders to the auction, if
he/she has any buyers.

 MARKETING FOR SALE OF ASSETS:
 Enforcement or Recovery Agencies.
 Paper inserts.
 Real estate agents
 The units in the same line of activity.
 (practical tip, if borrower comes for full payment before bidding date,
check auction notice two important clauses ( bank reserves the right
to cancel the auction and payment by the borrower)

 Auction – Highest Bidder.
 25% within 24 hours (DD/RTGS/NEFT)) & 75% within 15 days of
Confirmation of Sale. (with mutual agreement between the Purchaser
and Secured Creditor maximum 3 months). (EXTENSION OF TIME
FROM 15 DAYS TO 3 MONTHS TO BE DONE WELL IN TIME BEFORE
EXPIRY OF 15TH DAY FROM SALE CONFIRMATION DATE)
 Sale and Sale Certificate.
 Stamp Duty, Registration & TDS if applicable (to paid by the buyer)

 WHETHER SECURED CREDITOR BANK CAN GRANT FRESH
LOAN TO THE SUCCESSFUL BIDDER, IF HE OR SHE FULLFILS
BANK’S LAID DOWN NORMS FOR THAT PARTICULAR LOAN
SCHEME?
 YES, SEND THE BUSINESS LEAD TO THE MARKETING TEAM.
 Why to keep record of the bidders who participated in the last
auction which was failed as the bids were for less than reserve
price. The respective branches to take lead in this.

 IF BIDS ARE FOR LESS THAN RESERVE PRICE ?
 Secured Creditor can sale for less than Reserve Price with the
consent of the Borrower.(Rule 9(2)) Any practical tip?
 PLEASE FOLLOW THIS STEPS :
Advise the borrower each time separately whenever the
reduction is done with a request to bring suitable buyer for
current reserve price within stipulated time (Natural Justice)i.e.
15 days, It is advisable to obtain fresh valuation for each
reduction in the Reserve Price and wherever the valuation is
more than 1 year old. High Value properties please obtain 2
valuations and take the higher one for fixing the Reserve Price.

Confirmation of Sale & Issue of Sale Certificate:
 On payment of initial deposit i.e. 25% of sale consideration, the sale shall
be confirmed. Confirmation of sale shall be recorded and conveyed to the
highest bidder. The steps needs to be taken immediately for getting the
sale confirmed from the secured creditor i.e. respective Committee and
confirmation be conveyed to the highest bidder. Draft of recording of
confirmation of sale is given in Appendix B- Form SI – 22 of SARFAESI
Manual.
 On confirmation of sale by the secured creditor (Committee of Officers)
and if the terms of payment have been complied with, the Authorized
Officer exercising the power of sale shall issue a “Certificate of Sale” of the
immovable property in favour of the purchaser.” (Form SI-17 of the
SARFAESI Manual).

Confirmation of Sale & Issue of Sale Certificate:
 Some instances have been observed that, in the Sale notices (published in
the Newspapers and/or in the Notices uploaded at the Portal of the
Service Provider for E-Auction for sale of immovable properties), instead
of mentioning that “sale is to be confirmed by the Secured Creditor”, it
was wrongly mentioned that “sale is to be confirmed by the Authorized
Officer”

Bidding at more than Reserve Price
Rule 9 (2) provides that sale shall be confirmed in favor of the purchaser who
has offered the highest sale price in his bid or tender or quotation of offer to
the Authorized Officer and shall be subject confirmation by the secured
creditor: Provided that no sale under this rule shall be confirmed, if the
amount offered by sale price is less than the reserve price, specified under
sub rule (5) of rule 9; Provided further that if the authorized officers fails to
obtain a price higher than the reserve price, he may, with the consent of the
borrower and the secured creditor can effect the sale at such price.
Keeping the above provisions in view, Law Division, HO has opined that
though technically, a bidder can start bidding at reserve price, however, as the
sale at reserve price can be effected with the consent of borrower only, the
first bidding should start at any amount higher than reserve price. Keeping
the above in view, necessary utilities have been incorporated in E-auction
Portal of Bank .

• SALE BY PRIVATE TREATY? PRECUATIONS TO BE TAKEN? TIPS? (ONLY
AFTER ONE OR TWO AUCTIONS ARE FAILED)
• Put Announcement on Bank ‘s site & Branch notice board.
• Application of Buyer for purchase of asset above RESERVE PRICE.
• KYC of Buyer.
• Deposit 10% of his or her bid offer (more than Reserve Price) & 15 %
within 24 hours or next working day after receipt of offer.
• Check financial position of Buyer for remaining amount or ask him/her to
deposit the remaining amount in SB account. You may sanction him/her
the loan also if fits in to the norms.
• As per Bank’s extant guidelines, minimum number of attempts of sale of
immovable secured assets through other more transparent methods, depending
upon the assessed value/reserve price fixed for the secured assets, is reiterated
below:
– 1 such attempt is prescribed for assets with a value up to Rs.1 crore.
– 2 such attempts are prescribed for assets with a value more than Rs. 1 crore.
However, the alternative of private treaty may be considered without
resorting to other methods if all the dues of the bank/banks in the case are
fully recovered.

• For balance payment bank can give time maximum up to 15 days from the
date of confirmation of the sale.
• CARE DO NOT CONFIRM THE SALE.
 SEND NOTICE OF 15 DAYS TO THE BORROWER, DETAILING THE OFFER
RECEIVED FOR PRIVATE TREATY, AND ASK HIM/HER TO CLOSE THE
LOAN ACCOUNT OR BRING THE BUYER IF HE/SHE HAS ANY FOR MORE
THAN THE PRESENT OFFER, WITH A CONDITION THAT IF HE/SHE FAILS
TO CLOSE THE ACCOUNT OR BRING THE BUYER FOR MORE THAN THIS
OFFER WITHIN 15 DAYS, THE BANK WILL GO AHEAD AND CONFIRM THE
SALE TO THE PRIVATE TREATY BUYER AND SALE THE ASSET.(NATURAL
JUSTICE).
 WHETHER SECURED CREDITOR BANK CAN GRANT FRESH LOAN TO
THE PRIVATE TREATY BIDDER, IF HE OR SHE FULLFILS BANK’S LAID
DOWN NORMS FOR THAT PARTICULAR LOAN SCHEME?
 YES

 REFUNDS IF EXCESS. SECTION 13(7) (MAXIMUM WITHIN 15 DAYS)
 FOR SHORTFALL SUIT (DRT / DIST / HIGH COURT)13(10).
 SECTION 29:If any person contravene or attempts to contravene or
abets the contravention of the provisions of this act or any such rules
made there under, he/she shall be punishable with imprisonment for a
term which may extend to one year or with fine or with both.

PUBLICATION UNDER SARFAESI ACT:
Under SARFAESI Act and Rules, the publication in the newspapers is a must and cannot
be avoided. The cost of publication is as per the rates prescribed by the newspaper
publishers.
Any expenditure incurred on publication is a necessary expenditure and it is
appropriate to deem incurrence of such expenditure as approved, in the matters
where sanction for action under SARFAESI Act is given.
Vide Board Resolution No.30 dated 5.9.2006 that the powers delegated interalia
provide for sanction under SARFAESI Act implies incurring expenditure in full in
respect of publication effected for substituted service, taking possession, and
proclamation of sale/sale notice as per provisions of SARFAESI Act and Security
Interest (Enforcement) Rules 2002.”
The expenses incurred for publication under SARFAESI Act shall be debited under the
head “Law charges” and shall recorded in memoranda dues for record and recovery
from the sale proceeds of secured assets.

STRATEGIES FOR SUCCESSFUL SALE PROCESS UNDER SARFEASI ACT –
IMPORTANT ASPECTS Under the SARFAESI Act when we go for sale of secured assets, the aim is
to secure maximum price for the assets to be sold. However, experience has revealed that in
large number of cases the sale efforts are thwarted on account of non-receipt of bids or buyers
offering sale price not commensurate with the Market Value/Reserve Price.
In pursuit of free, fair and transparent auctions Ministry of Finance directed the Banks to adopt
the Electronic medium for conducting auctions also known by the name “E-Auctions”. However,
to improve the success rate of even e-auctions, we need to initiate certain steps, which are given
below:
Valuation of secured assets
Fixation of Reserve Price
Publicity
Preparation of list of potential buyers and Mobilization of bids
Spot Inspection of the property and Enquiries by the Prospective Buyers
Facelift of the Properties
Actual /Physical/Symbolic Possession
Utilization of services of Supporting Agencies

Reasons for Stay Remedial Measures
Section 13(2) and other Notices under SARFAESI Act
are sent by ordinary post or improper service of such
Notices is furnished in the Court/DRT.
Authorized Officer must ensure that Section 13(2)
Notices are sent through Registered Post
(acknowledgement due)/ Speed Post/Hand Delivery
and got served through as per the prescribed
guidelines mentioned in the SARFAESI Act. In case the
acknowledgment of service is not received by the
Authorized Officer, steps must be initiated for tracking
the same from Indian Post internet site
(http://www.indiapost.gov.in/).
Representations received under Section 13(3A) made
by the borrowers/ co borrowers/guarantors in the
DRTs/Courts against the action initiated by the Bank
under the SARFAESI Act, are not responded/replied by
the bank, in the prescribed time frame of 15 days
and/or in an appropriate manner.
It must be ensured that a proper reply is submitted
within 15 days. Possession Notice should not be
issued without or prior to giving reply to the
representation of the borrower.
STAY AGAINST SARFAESI ACT
We come across several cases where stay is granted by the DRTs/Courts against the SARFAESI
Action initiated by the Bank, on some ground or the other. Thus, there is always a need to
analyze on case to case basis and remedial measures be adopted for vacation of the stay.

As per Rule 8 of the Security Interest (Enforcement
Rules) 2002, in case of possession of immovable
properties, the possession is taken by affixing
Possession Notice as per Appendix-IV by affixing it on
the outer door or conspicuous place of the property.
However, proof submitted in the shape of
photographs give a very closed view of the door of the
property, not establishing conclusively that the
possession has been taken of the property in question
Compliance of Rule 8 of Security Interest must be
ensured. Further, for submission of the proofs for
having Symbolic/Actual Possession, photographs must
be taken from close as well as far angles, so as to
cover optimum area of the required area/asset
showing picture of the Borrower/his representative /
Witnesses / Authorized/Other Bank Officer. Possibility
may be explored for capturing the details through
Videography.
Copy of the Possession Notice is not delivered to the
borrower/ mortgagor and proof of sending such copy
to them is not furnished in the DRT/Court and/or
improper recording of the proof for having
possession.
Subsequent to taking of the possession of the secured
assets, copy of the Possession Notice be delivered to
the borrower/mortgagor against receipt and in case of
refusal the same may be recorded and copy of the
Possession Notice be sent through Registered Post
(Acknowledgement Due)/Speed Post and further, in
terms of amendments in the Security Interest
(Enforcement) Rules introduced through notification
dated 03.11.16, all notices under these rules may also
be served upon the borrower through electronic
mode of service.

Not adhering to the prescribed time limits for
publication of Possession Notice in the two
Newspapers within 7 days.
Time line of 7 days and of publication of possession
notice in two newspapers, must be strictly adhered
to.
Invalid mortgage created in favour of the bank and/or
different claimants pressing for their ownership for
the same secured assets. In other words a third party
files application, claiming to be the bonafide
purchaser of the secured assets.
Before initiating action under SARFAESI Act, it must be
ensured that valid mortgage has been created in
favour of the Bank. There may be some collusion of
the alleged purchaser with the mortgager, hence all
such cases of disputed ownership/invalid mortgage
must be contested on merits.
Challenging the market value of the immovable
properties, got assessed by the bank while going for
sale
Proper reply be filed as per the Bank’s records,
justifying and supporting the veracity of the Valuation
Report vis a vis Reserve Price, fixed by the Bank.
Inter-Bank disputes, each bank claiming to be the
rightful owner of the secured assets.
In case of Inter-Bank disputes, if the other banker
goes directly to the court, application must be
immediately filed stating that such cases need to be
dealt, first, through Inter Bank Dispute Mechanism,
besides immediately referring such matters to
Department of Financial services, Ministry of Finance
through Head Office

In case of NPA accounts of Educational Institutions,
plea is taken that any action initiated under SARFAESI
Act may ruin the career of the students etc
In case of Educational Institutions, possession may
preferably be taken when their academic sessions are
off/vacation period and applications may be filed for
granting orders to the defaulting borrowers, for
depositing of the fees deposited by the students, with
the concerned bank. Possibilities may be explored to
take up the matter with the governing Govt./Quasi-
Govt. bodies granting license/certification to such
institutions e.g AICTE (All India Council of Technical
Education), AIMA (All India Medical Association), for
putting pressure on such institutions.
While filing the appeal against the SARFAESI action
initiated by the Bank, plea is taken by the borrowers
that an OTS/Compromise/Restructuring etc. Proposal
is pending with the bank.
In case any OTS/Compromise/ Restructuring Proposal
has been received from the borrower, the same must
be processed without any delay and the decision in
that regard be immediately conveyed to the borrower
so that no stay is granted on such grounds.

Modified Day 1-S5-SARFAESI.pptx

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