The SARFAESI Act allows secured creditors like banks to enforce security interest for recovery of dues without court intervention. It gives banks the power to take possession of secured assets, sell them, or take over management upon default. The key steps are issuing a 60-day demand notice, taking possession if not paid, appointing an authorized officer, valuating and auctioning the assets. The debtor can raise objections within 15 days of notice or approach DRT within 45 days, otherwise the bank may proceed to sell the assets to recover dues.

1. SARFAESI ACT
2002
Presented by,
Abinash Kr. Mandilwar
Chief Manager & Faculty Member,
Staff Training College, Bhopal

2. WHAT IS SARFAESI ACT?
The Act enables the secured
creditors (Banks) to enforce security
interest for recovery of its dues
without intervention of the Court
provided that security interest has
been properly charged in favour of
the bank.

3. SARFAESI ACT 2002
SARFAESI Act was notified in Dec. 2002. It was
amended in 2004, 2012 and Dec. 2016.
Provisions in Act: U/s 13(4), in the event of default
by a borrower, a secured creditor (bank/FI) will
have the following rights.
Take possession, sell or lease secured assets,
Take over the management of the business,
Appoint a manager,
Recovery by money payable by 3rd parties to the
borrower.

4. CRITERIA FOR INVOKING THE
PROVISIONS OF THE SARFAESI ACT
The contractual dues in the account should be
more than Rs.1.00 lakh.
The default must have occurred i.e. the account
should have become NPA as per RBI norms.
The security charged to the Bank must be specific,
clear and available to the Bank.
The security documents in the advance account
should be in full force on the date of serving the
60 days notice.
The security documents should be duly filled in
and no column should be kept blank.

5. SARFAESI ACT 2002
In case of consortium financing or multiple lending
arrangements, if 75% of secured creditors in value,
agree to invite recovery action, the same will be
binding on all secured creditors.
Action can be initiated under SARFAESI Act in DRT
pending case.
Under securities Interest (Enforcement) Rules 2002
lenders have been permitted to disposed off the
assets which are charged to the bank where
possession of the asset has been taken by the bank.
The sale can be through private treaty and/or public
auction or bids.

6. SARFAESI ACT 2002
NPA A/c not eligible under SARFAESI Act
I. Loans where contractual dues are below Rs. 1
lakh,
II. Agriculture land charged against agriculture
purpose loan can not be sold,
III. The amount due is less than 20% of principal &
interest (80% or more already recovered ),
IV. Bank shall not be able to invoke the provision of
the SARFAESI Act, unless the charged is
registered within the time frame with CERSAI.
V. Loan Secured by pledge, lien & by security of
bank deposits,
VI. Limitation has expired as per Limitation act,
VII. Where security is not charged to bank.

7. PROCEEDING UNDER OF SARFAESI ACT 2002
 Identify all the eligible accounts under the Act,
 Due Diligence Study of the accounts,
 Put the proposal before the Competent Authority for
approval for action under the Act.as per prescribed
format,
 Appointment of Authorised Officer,
 Issue of 60 days Demand Notice u/s 13(2) of the Act
should be sent under the signature of Authorised Officer .
 Notice should be in the prescribed format.
 Formats for Demand Notice and all other annexures are
available in HOBC 110/180 Dt. 19/12/2016.

8. ISSUE OF NOTICES
Service of proper notice is a pre-requisite for
enforcement of security interest.
The authority for approving proposal for issuing
notice and taking action under Act are as under:
Authority Amount Rs. (in lakh)
MD, ED & GM (HO/NBG/ZO) Full Powers
Dy. General Manager 5000
Asst. General Manager 2500
Chief Manager 1000
Senior Manager (Large Branch) 200
Note: The official approving issue of Notice should not
have sanctioned the credit proposal. In such case, it
should be submitted to next higher authority.

9. DEMAND NOTICE
 Period of Notice – 60 days – Continuous follow up,
 Notices can be issued not only to the principal borrower but also
to the guarantor if security interest is created by the guarantor.
 If more than one borrower, Demand Notice serve to each
borrower,
 The service of the notice is to be made by Regd. Post/A.D., Speed
Post, Courier, E-mail, UPC, Fax etc. Proof of acknowledgements
should be kept in record.
 As per recent amendment in Dec. 2016, the demand notice can
be served/delivered by hand delivery also, apart from the other
prescribed mode.
 In case of non delivery of service, the service is to be affected by
affixing the notice on the conspicuous part of building where the
borrower/guarantor resides or carries business.

10. PROCEEDING UNDER OF SARFAESI ACT 2002
Simultaneous action in Suit Filed/DRT cases can be
taken.
After issuance of notice u/s 13(2) by the bank, if any
borrower/guarantor makes any representation or
raise any objection, then the bank has to consider
such objection and serve a revised notice or pass such
other suitable orders as deemed necessary, or If bank
feels that objection is not acceptable or tenable, he
shall communicate the justification for possession
within fifteen days (After amendment it was
enhanced from seven days to fifteen days) from the
date of receipt of the representation or objection.
The borrower may make an application to DRT
within a period of 45 days.

11. AUTHORISED OFFICER
Authorised Officer” means an officer not less than
a Chief Manager of a Public Sector Bank or
equivalent as specified by the Board of Directors of
the secured creditor.
Authorised Officer enjoys immunity for all Actions
done in good faith and without negligence while
exercising the right on the securities created.
A three member Zonal Committee headed by
Zonal Manager will finalize the reply in all cases
irrespective of any amount.

12. HOW TO GO ABOUT APPLYING
SARFAESI ACT
 If full payment is received during 60 days notice
period, no further action is called for. If the
borrower makes part payment, the Bank retains
the right to claim the balance amount.
 In case payment is not received within 60 days,
Authorised Officer can take peaceful possession
of the secured assets.
 Prior the sale of secured assets, an authorised
officer of the lender would have to take
possession of the same by service of a 60 days
possession notice.

13. POSSESSION OF THE PROPERTY
 In case peaceful possession is not possible, Bank has to make an
application to the District Magistrate (D.M.) or Chief Metropolitan
Magistrate (C.M.M.).
 30 days notice should be given before taking possession of secured
assets.
 The application before the DM/CMM for physical possession of the
charged property must be disposed of within a period of 30 days
from the date of application.
 Duplicate of Possession Notice should be affixed on the property
which should be visible.
 Possession Notice should also be published in leading 2
newspapers, one of them vernacular.
 Assets seized should be valued from panel valuer.

14. POSSESSION OF ASSETS
Movables Assets:-
Panchnama in the prescribed format – Two
Independent Witnesses;
Inventory in the prescribed format- Copy
should be given to the borrower;
Custody of the assets;
Preservation and protection;
Assets subject to speedy decay to be
immediately sold;
Valuation of the Assets.

15. POSSESSION OF ASSETS
Immovable Assets:
 By delivery of Possession Notice – Affixation;
 Possession notice to be published within 7 days;
 No prescribed format of Panchnama but it be recorded
giving brief details;
 In case both movables and immovables are charged,
inventory as per format for movables.
 The movables not charged if found to be returned to
the rightful owner;
 Valuation of the Asset.

16. AUCTION NOTICE
The Government has introduced new site
www.eprocure.gov.in for uploading tenders
vide their communication Ref. No.
10/1/2011-PDD Dated 17.05.2016.
Nodal officer of the bank will be able to
create new user ID and issue login password.
All the branches/zones have to send the
auction notice to their respective NBG.

17. AUCTION NOTICE
In addition, all the branches/zones have to send
auction notice to IT Dept. at HO for uploading the
notice on bank’s website.
The branches are advised to ensure that our notice is
published in our website.
Please note that this shall not dispense with the
notice mandatorily to be published in the news papers
are required under the Act.
The date of auction which is shown in the notice being
published in the website as well as in the newspaper
should be one and the same and ensure that no sale
should take place before expiry of 30 days from the
date on which the notice is given newspaper and the
website.

18. SALE OF SECURED ASSETS
Mode of Sale
a. by obtaining quotations from the persons
dealing with similar property or otherwise
interested in buying such property, or
b. by inviting tenders from the public,
c. by holding public auction, or
d. by private treaty.

19. SALE OF THE PROPERTY
Reserve Price:-Reserve Price should be fixed
before sale which should be reasonable. Both for
the movable and immovable assets the lender
would have to make proper valuation prior to
sale. The reserve price to be arrived only after
the valuation exercise.
Offer Price: If the price equal to the reserve price
can not be obtained, the asset can be disposed
off at a lower price with the consent of both
borrower and lender. If the first sale under
SARFAESI does not materialize, the Bank can
purchase the property.

20. SALE OF THE PROPERTY
 Property is sold to the buyer offering highest price.
 On every sale of immovable property, Sale will be confirmed, if the
purchaser shall immediately or max. next working day deposit 25%
of sale price. In default such deposit, the property shall be sold
again.
 Payment of balance 75% of sale price shall be paid by the purchaser
to the Authorised Officer on or before 15th days of sale confirmation
or such extended period as may be agreed in writing, in any case
not exceeding 3 months.
 Sale Certificate duly signed by the Authorised Officer is issued to
the buyer of the property which the prima facie evidence of title of
the buyer of the property.
 Sale Certificate specifies secured assets sold, Buyer’s name & the
price paid.

21. SARFAESI ACT 2002
Action Period
Notice for possession 60 days
Reply by bank to borrower’s representation or
objection from date of receipt of such
representation or objection
15 days
Borrower can approach DRT against Possession
Notice from date of acknowledgement
45 days
Appeal to DRAT against decision of DRT 30 days
Notice before sale of the immovable secured
asset
30 days
Period of balance payment of 75% amount by
the buyer of the secured assets
15 days

22. NEW CHANGES IN SARFAESI ACT IN 2016
 Sub rule (1) of (3):- The demand notice can be served/delivered by
hand delivery also, apart from the other prescribed mode.
 Section 14 :- The application before the DM/CMM for physical
possession of the charged property must be disposed of within a
period of 30 days from the date of application and in any case not
later than 60 days.
 Section 3A: Time prescribed for making change or modification, if
any, to the section 13(2) notice on the basis of representation of the
borrower to the said notice or to reply to the representation of the
borrower has been enhanced to 15 days.
 Sec. 26 E: SARFAESI Act first time introduced priority of charge of
banks dues over any other due of Central/State Government. It’s a
land mark amendment. Only exception is that it is subject to
insolvency & bankruptcy code 2016.
 Sec 30 A of DRT ACT: - An appeal against any order of recovery
officer under section 30 shall not be entertained unless 50% of the
amount due is deposited with DRT.
to the