IMPORTANT PROVISIONS OF SECURITISATION ACT AND RULES FRAMED THEREUNDER –

SECTION 13(2) – In the notice u/s 13(2), 60 days time to be given to the borrower/guarantor to repay the
secured debt. The notice may be sent by Registered Post with A-D / Speed Post / Courier /Fax / E-Mail. If
the notice cannot be served as aforesaid, the service of the shall be effected by affixing a copy thereof on
the outer door or some other conspicuous part of the house where the borrower resides / carry on business
and also by publishing the contents of the notice in two leading Newspapers of the locality.

SECTION 13(3) – Details of the amount payable, secured assets intended to be enforced and the details
of the documents executed by the borrowers are to be mentioned in the notice in scheduled form.

SECTION 13(3)(A) – On receipt of the notice under section 13(2), the borrower / guarantor may make
representation or raise any objection which is to be dealt with by the Authorised Officer by giving a
reasoned reply to the borrower / guarantor within one week of receipt of such representation or objection.

SECTION 13(4) – Incase the borrower fails to discharge liability in full within the period specified in the
notice u/s 13(2), the Authorised Officer may take symbolic or physical possession of the assets in
presence of two witnesses and appoint any person to manage the secured assets.

After taking possession of the secured assets, a Panchnama has to be prepared and signed by the
witnesses in Appendix – I and thereafter an inventory list is to be made in the Form given in Appendix –II
to the Security Interest (Enforcement) Rules and deliver a copy thereof to the borrower or his
representative. Incase the borrower does not appear, a copy of the same has to be affixed on the outside of
the premises.

NOTICE OF THE POSSESSION

After taking possession, a Possession Notice as per Appendix – IV has to be given –

(a) To the borrower;

(b) To be published in two leading Newspapers having sufficient circulation in that locality;
(c) To be affixed in the conspicuous part of the property, and;
(d) If necessary, to be put in the Bank’s website.
(e) FIR – If after taking possession of the Assets, any theft takes place, to lodge FIR /
Remove Security guards / Issue Show Cause Notice to them.

SECTION 13(6) – Any transfer of the secured assets after taking possession thereof by the
Secured Creditor shall vest in the transferee all rights in the secured asset transferred as if the
transfer had been made by the owner of such secured asset.

SECTION 13(9) – Incase of joint finance / consortium advance, no secured creditor shall be
entitled to exercise any / or all of the rights conferred on him under / or pursuant to Section 13(4)
unless exercise of such right is agreed upon by the Secured Creditors representing not less than
¾ th in value of the amount outstanding.
SECTION 13(10) – Where dues of the secured creditor are not fully satisfied with the sale
proceeds of secured assets, the secured creditor may file suit for recovery of balance amount
within the Limitation Period.

SECTION 13(13) – No borrower shall, after receipt of the notice u/s 13(2), transfer by way of
sale, lease or otherwise any of his secured asset referred to in the notice prior written consent of
the Secured Creditor.

SECTION 14 – For the purpose of taking possession and / or sale of any secured asset, the
secured creditor may, in writing, request the Chief Metropolitan Magistrate or the District
Magistrate under whose jurisdiction any such secured asset or other documents relating thereto is
situated / found.

SALE OF THE ASSETS

No sale of the immovable property will take place before 30 days from the date of publication. In
the meantime, after taking possession, the Authorised Officer shall obtain the estimated value of
the secured assets from an empanelled Valuer and fix the reserved price of the assets.

Sale shall take place –

(a) After obtaining quotations from the parties dealing in secured assets,
(b) Inviting tenders from the public,
(c) Holding public auction, and
(d) By private treaty.

Sale shall be confirmed to the highest bidder subject to confirmation of the Secured creditor and
if the price offered exceeds the reserve price.

However, the Authorised Officer may sale at the price lower than the reserved price after taking
fresh valuation and with the consent of the borrower and the secured creditor.

On every sale of immovable property, the purchaser shall immediately pay 25% of the sale price
and in default of such deposit / payment, the property shall forthwith be sold again. [See Rule
9(3) of the Security Interest (Enforcement) Rules].

The balance amount of purchase price shall be paid on or before the 15th day of confirmation of
sale or such extended period as may be agreed upon in writing between the parties. [ See Rule
9(4)].

In default of payment within the period as aforesaid, the deposit shall be forfeited and the
property shall be resold [See Rule 9(5)].
On confirmation of sale by the secured creditor, if the terms of payment as aforesaid have been
complied with, the Authorised Officer shall issue a sale certificate of the immovable property in
favour of the purchaser in the form given in Appendix – V [See Rule 9(6)].

Where the immovable property sold is subject to any encumbrances, the Authorised Officer may
allow the purchaser to deposit with him the money required to discharge the encumbrances and
any interest due thereon. [See Rule 9(7)]

Thereafter, the Authorised Officer shall deliver the property to the purchaser, free from
encumbrances known to the secured creditors, on payment of the money for discharge of the
encumbrances, if any, as specified in Rule 9(7) [See Rule 9(9)].

Authorised Officer, before delivering the possession to the purchaser, may, if necessary, apply
before the Chief Metropolitan Magistrate or District Magistrate for taking possession thereof u/s
14 of the Securitisation Act.

APPEAL

First Appeal can be preferred before the DRT u/s 17 of the SARFESI ACT, 2002, against the action taken
by the Authorised Officer u/s 13(4) but no appeal will lie against the action taken u/s 13(2).

Appeal before the DRT requires prescribed fee under the provisions of the DRT Act and Rules framed
thereunder.

Second Appeal can be preferred before the DRAT within 30 days from the date of receipt of the DRT’s
order.

No appeal shall be entertained by the DRAT unless 50% of the amount of debt is deposited. However, the
DRAT may reduce the amount to not less than 25% of the debt.

CIVIL COURT’S JURISDICTION

SECTION 34 – Civil court has got no jurisdiction to entertain any suit or proceeding in respect of any
matter u/s 13(4) of this Act. [SEE the decision passed in the matter of Branch Manager, Indian Bank &
Anr. –vs- Krishnamoorthy in CRP NO. 63 of 2006 reported in AIR 2007; Kerala 64]

SECTION 35 – The provisions of this Act will override other laws.

GIST OF THE LATEST SUPREME COURT JUDGMENT

In view of the judgment passed by the Hon’ble Supreme Court in the matter of M/s. Transcore – vs-
Union of India & Anr. AIR 2007 SC 712.

(a) The bank can invoke the provisions of both the SARFESI ACT and the DRT ACT
simultaneously. In case any DRT proceeding is pending, permission for initiating proceedings
 under SARFESI ACT or permission for withdrawal of the DRT case from the DRT is not
required.
(b) The bank can take both symbolic and actual physical possession of the asset.
(c) For the purpose of preferring appeal u/s 17(1), necessary Court Fee under the DRT Act and Rules
will be required to be paid.
 THE SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND
ENFORCEMENT OF SECURITY INTEREST ACT 2002

SERVING OF NOTICE

Notices are to be issued within 7 days after the a/c becomes NPA signed by the Authorised Officer of the
bank who may be a SCALE IV officer or above. The secured creditor (bank) is empowered to proceed
against the borrower as well as the guarantor.

EXCEPTIONS

 Lien on goods, money or security,

 Pledge of movables,
 Any conditional sale, hire purchase over which no security interest has been created,
 Properties exempted from attachment under Code of Civil Procedure,
 Any security interest for securing repayment of any financial assets not exceeding RS. 1 LAKH,
 Any security interest created on the agricultural land,
 Any case in which the amount due is less than 20% of the principal amount and interest thereon,
 Time barred debt under Limitation Act.
 The limitation period should not be counted merely from the date of execution of documents,
 Part payment by the borrower, part payment (as provided under Section 18 & 19 under Limitation
Act) or fresh promise to pay as envisaged under the Indian Contract Act should also be
considered.
 Limitation period for filling suit against mortgage is 12 years but personal liability will be time
barred within 3 years.