SARFAESI Act - 2002
The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (also known as the SARFAESI ACT) is an Indian law. It allows banks and other financial institutions to auction residential or commercial properties to recover loans.
Under this act secured creditors (banks or financial institutions) have many rights for enforcement of security interest under section 13 of SARFAESI Act, 2002. If borrower makes any default in repayment of loan instalment or interest and his account is classified as Non-Performing Asset (NPA) by secured creditor, then secured creditor is required to issue written notice to the borrower for repayment of due in full within 60 days by clearly stating amount due and intention for enforcement. If borrower does not discharge dues in full within 60 days, then Secured creditor may take possession of the mortgaged assets under section 13(4) of SARFAESI ACT WITHOUT INTERVENTION OF ANY COURT OR TRIBUNAL but with a prior notice to the borrower.
The secured creditors will then file an application under section 14 of the SARFAESI ACT, in the Metropolitan Magistrate Court or The District Magistrate Court as per the jurisdiction of the mortgaged assets in order to obtain the order for forceful physical possession of the assets. Generally the orders under section 14 of the SARFAESI ACT are passed in a period of 3 months in favour of the secured creditors.
The borrower may approach competent court to obtain stay against such orders even against the notice issued under section 13(4) of the said Act.