The secured creditor or his authorized officer may take recourse to one or more of the measures provided in sec.13(4) of the Act to recover his secured debt who has the following options: He may take possession of the secured assets of the borrower including the rights to transfer by way of lease, assignment or sale. He may take over the management of the securedassets of the borrower, including the right of transfer of lease, assignment, sale. He may appoint any person as the manager to manage the secured assets, the possession of which has been taken over. The secured creditor may require by notice any person who has acquired any securedassets from the borrower and from whom any money is due or may become due to the borrower to pay to the secured creditor so much of the money as is sufficient to cover the secured debt.
Both in the case of movable and immovable properties, it is obligatory to serve a notice of thirty days to the borrower about the sale. The notice of sale shall also be published in two leading widely circulated newspapers, of which one shall be of the local language. The public notice shall contain important details of the property, the debt, reserve price, time and place of public auction, earnest money to be deposited etc. The notice shall be affixed on the conspicuous part of the immovable property and may also be put on Website. Sale by any other modes than public auction / tender shall be on terms settled between the parties. After confirmation and completion of sale process, the authorized officer shall issue a sale certificate in favour of the purchaser in the prescribed format.
If the secured assets are movable properties, the authorized officer shall take the possession in the presence of two witnesses and ensure that panchanama is drawn and signed by the said two witnesses. The panchanama shall conform to the prescribed format. After taking possession, the authorized officer, shall prepare an inventory of the property as per the format prescribed and shall deliver a copy of such inventory to the borrower or his authorized agent.
If the property is subject to speedy or natural decay or expenses for keeping such property is likely to exceed the value of the property the authorized officer may sell it at once. It is the duty of the authorized officer to take proper care and take steps for preservation and protection of the assets. If necessary, the assets may be insured until they are sold or disposed of.
While taking possession or sale of the secured asset, thesecured creditor may request the help of Chief Metropolitan Magistrate or District Magistrate in whose jurisdictions the secured assets fall.
Under sec.17 of the Act, the person aggrieved by the actions of the secured creditor, as provided in sec.13(4) may make an application to the Debt Recovery Tribunal, having jurisdiction within 45 days from the date on which action has been taken. Similarly, any person aggrieved by the order made by DRT under section 17 may prefer an appeal to the Appellate Tribunal within 30 days from the date of the order. The party preferring appeal shall deposit 50% of the amount of debt, with a discretion given to the Appellate Tribunal to reduce the amount to not less than 25% of the debt.
Transactions not covered under the Act
The following transactions are excluded from the provisions of the SRFAESI Act:
a] A lien on any goods, money or security given by or under the Indian Contract Act, Sale of Goods Act or any other law for the time being in force;
b] pledge of movables within the meaning of sec.172 of the Indian Contract Act,
c] any conditional sale, hire purchase or lease or any other contract in which no security interest has been created;
d] any property not liable to attachment;
e] any security interest created in agricultural land;
f] any security interest for securing repayment of any financial asset not exceeding rupees one lakh;
g] any case in which the amount due is less than twenty per cent of the principal amount and interest thereon;
The provisions of the Limitation Act 1963 are applicable to the Act. Therefore, taking possession of the property or appointing a manager or taking over the management of the securities are to be carried out within the period stipulated in the Limitation Act, 1963.
The housing loan borrowers may note that if they default in payment of dues to banks and the loan account becomes NPA, the banks can initiate action under the SRFAESI Act, issue notice to the borrowers, take possession of the building and proceed to realize the dues by sale of the mortgaged property. Therefore, it is suggested that the housing loan borrowers may repay the housing loan as per schedule to protect their property.