What is the SARFAESI Act?
The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 lets a secured creditor enforce security without first going to court. Where an account is classified as non-performing, the creditor issues a demand notice under Section 13(2) requiring the borrower to discharge the liability in full within sixty days. If the borrower does not, the creditor may take possession of the secured asset under Section 13(4), with the assistance of the District Magistrate under Section 14 where needed. A borrower who disputes the action applies to the Debts Recovery Tribunal under Section 17.
We act for banks, NBFCs, financial institutions, companies and individuals in recovery, SARFAESI, bank guarantee, letter of credit and other loan-related matters before the High Courts, the Supreme Court and arbitral tribunals.
As DRT lawyers, the firm’s advocates are on the panels of banks and financial institutions, and appear for them in the courts and tribunals where recovery matters are heard.
What the practice covers
We act on the full course of a secured creditor’s enforcement, and equally for borrowers resisting it. That gives the practice a view of both sides of the same statute.
- Demand notices under Section 13(2) and the reply under Section 13(3A)
- Possession applications before the District Magistrate under Section 14
- Securitisation applications and appeals before the DRT and DRAT
- Recovery proceedings under the Recovery of Debts and Bankruptcy Act, 1993
- Asset reconstruction, assignment of debt, and settlement negotiation
- Writ petitions arising from enforcement action
Before proceedings begin
Most recovery starts with a legal notice for recovery of money: a written demand that identifies the debt, the default, and the time allowed to pay. It fixes the position between the parties, and it is usually the first document a tribunal reads. Where the debt is secured and the account has been classified as non-performing, the demand notice under Section 13(2) does that work instead, on the statutory timeline set out above.
How we work
We act for both creditors and borrowers in loan default, breach of contract and enforcement matters, in litigation, arbitration and mediation, at each stage of a recovery.
Common questions
How long does a borrower have to respond to a Section 13(2) notice?
Sixty days from the date of the notice to discharge the liability in full. Under Section 13(3A), a borrower may also make a representation or objection within that period, and the secured creditor must communicate the reasons for not accepting it within fifteen days.
Where is a SARFAESI action challenged?
An aggrieved borrower or other person applies to the Debts Recovery Tribunal under Section 17, generally within forty-five days of the measure complained of. An appeal from the DRT lies to the Debts Recovery Appellate Tribunal under Section 18.
What does Section 14 allow?
Section 14 lets a secured creditor request the Chief Metropolitan Magistrate or District Magistrate to take possession of a secured asset and hand it over. The Magistrate's role at that stage is largely ministerial.
Does SARFAESI apply to every loan?
No. It applies to secured debts, and under Section 31 agricultural land is excluded. Certain small outstanding amounts also fall outside its scope. Whether the Act applies to a particular facility turns on the security documents and the classification of the account.