The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 is an Indian law that empowers banks and financial institutions to recover non-performing assets (NPAs) by taking possession of the collateral and selling the assets without the intervention of the court. Section 14 of the SARFAESI Act is an important provision that deals with the enforcement of security interest by the secured creditor.
Here is a detailed explanation of Section 14 of the SARFAESI Act and the rules associated with it:
Section 14 of SARFAESI Act:
1. Issuance of possession notice: Section 14 of the SARFAESI Act allows the secured creditor (usually a bank or financial institution) to take possession of the secured asset after providing the borrower with a notice. This notice is known as a "possession notice." The possession notice informs the borrower that the creditor intends to take possession of the asset due to default in repayment.
2. Timeline for possession: The possession notice must specify a date (the "possession date") on or after which the creditor intends to take possession of the asset. The possession date must be at least 30 days from the date of the notice. This gives the borrower a reasonable time to rectify the default or raise any objections.
3. Borrower's right to object: The borrower has the right to raise objections to the possession notice within 15 days from the date of receiving the notice. If the borrower has any grievances or claims related to the possession of the asset, they can submit their objections in writing to the secured creditor.
4. Secured creditor's response: After receiving the borrower's objections, the secured creditor is required to consider them and communicate their decision to the borrower. If the objections are found to be valid and justified, the creditor may modify the possession notice accordingly.
5. Possession of the secured asset: If the borrower does not raise any objections or if the objections raised are not upheld by the secured creditor, the creditor can take possession of the secured asset on or after the specified possession date.
Rules under Section 14 of SARFAESI Act:
-
Notice format: The possession notice issued under Section 14 must be in a prescribed format, and it should clearly mention the details of the default, the amount outstanding, and the intention to take possession of the asset.
-
Reasonable opportunity: The Act provides the borrower with a reasonable opportunity to rectify the default and make the outstanding payments within the 30-day notice period.
-
Fair assessment: The secured creditor is required to assess the objections raised by the borrower fairly and reasonably. If the objections are genuine, the creditor should make necessary modifications to the possession notice.
-
Possession procedure: Once the possession notice period is over and there are no valid objections, the secured creditor can take possession of the asset in accordance with the procedures prescribed under the SARFAESI Act.
It's important to note that the SARFAESI Act provides a legal framework for the enforcement of security interest by secured creditors, and it is crucial for both borrowers and creditors to understand their rights and responsibilities under this Act. The Act is subject to various rules and regulations that may evolve over time, so it's advisable to consult with legal experts or refer to the latest legal documentation for specific cases or updates.
