Demand Notice under Sarfaesi Act

SARFAESI ACT : Securitisation And Reconstruction Of Financial Assets Of Security Interest Act ,2002.

Enforcement of security interest and recovery of debts laws ( Amendment ) act ,2004 has amended this act . This act provides for enforcement of security interest for the realization of the dues without the intervention of courts or tribunals which is one of the most effective tools for recovery of NPAs under existing law.

The act proceeds when borrower created security interest in favour of bank and on his default his liability is clear.

13(2) : Where any borrower who is under a liability to a secured creditor under a security agreement makes any default in repayment of secured debt or any instalment thereof and his account in respect of such debt is classified by the secured creditor as non performing asset then the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under sub section (4).

In the demand notice quantum of claim can be calculated as : the balance outstanding in the bank’s book and the un debited portion of interest accrued but not reflected in the bank’s book are added and in corporate in the demand notice. The authorized officer need not approach any court or tribunal for determining the quantum of amount claimed.

13(4) : In case the borrower fails to discharge his liability in full within the period specified in sub section (2) the secured creditor may take recourse to one or more of the following measures to recover his secured debt namely.

  1. Take possession of the secured assets of the borrower including the right to transfer by way of lease , assignment or sale for realising the secured asset.
  2. Take over the management of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale and realise the secured asset.
  3. Appoint any person to manage the secured assets the possession of which has been taken over by the secured creditor.
  4. Require at any time by notice in writing any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower to pay the secured creditor so much of the money is sufficient to pay the secured debt.

Changes in the address of the borrower must be noted in writing, oral information is not reliable.

3(1) : the service of demand notice shall be made by delivering or transmitting at the place where the borrower or his agent empowered to accept the notice or documents on behalf of the borrower actually and voluntarily resides or carries on business or personally works for gain by registered post with acknowledgement due addressed to the borrower or by speed post or by courier or by any other means of transmission of documents like fax message or electronic mail service.

Where authorised officer has reason to believe that the borrower or his agent is avoiding the service of notice or that for any other reason the service cannot be made as aforesaid the service shall be effected by affixing a copy of the demand notice on the outer door or some other conspicuous part of the house or building in which the borrower or his agent ordinarily resides or carries on business or personally work for gain and also by publishing the contents of the demand notice in two leading newspaper.

Service of notice to wife of borrower is sufficient service.

If borrower is a body corporate , the demand notice shall be served on the registered office or any of the branches of body corporate.

Any number of notice can be served by creditor.

If the borrower makes any representation or raises any objection to the notice the authorized officer shall consider such objections and see whether it is acceptable or not when secured creditor will reply to the objection and authorized officer within fifteen days communicate reply to borrower.

If amount mentioned in demand notice is not paid within the time specified therein

The authorized officer can:

  1. Take possession of the secured assets of the borrower including the right to transfer by way of lease , assignment or sale by realising the secured assets.
  2. Take over the management of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale and realise the secured assets.
  3. Appoint any person to manage the secured assets the possession of which has been taken over by the secured creditor.
  4. Require at any time by notice in writing any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower to pay the secured creditor so much of the money as is sufficient to pay the secured debt.

 

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