The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, is a legislation enacted by the Indian government to enable banks and financial institutions to recover their dues from borrowers in a faster and efficient manner. One of the key provisions of the SARFAESI Act is the power given to banks to sell mortgaged properties in case of non-repayment of loans. In this article, we will discuss the process of sale of mortgaged property under SARFAESI Act, its benefits, and challenges.
What is SARFAESI Act?
The SARFAESI Act provides banks and financial institutions with the right to take possession of the property in case of default by the borrower. The Act allows them to enforce the security interest without the intervention of a court. This is done by issuing a notice to the borrower, asking them to repay the dues within a specified time. If the borrower fails to comply, the bank or financial institution can proceed with the sale of the property.
Process of Sale of Mortgaged Property
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Issuance of notice: The bank or financial institution has to issue a notice to the borrower under Section 13(2) of the SARFAESI Act. The notice should specify the amount of outstanding dues and provide the borrower with an opportunity to rectify the default within 60 days from the date of receipt of the notice.
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Possession of property: If the borrower fails to comply with the notice, the bank or financial institution can take possession of the mortgaged property.
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Sale of property: The bank or financial institution can proceed with the sale of the property after taking possession of it. The sale can be conducted through a public auction or private treaty.
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Recovery of dues: The proceeds from the sale of the property are used to recover the outstanding dues from the borrower. If there is any surplus amount, it is returned to the borrower.
Benefits of Sale of Mortgaged Property under SARFAESI Act
The sale of mortgaged property under the SARFAESI Act has several benefits for banks, financial institutions, and borrowers. Some of the key benefits include:
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Quicker recovery of dues: The SARFAESI Act enables banks and financial institutions to recover their dues quickly and efficiently.
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Transparency in the process: The sale of mortgaged property is conducted through a public auction, ensuring transparency in the process.
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Protection of borrower's rights: The Act provides adequate protection to the borrower's rights and interests.
Challenges of Sale of Mortgaged Property under SARFAESI Act
While the SARFAESI Act has been successful in enabling banks and financial institutions to recover their dues efficiently, it also poses several challenges. Some of the key challenges include:
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Inadequate market conditions: Inadequate market conditions can result in lower sale prices, making it difficult for banks and financial institutions to recover their dues.
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Legal challenges: The Act has been challenged in courts on various grounds, including violation of the borrower's rights and the lack of an opportunity to be heard.
Conclusion
The sale of mortgaged property under the SARFAESI Act is a powerful tool that enables banks and financial institutions to recover their dues efficiently. The Act provides a transparent and quick process for the sale of mortgaged properties, ensuring that the borrower's rights are protected. However, it also poses several challenges, including inadequate market conditions and legal challenges. Overall, the SARFAESI Act is a vital legislation that enables banks and financial institutions to recover their dues, which is essential for the growth of the Indian economy.
