The SARFAESI (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest) Act, 2002, is a powerful tool for banks and financial institutions to recover loans. However, while it empowers lenders to seize and sell assets without court intervention in case of loan defaults, it also outlines specific rights for borrowers. These rights are crucial for maintaining fairness in the recovery process. In this article, Finlender outlines the key rights of borrowers under the SARFAESI Act.
1. Right to Receive Notice
Before any recovery action is initiated under the SARFAESI Act, the borrower must be served with a 60-day notice under Section 13(2) of the Act. This notice informs the borrower of the default amount and the bank’s intention to take possession of the secured assets. The borrower has the right to rectify the default within these 60 days, which can help avoid any further legal action.
2. Right to Contest the Notice
If the borrower believes the notice is unfair or inaccurate, they have the right to raise objections within the 60-day period. Under Section 13(3A), the bank is obligated to respond to any objections or representations made by the borrower. If the bank does not accept the objections, it must provide a reasoned reply in writing, thereby ensuring a transparent process.
3. Right to Approach DRT and DRAT
In cases where the bank proceeds with asset possession under Section 13(4) after the notice period, the borrower has the right to appeal to the Debt Recovery Tribunal (DRT) under Section 17 of the SARFAESI Act. The borrower must file the appeal within 45 days from the date of the possession notice. If unsatisfied with the DRT’s ruling, the borrower can further appeal to the Debt Recovery Appellate Tribunal (DRAT).
4. Right to Redemption of Property
Even after the lender has taken possession of the property, the borrower retains the right to redeem the secured asset by clearing the outstanding dues before the property is sold. This right to redemption provides the borrower with a final opportunity to retain their property.
5. Right Against Unfair Sale Practices
Borrowers have the right to be protected from undervaluation or arbitrary sale of their assets. The lender must conduct the sale in a transparent manner through a public auction. The borrower has the right to receive any surplus from the sale after the dues are settled.
Conclusion
While the SARFAESI Act gives lenders significant powers, it also safeguards borrower rights. At Finlender, we believe that understanding these rights is crucial for borrowers to protect themselves from unjust recovery processes. If you are facing recovery actions under the SARFAESI Act, knowing your rights can make all the difference.
