When Immoveable property is obtained as security by way of Mortgage, for its sale and realization of money court intervention is required. Similarly in case of moveable property , except the pledged security, court intervention is required.
The SARFAESI Act empowers bank and financial institutions to enforce securities in the event of default of borrower without intervention of either civil court or the DRT.Manner and Effect of Takeover of Management
No Compensation to the directors for loss of office
Right to Prefer Application to DRT
Any person, including borrower, aggrieved by the any of the measures taken by the SC or his authorised officer for taking possession of the security may apply to the DRT with prescribed fees within 45 Days.
If application by borrower, he has to deposit 50% of the amount claimed in the notice under Section 13(2) of the SARFAESI Act.
The DRT has to dispose of the application within 60 Days. If not possible, then DRT has to record reasons for delay but such delay should not be beyond 4 Months. If any such application is not disposed within 4 Months, the aggrieved party can prefer an application to the Appellate Tribunal for seeking early disposal of the application.
Appeal to Appellate Authority
Any person aggrieved by any order by the DRT under can prefer appeal along with the prescribed fees to the Appellate Tribunal within 30 Days from the date of the receipt of the order of the DRT. Different fees for borrower’s appeal and appeal by any other than borrower. The borrower has to deposit 50% of the debt claimed by the SC. The Tribunal has power to reduce this amount up to 25%.
Right of Borrower for Compensation and Costs
1. If the DRT /AT as the case may be, on the appeal holds that
The possession of secured asset by the SC is not in accordance with the provisions of the Acts or Rules
The SC should return such secured asset to the concerned borrower, with compensation and cost as may be determined by DRT/AT.
2. No pecuniary limit is fixed by the Act for the Appellate Jurisdiction.
If any Person contravenes or attempts to contravenes provisions of the SARFAESI Act or rules there under he shall be punishable with imprisonment for a term which may extend to one year or with fine or with both.
Section 12 : RBI is statutorily empowered to issue directions to the SC/RC. If any such company fails to comply with any of the directions issued by the RBI then such company is punishable with fine not exceeding 5 Lakh rupees for the default. In case of further continuation of the offence additional fine is up to Rs. 10 thousand per day of default can be imposed.
Section 31 : Exclusions of possessory securities to which act is NOT APPLICABLE
1. A Lien on any goods, money or security given by or under the Indian Contract Act, 1872.
2. A pledge of moveable within meaning of Section 172 of the Indian Contract Act, 1872.
3. Any conditional sale, hire-purchase or lease or any other contract in which security interest has been created.
4. Any rights of unpaid seller.
5. Any security interest for securing repayment of any financial asset not exceeding Rs. 1 Lakh rupees.
6. Any security interest created on agricultural land.
Section 20, 21 to 27 that provide for registration of security interest created, satisfaction of charge created.