Wednesday 12 August 2015

TRANSACTIONS NOT COVERED UNDER ‘SARFAESI ACT’

The following transactions are excluded from the provisions of the SARFAESI ACT:
a] A lien on any goods, money or security given by or under the Indian Contract Act, Sale of Goods Act or any other Law for the time being in force;

b] Pledge of movables within the meaning of sec.172 of the Indian Contract Act;
c] Any conditional sale, hire purchase or lease or any other contract in which no security interest has been created;
d] Any property not liable to attachment;
e] Any security interest created in agricultural land;
f] Any security interest for securing repayment of any financial asset not exceeding Rupees one lakh;
g] Any case in which the amount due is less than twenty percent of the principal amount and interest thereon.


Right of appeal:
Under sec.17 of the Act the person aggrieved by the actions of the secured creditor as provided in sec.13(4) may make an application to the Debt Recovery Tribunal having jurisdiction within 45 days from the date on which action has been taken. Similarly, any person aggrieved by the order made by DRT under section 17 may prefer an appeal to the Appellate Tribunal within 30 days from the date of the order. The party preferring appeal shall deposit 50% of the amount of debt, with a discretion given to the Appellate Tribunal to reduce the amount to not less than 25% of the debt.

Limitation:
The provisions of the Limitation Act 1963 are applicable to the Act. Therefore, taking possession of the property or appointing a Manager or taking over the management of the securities are to be carried out within the period stipulated in the Limitation Act, 1963.


The housing loan Borrowers may note that if they default in payment of dues to Banks and the loan account becomes NPA, the Banks can initiate action under the SARFAESI ACT, issue notice to the Borrowers, take possession of the building and proceed to realise the dues by sale of the mortgaged property. Therefore, it is suggested that the housing loan Borrowers may repay the housing loan as per schedule to protect their property.

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