SARFAESI (Securitisation and Reconstruction of Financial Assets)

SARFAESI Act, 2002

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The primary legislation enabling banks and NBFCs to enforce security interests without court intervention. Allows: taking possession of secured assets (Section 13(4)(a)), sale of secured assets (Section 13(4)(b)), management takeover (Section 13(4)(c)), and appointment of manager (Section 13(4)(d)).

In practice, this is the operative enforcement engine of the SARFAESI Act, 2002 — the menu of actions a secured creditor can take once an account is an NPA and the borrower defaults. The Act lets the creditor take possession of the secured asset under Section 13(4)(a), sell it under Section 13(4)(b), take over the management of the borrower's business under Section 13(4)(c), or appoint a manager under Section 13(4)(d), all without court intervention. In a live matter, counsel chooses the measure to fit the asset: possession-and-sale for real estate and plant, management takeover for a running business worth preserving as a going concern. Each measure has its own procedural discipline, and the borrower's challenge under Section 17 before the DRT typically attacks whether the chosen measure was validly invoked and executed. Over-reaching — for instance, a premature management takeover — exposes the action to being set aside and to damages. Well-advised creditors match the Section 13(4) measure to the nature of the secured asset before acting.