Security Interest

SARFAESI Act, 2002 — Section 2(zf)

A right, title, or interest of any kind upon property created in favour of a secured creditor as a security for repayment of any financial assistance. Includes mortgage, charge, hypothecation, assignment, or any other transaction or arrangement securing payment or performance of an obligation.

In practice, security interest is the legal heart of every secured loan — under Section 2(zf) of the SARFAESI Act, 2002 it is any right, title or interest created in favour of a creditor over property to secure repayment, and it spans mortgage, charge, hypothecation, assignment and similar arrangements. Everything that follows in enforcement depends on the security interest having been validly created and subsisting: SARFAESI possession, sale, the creditor's priority in liquidation, and its ranking against competing claimants all flow from it. The lender's drafting and diligence at the loan stage — correct execution, stamping, registration, and a clear description of the charged property — is what makes the interest enforceable years later when default arrives. A loosely created or improperly perfected security interest is the single most common reason enforcement collapses, leaving the lender with a personal claim but no asset to realise. Borrowers and rival creditors target exactly these defects in creation and perfection. Well-advised creditors confirm the security interest is properly perfected at disbursal, not at default.