The Sarfaesi Act 2002, which empowered banks to go out and seize the secured assets of their debtors without court intervention, sent out a ripple of fear, but did not help either as mountains of objections were filed. The lack of emphasis on ascertaining debt positions, the focus of the earlier Act, has meant that very little has been recovered. The core problem continues to be credibility of the Indian state as an effective arbitrator of debt disputes. The present article is devoted to making an effort to clarify the matter.

Keeping in view the burgeoning Non-Performing Assets (NPAs) in banks/Financial Institutions (FIs) a number of measures have been taken to control the NPA levels like the establishment of Debt Recovery Tribunals (DRTs), Lok adalats (a voluntary out-of-court settlement) and the system of One Time Settlement (OTS) of dues through mutual negotiation of the debtor and the creditor. The milestone in empowering banks/FIs in recovering dues without intervention of court was the enactment of the SARFAESI Act 2002 (Securitization and Reconstruction of Financial Assets & Enforcement of Security Interest).

This remedy, provided to the banks/FIS by the Act, is prescribed as non-adjudicatory process from the stage of issuance of demand notice under the Section 13(2). Since this notice is an action or a stop required before taking any measures under the Section 13(4), it is an opportunity having been provided to the aggrieved party/borrower to raise his objections, if any. Under the subsection 3(A) of Section 13, if on receipt of notice under subsection (2), the borrower makes any representation or any objection, the secured creditor shall consider such representation or objection is not acceptable or tenable, communication to this effect should be sent by the bank within one week of receipt. The objections may be accepted or rejected or accepted in part or rejected in part. But, in any case, the secured creditor/bank has to furnish reasons for the same. The Act is very clear that on the basis of the reply/disposal of the bank, the aggrieved party cannot approach the DRT by filing an appeal. He has to wait for the next move of the bank/FI.

Professional Banker Magazine, Chief Metropolitan Magistrate, District Magistrate in SARFAESI Act 2002, Court Intervention, Non-Performing Assets, NPAs, Debt Recovery Tribunals, One Time Settlement, Civil Procedure Code, CPC, Supreme Court, Financial Assets.