The stages of enforcement and the points that most often lead to challenges. General legal information only.
Before the notice
- Confirm the account is classified as a non-performing asset under the applicable regulatory norms.
- Confirm that the security interest is validly created and, where required, registered with CERSAI.
- Check that the borrower, guarantors and the secured asset are correctly described.
Demand notice (section 13(2))
The notice should state the amount due, give the borrower the statutory period (ordinarily 60 days) and describe the secured assets. Errors in the amount or description are frequently raised in challenges. Consider and respond in writing to the borrower’s objections.
Taking possession (sections 13(4) and 14)
After the period ends, the secured creditor may take possession or management of the secured asset. Where possession is not given, an application is made to the Chief Metropolitan Magistrate or District Magistrate under section 14.
Sale
- Give the notice of sale required by the Security Interest (Enforcement) Rules, 2002, which is at least 30 days.
- Fix a reserve price on a proper valuation and publish the sale as the Rules require.
- Record the process carefully: auctions are often challenged on valuation and notice.
Parallel remedies
Banks and financial institutions can also file recovery proceedings before the Debts Recovery Tribunal. See all debt recovery guides.
Related: Debt recovery and SARFAESI · Send an enquiry
Important disclaimer: This article is general legal information, not legal advice. It does not create a lawyer-client relationship and is not an advertisement or solicitation under Bar Council of India rules. Verify current statutes, rules and judgments before relying on it.
