The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act 2002, an Act to regulate secured creditors' interests came into force in 2002. It is primarily aimed at the enforcement of the security interests besides securitisation and reconstruction of the financial assets.
A secured creditor has right to enforce security interest if their loan is classified as Non Performing Asset (NPA) in accordance with guidelines issued by Reserve Bank of India. In case of financing by more than one secured lender, the rights under the Act can be exercised only after it is agreed upon by secured creditors representing not less than three-fourth in value of the amount outstanding and such action is binding on all secured creditors. The Act lays down the steps to be taken for possession of assets and prescribes methods of sale.
- Private treaty
- Obtaining quotations from parties who could be interested in buying such as assets
- Conducting a public auction
- Inviting tenders from the public
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SARFAESI Act (2004) (193kb)
