By continuing, you agree to LoansJagat's Credit Report Terms of Use, Terms and Conditions, Privacy Policy, and authorize contact via Call, SMS, Email, or WhatsApp
Disclaimer: The information published on LoansJagat is intended for general informational and educational purposes only and should not be considered financial, legal, or investment advice. Interest rates, loan terms, statistics, and other data may change over time and may vary by lender or source. Please verify the latest information and consult a qualified financial advisor or the respective Bank/NBFC before making any financial decisions.
Subscribe Now
About the author
Vidhi Chauhan
Vidhi Chauhan is a copywriter and content writer with extensive experience creating high-quality, SEO-driven content across multiple industries, with a strong focus on fintech. She has written extensively on GST, banking, personal loans, business loans, credit cards, income tax, insurance, and other financial topics, helping Indian readers understand complex concepts through clear, accurate, and engaging content.
Related Blog Post
Simplify All Your Loans Into One Affordable EMI
Customers Served
Debt Consolidated
1200+ Reviews
Locations in India
Club all Loans & Credit Card Bills into Single EMI
Quick Apply Loan
Consolidate your debts into one easy EMI.
Takes less than 2 minutes. No paperwork.
10 Lakhs+
Trusted Customers
2000 Cr+
Loans Disbursed
4.7/5
Google Reviews
50+
Banks & NBFCs Offers
Other services mentioned in this article
The possession notice under SARFAESI is a legally recognised procedure for the secured lender to declare that the lender is taking possession of a secured asset when the borrower has not repaid the amount owed within the given time period. It is distinct from the earlier demand notice sent out as per Section 13(2) and from a later notice of sale or auction. The process of possession may involve symbolic possession of the asset and/or may include the actual physical possession of the asset. By learning about all stages in the process, the borrowers can recognise what actions are being undertaken in conjunction with the possession process. This blog is aimed at explaining this process, its rights and the significant steps involved in it.
KEY TAKEAWAYS
As per Section 13(2) of the SARFAESI Act, 2002, the lender of the secured creditor has the right to issue a written demand notice to the debtor to repay the loan amount within 60 days from the date of the notice by classifying the loan as a Non-Performing Asset (NPA).
Upon failure of the borrower to respond to the Demand Notice, the secured creditor may resort to any action as provided under Section 13(4) of the SARFAESI Act, including taking possession of the secured asset of the debtor.
To take possession of any immovable security, Rule 8(1) of the Security Interest (Enforcement) Rules, 2002 lays down the procedure followed. The officer must serve a possession notice upon the borrower and also affix the notice on the outer door or any other prominent position in the premises.
The possession notice, as prescribed under Rule 8(2), must also be published within seven days of taking possession of the property in two leading newspapers. One must necessarily be a vernacular newspaper with a wide circulation in the local area of the property.
The SARFAESI proceedings make extensive use of the terms ‘symbolic possession’ and ‘physical possession’, although the terms as such are not described in the SARFAESI Act.
Symbolic possession means that the creditor has taken possession of the secured asset by following a statutory procedure even while the borrower/occupier continues to reside in the property. Physical possession means that the creditor has taken actual possession of the secured asset.
If help is needed to take possession, the secured creditor has to approach Chief Metropolitan Magistrate or the District Magistrate as per Section 14. Moreover, the Supreme Court has also recognised that in some instances, the act of symbolic possession as per Section 13(4) may be followed by the process of Section 14.
So, a notice of possession does not automatically translate into dispossession. The process of possession will vary depending on the facts of the case and the relevant statute.
A possession notice does not indicate that the lender has already sold the property. Nowadays, according to the SARFAESI Act, the procedure of obtaining a possession notice and the process of selling the property are two different processes and each of them has different requirements.
With regard to immovable property, Rule 8 of the Security Interest (Enforcement) Rules, 2002 needs to be followed by the authorised officer when obtaining the possession. Once the possession has been obtained, the rules set out the additional requirements for the preservation and valuation of the property and the procedure of sale.
According to Rule 8(5), the authorised officer must value the immovable secured asset upon obtaining its possession in consultation with the secured creditor, and the asset must be assigned a reserve price. Additionally, Rule 8(6) lays out the requirement of providing the borrower with a 30-day notice prior to the sale.
The sale has to comply with the notice as well as the publication requirements. Rule 9 lays down the guidelines pertaining to the timing of the sale, among others, stipulating the mandatory 30-day notice mandated in the rules.
Thus, a possession notice must not be/token that the property has already been sold.
A borrower or other affected person may have legal remedies after a possession notice is issued. Under Section 17 of the SARFAESI Act, any person, including the borrower, aggrieved by a measure taken under Section 13(4) may apply to the Debt Recovery Tribunal (DRT) having jurisdiction. The application is generally required to be filed within 45 days from the date on which the measure was taken.
The DRT may examine whether the secured creditor has complied with the Act and the applicable Rules. It can also consider issues concerning the demand notice, possession procedure, publication, valuation and sale process. The effect of a procedural defect depends on the relevant legal provision, facts and applicable judicial decisions.
The requisite actions depend on the level of SARFAESI procedures and the financial condition and legal position of the borrower.
Section 13(8) gives a statutory opportunity to pay the dues and the relevant expenses before the relevant sale or transfer notice, subject to its conditions. The Supreme Court has considered this section and its impact on the borrower’s right to redeem the property.
A possession notice issued pursuant to Section SARFAESI only relates to the secured assets pertaining to the respective secured debts.
For example, in the event of enforcement of a housing loan secured by the secured property, the enforcement in that regard will neither extinguish nor suspend the borrower’s loan, credit card or any other separate credit facility.
Thus, every separate credit facility remains subject to the respective contract.
Consequently, borrowers who are undergoing SARFAESI process must also verify their respective outstanding obligations.
*T&C Apply
Noticing the acquiring of possessions should be given immediate consideration. The borrower has to consider the notice that has been received to ensure record keeping.
The borrower needs to look at the following requirements:
If there is a dissent over the due amount or if the borrower feels that the SARFAESI Act or applicable Rules have not been adhered to, prompt advice shall be needed. Section 17 provides remedy under DRT against actions taken under Section 13(4), typically within 45 days from the respective action.
The possession notice that is issued according to the provisions of SARFAESI is crucial in the recovery of a mortgage loan. The issuance of this notice does not imply that the property has been sold or that physical possession has already taken place. Borrowers must keep track of the various procedures that are required to follow in this process and be aware of the contents of the notices. They must also ensure that the relevant documents are kept safe during this time and take proper legal action as per the timelines provided to them.
Yes, a borrower is entitled to raise objections or representations to the demand of the secured creditor. The creditor must accept any objection raised by the borrower and must respond to him regarding any refusal.
The SARFAESI Act does permit a secured creditor to enforce security right away and thus not going to a court or tribunal at first while fulfilling the necessary conditions laid down in the Act. But this mechanism is subject to all necessary safeguards and remedies prescribed under the law.
No, there are some exceptions from the definition of security interests and enforcement under SARFAESI Act. Thus, the types of security and properties in question are relevant in order to find out whether SARFAESI enforcement is applicable or not.
A tenant, or anybody else having an interest in the secured asset, may obtain remedy considering the nature and legality of that interest. The DRT can adjudicate upon the matter related to the rights or interests in the property in the proceedings as per the Act.
The proceeds will get distributed following the statutory mechanism of distribution of sale proceeds. Refund of any remaining amount after making the payment of all dues of secured creditors and applicable claims will be made as per the Act and Rules.
Yes, section 19 of the SARFAESI Act provides for compensation and costs under certain specified conditions when a borrower or a person affected suffers loss due to action that has been taken contrary to the Act. The DRT gives such relief as per the facts and law applicable on the matter.
The demise of a borrower does not by itself put an end to enforcement proceedings. Rights and obligations get transferred to the legal heirs of the borrower concerned, subject to applicable laws and circumstances.
The SARFAESI framework allows the secured creditor to enforce the liability of the guarantor if the legal requirements are met. The Supreme Court of India has held that a secured creditor can proceed against secured assets furnished by a guarantor subject to the provisions of the Act.
A security interest provides secured creditors with enforceable rights over specified properties or interests which serve as collateral for a loan repayment. SARFAESI enforcement primarily relates to secured releases instead of reference to unsecured debts.
The borrower is entitled to any surplus remaining after the secured creditor has recovered all dues along with any other amounts authorised in law. How the surplus is treated is governed under different provisions of SARFAESI Act and Rules.
