Knowledge Centre

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  Research

  Start by researching our online auction portal i.e., eauctions.samil.in or augeo.samil.in, as we specialize in NPA property auction/disposal. You can refer to our portal as it has a good selection of properties across India, from all the Major Banks, NBFCs, and Asset Restructuring Companies. You can also talk to our Auction Property Sales Expert, who will guide you through the process and ensure that your experience of purchasing NPA property is smooth and transparent. For this, simply register on our portal (eauctions.samil.in or augeo.samil.in).

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  Registration

  Register on the auction website by providing your personal information and other details. Some websites may require a registration fee or a refundable deposit.

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  Property selection

  Browse through the available properties on the auction website and identify the ones that match your requirements.

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  Due diligence

  Conduct thorough due diligence on any property you are interested in. This may include checking the property's title, history, condition, and any potential liens or outstanding debts. It is crucial to gather as much information as possible to make an informed decision.

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  Submit EMD and Bid form

  Once you are ready to participate in eauction submit your EMD ( Earnest Money Deposit) to bank via Demand draft or online transfer and also submit your bid form along with KYC documents.

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  Set a budget

  Determine your maximum bid based on your budget and the value of the property. Remember to account for additional costs such as auction fees, legal fees, and any necessary repairs or renovations.

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  Participate in the auction

  Once you are ready, attend the online auction and place your bids. Stick to your budget and be prepared for competition from other bidders.

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  Secure financing

  Make sure you have secured the necessary financing or funds to complete the purchase if you are the winning bidder.

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  Winning bid

  If you win the auction, you will typically be required to pay a deposit immediately or within a specified timeframe.

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  Completion

  Work with the auction platform and the seller to complete the necessary paperwork and finalize the purchase. This may involve signing a sales contract and coordinating the transfer of ownership.

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  Payment and possession

  Pay the remaining balance within the agreed-upon timeframe. Once the transaction is complete, you can take possession of your newly purchased property.

  It is important to note that the process may vary depending on the kind of property and the specific property you are interested in. Therefore, it is recommended to carefully review the terms and conditions provided by the auction website and seek professional advice

Frequently Asked Questions

The SARFAESI Act full form is - “Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act”. The SARFAESI Act allows banks and other financial institutions for auctioning commercial or residential properties to recover a loan when a borrower fails to repay the loan amount. Thus, the SARFAESI Act, 2002 enables banks to reduce their Non-Performing Assets (NPAs) through recovery methods and reconstruction.

The SARFAESI Act provides that banks can seize the property of a borrower without going to court except for agricultural land. SARFAESI Act, 2002 is applicable only in the cases of secured loans where banks can enforce underlying securities such as hypothecation, mortgage, pledge etc. An order from the court is not required unless the security is invalid or fraudulent. In the case of unsecured assets, the bank would have to go to court and file a civil case against the defaulters.

Applicability Of SARFAESI Act, 2002

The Act deals with the following:

• Registration and regulation of Asset Reconstruction Companies (ARCs) by the Reserve Bank of India.
• Facilitating securitization of financial assets of banks and financial institutions with or without the benefit of underlying securities.
• Promotion of seamless transferability of financial assets by the ARC to acquire financial assets of banks and financial institutions through the issuance of debentures or bonds or any other security as a debenture.
• Entrusting the Asset Reconstruction Companies to raise funds by issue of security receipts to qualified buyers.
• Facilitating the reconstruction of financial assets which are acquired while exercising powers of enforcement of securities or change of management or other powers which are proposed to be conferred on the banks and financial institutions.
• Presentation of any securitization company or asset reconstruction company registered with the Reserve Bank of India as a public financial institution.
• Defining ‘security interest’ to be any type of security including mortgage and change on immovable properties given for due repayment of any financial assistance given by any bank or financial institution.
• Classification of the borrower’s account as a non-performing asset in accordance with the directions given or under guidelines issued by the Reserve Bank of India from time to time.
• The officers authorized will exercise the rights of a secured creditor in this behalf in accordance with the rules made by the Central Government.
• An appeal against the action of any bank or financial institution to the concerned Debts Recovery Tribunal and a second appeal to the Appellate Debts Recovery Tribunal.
• The Central Government may set up or cause to be set up a Central Registry for the purpose of registration of transactions relating to securitization, asset reconstruction and creation of the security interest.
• Application of the proposed legislation initially to banks and financial institutions and empowerment of the Central Government to extend the application of the proposed legislation to non-banking financial companies and other entities.
• Non-application of the proposed legislation to security interests in agricultural lands, loans less than rupees one lakh and cases where eighty per cent, of the loans, is repaid by the borrower

Role of SARFAESI Act, 2002

Objectives of SARFAESI Act, 2002

• Efficient or rapid recovery of non-performing assets (NPAs) of the banks and FIs.
• Allows banks and financial institutions to auction properties (say, commercial/residential) when the borrower fails to repay their loans.

How SARFAESI Act, 2002 works?

SARFAESI Act, 2002 provides power to a bank or financial institution to seize the property of a defaulting borrower. If the loan borrowers make any default in repayment of a loan or a loan installment, the financial institution can classify the account as Non-Performing Asset (NPA). The banks or financial institution can issue notices to the defaulting borrowers to discharge their liabilities within 60 days period. When the defaulting borrower fails to comply with the bank or financial institution notice, then the SARFAESI Act gives the following recourse to a bank:

• Take possession of the loan security
• Lease, sell or assign the right to the security
• Manage the same or appoint any person to manage the same.
• The Act also provides for the establishment of ARCs, regulated by the RBI, to acquire assets from banks and other financial institutions.

Formation of SARFAESI Act, 2002

SARFAESI Act, 2002 was circulated:

• To regulate securitization and reconstruction of financial assets.
• Enforcement of the security interest for.
• Matters connected therewith or incidental thereto.

It extended to the whole of India. Amendment in the (SARFAESI) Act, 2002 vide the enforcement of the Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016. It is an Act to further amend four laws:

• Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI).
• Recovery of Debts due to Banks and Financial Institutions Act, 1993 (RDDBFI).
• Indian Stamp Act, 1899.
• Depositories Act, 1996, and for matters connected therewith or incidental thereto.

Amendments to the SARFAESI Act, 2002

The Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2016 provided amendments for the SARFAESI Act, which are as follows:

• The banks and Asset Reconstruction Companies (ARCs) should have the power to transfer any part of the debt of the defaulting company into equity. Such a translation would indicate that lenders or ARCs would become equity holders, instead of the creditor of the company.
• Banks may request any immovable property set out for auction by themselves if they do not receive any request during the auction. In such a case, banks will be capable of adjusting the debt with the amount paid for this property. It allows the bank to secure the asset in partial fulfilment of the defaulted loan amount.
• Banks can also sell this property to a new person by asking him/her to remit these debts entirely over a period of time.

Right of Borrwer Under SARFAESI Act, 2002

The borrowers have the following rights:

• Borrowers can remit the dues and avoid losing their securities before the sale is concluded.
• Borrowers will get compensation for the default of an officer.
• SARFAESI Act Section 17 provides that borrowers can approach the Debt Recovery Tribunal to rectify their grievances against the creditor or authorised officer.

Methods of Recovery Under SARFAESI Act, 2002

The SARFAESI Act provides the following three methods of recovery of the Non-Performing Assets (NPAs):

• Securitisation
  Securitisation is the process of issuing marketable securities backed by a pool of existing assets such as home or auto loans. An asset can be sold after it is converted into a marketable security. A securitisation or asset reconstruction company can raise funds from only the Qualified Institutional Buyers (QIBs) by forming schemes for acquiring financial assets.
• Asset Reconstruction
  Asset reconstruction empowers asset reconstruction companies. It can be done by managing the borrower’s business by selling or acquiring it or by rescheduling payments of debt payable by the borrower as per the provisions of the Act.
• Enforcement of security without the interruption of the court
  The Act empowers banks and financial institutions to issue notices to individuals who have obtained a secured asset from the borrower for paying the due amount and claim to a borrower's debtor to pay the sum due to the borrower.

Assets Not Covered Under SARFAESI Act, 2002

The SARFAESI Act does not cover the following assets:

• Money or security issued under the Sale of Goods Act, 1930 or Indian Contract Act, 1872.
• Any lease, hire-purchase, conditional sale, or any other contract where no security interest has been created.
• Any rights of the unpaid seller under Section 47 of the Sale of Goods Act, 1930.
• Any properties which are not liable for sale or attachment under Section 60 of the Code of Civil Procedure, 1908.

Frequently Asked Questions

Under the Insolvency and Bankruptcy Code (IBC) in India, the sale of assets of a company undergoing insolvency proceedings is a crucial aspect of the resolution process. Here's an overview of asset sales under the IBC:

• Corporate Insolvency Resolution Process (CIRP):

  • When a company defaults on its debt obligations, creditors or the debtor itself can initiate insolvency proceedings under the IBC.
  • Once the insolvency process begins, a resolution professional (RP) is appointed to manage the affairs of the company during the Corporate Insolvency Resolution Process (CIRP).

• Sale of Assets:

  • During the CIRP, the resolution professional has the authority to take various measures to maximize the value of the assets of the insolvent company.
  • One of the key measures is the sale of assets, which may include movable and immovable property, plant and machinery, intellectual property rights, stocks, and other assets of the company.

• Modes of Asset Sale:

  Assets can be sold through various modes, including:

  • Open Bidding: Interested buyers submit bids through a transparent bidding process.
  • Negotiated Sale: Assets are sold through direct negotiations with potential buyers.
  • Asset Reconstruction Companies (ARCs): ARCs may acquire distressed assets for restructuring and eventual sale.
  • Liquidation: If a resolution plan cannot be approved, assets may be liquidated to repay creditors.

• Approval Process:

  • The sale of assets must be approved by the Committee of Creditors (CoC), which consists of financial creditors of the insolvent company.
  • The CoC evaluates and approves the resolution plan proposed by the resolution applicant, which may include the sale of assets to repay creditors.

• Priority of Claims:

  • Proceeds from the sale of assets are distributed among creditors in accordance with the priority of claims specified under the IBC.
  • Secured creditors, employees, and operational creditors have priority in the distribution of proceeds from asset sales.

• Transparency and Fairness:

  • The IBC emphasizes transparency and fairness in the sale process to ensure that the interests of all stakeholders, including creditors, employees, and shareholders, are protected.
  • Asset sales are conducted through a competitive and transparent process to maximize value for creditors.

• Legal Framework:

  • The sale of assets under the IBC is governed by the provisions of the Code, along with regulations and guidelines issued by the Insolvency and Bankruptcy Board of India (IBBI).
  • Overall, asset sales play a critical role in the resolution process under the IBC, as they help maximize the value of assets and facilitate the repayment of creditors, thereby promoting the revival or orderly liquidation of insolvent companies.

• Corporate Insolvency Resolution Process (CIRP):

  • When a company defaults on its debt obligations, creditors or the debtor itself can initiate insolvency proceedings under the IBC.
  • Once the insolvency process begins, a resolution professional (RP) is appointed to manage the affairs of the company during the Corporate Insolvency Resolution Process (CIRP).

Frequently Asked Questions