Sarfaesi Act - Reply by Authorised Officer

SARFAESI ACT, 2002 – Can the Authorised Officer delegate his powers to send notice and submit replies through a lawyer?

It is observed that in many cases notices u/s 13(2) of SARFAESI Act and the reply to the representation made and objections raised by the borrower either by himself or through his lawyer are being sent by the lawyer on behalf of the Authorised Officer. The Security Interest (Enforcement) Rules, 2002 defines an Authorised Officer under rule 2(a) as (Quote) ““authorised officer” means an officer not less than a chief manager of a public sector bank or equivalent, as specified by the Board of Directors or Board of Trustees of the secured creditor or any other person or authority exercising powers of superintendence, direction and control of the business or affairs of the secured creditor under the Act.”(Unquote).  

(Quote) Section 2(b) under definition of The security Interest (Enforcement) Rules, 2002 states , “Demand notice means the notice in writing issued by a secured creditor or authorized officer; as the case may be, to any borrower pursuant to sub section (2) of section 13 of the Ordinance.” (Unquote)   Here it is very clear that either the secured creditor or the authorized officer can send the notice. But section 13 (2) of SARFAESI ACT under Enforcement of Security Interest states, (Quote) “Where any  borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any instalment thereof, and his account in respect of such debt is classified by the secured creditor as non –performing asset, then the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under sub section (4)” (Unquote). As per the aforesaid clause, it can be interpreted that the secured creditor alone can send the notice under section 13(2) of SARFAESI ACT, 2002 through their lawyer or by himself since there is no mention of Authorised Officer in the said section of the act.  

But Section “3A- Reply to representation of the borrower” which clearly states,(Quote) “(a) After issue of demand notice under sub-section (2) of Section 13, if the borrower makes any representation or raises any objection to the notice, the Authorized Officer shall consider such representation or objection  and examine whether the same be acceptable or tenable.” (Unquote) (Here there is no mention of secured creditor.)

(Quote) “(b) If on examining the representation made or objection raised by the borrower, the secured creditor is satisfied that there is a need to make any changes or modifications in the demand notice, he shall modify the notice accordingly and serve a revised notice or pass such other suitable orders or deemed necessary, within seven days from the date of receipt of the representation or objection.” (Unquote)  (Here the rule talks about notice by the secured creditor only and no mention of an authorized officer.)

(Quote) “(c) If on examining the representation made or objection raised by the Authorized Officer comes to the conclusion that such representation or objection is not acceptable or tenable, he shall communicate with in one week of receipt of such representation or objection, the reasons for non-acceptance of the representation or objection, to the borrower.” (Unquote) It is very clear and evident from the aforesaid sub section (c) that the Authorized Officer alone has to reply the representation made and objection raised by the borrower since the said section specifically mentions the Authorized Officer and no mention of secured creditor is made unlike in Section 2(b) of The security Interest (Enforcement) Rules, 2002.

Further when the bank appoints The  Authorized Officer, he is taking the position of a judge in the Court and as such he cannot delegate his authority to any one else as per the “Internal Mechanism “ of the Bank as observed by Supreme Court in the matter of Mardia Chemical case.

In view of what is stated above if any reply is received from the lawyer of the bank for the representation made and objection raised by the borrower, then the reply is not valid and not maintainable under the law as the reply is not that of the Authorised Officer..

(What I have stated above is my personal opinion and I invite the views of legal people on this matter.)

T.R.Radhakrishnan,

Banking & Management Consultant,

Facilitator: DRT & SARFAESI CASES,

H.R.Trainer; Corporates, Colleges & Schools,

17, Morya Gardens, Kanadia Road,

Behind Karnataka Vidya Niketan,

Indore. 452016.

Madhya Pradesh

Email: trrk1941@gmail.com; radhakrishnan1941@gmail.com