Sec. 13(9) of SARFAESI Act,2002

Dear Mr. Balaji,

section 13(9) speaks only about the financial assets which are held by more than one secured creditors. if that is the case then the said sub clause applies thereon and no secired creditor alone can take actions under the SARFAESI Act without taking consent of other 75% of such owners of the said financial asset.

Dear Balaji Sir,

       Section 13(9) of the SARFAESI Act provides that where a “financial asset” is financed by more than one secured creditor or jointly financed by a group of secured creditors, then a secured creditor may only exercise his rights pursuant to Section 13(4) of the SARFAESI Act, to enforce the security interest created in his favour. This can happen only if the exercise of such a right is agreed upon by secured creditors, representing not less than three-fourth in value of the amount outstanding, as on the record date and such action shall be binding upon all the secured creditors.

Upon reading Section 13(9) of the SARFAESI Act with the definition of “financial asset”, it may be inferred that agreement amongst secured creditors in respect of enforcement measures is required only if more than one secured creditor has financed a particular debt, in other words, where it is a case of consortium lending.

The judgment in the case of Swift Finlease (India) Limited vs. Bank of India [IV (2005) BC 197] supports this view. In this case, the appellant had availed separate credit facilities from the respondents at different times, and there was an exchange of letters amongst the respondents, whereby they had agreed to share the mortgaged property on pari passu basis and had also contemplated forming a consortium. The Debt Recovery Tribunal (“DRT”) held that this was not a case where the creditors had advanced loans pursuant to a consortium arrangement and therefore, the provisions of Section 13(9) of the Act would not be attracted.

It therefore appears that where more than one secured creditor has security interest over the same ‘asset(s)’, with respect to which each creditor has made separate advances without forming a consortium, then any of such secured creditor(s) may take enforcement measures under the SARFAESI Act, without requiring consent from any other secured creditors, as the provisions of Section 13(9) of the SARFAESI Act are then not applicable.

Therefore, other secured creditors may be left without a right to dissent to, or otherwise control, the manner in which the secured asset, with respect to which they have security interest, is dealt with before the enforcement measures are taken by one secured creditor. This necessitates the understanding of the rights of other secured creditors, when enforcement measures under the SARFAESI Act is taken by one secured creditor, in cases other than a consortium lending.

Hope your query cleared now.

thanks Mr. Shree

Thank You for clear explanation

Great work Shree.

Regards..

again thanks

Mr Shree Your message is  total information on the subject - thanks!