The recent notice of the Bank of Baroda (BoB) to auction Sunny Deol’s bungalow in Juhu, Mumbai, due to unpaid dues has stirred discussions on the implementation of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002. This act empowers financial institutions to recover loans by auctioning mortgaged properties, bypassing the need for court intervention.
Understanding the SARFAESI Act
The SARFAESI Act, enacted in 2002, grants banks and financial institutions the authority to initiate the process of property possession when borrowers default on loan payments and the loan turns into a Non-Performing Asset (NPA). The borrower is issued a notice mandating repayment within 60 days. Failure to comply prompts the institution to proceed with property possession. In this process, the institution requires permission from the Chief Judicial Magistrate (CJM) or District Magistrate (DM) to proceed under Section 14 of the Act.
Sunny Deol’s Case and Legal Steps
In the case of Sunny Deol, the Bank of Baroda issued an auction notice for his Juhu villa under the SARFAESI Act, citing unpaid dues amounting to around Rs 56 crore. The bank’s notice was later withdrawn, possibly due to technical reasons. Deol has communicated his intention to clear the dues. Deol’s case gained attention not only due to his celebrity status but also because he is a Member of Parliament from Gurdaspur.
Challenges and Implications
While the SARFAESI Act streamlines the property possession process, the legal journey isn’t without complexities. Debt Recovery Tribunals (DRTs), responsible for addressing disputes related to the Act, have faced challenges due to vacancies and increased caseload. The introduction of the Insolvency and Bankruptcy Code (IBC) in 2016 has altered the approach of financial institutions, prompting them to opt for the National Company Law Tribunal (NCLT) route for debt recovery, especially for corporate cases.