SARFAESI Act 2002: Scheme

The SARFAESI Act provides a scheme for the enforcement of security interests by secured creditors. The scheme is as follows:

  1. The secured creditor must send a notice of demand to the borrower. The notice must specify the amount due and payable, the security interest created, and the consequences of default.
  2. If the borrower fails to repay the loan amount within 60 days of the notice of demand, the secured creditor can take possession of the secured assets.
  3. The secured creditor must then sell the secured assets through a public auction.
  4. The proceeds of the sale will be used to repay the loan amount, and any remaining amount will be returned to the borrower.

MCQs

  1. What is the first step in the SARFAESI Act scheme?
    • The secured creditor must send a notice of demand to the borrower.
    • The secured creditor must take possession of the secured assets.
    • The secured creditor must sell the secured assets through a public auction.

Answer: The secured creditor must send a notice of demand to the borrower.

  1. How long does the borrower have to repay the loan amount after receiving the notice of demand?
    • 30 days
    • 60 days
    • 90 days
    • 120 days

Answer: 60 days.

  1. What happens if the borrower fails to repay the loan amount within 60 days of the notice of demand?
    • The secured creditor can take possession of the secured assets.
    • The secured creditor can sell the secured assets through a public auction.
    • The borrower may be declared a wilful defaulter.

Answer: All of the above.

  1. Who is responsible for conducting the public auction of the secured assets?
    • The secured creditor
    • A court-appointed liquidator
    • A government agency

Answer: The secured creditor.

  1. What happens to the proceeds of the sale of the secured assets?
    • The proceeds are used to repay the loan amount.
    • Any remaining amount is returned to the borrower.
    • The borrower is not entitled to any remaining amount.

Answer: The proceeds are used to repay the loan amount. Any remaining amount is returned to the borrower.

Answers

  1. The secured creditor must send a notice of demand to the borrower.
  2. 60 days.
  3. All of the above.
  4. The secured creditor.
  5. The proceeds are used to repay the loan amount. Any remaining amount is returned to the borrower.