Two options for Secured Creditor in SARFAESI

A secured creditor has two options when the borrower or the guarantor defaults in repaying the loan. Under Section 13 of SARFAESI, the creditor can either take possession of the asset on his own or employ Section 14 and seek the help of the magistrate to get possession. It is not necessary that the first course should be adopted and having failed, the second course should be resorted to. This was stated by the Supreme Court last week while allowing the appeals of Standard Chartered Bank and State Bank of India in two appeals against the Madras High Court judgment. The Supreme Court stated that the high court view was wrong and observed: "No doubt that a secured creditor may initially resort to Section 13 and on facing resistance he may still approach the magistrate under Section 14. But it is not mandatory for the creditor to make attempt to obtain possession on his own before approaching the magistrate." The judgment also ruled that the argument of bypassing Section 13 would deprive the borrower of a right to appeal is a misconception of the law."