Sarfaesi act 2002

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Guest

Guest (Querist)

12 September 2014 whether a scuritisation company can take action under section 13(4) of SARFAESI Act for loans granted by it out of its own funds?

Whether SARFAESI Act is applicable on the loans granted and disbursed by SC/RC Company to an existing borrower, the funds disbursed by it through its own corpus.

Guest

Guest (Querist)

12 September 2014 Not resolved yet pls give your openion...

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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23 July 2025 Good question! Here's a clear explanation regarding the applicability of **SARFAESI Act, 2002** on securitisation companies (SCs) and reconstruction companies (RCs):

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### Can a Securitisation or Reconstruction Company take action under Section 13(4) of SARFAESI Act for loans granted out of its own funds?

* **Section 13(4)** of the SARFAESI Act empowers **secured creditors** to take possession of secured assets when a borrower defaults.
* The term **secured creditor** under SARFAESI includes:

* Banks,
* Financial institutions,
* Securitisation companies (SCs),
* Reconstruction companies (RCs),
* Any other creditor to whom a secured asset has been assigned.

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### Applicability when loans are granted from own funds by SC/RC:

* The key factor is **whether the SC/RC is a secured creditor in respect of the loan**.
* **If SC/RC grants loans out of its own corpus and holds security interest on the borrower’s assets**, it qualifies as a **secured creditor** under SARFAESI Act.
* Therefore, it **can invoke the powers under Section 13(4)** and other relevant provisions to enforce security and take possession of secured assets on borrower’s default.
* The **Act does not restrict SC/RCs from taking action if loans are disbursed from their own funds**, as long as the transaction qualifies as a secured loan and SC/RC holds the security interest.

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### Supporting References:

* The Supreme Court and various High Courts have upheld the **power of SC/RCs to initiate SARFAESI proceedings for their secured debts**, irrespective of whether the funds originated from securitisation or their own corpus.
* The definition of **secured creditor under Section 2(zd)** includes SCs/RCs holding security interest on loans.

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### Summary:

| Query | Answer |
| -------------------------------------------------------------- | ------------------------------------------------------------------------------------------------ |
| Can SC/RC take action under SARFAESI for loans from own funds? | **Yes**, if they hold a security interest on the loan, they qualify as secured creditors. |
| Is SARFAESI applicable to such loans? | **Yes**, loans granted and disbursed by SC/RC from own corpus with security fall under SARFAESI. |

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If you want, I can share some case laws and detailed procedural steps for SARFAESI action by SC/RC companies. Would that help?

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