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Purchaser’s Liability Towards Prior Encumbrances Over A Property Auctioned Under SARFAESI Act, 2002


The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (hereinafter referred to as the SARFAESI Act) was passed in the year 2002 with the primary objective of developing an efficient process for rapid recovery of non-performing assets of banks and financial institutions. In furtherance of this, it allows the banks and financial institutions to auction a debtor’s secured properties, upon failure of repayment of loan(s). Such auctioned properties, in most cases, are not free from encumbrances, as they have tax/electricity or similar arrears due on them. In the event of non-disclosure of such arrears at the time of auction, it becomes difficult to determine which party, the bank or the purchaser, would be liable to pay off such encumbrances/arrears. This piece of work analyses the present laws governing such auctions and tries to determine whether the purchaser can be made liable for prior/pre-sale encumbrances over the auctioned property.

Read the full paper HERE.

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