A Borrower Can Now Challenge Symbolic Possession Under The Sarfaesi Act

Introduction

The Hon'ble Supreme Court (SC), in its recent decision in the matter of M/s Hindon Forge Pvt. Ltd. & Anr. v State of Uttar Pradesh [(Civil Appeal No 10873 of 2018 along with Civil Appeal No 10874 of 2018)] (Appeals) held that a borrower can prefer an application under Section 17(1) of the Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (Act) even before physical or actual possession of secured assets is taken over by banks/financial institutions in exercise of their powers under Section 13(4) of the Act read with Rule 8 of the Security Interest (Enforcement) Rules, 2002 (Rules).

Background

A full bench of the Hon'ble Allahabad High Court held that under the scheme of Section 13(4) and Sections 14 and 17 of the Act read with Rules 8 and 9 of the Rules, unless physical or actual possession of the secured asset was taken over by the banks/financial institutions, as contemplated under Section