For secured creditors with B2B claims backed by collateral, the SARFAESI Act 2002 — the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act — lets you bypass courts entirely. 60-day notice. Asset takeover. Sale. No judicial intervention required at the first stage. Most non-bank creditors don't realise they can use it.
SARFAESI was originally designed for banks and NBFCs but the definition has expanded over time to include Asset Reconstruction Companies, securitisation companies, and (post-2016 amendment) certain other secured creditors with registered charges. Critical pre-condition: the security interest must be created in your favour and, for company borrowers, registered with the Registrar of Companies under Section 77 of the Companies Act 2013.
SARFAESI can only be invoked when the borrower's account is classified as a Non-Performing Asset per RBI's prudential norms — typically 90 days overdue for term loans, continuous out-of-order for 90 days for cash credit, or 90+ days overdue for bills discounted. For trade credit secured by hypothecation of goods or receivables, the analogous test applies: 90 days of default after demand.
Recovery begins with a written notice to the borrower demanding payment of dues within 60 days. The notice must specify the amount due (principal + interest + costs), the secured assets that will be taken over if default continues, and the borrower's right to make representations under Section 13(3A). If the borrower doesn't pay within 60 days, you proceed to Section 13(4) takeover.
- Take physical possession of movable property directly.
- For immovable property — symbolic possession first, then physical possession with the District Magistrate's assistance under Section 14.
- Sell the asset by public auction or private treaty after issuing a 30-day notice.
- Sale proceeds discharge the secured debt; any surplus goes back to the borrower.
Cumulative recovery after Section 13(2) notice — typical secured B2B claim
Funded-matter observation. Day-90 typically marks expiry of 60-day demand + first 30 days of negotiation. Most recovery happens between months 4-8 via asset sale or pre-sale settlement.
Borrower can challenge SARFAESI action before the Debt Recovery Tribunal under Section 17 — must be filed within 45 days of the action complained of. DRT can grant interim stay, set aside a procedurally defective Section 13(2) notice, or direct restitution. Appeal lies to DRAT, then High Court under Article 226/227. In practice, well-framed SARFAESI proceedings survive most DRT challenges — the bar for setting aside is high.
- Unsecured trade credit — back to civil suit, Section 138, or IBC.
- Security interest created post-NPA — treated as preferential and void.
- Borrower already in moratorium under IBC — IBC overrides.
- Agricultural land — specific statutory carve-out.
Typical timeline from Section 13(2) notice to recovery: 4-8 months. The procedural discipline needed is upstream — at contract drafting, creating valid security, registering it, and triggering NPA classification promptly. Most secured creditors who could use SARFAESI don't, because the security was never properly created to begin with.