STANDARD OPERATING PROCEDURE (SOP) FOR SALE OF ASSETS UNDER SARFAESI
The main objective of the Asset Reconstruction Companies (ARC) is securitisation and reconstruction
of the financial assets by adhering to the due process of law as defined under the provisions of
Securitisation and Asset Reconstruction of the Financial Assets and Enforcement of Security Interest
Act of 2002 (SARFAESI). CFM ARC follows a transparent process for acquisition of financial assets
from banks/financial institutions and post due diligence, the acquisition note is put up for approval of
the competent authority as per the Authority Matrix approved by the Board.
Under reconstruction of the financial assets, sale of secured assets is one of the modes available to
ARC under the provisions of Section 9(1)(b) of the SARFAESI. Procedure in detail with regard to sale
of secured asset is explained under the provisions of Section 13 read with Rule 6, 7, 8 and 9 of Security
Interest (Enforcement) Rules 2002 (Rules) as amended from time to time.
Recently, Reserve Bank of India (RBI) vide circular dated July 16, 2020, issued certain guidelines as a
Fair Practice Code for Asset Reconstruction Companies (FPC) in order to ensure the transparency and
fairness in their operations. Same is reproduced hereinbelow for the sake of convenience:
“In order to enhance transparency in the process of sale of secured assets,
(i) Invitation for participation in auction shall be publicly solicited; the process should enable
participation of as many prospective buyers as possible.
(ii) Terms and conditions of such sale may be decided in wider consultation with investors in
the security receipts as per SARFAESI Act 2002.
(iii) Spirit of section 29(A) of Insolvency and Bankruptcy Code, 2016 may be followed in dealing
with prospective buyers”.
In order to maintain the transparency, fairness and harmony between FPC, SARFAESI provisions and
Rules, the Company has laid out a Standard Operating Procedure to deal with the process of sale of
secured assets, which is to be followed keeping the spirit of FPC and SARFAESI Act intact.
Before initiating the process of monetisation of the secured asset under the provisions of SARFAESI
and its Rules, there are certain pre-requisites which need to be strictly followed:
(i) Issuance of demand notice u/s 13(2) of SARFAESI to the principal borrower including
mortgagor and all the guarantors.
(ii) Complete and effective service of demand notice by way of RPAD, Courier including
through electronic modes.
(iii) If the demand notice is unserved, service of the same should be effected by pasting the
notice on the registered office or the mortgaged property of the secured asset and
publication in two newspapers including one in vernacular having wide circulation in the
region.
(iv) In case borrower replies, objects or makes any representation to the notice u/s 13(3) of the
SARFAESI, response to the same should be sent by the authorised officer of CFMARC
within 15 days from the receipt of such reply, objection or representation along with reason
for non-acceptance.
(v) CFMARC should preferably take the physical possession of the secured asset before
putting it up for sale through public auction or otherwise for maximisation of value of the
secured asset. CFMARC may also put-up secured asset on sale under the provisions of
SARFAESI on the basis of symbolic possession and may apply to the concerned authority
for physical possession upon the request of buyer later after concluding the sale in case
buyer is unable to obtain the possession. (This position has also been clarified by the
Supreme Court in the matter of ITC -Vs- Blue Coast).
(vi) Authorised Officer of CFMARC may obtain the valuation of the secured asset from an
approved valuer before putting the same for sale/auction. If authorised officer is not
satisfied with the valuation of secured asset conducted by the valuer, he may further obtain
second valuation from another approved valuer in consultation with President (Legal)/MD
& CEO of CFMARC.
Authorised Officer should prepare the demand notice u/s 13(2) of the SARFAESI in sync with title
document and the deed of mortgage including the title investigation report to avoid any confusion on
the description of the property as well as its title. Further possession and sale notice should be prepared
on the basis of demand notice issued u/s 13(2) of the SARFAESI.
There are various modes available under the provisions of SARFAESI for sale of secured assets which
are namely:
1. By obtaining quotations from the persons dealing with similar secured assets or otherwise
interested in buying such assets. (It is a kind of swiss challenge process)
2. By inviting tender from the public.
3. By holding public auction including through e-auction.
4. By private treaty
I. In case CFMARC wishes to conduct the sale of asset by adopting the method as explained at
Sr. no 1 mentioned above, authorised officer of CFMARC shall obtain the interest from the open
market (persons dealing with similar asset or otherwise interested in buying such assets) and
based on the interest received from the market (Anchor Bid), authorised officer shall fix a
reserve price in wide consultation with asset sale committee and may undertake the process of
sale through inviting tender, public auction or otherwise. Post completion of the sale process,
authorised officer shall provide the right of refusal to the Anchor Bidder and may proceed for
issuance of sale certificate in consultation with CFMARC to the highest bidder.
II. Sale of secured asset (Movable) through Public Auction or by Inviting Public Tender:
A. Authorised officer of CFM ARC to obtain the valuation of the secured asset. Endeavour should
be made to ensure that the valuation on record is not more than two years old.
B. *To fix the reserve price (RP) by convening a meeting of the Asset Sale committee. The broad
scope of responsibilities of the Sale committee would be:
a. To evaluate the valuation report(s) of the secured asset obtained by the authorized officer
b. To fix the reserve price for the underlying asset proposed to be sold based on the valuation
report(s)
c. To evaluate the bids received based on various parameters such as bid amount, payment
schedule, background of bidder, etc., if multiple bids are received and approve the best bid
suited to CFMARC
Since the SARFAESI and its Rules are silent upon fixation of RP, it is upon the wisdom of
the Asset Sale Committee to fix the RP. While fixing the RP, Committee members have to
keep in mind value maximisation of secured asset. However, authorised officer of CFM
ARC may fix the RP in wider consultation with investor in the security receipts as per
SARFAESI to comply with FPC prior to placing the proposal before the Sale Committee in
all cases of asset sale.
*The Authority matrix of the Company, duly approved by the Board needs to be referred for
designated competent authority for fixation of reserve price.
C. In case of multiple banking or consortium banking arrangement, the RP needs to be fixed in
consultation and concurrence with majority of the lenders, as per the SARFAESI Act; after
internal discussion in the Asset Sale Committee of CFM ARC. Sale notice must be prepared
as per Appendix -II-A available under the SARFAESI Rules.
D. In case of first sale, a notice of 30 days is to be served upon the borrower including mortgagor
and guarantor.
E. The abovesaid sale notice has to be served through RPAD, Courier, pasting notice on the
secured asset, publication in the two leading newspapers including one in vernacular having
wide circulation in the region including through electronic modes (e-mail, fax, whatsapp etc.).
(Newspaper may be chosen with an intention to invite as many bidders as possible and in
compliance with FPC as well).
F. Notice of sale intimation to borrower through RPAD and/or courier must carry the copy of
publications made to ensure the limitation of 30 days.
G. The abovesaid sale notice should also be uploaded on the website of CFM ARC including
detailed terms and conditions of the sale.
H. The abovesaid sale notice should also be uploaded on the website of the service provider for
e-auction (in case auction is through e-auction process) including detailed terms and conditions
of the sale.
I. Sale notice should carry the following information:
I. Details of Borrower, mortgagor and guarantor
II. Details of CFM ARC.
III. Complete description of the secured asset.
IV. Reserve Price, time and manner of the payment.
V. Time and place for auction or to submit the tender.
VI. Deposit of earnest money.
VII. Encumbrances known to the CFM ARC.
VIII. Any other information which authorised officer deems fit and necessary.
J. In case of any subsequent sale, 15 days’ notice of sale to the borrower shall be served, affixed
and published by the authorised officer.
K. Upon receipt of entire sale consideration, authorised officer shall issue the sale certificate to
the purchaser.
L. In the event of default of payment, secured asset can be offered for sale again and amount
deposited by the earlier purchaser may be forfeited.
M. In case of sale under public auction or by inviting tender from the public, authorised officer is
obligated to handover the peaceful physical possession to the purchaser unless otherwise
agreed.
N. In case of No bidder in the Public auction, secured asset may again put up for sale by adopting
any method as mentioned above.
Note: In case of sale through public auction, same may be conducted by way of holding physical auction
including e-auction. In case of physical auction, all the bids would be received by the authorised officer
in the sealed envelope and shall be opened at the scheduled time of public auction in presence of all
the bidders participating in the auction process as well as authorized representative of CFMARC. A roll
call shall be taken of all the participants along with their bid amount. Authorised officer shall not consider
any bid submitted less than the reserve price. However, Authorised Officer may consider such bid if the
bidder agrees to improve the bid amount equal to or more than the reserve price. In case of e-auction,
all the bidder shall submit their bid on the e-auction portal and its physical copy along with their KYC to
the authorised officer for its verification and record.
In case authorised officer receives a single bid equal to above than the reserve price, he may confirm
the sale in wide consultation with Sale Committee of CFMARC. Any Borrower or mortgagor may also
participate in the auction process subject to applicability of Fair Practice Code promulgated by RBI.
III. Sale of Secured Asset (Movables) under Private Treaty:
As an alternative to sale of secured assets under public auction, SARFAESI Act also permits CFM
ARCs to sell the underlying mortgaged assets through private treaty.
CFM ARC has two options for sale of asset under private treaty:
• With Consent of borrower
• Without Consent of borrower
The method of sale under private treaty shall be preferred as a first option when the offer price from the
buyer is at or above the fair market value# or the realizable value of the secured asset.
#Fair market value: value or price at which asset would sell for in the open market between a willing
seller and a willing buyer. The same is indicated by the valuer in the valuation report of the asset.
In case consent of the borrower is available to the CFM ARC, authorized officer of CFM ARC may issue
a sale certificate to the proposed pre-identified buyer at price on or above the fair market value of the
asset under sale and after receipt of entire sale consideration, possession of the property may be
handed over as per the terms agreed with the purchaser.
In case consent of the borrower is not available, CFM ARC has to adhere to the following procedure:
(i) Authorised officer may fix the tentative Reserve Price in wider consultation with assignor bank or
investors in security receipts based upon the value indicated by a pre-identified purchaser, in
compliance with the FPC.
(ii) The final sale price under private treaty needs to be approved as per the Authority Matrix duly
approved by the Board of Directors of the company.
(iii) Authorised officer shall serve a notice to the borrower and/or mortgagor/guarantor providing an
opportunity for redemption of the mortgaged property by tendering the total outstanding dues
payable to the CFM ARC. However, authorised officer is at liberty to release the secured asset at
price equal to or higher than the price offered by the highest bidder in wide consultation with asset
sale committee of CFMARC.
(iv) The abovesaid notice shall contain the details of Reserve Price and time (date) including place of
sale under private treaty.
(v) The said notice shall be served to the borrower through RPAD, Courier including electronic modes
(email, fax, whatsapp etc.).
(vi) In case the notice is not served through the modes as abovementioned, same should be served
through pasting notice on the secured asset and publication.
(vii) In case borrower does not turn-up after due service of the notice within the period specified in the
aforesaid notice, authorised officer shall issue the sale certificate upon receipt of entire sale
consideration.
(viii) Manner of payment of Reserve Price may be mutually decided between authorised officer of
the CFM ARC and purchaser under private treaty. However, same should not exceed three months
preferably.
(ix) In case of sale under private treaty subsequent to a public auction, RP would preferably be fixed at
price mutually agreed between CFM ARC and the purchaser. The competent authority to approve
the sale price under private treaty would be as per the Authority Matrix duly approved by the Board
of Directors of the company.
IV. Sale of secured asset (Immovables) through Public Auction or by Inviting Public Tender:
A. Authorized officer to obtain the valuation of the secured asset. Endeavour should be made to
ensure that the valuation on record is not more than two years old.
B. To fix the reserve price (RP) by convening a meeting of the Asset sale committee. The broad
scope of responsibilities of the Sale committee would be:
a. To evaluate the valuation report(s) of the secured asset obtained by the authorized officer
b. To fix the reserve price for the underlying asset proposed to be sold based on the valuation
report(s)
c. To evaluate the bids received based on various parameters such as bid amount, payment
schedule, background of bidder, etc., if multiple bids are received and approve the best bid
suited to CFMARC
Since the SARFAESI and its Rules are silent upon fixation of RP, it is upon the wisdom of the Sale
Committee to fix the RP. While fixing the RP, Committee members have to keep in mind value
maximisation of secured asset. However, authorised officer of CFM ARC may fix the RP in wider
consultation with investor in the security receipts as per SARFAESI to comply with FPC prior to placing
the proposal before the Sale Committee in all cases of asset sale.
*The Authority matrix of the Company needs to be referred for designated competent authority for
fixation of reserve price.
In case of multiple banking or consortium banking arrangement, the RP needs to be fixed in consultation
and concurrence with majority of the lenders, as per the SARFAESI Act; after internal discussion in the
Asset Sale Committee of CFM ARC.
C. Sale notice must be prepared as per Appendix -IV-A available under the SARFAESI Rules.
D. In case of first sale, a notice of 30 days is to be served upon the borrower including mortgagor and
guarantor. The abovesaid sale notice has to be served through RPAD, Courier, pasting on the
secured asset, publication in the two leading newspapers including one in vernacular having wide
circulation in the region including through electronic modes (e-mail, fax, whatsapp etc.).
(Newspaper may be chosen with an intention to invite as many bidders as possible and in
compliance with FPC as well). Sale notice of the immovable property is required to be pasted also
in the conspicuous part of the mortgage property.
E. Notice of sale intimation to borrower through RPAD and/or courier must carry the copy of
publications made to ensure the limitation of 30 days.
F. The abovesaid sale notice should also be uploaded on the website of the CFM ARC including
detailed terms and conditions of the sale.
G. The abovesaid sale notice should also be uploaded on the website of the service provider for e-
auction (In case auction is through e-auction process) including detailed terms and conditions of
the sale.
H. Sale notice should carry the following information:
I. Details of Borrower, mortgagor and guarantor
II. Details of CFM ARC.
III. Complete description of the secured asset.
IV. Reserve Price, time and manner of the payment.
V. Time and place for auction or to submit the tender.
VI. Deposit of earnest money.
VII. Encumbrances known to the CFM ARC.
VIII. Any other information which authorised officer deems fit and necessary.
I. In case of any subsequent sale, 15 days’ notice of sale to the borrower shall be served, affixed
and published by the authorised officer.
J. Upon receipt of 25% of the bid price, authorised officer shall confirm the sale in the name of the
highest bidder subject to the confirmation of CFM ARC.
K. In case of immovable property, no sale shall be confirmed if the amount offered by the sale price
is less than the RP.
L. In case authorised officer fails to obtain a price equal to or higher than the RP, he may with the
consent of borrower and CFM ARC effect the sale at such price decided.
M. In case of sale of immovable property, purchaser shall immediately, i.e., on the same day or not
later than next working day, deposit 25% of the sale price inclusive of earnest money deposit
(EMD).
N. In case purchaser fails to do so, property shall be sold again.
O. Balance amount i.e. 75% of the sale price shall be paid by the purchaser on or before 15th day of
confirmation of sale or such extended period as agreed between purchaser and CFM ARC but not
exceeding three months.
P. In case of default of payment within the period stipulated in law and settled between CFM ARC
and purchaser, deposit shall be forfeited and property shall be resold and defaulting purchaser
shall forfeit to the CFM ARC all claim to the property or to any part of sum for which it may be
resold.
Q. Upon receipt of entire sale consideration, authorised officer shall issue the sale certificate to the
purchaser in the prescribed format given in Appendix V to SARFAESI Rules.
R. In the event of default of payment, secured asset can be offered for sale again and amount
deposited by the earlier purchaser may be forfeited.
S. In case of sale under public auction or by inviting tender from the public, authorised officer is
obligated to handover the peaceful physical possession of the property to the purchaser unless
otherwise agreed.
T. In case immovable property on sale is subject to encumbrances, authorised officer may allow the
purchaser to deposit with him the money required to discharge such encumbrance and any interest
due on such encumbrance along with such additional amount to meet the contingencies or further
cost, expenses and interest.
U. In case after meeting the cost of removing encumbrances and contingencies, any surplus available
out of money deposited by the purchaser shall be paid to the purchaser within 15 days from the
date of finalisation of sale.
V. Authorised Officer shall mention in the sale certificate that purchaser has purchased immovable
secured asset free from encumbrance known to the CFM ARC or not.
W. In case of No bidder in the Public auction, secured asset may again put up for sale by adopting
any method as mentioned above.
Note: In case of sale through public auction, same may be conducted by way of holding physical auction
including e-auction. In case of physical auction, all the bids would be received by the authorised officer
in the sealed envelope and shall be opened at the scheduled time of public auction in presence of all
the bidders participating in the auction process as well as authorized representative of CFMARC. A roll
call shall be taken of all the participants along with their bid amount. Authorised officer shall not consider
any bid submitted less than the reserve price. However, Authorised Officer may consider such bid if the
bidder agrees to improve the bid amount equal to or more than the reserve price. In case of e-auction,
all the bidder shall submit their bid on the e-auction portal and its physical copy along with their KYC to
the authorised officer for its verification and record.
In case authorised officer receives a single bid equal to above than the reserve price, he may confirm
the sale in wide consultation with Sale Committee of CFMARC. Any Borrower or mortgagor may also
participate in the auction process subject to applicability of Fair Practice Code promulgated by RBI.
V. SOP for sale of Secured Asset (Immovables) under Private Treaty:
As an alternative to sale of secured assets under public auction, SARFAESI Act also permits CFM
ARCs to sell the underlying mortgaged assets through private treaty.
CFMARC has two options for sale of asset under private treaty
• With Consent of borrower
• Without Consent of borrower
In case consent of the borrower is available to the CFM ARC, authorized officer of CFMARC may issue
a sale certificate (in case of sale at a first instance) to the proposed pre-identified buyer at a price on or
above the fair market value or the realizable value of the asset under sale along with an affidavit
regarding declaration of compliance of section 29(A) of Insolvency and Bankruptcy code of India 2016
(IBC) and after receipt of entire sale consideration, possession of the property may be handed over as
per the terms agreed with the purchaser.
In case consent of the borrower is not available, CFM ARC has to adhere to the following procedure:
(i) Authorised officer may fix the Reserve Price in wider consultation with assignor bank or investors
in security receipt based upon the value indicated by a pre-identified purchaser.
(ii) The final sale price under private treaty needs to be approved as per the Authority Matrix duly
approved by the Board of Directors of the company.
(iii) Authorised officer shall serve a notice to the borrower and/or mortgagor providing an opportunity
for redemption of the mortgage property by tendering the total outstanding dues payable to the
CFM ARC.
(iv) The abovesaid notice shall contain the details of Reserve Price and time (date) including place of
sale under private treaty.
(v) The said notice shall be served through RPAD, Courier including electronic modes (email, fax,
whatsapp etc.).
(vi) In case the notice is not served through the modes as abovementioned, same should be served
through pasting notice on the secured asset and publication.
(vii) In case borrower did not turn-up after due service of the notice within the period specified in the
aforesaid notice, authorised officer shall issue the sale certificate upon receipt of entire sale
consideration.
(viii) Manner of payment of Reserve Price may be mutually decided between authorised officer of
the CFM ARC and purchaser under private treaty. However, same should not be exceeding three
months.
(ix) In case of sale under private treaty subsequent to a public auction, RP would preferably be fixed at
price mutually agreed between CFM ARC and the purchaser. The competent authority to approve
the sale price under private treaty would be as per the Authority Matrix duly approved by the Board
of Directors of the company.
For the purpose of compliance with FPC regarding wider consultation with SR investors for fixation of
the reserve price, an email shall be sent to them inviting their views for discussion, if any. In case of no
response from them within three days, the sale process may be initiated.
