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narendra.s.p (Chief Manager(Law))     17 December 2013

Authorised officer for multiple banking

The “Secured creditor” as defined in section 2(zd) of SARFAESI Act could mean and include “group of banks”. In case of Multiple banking where two or more Banks [group of banks] have obtained common “secured assets” of the borrower:

i)                    Whether the Authorised Officer of one Bank can be authorized to issue Demand and possession notices on behalf of group of Banks?

ii)                   If so, what is the nature of authorisation he should obtain from other bank/s so that he can exercise powers as authorized officer even on behalf of other Bank/ also?



 3 Replies

c.p.s. ramachary (1500)     24 December 2013

In the given query it can be interpreted that, Sec.13(9) of SARFAESI Act provides that in the case of multiple financing by more than one secured creditors, no secured creditor shall be entitled to exercise any or all of the rights conferred on him under or pursuant to sub-section (4) unless exercise of such right is agreed upon by the secured creditors  representing not less than 60% in value of the amount (including principal, interest and any other dues payable) outstanding as on a record date (the date as agreed upon by the secured creditors.  



In case of multiple banking it is advisable that secured creditors representing  not less than 60% in value of the amount outstanding as on a record date enter into an "Inter Se" agreement  as in case of consortium lending and that all the banks give an 'Irrevocable Letter of Authority' to one or more of the bank(s) to initiate action under the Act and distribute the sale proceeds among the banks as per their ranking status (i.e. as per their priority), clearly reciting the manner of payment / appropriation. It is necessary that all such banks incorporate their sharing pattern clearly in the 'inter se agreement'. 


The bank(s) enforcing the security interest shall be entitled to appropriate the legally incurred expenses first, before distributing the sale proceeds to the charge holders as per their priority. Letter of Authority must clearly spell out all the above stipulations on payment of sale proceeds The Authorised Officer of one or more of such authorised banks/bank(s) shall be deemed to be authorized by the multiple banks to take action under the Act.

narendra.s.p (Chief Manager(Law))     28 December 2013

Banks in their Board resolution resolve that their officers who hold post of Scale IV grade and above are their authorised officers. In the interse agreement the mandate is given by the respective member branch managers and not the Board of the member banks. In absence of the Board of each member Bank[secured creditor] making such appointment, is the authorisation valid? Can a challenge be made, that the authorised officer of a Bank cannot act as the authorised officer of another Bank in absence of a valid board resolution of the Appointing bank?

c.p.s. ramachary (1500)     28 January 2014

I am sorry I could not answer the query due to some problem in my computer.

I do agree with you. The Boards of the respective banks have to pass such resolution for making such appointment

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