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Section 6: Notice to obligor and discharge of obligation

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 • Official Statutory Text & Practice Guide

Statutory Regulation
Legal Standard
Competent Court / Tribunal
Act 2002
Section 5 All 42 Sections of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 Section 7

Legal Commentary & Landmark Judgments: Section 6

Section 6 of the SARFAESI Act, 2002 governs the issuance of statutory notice of debt acquisition to the obligor and establishes the legal discharge of the obligor's payment obligations towards the assignor bank prior to receipt of such notice.

  • Notice of Acquisition to Obligor: The assignor bank/FI or the acquiring ARC may send a formal notice of acquisition of the financial asset to the obligor (borrower/guarantor) under Section 6(1).
  • Statutory Discharge of Obligor: Under Section 6(2), where no notice of acquisition is sent, any payment made by the obligor to the original assignor bank constitutes a valid and complete discharge of the debt.
  • Statutory Novation and Substitution: Service of Section 6 notice completes the statutory attornment of debt, legally obligating the debtor to pay the ARC exclusively and invalidating subsequent payments made to the original lender.
Key Landmark Precedents:
  • ICICI Bank Ltd. v. Official Liquidator of APS Star Industries Ltd. (2010) 10 SCC 1: The Supreme Court held that assignment of debts and non-performing assets by banks to ARCs is legally permissible under the Banking Regulation Act and SARFAESI, transferring both the underlying debt and all accompanying security interests.
  • Asset Reconstruction Company (India) Ltd. v. Amit Properties, 2014 SCC OnLine Bom 4268: The Bombay High Court ruled that once Section 6 notice is issued, the obligor has no legal standing to challenge the commercial consideration or terms of the assignment deed; the statutory notice binds the debtor to discharge obligations to the assignee.
Courtroom Practice & Strategic Litigation Guidance:

In DRT proceedings, verify whether the ARC served a valid Section 6 notice prior to issuing Section 13(2) demand. If the borrower made repayments to the assignor bank prior to receiving Section 6 notice, plead statutory discharge under Section 6(2) to defeat default claims.

Section 5 All 42 Sections of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 Section 7