Summary of sarfaesi act amendments introduced in 2016. Section 3a of the sarfaesi act is mandatory and omission to consider representation is fatal. Restrictive remedy under section 14 of sarfaesi act vinod. An act further to amend the securitisation and reconstruction of financial assets and enforcement of security interest act, 2002, the recovery of debts due to banks and financial institutions act, 1993, the indian stamp act, 1899, and the depositories act. Section 2 in the securitisation and reconstruction of financial assets and enforcement of security interest act, 2002 2 where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any instalment thereof, and his account in respect.
Securitisation and reconstruction of financial assets and. Supreme court rules on mandatory procedure under the sarfaesi act. Is the period of 15 days stipulated under section 3a of sarfaesi act to respond to a representation by a borrower mandatory. Feb 25, 2011 courts have dealt with the issue of limitation to approach the debt recovery tribunal under section 17 of sarfaesi act, 2002 and according me, it is the wonderful interpretation by courts in giving the borrower a right to challenge the banks action on all measures pursuant to section 4 of the act. Notice under section 4 of sarfaesi act, 2002 banking. Review of the secs section f reporting requirements. Process flow under provisions of sarfaesi 2 and 4 a secured creditor shall be entitled to exercise all of any of the rights under. The high court observed that the intent of legislature, while introducing sub section 3a was to ensure that objectionsrepresentations of a borrower against any action for enforcement of security interest are considered before a secured creditor proceeds to take possession of the secured assets in terms of section 4 of the sarfaesi act. Public notice for saleauction of immovable propertiesunder.
Is the period of 15 days stipulated under section 3a of. Action under sarfaesi act and drt act,1993 the recovery of debts due to banks and financial institutions act, 1993 can move concurrently. Section of the securitization act contains elaborate. An act further to amend the securitisation and reconstruction of financial assets. Jan 23, 2017 section of sarfaesi overrides section 68 and 69 of the transfer of property act, 1882 the act, 1882 but not all its provisions in relation to the rights of the lessee, under a valid lease agreement, which is created prior to the receipt of notice, under section 2, by the borrower. The financial sector is important for indias efforts to achieve. Companies act, 1956 1 of 1956 or the securities and exchange board of india act, 1992 15 of 1992 shall have the same meanings respectively assigned to them in those acts. Clarification on section 3a of sarfaesi act answered by expert bankingfinance lawyer. If borrower of financial assistance makes any default in repayment of loan or any installment and his account is classified as nonperforming asset by secured creditor, then secured. Section 17 of sarfaesi act provides remedy before drt against. Once the bank in satisfied to proceed recovery under sarfaesi, it should send a demand notice notice under sec 2 of the act giving details of the loan. Courts have dealt with the issue of limitation to approach the debt recovery tribunal under section 17 of sarfaesi act, 2002 and according me, it is the wonderful interpretation by courts in giving the borrower a right to challenge the banks action.
The calcutta high court, on friday, ruled that a secured creditor cannot maintain an application under section 14 of the securitization and reconstruction of financial assets and enforcement of. The impact of sarfaesi act 2002 in recovering the non performance assets in public sector banks. Sarfaesi act applicable to cooperative banks free pdf. Uco bank vs union of india in the absence of any specific provisions in sarfaesi act creating any first charge in favour of the bank, sec 281 b of the income tax act rw rule 16 of the second schedule of the it act will have overriding effect.
Section 2 sarfaesi act archives scc blog scc online. It is true that section 19 of the sarfaesi act, 2002 provides an authority to the debt recovery tribunal to order compensation against the bank in. Full text of supreme court judgement on sarfaesi act. Restrictive remedy under section 14 of the sarfaesi act.
Securitization and reconstruction of financial assets. Once the bank in satisfied to proceed recovery under sarfaesi, it should send a demand notice notice under sec 2 of the act giving details of the loan availed, amount outstanding, document executed to created security, description of the security offered and a. In a matter arising under securitisation and reconstruction of financial assets and enforcement of securities interest sarfaesi act, 2002, a division bench comprising of hemant gupta, cj and atul sreedharan, j. Jan 06, 2016 process flow under provisions of sarfaesi 2 and 4 a secured creditor shall be entitled to exercise all of any of the rights under subsection 4 of section of sarfaesi act without. A notice under section 2 of the sarfaesi act was send to the borrower by registrered post. The act extends to the whole of india and came into force from 21062002. Reconstruction of financial assets and enforcement of security interest act, 2002 in short sarfaesi act and in exercise of powers conferred under section 12 read with the security interest enforcement rules, 2002 issued demand notice under sec. Is the period of 15 days stipulated under section 3a. In 1975, congress enacted section f of the securities exchange act of 1934 exchange act, 15 u. Section of sarfaesi overrides section 68 and 69 of the transfer of property act, 1882 the act, 1882 but not all its provisions in relation to the rights of the lessee, under a valid lease agreement, which is created prior to the receipt of notice, under section 2, by the borrower. Section in the securitisation and reconstruction of financial assets andenforcement of security interest act, 2002. The securitisation and reconstruction of financial assets and enforcement of security interest amendment act, 2016 was introduced to amend the securitisation and reconstruction of financial assets and enforcement of security interest act, 2002 sarfaesi act,the recovery of debt due to banks and financial institutions act, 1993, the indian stamp act, 1899, and the depositories.
All about securitisation and reconstruction of financial. Aug 16, 2018 the provisions of the limitation act would apply to the proceedings of sarfaesi act, 2002 by virtue of section 36 of the sarfaesi act, 2002. Bank did not make publication of the notice in newspaper treating the notice as served and is now proceeding further to take possession. However, this mandate can also be constructively satisfied. In accordance with the same, the authorised officer intend selling the schedule mentioned securities by way of public tender auction. Important case law on securitisation act high court and. The securitisation and reconstruction of financial assets and enforcement of security interests act, 2002 or sarfaesi act amendments have been made in 2016 because of enforcement of security interest and recovery of debts laws and miscellaneous provisions amendment act, 2016.
Supreme court explains sarfaesi act in latest judgement. Appoint a manager to manage the secured assets so taken over sec. Nov 27, 2018 the high court observed that the intent of legislature, while introducing subsection 3a was to ensure that objectionsrepresentations of a borrower against any action for enforcement of security interest are considered before a secured creditor proceeds to take possession of the secured assets in terms of section 4 of the sarfaesi act. Clarification on section 3a of sarfaesi act lawrato. Section 2 in the securitisation and reconstruction of financial assets and enforcement of security interest act, 2002. Section in the securitisation and reconstruction of financial. Section 2 in the securitisation and reconstruction of. Demand by notice in writing from any person who has acquired any of the secured assets from owner and from whom any money is due or may become due to. Section in the securitisation and reconstruction of. The submission made by the learned counsel for the respondents that section 14 cannot be read in isolation and has to be viewed in the context of all other provisions of the act, such as sections 468, 15, 17, 18 rule 89 of sarfaesi rules and section 55 of the transfer of property act is acceptable. The supreme court has held that in recovering secured property from nonperforming assets npas, a secured creditor is bound to consider representations, if any, made by the debtor under section 3a, after the initiation of proceedings under section of the sarfaesi act. The next safeguard available to a secured borrower within the framework of the act is to approach the debt recovery tribunal under section 17 of the act. An act to regulate securitisation and reconstruction of financial assets and enforcement of security interest and to provide for a central database of security interests created on property rights, and for matters connected therewith or incidental thereto. Sarfaesi section 2 delay of 14 days in filing application drt declined to condone the delay appellant approached the high court who relegated the appellant to debt recovery appellate tribunal high court also directed the appellant to deposit 25% of the amount covered by the 2 notice matter has been pending before this court for the last two years interest of justice.
In exercise of the powers conferred by sub section 1 and clause b of sub section 2 of section 38 read with subsections 4, 10 and 12 of section of the securitisation and reconstruction of financial assets and enforcement of security interest 2 act, 2002, the central government hereby makes the following rules, namely. If borrower of financial assistance makes any default in repayment of loan or any installment and his account is classified as non performing asset by secured creditor,then secured. Take over management of the business of the borrower sec. The provisional attachment being prior to the creation of the security interest, the subsequent. The provisions of the limitation act would apply to the proceedings of sarfaesi act, 2002 by virtue of section 36 of the sarfaesi act, 2002. Section 2 in the securitisation and reconstruction of financial. Important information about sarfaesi act free download pdf. Such a right accrues only after measures are taken under subsection 4 of section of the act. Sarfaesi amendment act, 2016 a new life for banks and. Once the bank in satisfied to proceed recovery under sarfaesi, it should send a demand notice notice under sec 2 of the act giving details of the loan availed, amount outstanding, document executed to created security, description of the security offered and a time period of 60 days to correct the default. Feb 03, 2012 notice issued under section 2 sarfaesi act,2002 banking posted 3 feb 2012 post answer my father aged 79 years given our house property as a guarantee to a company during year 2001 at the time his age was 69 years without our knowledge. Important case law on securitisation act high court. Financial assets and enforcement of security interest act, 2002 in short sarfaesi act and in exercise of powers conferred under section 12 read with the security interest enforcement rules, 2002 issued demand notice under sec.
The said notice was received by the borrowers employee and the acknowledgment was also signed by the said employee. The high court observed that the intent of legislature, while introducing subsection 3a was to ensure that objectionsrepresentations of a borrower against any action for enforcement of security interest are considered before a secured creditor proceeds to take possession of the secured assets in terms of section 4 of the sarfaesi act. Even when there is a certificate of recovery, the bank, if wants to invoke the provisions of sarfaesi act, 2002, makes a fresh demand under section 2, entertains objections, gives a reply if required and then only proceeds under section 4 of the act and the borrower gets a right to appeal to drt under section 17 of sarfaesi act. Supreme court rules on mandatory procedure under the. Secured creditor cannot invoke section 14 of sarfaesi act. An act to regulate securitisation and reconstruction of financial assets and. The effect of section 37 would, therefore, be that in addition to the provisions contained under the sarfaesi act, in respect of proceedings initiated under the said act, it will be in order for a party to fall back upon the provisions of the other acts mentioned in section 37, namely, the companies act, 1956, the securities contracts. Sir if reply by debtor is filed in 68 days instead of 15 days what happens as in the case of blue coast hotels judgement by hon. Auction sale notice financial assets and enforcement of. Review of the sec s section f reporting requirements. Reconstruction of financial assets and enforcement of security interest act, 2002. Sep 08, 2017 the submission made by the learned counsel for the respondents that section 14 cannot be read in isolation and has to be viewed in the context of all other provisions of the act, such as sections 468, 15, 17, 18 rule 89 of sarfaesi rules and section 55 of the transfer of property act is acceptable. The full form of sarfaesi act as we know is securitisation and reconstruction of financial assets and enforcement of security interest act, 2002. Under this act secured creditors banks or financial institutions have many right for enforcement of security interest under section of sarfaesi act, 2002.
Whether the pendency of proceedings before the debt recovery tribunal under the rdb act, 1993 will save the period of limitation for a proceeding under sarfaesi act, 2002. Register of securitisation, reconstruction and security interest transactions. Pdf the impact of sarfaesi act 2002 in recovering the non. A single judge bench comprising of vibhu bakhru, j. Enforcement of security interest and recovery of debts laws. There is a question before me that if the borrower has knowledge that the bank has prepared the notice under section 4 of the sarfaesi act, 2002 and the borrower also seen the same when he went to bank to give a request letter for granting time for 40 45 days for the entire payment. A study on recovery in sbi, cbi, cb, bob and pnb 2008 to 2014. Faqs on section 14 of the securitisation and reconstruction.
There is a question before me that if the borrower has knowledge that the bank has prepared the notice under section 4 of the sarfaesi act, 2002 and the borrower also seen the same when he went to bank to give a request letter for granting time for 40. Security interest enforcement rules, 2002 bare acts live. Section 3a was inserted after the judgment of the supreme court in mardia chemicals vs. One of the important changes that sarfaesi has brought is that it allowed the banks according to sec. I have got doubt whether under sarfaesi act can the bankfinancial institutions execute a sale certificate under section 89 of the registration act, 1908 as the section provides to execute a sale certificate only to courts under c. Posted 3 feb 2012 post answer my father aged 79 years given our house property as a guarantee to a company during year 2001 at the time his age was 69 years without our knowledge. Jul 28, 2014 the bank also filed an application under section 2 5 of the sarfaesi act on 11. Since the compliance of section 2, 4 and rule 8 are mandatory for the secured creditor to implement them, any order of the district magistrate chief metropolitan magistrate without reference to the compliance of the aforesaid sections of sarfaesi act, it must be presumed that no materials are placed before the district magistrate. The submission made by the learned counsel for the respondents that section 14 cannot be read in isolation and has to be viewed in the context of all other provisions of the act, such as sections 468, 15, 17, 18 rule 89 of sarfaesi rules and section 55 of the transfer of property act is. The bank also filed an application under section 2 5 of the sarfaesi act on 11. Definitions 1 in this act, unless the context otherwise requires. It is the sarfaesi act that brought a greater change in the debt recovery scenario in the country.
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