CONTENTS I-27 Foreword to Third Edition I-5 Preface to Third Edition I-7 Foreword to Second Edition I-11 Preface to Second Edition I-13 Foreword to First Edition I-17 Preface to First Edition I-19 Disclaimer by author I-23 Chapter-heads I-25 1 SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT, 2002 (SARFAESI ACT) 1.0 Introduction 1 1.1 Asset classification - Prudential norms 3 1.2 Empowerment to banks/fis 6 1.3 Authorised officer 6 1.4 Eligibility of accounts for taking action under Act 7 1.5 Basis of identification of NPA accounts for issue of demand notice u/s 13(2) 7 1.6 Abatement of reference before BIFR 9 1.7 Limitation 9 1.8 Issue of notice in non-suit filed and suit filed cases 11 1.9 Expiry of 60 days notice period 11 1.10 Norms for taking over possession of secured assets 12 1.11 Procedure for taking possession of movable/immovable assets 12 1.12 Engagement of counsel for filing of application before CMM/DM 13 1.13 Sale of acquired secured assets 13 1.14 Appropriation of sale proceeds 14 1.15 Recovery of balance dues 14 1.16 Taking possession of assets 14 1.17 Amendments - 2007 Security Interest (Enforcement) Amendments Rules 14
CONTENTS I-28 (JUDICIAL RULING) 1.18 Historical Decision of the Hon ble Supreme Court Latest Judicial Ruling in the case of M/s. Transcore v. Union of India [2007] 73 SCL 11 (SC) 19 1.19 Main effects of the Decision of Hon ble Supreme Court in M/s. Transcore v. Union of India [2007] 73 SCL 11 (Case No. 3228 of 2006) 26 1.20 Amendments 2012 SARFAESI Act & DRT Act 27 1.21 Amendments - 2012 - Security Interest (Enforcement) Rules, 2002 50 2 PRACTICAL TIPS FOR TAKING ACTION UNDER SARFAESI ACT 2.0 Identification of accounts 52 2.1 Agricultural security/agricultural Land 52 2.2 Negative lien 53 2.3 Hypothecation of Stock, Plant & Machinery and Book Debts/ Receivables etc. 54 2.4 Service of demand notice under section 13(2) 56 2.4-1 Publication of undelivered notices 57 2.4-2 Demand Notice u/s 13(2) General Complaint 57 2.5 Powers of Secured Creditor under section 13(4) 60 2.5A Restraint on Sale/Lease/Transfer without consent of bank/ FIs (secured creditors) under section 13(13) 61 2.5A-1 Joint Financing [SARFAESI Act Section 13(9)] 62 2.6 Physical possession of secured assets through CMM/District Magistrate 62 2.6-1 Filing of application before CMM/DM 63 2.6-1A Documents required for taking assistance from CMM/DM [Application under section 14] 63 2.6-1B CMM/DM Orders under section 14 through the process of non-adjudication only 64 2.6-2 Possession of immovable assets 66 2.6-3 Service of possession notice 66 2.6-3A Possession of Nursing Homes, Hospitals etc. mortgaged/ hypothecated to the banks/fis 66 2.6-3B Possession of abandoned movable/immovable properties 69 2.6-3C Possession through receiver appointed by the Court 69
I-29 CONTENTS 2.6-3D Custody of properties/perishable goods taken under possession 70 2.6-4 Publication of possession notice 70 2.6-4A Possession-cum-sale notice 70 2.6-4B Offences 71 2.6-5 Valuation of immovable secured assets 71 2.6-6 Possession Kit 71 2.7 Possession of movable secured assets 72 2.7-1 Possession of valuable stocks hypothecated to the banks/fis 72 2.8 Valuation of movable secured assets 73 2.9 Procedure for sale of movable secured assets 73 2.9-1 Certificate of sale 74 2.10 Notice for sale of immovable secured assets 74 2.10-1 Appointment of Manager 75 2.10-2 Procedure for recovery of shortfall 75 2.11 Overriding effect of the Act 75 2.12 Release of securities 76 2.13 Appointment of enforcement agents 76 2.14 Safeguarding Bank s interest in case of equitable mortgage of immovable property 76 2.15 Registration of sale certificate of immovable property 76 2.16 Settlement/Compromise proposals 77 2.17 No sale on payment of full dues and expenses 78 2.18 E-Auction for sale of Immovable Properties/Secured Assets 78 2.19 Seal/Lock Broken by the Borrower after Actual Possession 78 2.20 Benefits of Caveat 79 2.21 Physical Possession after sale of immovable property on symbolic basis 80 2.22 Assets sold by borrower after receipt of demand notice under section 13(2) without bank s consent 81 2.23 Seeking of CMM/DM help even 60 days of demand notice u/s 13(2) not expired referring section 13(13) of SARFAESI Act 81 2.24 Possession of undivided immovable properties - Method & procedure for demarcation 82 2.25 Change of court receiver appointed by the CMM/DM u/s 14 of SARFAESI Act - Method & procedure 82 2.26 Common Passage - Possession of Property 83 2.27 Conclusion 83
CONTENTS I-30 3 SCHEME OF SARFAESI ACT AND SECURITY INTEREST (ENFORCEMENT) RULES, 2002 3.0 Scheme of the SARFAESI Act - Related sections & other important provisions under different Laws with Explanations 84 3.1 The Security Interest (Enforcement) Rules, 2002 with Explanations 122 4 CHECK LIST : FOR BANKS/FINANCIAL INSTITUTIONS TO BE FOLLOWED WHILE TAKING ACTION UNDER THE SARFAESI ACT 4.1 Procedure 134 4.2 Points to remember 135 4.2-1 Excluded transactions [Section 31] 135 4.2-2 Joint financing section 13(9) 135 4.2-3 General 136 4.2-4 Other Important Points 137 5 ROLE AND RESPONSIBILITY OF AUTHORISED OFFICER 5.1 Precautions to be taken by Authorised Officer 138 5.2 Service of notice 139 5.3 Taking over possession 141 5.4 Sale of charged secured assets 146 5.5 Sale certificate 150 5.5-1 Movables 150 5.6 Appropriation of sale proceeds 151 5.7 Possession Certificate from the purchaser of secured Assets 153 6 FREQUENTLY ASKED QUESTIONS u Frequently asked questions 154 7 CENTRAL REGISTRY 7.0 Role of Central Registry 160 7.1 Relevant Sections SARFAESI Act relating to Central Registry 161 7.2 Rules - Central Registry (CERSAI) 163
I-31 CONTENTS 8 TYPES OF RECOVERY MECHANISMS u Types of Recovery Mechanisms 167 9 RECOVERY CAMPS - SETTLEMENT OF NPAs 9.0 Holding of recovery camps 174 9.1 Negotiating Skills 174 9.2 Action Plan 175 10 LOK ADALAT u Lok adalat 176 11 RECOVERY OF DEBTS DUE TO BANKS AND FINANCIAL INSTITUTIONS ACT, 1993 (DRT ACT) 11.0 Important provisions - DRT Act 178 11.1 Powers of Recovery officer to issue arrest orders 182 11.2 Important Points/Tips for DRT cases 184 11.3 Procedure of sale in Decreed Accounts 186 11.4 Other Important Points 187 11.5 Registration of sale certificate of Immovable Property 191 11.6 Filing of Caveat Petition in DRT/DRAT - Amendments SARFAESI Act, 2012 191 12 RECOVERY THROUGH STATE RECOVERY ACTS u Recovery through state recovery acts 193 13 BIFR SCHEME FOR SETTLEMENT u BIFR scheme for settlement 194 14 BOMBAY RELIEF UNDERTAKING (SPECIAL PROVISION) ACT, 1958 u Bombay Relief Undertaking (Special Provision) Act, 1958 197 15 CORPORATE DEBT RESTRUCTURING 15.1 Background 198
CONTENTS I-32 15.2 Objective 198 15.3 Structure 198 15.4 Other Features 202 15.5 Legal Basis 204 15.6 Exit Option & Other Important Issues 206 16 SECURITISATION COMPANIES (SCs) & ASSET RECONSTRUCTION COMPANIES (ARCs) 16.0 Securitization and reconstruction of assets through SCs/ARCs 228 16.1 Asset Reconstruction Companies (ARCs) 229 16.2 Objectives/Vision/Mission of ARCs 230 16.3 Advantages to banks/fis from sale of NPAs 230 16.4 Procedure/system of sale and transfer of assets by the Banks/ FIs to the ARCs/SCs 231 16.5 Resolution strategy by ARCs 235 16.6 Funding 235 16.6A Other important points 236 16.7 Important definitions and relevant sections under SARFAESI Act relating to SCs/ARCs 237 17 ANNEXURES (PROFORMAS & FORMATS) Annexure I Format of notice under section 13(2), read with section 13(13), of SARFAESI Act, 2002 249 Annexure II On Bank s/fi s Letter Head 251 Annexure III Proforma for informing court/drt 254 Annexure IV Undertaking to be obtained from the borrower/ guarantor/partner/director/mortgagors, etc. 255 Annexure V Possession notice Appendix IV 256 Annexure V(A) Annexure VI Possession notice Proforma for publishing in the newspaper for immovable property 257 Application before the Chief Metropolitan Magistrate/District Magistrate 258 Annexure VI(A) Affidavit to be submitted to the CMM/DM alongwith application u/s 14 - Proforma 261 Annexure VII Format for intimation to take possession 263 Annexure VIII Panchnama Appendix I 264 Annexure IX Inventory Appendix II 265
I-33 CONTENTS Annexure X Annexure XI Annexure XII Certificate of sale Appendix III (for movable property) 266 Sale certificate Appendix V (for immovable property) 267 Application to the DRT under sub-section (10) of section 13 of the SARFAESI Act (Appendix VI) for Balance dues 268 Annexure XIII Physical possession notice (General) to be affixed on the Immovable property 271 Annexure XIII(A) Possession notice to the borrower by the receiver 272 Annexure XIII(B) Annexure XIV Possession letter by the receiver to the police authorities for providing police force 273 Tamsuk deed (undertaking) - Proforma of undertaking to be obtained at the time of settlement of protested bill/suit filed/decreed accounts (including accounts in which action taken under SARFAESI Act) from the borrower(s)/guarantor(s) 274 Annexure XIVA Tamsuk deed (undertaking) - (For accounts not settled but party gave an undertaking to pay full dues of the bank in instalments or lump sum including accounts in which action taken under the SARFAESI Act) 276 Annexure XV Notice for sale of assets to the borrower 278 Annexure XVI Draft of tender notice (Type I) 279 Annexure XVI(A) Tender notice for sale of assets (Type II - website) 281 Annexure XVII Draft of auction notice 283 Annexure XVIII Annexure XIX Annexure XX Notice to the debtor of the borrower under section 13(4)(d) of the SARFAESI Act 285 Notice to the Corporate body wherein borrower is holding the shares under section 13(4)(d) of the SARFAESI Act 286 Notice to party holding the movable secured assets of the borrower under section 13(4)(d) of the SARFAESI Act 287 Annexure XXI Notice to the tenant/lessee of the borrower under section 13(4)(d) of the SARFAESI Act 289 Annexure XXII Notice u/s 13(2) of the Securitisation Act, 2002 for publication in the newspapers 291 Annexure XXIII Possession-cum-sale notice by inviting tenders 292 Annexure XXIV Proforma of Decree/order for recovery Debts Recovery Tribunal 295 Annexure XXV Recovery certificate under section 19(22) - Proforma - Debts Recovery Tribunal 296
CONTENTS I-34 Annexure XXVI Recovery certificate - Demand Notice Proforma 298 Annexure XXVII Sale of non-performing financial assets (NPAs) - Notice Proforma 300 Annexure XXVIII Delinquency card (Client Data sheet) - Proforma 301 Annexure XXIX Possession Certificate from the purchaser of secured assets - Proforma 306 Annexure XXX Format - A for Recovery Camp 307 Annexure XXXI Format - B for Recovery Camp 309 Annexure XXXII Application for change of Receiver (Proforma) 311 18 IMPORTANT CASE LAWS u Important case laws 313 19 CASE STUDIES u Case studies 442 20 AMENDMENTS & NOTIFICATIONS 20.1 SARFAESI (Amendment) Act, 2004 457 20.2 Notifications under Security Interest Enforcement (Amendment) Rules, 2007 466 20.3 Amendments in Rules 2012 of the SARFAESI Act, 2002 477 20.4 Amendments in the SARFAESI Act & DRT Act, 2012 477 APPENDICES u SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT, 2002 487 u SECURITY INTEREST (ENFORCEMENT) RULES, 2002 518 u RECOVERY OF DEBTS DUE TO BANKS AND FINANCIAL INSTITUTIONS ACT, 1993 540 u DEBTS RECOVERY TRIBUNAL (PROCEDURE) RULES, 1993 558 u ENFORCEMENT OF SECURITY INTEREST AND RECOVERY OF DEBTS LAWS (AMENDMENT) ACT, 2004 572 u ENFORCEMENT OF SECURITY INTEREST AND RECOVERY OF DEBTS LAWS (AMENDMENT) ACT, 2012 581