In exercise of the powers conferred therein, the bank has framed guidelines and directions to scsrcs relating to registration and other matters like acquisition of financial assets, prudential norms relating to income recognition, classification of assets. The securitisation and reconstruction of financial assets and enforcement of security interest act, of 2002, allows banks and financial institutions to auction properties residential and commercial when borrowers fail to repay their loans. The legal blog is an earnest attempt to promote research based websites blogs, by providing free, accurate and up to date information to lawyers, students and the layman. Learned senior counsel on behalf of the petitioner, mr. Sarfaesi amendment act, 2016 a new life for banks and. It allows banks and other financial institution to auction residential or commercial properties of defaulter to recover loans. Recently, in january 2014, the reserve bank of india had released a. The securitization and reconstruction of financial assets and.
In addition, it amends 11 laws including companies act, 20, drt act, 1993 and sarfaesi act, 2002. Substantive amendments were made in the sarfaesi act on 14. The bill further provides that the district magistrate has to assist in the recovery process of the secured. The securitisation and reconstruction of financial assets and enforcement of security interest act, 2002, allows banks and financial institutions to auction properties residential and commercial when borrowers fail to repay their loans. Securitisation and reconstruction of financial assets and. Enforcement of security interest and recovery of debts laws. Apr 25, 2020 sarfaesi act latest breaking news, pictures, videos, and special reports from the economic times. Certain provisions of the enforcement of security interest and recovery of debts laws and miscellaneous provisions amendment act, 2016, came into force on 1 september. The banking sector would have had to wait a long time over the long drawn legal process for judicial intervention. How banks misuse sarfaesi act provisions for loan recovery. Assets and enforcement of security interest act, 2002, the recovery. Banks are brought under the perview of sarfaesi act whereas supreme court was granting liberal ex parte stay and number of matters were just kept pending without any hearing in the matter stonewalling recoveries of cooperative. Thus was born the sarfaesi act in the year 2002 which will be our subject study and practice in our vocation.
Key features of amendment bill 2016 to sarfaesi act 2002. Enforcement of security interest act, 2002 and the recovery of. The impact of sarfaesi act 2002 in recovering the non pe rformance assets in public sector banks. As per the act, valuation of the asset has to be done and notify that valuation to the borrower before issuing public notice for auction of property.
The enforcement of security interest and recovery of debts laws amendment bill, 2011, amends two acts sarfaesi act 2002, and recovery of debts due to banks and financial institutions act, 1993 drt act. The amendment bill, 2016 was introduced before the loksabha with an aim to improve ease of doing business and facilitate investment leading to higher economic growth and development. The parliament has cleared a bill to amend laws including the sarfaesi act, 2002, the recovery of debts due to banks and financial institutions act, 1993, the indian stamp act, 1899, and the depositories act, 1996, which will help banks and financial institutions recover loans more effectively, encourage more asset reconstruction companies arcs to set up business in india and. In exercise of powers conferred by sarfaesi act, 2002, reserve bank of india has issued guidelines to registration, measures of asset reconstruction, prudential norms, acquisition of financial assets etc. However, scs rcs are with effect from january 23, 2014 permitted to. Supreme court exempts cooperative banks from claiming under recovery of debts due to banks and financial institutions act 9. Consequent tothe above amendment, asset reconstruction companyno. An act to regulate securitisation and reconstruction of financial assets and enforcement of security interest and for matters connected therewith or incidental thereto. Parliament gives nod to amendments in sarfaesi and drt acts. Dandapani, submitted that section 14 of sarfaesi act vests jurisdiction to assist the secured creditor in taking possession of a secured asset, only with a metropolitan magistrate or a district magistrate, within whose jurisdiction any such secured asset is situated or found.
Recovery proceedings under the sarfaesi act were initiated by. However, only that property given as security can be proceeded under the provisions of sarfaesi act. Arc, the first asset reconstruction company, was established under this act. First, enactment of the insolvency and bankruptcy code, 2016, second, enactment of the constitution one hundred and twentysecond amendment act, 2016, third, enactment of the. All about sarfaesi act ias abhiyan ii ias upsc exam preparation. Sarfaesi securitisation and reconstruction of financial assets and enforcement of security interest act, 2002 is an act which came in 2002 to allow banks and other financial institutions to recover their nonperforming assets npas or bad loans without the intervention of the court. Be it enacted by parliament in the fiftythird year of republic of india as follows. The act added new definitions to sarfaesi, widened the scope of debts and secured creditors and bestowed upon rbi new powers in relation to making of. In the high court of delhi at new delhi reserved on ibbi.
An act to regulate securitisation and reconstruction of financial assets and enforcement of security. Securitisation reserve bank of india master circulars. Sarfaesi act may be amended by giving power to rbi to specify the category of the. Important information about sarfaesi act free download pdf. Provided that different dates may be appointed for different provisions of this act. Live samachar bring nonbanking finance companies under sarfaesi act. Point no ix of section 14 of sarfaesi act to be affirmed in the affidavit being filed by the authorised officer of the secured creditor states, that the provisions of this act and the rules made thereunder had been complied with. Regulatory framework for scsrcs certain amendments, rbi august 2014. To ascertain the recovery process of sarfaesi act with the other recovery methods adopted viz.
The securitisation and reconstruction of financial assets and enforcement of securities interest act, 2002 also known as the sarfaesi act is an indian law. Assocham suggests nbfcs under sarfaesi act, sunday, february 23, 2014 10. Pdf the impact of sarfaesi act 2002 in recovering the. Dec 04, 2012 with an intention to speed up the process and convert the non performing assets npa of bank and fi,s the government of india has enacted the securitization and reconstruction of financial assets and enforcement of security interest act, 2002 sarfaesi which empowers the banks fis to recover their npa without the intervention of the court. Notification as amended up to june 30, 2015 the securitisation companies. The code seeks to consolidate the existing framework by repealing the presidency towns insolvency act, 1909 and the provincial insolvency act, 1920. Per sri justice sanjay kumar by way of their amended prayer in this writ. Definitions 1 in this act, unless the context otherwise requires. The following act of parliament received the assent of the president on the 12th august, 2016, and is hereby published for general information. O n 5 september, the government notified the majority of provisions amending the securitisation and reconstruction of financial assets and enforcement of security interest act, 2002 sarfaesi act.
An act further to amend the securitisation and reconstruction of financial. A study on recovery in sbi, cbi, cb, bob and pnb 2008 to 2014. On 5 september, the government notified the majority of provisions amending the securitisation and reconstruction of financial assets and enforcement of security interest act, 2002 sarfaesi act. Banks fis throwing overboard these norms, classify all the msme npas as wilful defaulters to apply the sarfaesi lever. Nov 29, 2018 the bombay high court has held in axis bank v madhav prasad aggarwal and ors appeal no 360 of 2017 vide order dated 26 october 2018 that under the restriction set out in section 34 of the securitisation and reconstruction of financial assets and enforcement of securities interest act, 2002 act sarfaesi act, a civil court is barred. Nov 10, 2017 the amendments last year to the securitisation and reconstruction of financial assets and enforcement of security interest act, 2002 sarfaesi act were long overdue. An act further to amend the securitisation and reconstruction of financial assets and enforcement of security interest act, 2002 and the recovery of debts. The security interest enforcement rules, 2002 1 in exercise of the powers conferred by subsection 1 and clause b of subsection 2 of section 38 read with subsections 4, 10 and 12 of section of the securitisation and reconstruction of financial assets and enforcement. It enables banks to reduce their nonperforming assets npas by adopting measures for recovery or reconstruction. Supreme court rules on mandatory procedure under the sarfaesi act.
Dec 11, 2012 not only bill is passed by both houses it has got assent of the president and notification is also passed on 040120. Dec 15, 20 the sarfaesi act covers any asset, movable or immovable, given as security whether by way of mortgage, hypothecation or creation of a security interest. What all indians should know about the sarfaesi act. Amendment act, 2016 debts recovery tribunal, coimbatore. The code specifies a framework for time bound insolvency resolution, with two similar. Securitization and reconstruction of financial assets and enforcement of security interest act, 2002. Proposed amendments to the sarfaesi act and debt recovery. Following sections of the above act were notified by ministry of finance, department of financial services, vide notification no so. The impact of sarfaesi act 2002 in recovering the non performance assets in public sector banks. Finance act, 2018 and the prevention of corruption amendment. They sought to ensure that the various banking and recovery laws were in consonance with each other, and they also facilitated the introduction of the insolvency and bankruptcy. Pdf the impact of sarfaesi act 2002 in recovering the non. The amendment to this law provides that the courts and tribunals shall not interfere in secured creditors taking possession of the security offered by the borrowerguarantor under sarfaesi act 2002. The enforcement of security interest and recovery of debt laws and miscellaneous provisions amendment bill, 2016 the bill was introduced in lok.
Enforcement of security interest law orient publishing company, delhi, 1st edn. Features of sarfaesi act, 2002sarfaesi act is procedural in nature this act is procedural in nature and lays a procedure for providing remedy of enforcement of security interest in secured assets, not through court but by the secured creditor directly with the intervention of the tribunal and appellate tribunal are not relevant for holding. Enforcement of securities interest act, 2002 sarfaesi act, for short. The securitisation and reconstruction of financial assets and enforcement of securities. Jul 11, 2016 chapter ii of the amendment bill, 2016 proposes the amendments to be carried out in the sarfaesi act. Provisions amendment act, 2016 came in force on 12th august 2016 for the purpose of making amendments in sarfaesi act, 2002, however, different sections were notified on different dates. Aug 04, 2016 section 21 o of the sarfaesi act dealing with nonperforming assets an npa provides that npa is a loan which has been classified by a bank or financial institution as substandard.
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. Corporate law amendment to sarfaesi act introduced in 20 brought out certain changes in the act wherein under section 14 compulsory filing of an affidavit by the secured creditor through their authorised officer with the district magistrate chief metropolitan magistrate, as the case may be, to take possession of the secured assets is. 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. Asset reconstruction and npa management in india bis. There are some exceptions in the act such as personal belongings. As per section 21c of sarfaesi act, 2002 bank means i a banking. The act was amended by enforcement of security interest and recovery of debts. A notice under section, clause 2 of the sarfaesi act was served upon borrower and pursuant to the same the symbolic possession of the secured asset was taken over by the petitioner bank under section, clause 4 of the act in the year 2007. Securitisation and reconstruction of financial assets wikipedia. 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. Jun 30, 2015 guidance notes for securitisation companies and reconstruction companies sarfaesi act, 2002 had come into effect from june 21, 2002. Summary of sarfaesi act amendments introduced in 2016. Sbi can take actions under sarfaesi act, to recover the loan money.