THE SECURITISATION AND RECONSTRUCTION OF FINANCIAL

ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT, 2002

(Act No. 54 of 2002)

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STATEMENT OF OBJECTS AND REASONS

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The financial sector has been one of the key drivers in India's efforts to
achieve success in rapidly developing its economy. While the banking
industry in India is progressively complying with the international
prudential norms and accounting practices, there are certain areas in
which the banking and financial sector do not have a level playing field
as compared to other participants in the financial markets in the world.
There is no legal provision for facilitating securitisation of financial
assets of banks and financial institutions. Further, unlike international
banks, the banks and financial institutions in India do not have power to
take possession of securities and sell them. Our existing legal framework
relating to commercial transactions has not kept pace with the changing
commercial practices and financial sector reforms. This has resulted in
slow pace of recovery of defaulting loans and mounting levels of non-
performing assets of banks and financial institutions. Narasimham
Committee I and II and Andhyarujina Committee constituted by the
Central Government for the purpose of examining banking sector reforms
have considered the need for changes in the legal system in respect of
these areas. These Committees, inter alia, have suggested enactment of a
new legislation for securitisation and empowering banks and financial
institutions to take possession of the securities and to sell them without
the intervention of the court. Acting on these suggestions, the
Securitisation and Reconstruction of Financial Assets and Enforcement
of Security Interest Ordinance, 2002 was promulgated on the 21st June,
2002 to regulate securitisition and reconstruction of financial assets and
enforcement of security interest and for matters connected therewith or
incidental thereto. The provisions of the Ordinance would enable banks
and financial institutions to realise long-term assets, manage problem of
liquidity, asset liability mismatches and improve recovery by exercising
powers to take possession of securities, sell them and reduce non-
performing assets by adopting measures for recovery or reconstruction.

2. It is now proposed to replace the Ordinance by a Bill, which, inter alia,

contains provisions of the Ordinance to provide for--

(a) registration and regulation of securitisation companies or

reconstruction companies by the Reserve Bank of India;
(b) facilitating securitisation of financial assets of banks and
financial institutions with or without the benefit of underlying
securities;

(c) facilitating easy transferability of financial assets by the

securitisation company or reconstruction company to acquire
financial assets of banks and financial institutions by issue of
debentures or bonds or any other security in the nature of a
debenture;

(d) empowering securitisation companies' or reconstruction

companies to raise funds by issue of security receipts to qualified
institutional buyers;

(e) facilitating reconstruction of financial assets acquired by

exercising powers of enforcement of securities or change of
management or other powers which are proposed to be conferred
on the banks and financial institutions;

(f) declaration of any securitisation company or reconstruction

company registered with the Reserve Bank of India as a public
financial institution for the purpose of section 4A of the
Companies Act, 1956;

(g) defining 'security interest' as any type of security including

mortgage and change on immovable properties given for due
repayment of any financial assistance given by any bank or
financial institution;

(h) empowering banks and financial institutions to take

possession of securities given for financial assistance and sell or
lease the same or take over management in the event of default,
i.e. classification of the borrower's account as non-performing
asset in accordance with the directions given or under guidelines
issued by the Reserve Bank of India from time to time;

(i) the rights of a secured creditor to be exercised by one or more of

its officers authorised in this behalf in accordance with the rules
made by the Central Government;

(j) an appeal against the action of any bank or financial institution to

the concerned Debts Recovery Tribunal and a second appeal to the
Appellate Debts Recovery Tribunal;

(k) setting up or causing to be set up a Central Registry by the

Central Government for the purpose of registration of transactions
relating to securitisation, asset reconstruction and creation of
security interest;

(l) application of the proposed legislation initially to banks and

financial institutions and empowerment of the Central Government
to extend the application of the proposed legislation to non-banking
financial companies and other entities;
 (m) non-application of the proposed legislation to security interests
in agricultural lands, loans not exceeding rupees one lakh and cases
where eighty per cent, of the loans are repaid by the borrower.

2. The Bill seeks to achieve the above objects.

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PREAMBLE
AN ACT to regulate securitisation and reconstruction of financial assets
and enforcement of security interest and for matters connected therewith
or incidental thereto,

BE it enacted by Parliament in the Fifty-third Year of the Republic of

India as follows:--

CHAPTER I
PRELIMINARY

1. Short title, extent and commencement.--

(1) This Act may be called the Securitisation and Reconstruction of

Financial Assets and Enforcement of Security Interest Act, 2002.

(2) It extends to the whole of India.

(3) It shall be deemed to have come into force on the 21st day of June,
2002.

2. Definitions.--

(1) In this Act, unless the context otherwise requires,--

(a) "Appellate Tribunal" means a Debts Recovery Appellate

Tribunal established under sub-section (1) of section 8 of the
Recovery of Debts Due to Banks and Financial Institutions Act,
1993;

(b) "asset reconstruction" means acquisition by any securitisation

company or reconstruction company of any right or interest of
any bank or financial institution in any financial assistance for the
purpose of realisation of such financial assistance;

(c) "bank" means--

 (i) a banking company; or

(ii) a corresponding new bank; or

(iii) the State Bank of India; or

(iv) a subsidiary bank; or

(v) such other bank which the Central Government may,

by notification, specify for the purposes of this Act;

(d) "banking company" shall have the meaning assigned to it in

clause (c) of section 5 of the Banking Regulation Act, 1949;

(e) "Board" means the Securities and Exchange Board of India

established under section 3 of the Securities and Exchange Board
of India Act, 1992;

(f) "borrower" means any person who has been granted financial
assistance by any bank or financial institution or who has given
any guarantee or created any mortgage or pledge as security for
the financial assistance granted by any bank or financial
institution and includes a person who becomes borrower of a
securitisation company or reconstruction company consequent
upon acquisition by it of any rights or interest of any bank or
financial institution in relation to such financial assistance;

(g) "Central Registry" means the registry set up or cause to be set

up under subsection (1) of section 20;

(h) "corresponding new bank" shall have the meaning assigned to

it in clause (da) of section 5 of the Banking Regulation Act, 1949;
1
[(ha) "debt" shall have the meaning assigned to it in clause (g) of
section 2 of the Recovery of Debts Due to Banks and Financial
Institutions Act, 1993;';]

(i) "Debts Recovery Tribunal" means the Tribunal established

under sub-section (1) of section 3 of the Recovery of Debts Due
to Banks and Financial Institutions Act, 1993;

(j) "default" means non-payment of any principal debt or interest

thereon or any other amount payable by a borrower to any
secured creditor consequent upon which the account of such
borrower is classified as non-performing asset in the books of
account of the secured creditor 2[***]

(k) "financial assistance" means any loan or advance granted or

any debentures or bonds subscribed or any guarantees given or
letters of credit established or any other credit facility extended
by any bank or financial institution;

(l) "financial asset" means debt or receivables and includes--

 (i) a claim to any debt or receivables or pan thereof,
whether secured or unsecured; or

(ii) any debt or receivables secured by, mortgage of, or

charge on, immovable property; or

(iii) a mortgage, charge, hypothecation or pledge of

movable property ; or

(iv) any right or interest in the security, whether fall or

part underlying such debt or receivables; or

(v) any beneficial interest in property, whether movable or

immovable, or in such debt, receivables, whether such
interest is existing, future, accruing, conditional or
contingent; or

(vi) any financial assistance;

(m) "financial institution" means--

(i) a public financial institution within the meaning of

section 4A of the Companies Act, 1956;

(ii) any institution specified by the Central Government

under sub-clause (ii) of clause (h) of section 2 of the
Recovery of Debts Due to Banks and Financial
Institutions Act, 1993;

(iii) the International Finance Corporation established

under the International Finance Corporation (Status,
Immunities and Privileges ) Act, 1958;

(iv) any other institution or non-banking financial

company as defined in clause (f) of section 45-1 of the
Reserve Bank of India Act, 1934, which the Central
Government may, by notification, specify as financial
institution for the purposes of this Act;

(n) "hypothecation" means a charge in or upon any movable

property, existing or future, created by a borrower in favour of a
secured creditor without delivery of possession of the movable
property to such creditor, as a security for financial assistance and
includes floating charge and crystallisation of such charge into
fixed charge on movable property;

(o) "non-performing asset" means an asset or account of a

borrower, which has been classified by a bank or financial
institution as sub-standard, 3[doubtful or loss asset, --

(a) in case such bank or financial institution is administered

or regulated by an authority or body established, constituted or
appointed by any law for the time being in force, in accordance
with the directions or guidelines relating to assets classifications
issued by such authority or body;

(b) in any other case, in accordance with the directions or

guidelines relating to assets classifications issued by the Reserve
Bank;";]

(p) "notification" means a notification published in the Official

Gazette;

(q) "obligor" means a person liable to the originator, whether

under a contract or otherwise, to pay a financial asset or to
discharge any obligation in respect of a financial asset, whether
existing, future, conditional or contingent and includes the
borrower;

(r) "originator" means the owner of a financial as set which is

acquired by a securitisation company or reconstruction company
for the purpose of securitisation or asset reconstruction;

(s) "prescribed" means prescribed by rules made under this Act;

(t) "property" means--

(i) immovable property;

(ii) movable property;

(iii) any debt or any right to receive payment of money,

whether secured or unsecured;

(iv) receivables, whether existing or future;

(v) intangible assets, being know-how, patent, copyright,

trade mark, licence, franchise or any other business or
commercial right of similar nature;

(u) "qualified institutional buyer" means a financial institution,

insurance company, bank, state financial corporation, state
industrial development corporation, 4[trustee or securitisation
company or reconstruction company which has been granted a
certificate of registration under sub-section (4) of section 3 or any
asset management company making investment on behalf of
mutual fund"] or a foreign institutional investor registered under
the Securities and Exchange Board of India Act, 1992 or
regulations made thereunder, or any other body corporate as may
be specified by the Board;

(v) "reconstruction company" means a company formed and

registered under the Companies Act, 1956 for the purpose of asset
reconstruction;
(w) "Registrar of Companies" means the Registrar defined in
clause (40) of section 2 of the Companies Act, 1956;

(x) "Reserve Bank" means the Reserve Bank of India constituted

under section 3 of the Reserve Bank of India Act, 1934;

(v) "scheme" means a scheme inviting subscription to security

receipts proposed to be issued by a securitisation company or
reconstruction company under that scheme;

(z) "securitisation" means acquisition of financial assets by any

securitisation company or reconstruction company from any
originator, whether by raising of funds by such securitisation
company or reconstruction company from qualified institutional
buyers by issue of security receipts representing undivided
interest in such financial assets or otherwise;

(za) "securitisation company" means any company formed and

registered under the Companies Act, 1956 for the purpose of
securitisation;

(zb) "security agreement" means an agreement, instrument or any

other document or arrangement under which security interest is
created in favour of the secured creditor including the creation of
mortgage by deposit of title deeds with the secured creditor;

(zc) "secured asset" means the property on which security interest

is created;

(zd) "secured creditor" means any bank or financial institution or

any consortium or group of banks or financial institutions and
includes--

(i) debenture trustee appointed by any bank or financial

institution; or (ii) securitisation company or reconstruction
company; or
5
[(ii) securitisation company or reconstruction company,
whether acting as such or managing a trust set up by such
securitisation company or reconstruction company for the
securitisation or reconstruction, as the case may be; or".]

(ze) "secured debt" means a debt which is secured by any security

interest;

(zi) "security interest" means right, title and interest of any kind
whatsoever upon property, created in favour of any secured
creditor and includes any mortgage, charge, hypothecation,
assignment other than those specified in section 31;

(zg) "security receipt" means a receipt or other security, issued by

a securitisation company or reconstruction company to any
qualified institutional buyer pursuant to a scheme, evidencing the
 purchase or acquisition by the holder thereof, of an undivided
right, title or interest in the financial asset involved in
securitisation;

(zh) "sponsor" means any person holding not less than ten per
cent. of the paid-up equity capital of a securitisation company or
reconstruction company;

(zi) "State Bank of India" means the State Bank of India

constituted under section 3 of the State Bank of India Act, 1955;

(zj) "subsidiary bank" shall have the meaning assigned to it in

clause (A) o: section 2 of the State Bank of India (Subsidiary
Banks) Act, 1959.

(2) Words and expressions used and not defined in this Act but
defined in the India Contract Act, 1872 or the Transfer of
Property Act, 1882 or the Companies Act, 1956 or the Securities
and Exchange Board of India Act, 1992 shall have the same
meanings respectively assigned to them in those Acts.

CHAPTER II
REGULATION OF SECURITISATION AND
RECONSTRUCTION OF FINANCIAL ASSETS OF BANKS AND

FINANCIAL INSTITUTIONS

3. Registration of securitisation companies or reconstruction companies.--

(1) No securitisation company or reconstruction company shall

commence or carry on the business of securitisation or asset
reconstruction without--

(a) obtaining a certificate of registration granted under this

section; and

(b) having the owned fund of not less than two crore rupees or
such other amount not exceeding fifteen per cent. of total
financial assets acquired or to be acquired by the securitisation
company or reconstruction company, as the Reserve Bank may,
by notification, specify:

Provided that the Reserve Bank may, by notification, specify

different amounts of owned fund for different class or classes of
securitisation companies or reconstruction companies:

Provided further that a securitisation company or reconstruction

company, existing on the commencement of this Act, shall make
an application for registration to the Reserve Bank before the
expiry of six months from such commencement and
notwithstanding anything contained in this sub-section may
 continue to carry on the business of securitisation or asset
reconstruction until a certificate of registration is granted to it or,
as the case may be, rejection of application for registration is
communicated to it.

(2) Every securitisation company or reconstruction company shall make

an application for registration to the Reserve Bank in such form and
manner as it may specify.

(3) The Reserve Bank may, for the purpose of considering the application
for registration of a securitisation company or reconstruction company to
commence or carry on the business of securitisation or asset
reconstruction, as the case may be, require to be satisfied, by an
inspection of records or books of such securitisation company or
reconstruction company, or otherwise, that the following conditions are
fulfilled, namely:--

(a) that the securitisation company or reconstruction company has

not incurred losses in any of the three preceding financial years;

(b) that such securitisation company or reconstruction, company

has made adequate arrangements for realisation of the financial
assets acquired for the purpose of securitisation or asset
reconstruction and shall be able to pay periodical returns and
redeem on respective due dates on the investments made in the
company by the qualified institutional buyers or other persons;

(c) that the directors of securitisation company or reconstruction

company have adequate professional experience in matters related
to finance, securitisation and reconstruction;

(d) that the board of directors of such securitisation company or

reconstructioncompany does not consist of more than half of its
total number of directors who areeither nominees of any sponsor
or associated in any manner with the sponsor or any of its
subsidiaries;

(e) that any of its directors has not been convicted of any offence
involving moral turpitude;

(f) that a sponsor, is not a holding company of the securitisation

company or reconstruction company, as the case may be, or, does
not otherwise hold any controlling interest in such securitisation
company or reconstruction company;

(g) that securitisation company or reconstruction company has

complied with oris in a position to comply with prudential norms
specified by the Reserve Bank.
6
(h) that securitisation company or reconstruction company has
complied with one or more conditions specified in the guidelines
issued by the Reserve Bank for the said purpose.".
 (4) The Reserve Bank may, after being satisfied that the conditions
specified in subsection (3) are fulfilled, grant a certificate of registration
to the securitisation company or the reconstruction company to
commence or carry on business of securitisation or asset reconstruction,
subject to such conditions, which it may consider, fit to impose.

(5) The Reserve Bank may reject the application made under sub-section
(2) if it is satisfied that the conditions specified in sub-section (3) are not
fulfilled:

Provided that before rejecting the application, the applicant shall be given
a reasonable opportunity of being heard.

(6) Every securitisation company or reconstruction company, shall obtain

prior approval of the Reserve Bank for any substantial change in its
management or change of location of its registered office or change in its
name:

Provided that the decision of the Reserve Bank, whether the change in
management of a securitisation company or a reconstruction company is
a substantial change in its management or not, shall be final.

Explanation--For the purposes of this section, the expression

"substantial change in management" means the change in the
management by way of transfer of shares or amalgamation or transfer of
the business of the company.

4. Cancellation of certificate of registration .--

(1) The Reserve Bank may cancel a certificate of registration granted to a

securitisation company or a reconstruction company, if such company--

(a) ceases to carry on the business of securitisation or asset

reconstruction; or

(b) ceases to receive or hold any investment from a qualified

institutional buyer; or

(c) has failed to comply with any conditions subject to which the
certificate of registration has been granted to it; or

(d) at any time fails to fulfil any of the conditions referred to in

clauses (a) to (g) of sub-section (3) of section 3; or

(e) fails to--

(i) comply with any direction issued by the Reserve Bank

under the provisions of this Act; or

(ii) maintain accounts in accordance with the requirements

of any law or any direction or order issued by the Reserve
Bank under the provisions of this Act; or
 (iii) submit or offer for inspection its books of account or
other relevant documents when so demanded by the
Reserve Bank; or

(iv) obtain prior approval of the Reserve Bank required

under sub-section (5) of section 3:

Provided that before cancelling a certificate of registration on the

ground that the securitisation company or reconstruction company
has failed to comply with the provisions of clause (c) or has failed
to fulfil any of the conditions referred to in clause (d) or sub-
clause (iv) of clause (e), the Reserve Bank, unless it is of the
opinion that the delay in cancelling the certificate of registration
granted under sub-section (4) of section 3 shall be prejudicial to
the public interest or the interests of the investors or the
securitisation company or the reconstruction company, shall give
an opportunity to such company on such terms as the Reserve
Bank may specify for taking necessary steps to comply with such
provisions or fulfilment of such conditions.

(2) A securitisation company or reconstruction company aggrieved by the

order of 7[***] or cancellation of certificate of registration may prefer an
appeal, within a period of thirty days from the date on which 8[such order
of cancellation] is communicated to it, to the Central Government:

Provided that before rejecting an appeal such company shall be given a

reasonable opportunity of being heard.

(3) A securitisation company or reconstruction company, which is

holding investments of qualified institutional buyers and whose
application for grant of certificate of registration has been rejected or
certificate of registration has been cancelled shall, notwithstanding such
rejection or cancellation, be deemed to be a securitisation company or
reconstruction company until it repays the entire investments held by it
(together with interest, if any) within such period as the Reserve Bank
may direct.

5. Acquisition of rights or interest in financial assets.--

(1) Notwithstanding anything contained in any agreement or any other

law for the time being in force, any securitisation company or
reconstruction company may acquire financial assets of any bank or
financial institution,--

(a) by issuing a debenture or bond or any other security in the

nature of debenture, for consideration agreed upon between such
company and the bank or financial institution, incorporating
therein such terms and conditions as may be agreed upon between
them; or

(b) by entering into an agreement with such bank or financial

institution for the transfer of such financial assets to such
 company on such terms and conditions as may be agreed upon
between them.

(2) If the bank or financial institution is a lender in relation to any

financial assets acquired under sub-section (1) by the securitisation
company or the reconstruction company, such securitisation company or
reconstruction company shall, on such acquisition, be deemed to be the
lender and all the rights of such bank or financial institution shall vest in
such company in relation to such financial assets.

(3) Unless otherwise expressly provided by this Act, all contracts, deeds,
bonds, agreements, powers-of-attorney, grants of legal representation,
permissions, approvals, consents or no-objections under any law or
otherwise and other instruments of whatever nature which relate to the
said financial asset and which are subsisting or having effect immediately
before the acquisition of financial asset under sub-section (1) and to
which the concerned bank or financial institution is a party or which are
in favour of such bank or financial institution shall, after the acquisition
of the financial assets, be of as full force and effect against or in favour
of the securitisation company or reconstruction company, as the case may
be, and may be enforced or acted upon as fully and effectually as if, in
the place of the said bank or financial institution, securitisation company
or reconstruction company, as the case may be, had been a party thereto
or as if they had been issued in favour of securitisation company or
reconstruction company, as the case may be.

(4) If, on the date of acquisition of financial asset under sub-section (1),
any suit, appeal or other proceeding of whatever nature relating to the
said financial asset is pending by or against the bank or financial
institution, save as provided in the third proviso to subsection (1) of
section 15 of the Sick Industrial Companies (Special Pro visions) Act,
1985 the same shall not abate, or be discontinued or be, in any way,
prejudicially affected by reason of the acquisition of financial asset by
the securitisation company or reconstruction company, as the case may
be, but the suit, appeal or other proceeding may be continued, prosecuted
and enforced by or against the securitisation company or reconstruction
company, as the case may be.
9
[5A. Transfer of pending applications to any one of Debts Recovery
Tribunals in certain cases.

(1) If any financial assets, of a borrower acquired by a securitisation

company or reconstruction company, comprise of secured debts of more
than one bank or financial institution for recovery of which such banks or
financial institutions has filed applications before two or more Debts
Recovery Tribunals, the securitisation company or reconstruction
company may file an application to the Appellate Tribunal having
jurisdiction over any of such Tribunals in which such applications are
pending for transfer of all pending applications to any one of the Debts
recovery Tribunals as it deems fit.
 (2) On receipt of such application for transfer of all pending
applications under sub-section (1), the Appellate Tribunal may, after
giving the parties to the application an opportunity of being heard, pass
an order for transfer of the pending applications to any one of the Debts
Recovery Tribunals.

(3) Notwithstanding anything contained in the Recovery of debts due

to Banks and financial Institutions Act, 1993, any order passed by the
Appellate Tribunal under sub-section (2), shall be binding on all the
Debts Recovery Tribunals referred to in sub-section (1) as if such order
had been passed by the Appellate Tribunal having jurisdiction on each
such Debts Recovery Tribunals.

(4) Any recovery certificate, issued by the Debts Recovery Tribunals

to which all pending applications are transferred under sub-section (2),
shall be executed in accordance with the provisions contained in sub-
section (23) of section 19 and other provisions of the Recovery of Debts
Due to Banks and Financial Institutions Act, 1993 shall, accordingly,
apply to such execution.".]

6. Notice to obligor and discharge of obligation of such obligor.--

(1) The bank or financial institution may, if it considers appropriate, give

a notice of acquisition of financial assets by any securitisation company
or reconstruction company, to the concerned obligor and any other
concerned person and to the concerned registering . authority (including
Registrar of Companies) in whose jurisdiction the mortgage, charge,
hypothecation, assignment or other interest created on the financial assets
had been registered,

(2) Where a notice of acquisition of financial asset under sub-section (1)

is given by a bank or financial institution, the obligor, on receipt of such
notice, shall make payment to the concerned securitisation company or
reconstruction company, as the case may be, and payment made to such
company in discharge of any of the obligations in relation to the financial
asset specified in the notice shall be a full discharge to the obligor
making the payment from all liability in respect of such payment.

(3) Where no notice of acquisition of financial asset under sub-section (1)

is given by any bank or financial institution, any money or other
properties subsequently received by the bank or financial institution,
shall constitute monies or properties held in trust for the benefit of and on
behalf of the securitisation company or reconstruction company, as the
case may be, and such bank or financial institution shall hold such
payment or property which shall forthwith be made over or delivered to
such securitisation company or reconstruction company, as the case may
be, or its agent duly authorised in this behalf.

7. Issue of security by raising of receipts or funds by securitisation company

or reconstruction company.--
 (1) Without prejudice to the provisions contained in the Companies Act,
1956, the Securities Contracts (Regulation) Act, 1956 and the Securities
and Exchange Board of India Act, 1992, any securitisation company or
reconstruction company, may, after acquisition of any financial asset
under sub-section (1) of section 5, offer security receipts to qualified
institutional buyers (other than by offer to public) for subscription in
accordance with the provisions of those Acts.

(2) A securitisation company or reconstruction company may raise funds

from the qualified institutional buyers by formulating schemes for
acquiring financial assets and shall keep and maintain separate and
distinct accounts in respect of each such scheme for every financial asset
acquired out of investments made by a qualified institutional buyer and
ensure that realisations of such financial asset is held and applied towards
redemption of investments and payment of returns assured on such
investments under the relevant scheme.
10
[(2A) (a) The theme for the purpose of offering security receipts under
sub-section (1) or raising funds funds under sub-section (2), may be in
the nature of a trust to be managed by the securitisation company or
reconstruction company, and the securitisation company or
reconstruction company shall hold the assets so acquired or the funds so
raised for acquiring the assets, in trust for the benefit of the qualified
institutional buyer holding the security receipts or from whom the funds
are raised.

(b) The provisions of the Indian Trust Act 1882 shall, except in so
far as they are inconsistent with the provisions of this Act, apply with
respect to the trust referred to in clause (a) above.".]

(3) In the event of non-realisation under sub-section (2) of financial

assets, the qualified institutional buyers of a securitisation company or
reconstruction company, holding security receipts of not less than
seventy-five per cent. of the total value of the 11[security receipts issued
under a scheme by such company], shall be entitled to call a meeting of
all the qualified institutional buyers and every resolution passed in such
meeting shall be binding on the company.

(4) The qualified institutional buyers shall, at a meeting called under sub-
section (3), follow the same procedure, as nearly as possible as is
followed at meetings of the board of directors of the securitisation
company or reconstruction company, as the case maybe.

8. Exemption from registration of security receipt.--

Notwithstanding anything contained in sub-section (1) of section 17 of

the Registration Act, 1908,--

(a) any security receipt issued by the securitisation company or

reconstruction company, as the case may be, under sub-section
(1) of section 7, and not creating, declaring, assigning, limiting or
extinguishing any right, title or interest, to or in immovable
 property except in so far as it entitles the holder of the security
receipt to an undivided interest afforded by a registered
instrument; or

(b) any transfer of security receipts,

shall not require compulsory registration.

9. Measures for assets reconstruction.--

Without prejudice to the provisions contained in any other law for the
time being in force, a securitisation company or reconstruction company
may, for the purposes of asset reconstruction, having regard to the
guidelines framed by the Reserve Bank in this behalf, provide for any
one or more of the following measures, namely:--

(a) the proper management of the business of the borrower, by

change in, or take over of, the management of the business of the
borrower;

(b) the sale or lease of a part or whole of the business of the

borrower;

(c) rescheduling of payment of debts payable by the borrower;

(d) enforcement of security interest in accordance with the

provisions of this Act;

(e) settlement of dues payable by the borrower;

(f) taking possession of secured assets in accordance with the

provisions of this Act.

10.Other functions of securitisation company or reconstruction company.--

(1) Any securitisation company or reconstruction company registered

under section 3 may--

(a) act as an agent for any bank or financial institution for the
purpose of recovering their dues from the borrower on payment
of such fees or charges as may be mutually agreed upon between
the parties;

(b) act as a manager referred to in clause (c) of sub-section (4) of

section 13 on such fee as may be mutually agreed upon between
the parties;

(c) act as receiver if appointed by any court or tribunal:

Provided that no securitisation company or reconstruction company shall

act as a manager if acting as such gives rise to any pecuniary liability.

(2) Save as otherwise provided in sub-section (1), no securitisation

company or reconstruction company which has been granted a certificate
 of registration under sub-section (4) of section 3, shall commence or
carry on, without prior approval of the Reserve Bank, any business other
than that of securitisation or asset reconstruction:

Provided that a securitisation company or reconstruction company which

is carrying on, on or before the commencement of this Act, any business
other than the business of securitisation or asset reconstruction or
business referred to in sub-section (1), shall cease to carry on any such
business within one year from the date of commencement of this Act.

Explanation-- For the purposes of this section, "securitisation company"

or "reconstruction company" does not include its subsidiary.

11.Resolution of disputes.--

Where any dispute relating to securitisation or reconstruction or non-

payment of any amount due including interest arises amongst any of the
parties, namely, the bank or financial institution or securitisation
company or reconstruction company or qualified institutional buyer, such
dispute shall be settled by conciliation or arbitration as provided in the
Arbitration and Conciliation Act, 1996, as if the parties to the dispute
have consented in writing for determination of such dispute by
conciliation or arbitration and the provisions of that Act shall apply
accordingly.

12.Power of Reserve Bank to determine policy and issue directions.--

(1) If the Reserve Bank is satisfied that in the public interest or to

regulate financial system of the country to its advantage or to prevent the
affairs of any securitisation company or reconstruction company from
being conducted in a manner detrimental to the interest of investors or in
any manner prejudicial to the interest of such securitisation company or
reconstruction company, it is necessary or expedient so to do, it may
determine the policy and give directions to all or any securitisation
company or reconstruction company in matters relating to income
recognition, accounting standards, making provisions for bad and
doubtful debts, capital adequacy based on risk weights for assets and also
relating to deployment of funds by the securitisation company or
reconstruction company, as the case may be, and such company shall be
bound to follow the policy so determined and the directions so issued.

(2) Without prejudice to the generality of the power vested under sub-
section (1), the Reserve Bank may give directions to any securitisation
company or reconstruction company generally or to a class of
securitisation companies or reconstruction companies or to any
securitisation company or reconstruction company in particular as to--

(a) the type of financial asset of a bank or Financial institution

which can beacquired and procedure for acquisition of such assets
and valuation thereof;

(b) the aggregate value of financial assets which may be acquired

by any securitisation company or reconstruction company.
12
[12A. Power of Reserve Bank to Call for Statements and information. --

The Reserve Bank may at any time direct a securitisation company or

reconstruction company to furnish it within such time as may be
specified by the Reserve Bank, with such statements and information
relating to the business or affairs of such securitisation company or
reconstruction company ( including any business or affairs with which
such company is concerned) as the Reserve Bank may consider necessary
or expedient to obtain for the purpose of this Act.".]

CHAPTER III
ENFORCEMENT OF SECURITY INTEREST

13.Enforcement of security interest.--

(1) Notwithstanding anything contained in section 69 or section 69A of

the Transfer of Property Act, 1882, any security interest created in favour
of any secured creditor may be enforced, without the intervention of the
court or tribunal, by such creditor in accordance with the provisions of
this Act.

(2) Where any borrower, who is under a liability to a secured creditor

under a securityagreement, makes any default in repayment of secured
debt or any instalment thereof, and -his account in respect of such debt is
classified by the secured creditor as non-performingasset, then, the
secured creditor may require the borrower by notice in writing to
dischargein full his liabilities to the secured creditor within sixty days
from the date of notice failingwhich the secured creditor shall be entitled
to exercise all or any of the rights under subsection (4).

(3) The notice referred to in sub-section (2) shall give details of the
amount payable by the borrower and the secured assets intended to the
enforced by the secured creditor in the event of non-payment of secured
debts by the borrower.
13
[(3A) If, on receipt of the notice under sub-section (2), the borrower
makes any representation or raises any objection, the secured creditor
shall consider such representation or objection and if the secured creditor
comes to the conclusion that such representation or objection is not
acceptable or tenable, he shall communicate within one week of receipt
of such representation or objection the reasons for non-acceptance of the
representation or objection to the borrower:

Provided that the reasons so communicated or the likely action of

the secured creditor at the stage of communication of reasons shall not
confer any right upon the borrower to prefer an application to the Debts
Recovery Tribunal under section 17 or the Court of District Judge under
section 17A.".]

(4) In case the borrower fails to discharge his liability in full within the
period specified in sub-section (2), the secured creditor may take
recourse to one or more of the following measures to recover his secured
debt, namely:--

(a) take possession of the secured assets of the borrower including

the right to transfer by way of lease, assignment or sale for
realising the secured asset;
14
[(b) take over the management of the business of the borrower
including the right to transfer by way of lease, assignment or sale
for realising the secured asset:

Provided that the right to transfer by way of lease,

assignment or sale shall be exercised only where the substantial
part of the business of the borrower is held as security for the
debt:,

Provided further that where the management of whole of

the business or part of the business is severable, the secured
creditor shall take over the management of business of the
borrower which is relatable to the security for the debt.".]

(c) appoint any person (hereafter referred to as the manager), to

manage the secured assets the possession of which has been taken
over by the secured creditor;

(d) require at any time by notice in writing, any person who has
acquired any of the secured assets from the borrower and from
whom any money is due or may become due to the borrower, to
pay the secured creditor, so much of the money as is sufficient to
pay the secured debt.

(5) Any payment made by any person referred to in clause (d) of sub-
section (4) to the secured creditor shall give such person a valid
discharge as if he has made payment to the borrower.

(6) Any transfer of secured asset after taking possession thereof or take
over of management under sub-section (4), by the secured creditor or by
the manager on behalf of the secured creditor shall vest in the transferee
all rights in, or in relation to, the secured asset transferred as if the
transfer had been made by the owner of such secured asset

(7) Where any action has been taken against a borrower under the
provisions of subsection (4), all costs, charges and expenses which, in the
opinion of the secured creditor, have been properly incurred by him or
any expenses incidental thereto, shall be recoverable from the borrower
and the money which is received by the secured creditor shall, in the
absence of any contract to the contrary, be held by him in trust, to be
applied, firstly, in payment of such costs, charges and expenses and
secondly, in discharge of the dues of the secured creditor and the residue
of the money so received shall be paid to the person entitled thereto in
accordance with his rights and interests.
(8) If the dues of the secured creditor together with all costs, charges and
expenses incurred by him are tendered to the secured creditor at anytime
before the date fixed for sale or transfer, the secured asset shall not be
sold or transferred by the secured creditor, and no further step shall be
taken by him for transfer or sale of that secured asset.

(9) In the case of financing of a financial asset by more than one secured
creditors or joint financing of a financial asset by 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 three-fourth in value of the amount outstanding as on a record date
and such action shall be binding on all the secured creditors:

Provided that in the case of a company in liquidation, the amount realised

from the sale of secured assets shall be distributed in accordance with the
provisions of section 529A of the Companies Act, 1956:

Provided further that in the case of a company being wound up on or

after the commencement of this Act, the secured creditor of such
company, who opts to realise his security instead of relinquishing his
security and proving his debt under proviso to subsection (1) of section
529 of the Companies Act, 1956, may retain the sale proceeds of his
secured assets after depositing the workmen's dues with the liquidator in
accordance with the provisions of section 529A of that Act;

Provided also that the liquidator referred to in the second proviso shall
intimate the secured creditor the workmen's dues in accordance with the
provisions of section 529A of the Companies Act, 1956 and in case such
workmen's dues cannot be ascertained, the liquidator shall intimate the
estimated amount of workmen's dues under that section to the secured
creditor and in such case the secured creditor may retain the sale
proceeds of the secured assets after depositing the amount of such
estimated dues with the liquidator:

Provided also that in case the secured creditor deposits the estimated
amount of workmen's dues, such creditor shall be liable to pay the
balance of the workmen's dues or entitled to receive the excess amount, if
any, deposited by the secured creditor with the liquidator:

Provided also that the secured creditor shall furnish an undertaking to the
liquidator to pay the balance of the workmen's dues, if any.

Explanation-- For the purposes of this sub-section,--

(a) "record date" means the date agreed upon by the secured
creditors representing not less than three-fourth in value of the
amount outstanding on such date;

(b) "amount outstanding" shall include principal, interest and any

other dues payable by the borrower to the secured creditor in
respect of secured asset as per the books of account of the secured
creditor.
 (10) Where dues of the secured creditor are not fully satisfied with the
sale proceeds of the secured assets, the secured creditor may file an
application in the form and manner as may be prescribed to the Debts
Recovery Tribunal having jurisdiction or a competent court, as the case
may be, for recovery of the balance amount from the borrower.

(11) Without prejudice to the rights conferred on the secured creditor

under or by this section, the secured creditor shall be entitled to proceed
against the guarantors or sell the pledged assets without first taking any
of the measures specified in clauses (a) to (d) of subsection (4) in relation
to the secured assets under this Act.

(12) The rights of a secured creditor under this Act may be exercised by
one or more of his officers authorised in this behalf in such manner as
may be prescribed.

(13) No borrower shall, after receipt of notice referred to in sub-section

(2), transferby way of sale, lease or otherwise (other than in the ordinary
course of his business) anyof his secured assets referred to in the notice,
without prior written consent of the securedcreditor.

14.Chief Metropolitan Magistrate or District Magistrate to assist secured

creditor in taking possession of secured asset.--

(1) Where the possession of any secured asset is required to be taken by

the secured creditor or if any of the secured asset is required to be sold or
transferred by the secured creditor under the provisions of this Act, the
secured creditor may, for the purpose of taking possession or control of
any such secured asset, request, in writing, the Chief Metropolitan
Magistrate or the District Magistrate within whose jurisdiction any such
secured asset or other documents relating thereto may be situated or
found, to take possession thereof, and the Chief Metropolitan Magistrate
or, as the case may be, the District Magistrate shall, on such request
being made to him--

(a) take possession of such asset and documents relating thereto;

and

(b) forward such asset and documents to the secured creditor.

(2) For the purpose of securing compliance with the provisions of sub-
section (1), the Chief Metropolitan Magistrate or the District Magistrate
may take or cause to be taken such steps and use, or cause to be used,
such force, as may, in his opinion, be necessary.

(3) No act of the Chief Metropolitan Magistrate or the District Magistrate

done in pursuance of this section shall be called in question in any court
or before any authority.

15.Manner and effect of take over of management.--

(1) 15[When the management of business of a borrower is taken over by a

securitisation company or reconstruction company under clause (a) of
section 9 or, as the case may be, by a secured creditor under clause (b) of
sub-section (4) of section 13] may, by publishing a notice in a newspaper
published in English language and in a newspaper published in an Indian
language in circulation in the place where the principal office of the
borrower is situated, appoint as many persons as it thinks fit--

(a) in a case in which the borrower is a company as defined in the

CompaniesAct, 1956, to be the directors of that borrower in
accordance with the provisions of that Act; or

(b) in any other case, to be the administrator of the business of the

borrower.

(2) On publication of a notice under sub-section (1),--

(a) in any case where the borrower is a company as defined in the

Companies Act, 1956, all persons holding office as directors of
the company and in any other case, all persons holding any office
having power of superintendence, direction and control of the
business of the borrower immediately before the publication of
the notice under sub-section (1), snail be deemed to have vacated
their offices as such;

(b) any contract of management between the borrower and any

director or manager thereof holding office as such immediately
before publication of the notice under sub-section (1), shall be
deemed to be terminated;

(c) the directors or the administrators appointed under this section

shall take such steps as may be necessary to take into their
custody or under their control all the property, effects and
actionable claims to which the business of the borrower is, or
appears to be, entitled and all the property and effects of the
business of the borrower shall be deemed to be in the custody of
the directors or administrators, as the case may be, as from the
date of the publication of the notice;

(d) the directors appointed under this section shall, for all
purposes, be the directors of the company of the borrower and
such directors or as the case may be, the administrators appointed
under this section, shall alone be entitled to exercise all the
powers of the directors or as the case may be, of the persons
exercising powers of superintendence, direction and control, of
the business of the borrower whether such powers are derived
from the memorandum or articles of association of the company
of the borrower or from any other source whatsoever.

(3) Where the management of the business of a borrower, being a

company as defined in the Companies Act, 1956, is taken over by the
secured creditor, then, notwithstanding anything contained in the said Act
or in the memorandum or articles of association of such borrower,--
 (a) it shall not be lawful for the shareholders of such company or
any other person to nominate or appoint any person to be a
director of the company;

(b) no resolution passed at any meeting of the shareholders of

such company shall be given effect to unless approved by the
secured creditor;

(c) no proceeding for the winding up of such company or for the

appointment of a receiver in respect thereof shall lie in any court,
except with the consent of the secured creditor.

(4) Where the management of the business of a borrower had been taken
over by the secured creditor, the secured creditor shall, on realisation of
his debt in full, restore the management of the business of the borrower
to him.

16.No compensation to directors for loss of office.--

(1) Notwithstanding anything to the contrary contained in any contract or

in any other law for the time being in force, no managing director or any
outer director or a manager or any person in charge of management of the
business of the borrower shall be entitled to any compensation for the
loss of office or for the premature termination under this Act of any
contract of management entered into by him with the borrower.

(2) Nothing contained in sub-section (1) shall affect the right of any such
managing director or any other director or manager of any such person in
charge of management to recover from the business of the borrower,
moneys recoverable otherwise than by way of such compensation.

17.Right to appeal.--

(1) Any person (including borrower), aggrieved by any of the measures

referred to in sub-section (4) of section 13 taken by the secured creditor
or his authorised officer under this Chapter,16[may make an application
along with such fee, as may be prescribed,] to the Debts Recovery
Tribunal having jurisdiction in the matter within forty-five days from the
date on which such measure had been taken.
17
["Provided that different fees may be prescribed for making the
application by the borrower and the person other than the borrower.

Explanation- For the removal of doubts, it is hereby declared

that the communication of reasons to the borrower by the secured
creditor for not having accepted his representation or objection or the
likely action of the secured creditor at the stage of communication of
reasons to the borrower shall not entitle the person ( including borrower)
to make an application to the Debts Recovery Tribunal under this sub-
section.]
18
[(2) The Debts Recovery Tribunal shall consider whether any of the
measures referred to in sub-section (4) of section 13 taken by the secured
creditor for enforcement of security are in accordance with the provisions
of this Act and the rules made thereunder.

(3) If, the Debts Recovery Tribunal, after examining the facts and
circumstances of the case and evidence produced by the parties, comes
to the conclusion that any of the measures referred to in sub-section (4)
of section 13, taken by the secured creditor are not in accordance with the
provisions of this Act and the rules made thereunder, and require
restoration of the management of the business of the borrower or
restoration of possession of the secured assets to the borrower, it may by
order, declare the recourse to any one or more measures referred to in
sub-section (4) of section 13 taken by the secured creditors as invalid and
restore the possession of the secured assets to the borrower or restore the
management of the business to the borrower, as the case may be, and
pass such order as it may consider appropriate and necessary in relation
to any of the recourse taken by the secured creditor under sub-section (4)
of section 13.

(4) If, the Debts Recovery Tribunal declares the recourse taken by a
secured creditor under sub-section (4) of section 13, is in accordance
with the provisions of this Act and the rules made thereunder, then,
notwithstanding anything contained in any other law for the time being in
force, the secured creditor shall be entitled to take recourse to one or
more of the measures specified under sub-section (4) of section 13 to
recover his secured debt.

(5) Any application made under sub-section (1) shall be dealt with by
the Debts Recovery Tribunal as expeditiously as possible and disposed of
within sixty days from the date of such application:

Provided that the Debts Recovery Tribunal may, from time to

time, extend the said period for reasons to be recorded in writing, so,
however, that the total period of pendency of the application with the
Debts Recovery Tribunal, shall not exceed four months from the date of
making such application made under sub-section (1).

(6) If the application is not disposed of by the Debts Recovery Tribunal

within the period of four months as specified in sub-section (5), any
party to the application may make an application, in such form as may be
prescribed, to the Appellate Tribunal for directing the Debts Recovery
Tribunal for expeditious disposal of the application pending before the
Debts Recovery Tribunal and the Appellate Tribunal and the Appellate
Tribunal may, on such application, make an order for expeditious
disposal of the pending application by the Debts Recovery Tribunal.

(7) Save as otherwise provided in this Act, the Debts Recovery Tribunal
shall, as far as may be, dispose of the application in accordance with the
provisions of the Recovery of Debts Due to Banks and Financial
Institutions Act, 1993 and the rules made thereunder.".]
19
[17A. Making of application to Court of District Judge in certain cases.--

In the case of a borrower residing in the State of Jammu and Kashmir, the
application under section 17 shall be made to the Court of District Judge
in that State having jurisdiction over the borrower which shall pass an
order on such application.

Explanation.- For the removal of doubts, it is hereby declared that the

communication of the reasons to the borrower by the secured creditor for
not having accepted his representation or objection or the likely action of
the secured creditor at the stage of communication of reasons shall not
entitle the person (including borrower) to make an application to the
Court of District Judge under this section.".]

18.Appeal to Appellate Tribunal.--

(1) Any person aggrieved, by any order made by the Debts Recovery
Tribunal 20[under section 17, may prefer an appeal along with such fee,
as may be prescribed] to the Appellate Tribunal within thirty days from
the date of receipt of the order of Debts Recovery Tribunal.
21
[Provided that different fees may be prescribed for filing an appeal
by the borrower or by the person other than the borrower.

Provided further that no appeal shall be entertained unless the

borrower has deposited with the Appellate Tribunal fifty per cent of the
amount of debt due from him, as claimed by the secured creditors or
determined by the Debts Recovery Tribunal, whichever is less:

Provided also that the Appellate Tribunal may, for the reasons
to be recorded in writing, reduce the amount to not less than twenty-five
per cent of debt referred to in the second proviso.]

(2) Save as otherwise provided in this Act, the Appellate Tribunal shall,
as tar as may be, dispose of the appeal in accordance with the provisions
of the Recovery of Debts Due to Banks and Financial Institutions Act,
1993 and rules made thereunder.
22
[18A. Validation of fees levied.--

Any fee levied and collected for preferring, before the commencement of
the Enforcement of Security Interest and Recovery of Debt Laws
(Amendment) Act, 2004, an appeal to the Debts Recovery Tribunal or the
Appellate Tribunal under this Act, shall be deemed always to have been
levied and collected in accordance with laws as if the amendments made
to sections 17 and 18 of this Act by Sections 11 and 12 of the said Act
were in force at all material times.]
29
[18B. Appeal to High Court in certain cases.-

Any borrower residing in the State of Jammu and Kashmir and aggrieved
by any order made by the Court of District Judge under Section 17A may
prefer an appeal, to the High Court having jurisdiction over such Court,
 within thirty days from the date of receipt of the order of the Court of
District Judge:

Provided that no appeal shall be preferred unless the borrower

has deposited, with the Jammu and Kashmir High Court, fifty per cent of
the amount of the debt due from him as claimed by the secured creditor
or determined by the Court of District Judge, whichever is less:

Provided further that the High Court may, for the reasons to be
recorded in writing, reduce the amount to not less than twenty-five per
cent of the debt referred to in the first proviso.".]

19.Right of borrower to receive compensation and costs in certain cases.--

23
[ If the Debts Recovery Tribunal or the Court of District Judge, on an
application made under section 17 or section 17A or the Appellate
Tribunal or the High Court on an appeal preferred under section 18 or
section 18A, holds that the possession of secured assets by the secured
creditor is not in accordance with the provisions of this Act and rules
made thereunder and directs the secured creditors to return such secured
assets to the concerned borrowers, such borrower shall be entitled to the
payment of such compensation and costs as may be determined by such
Tribunal or Court of District Judge or Appellate Tribunal or the High
Court referred to in section 18B.".]

CHAPTER IV
CENTRAL REGISTRY

20.Central Registry.--

(1) The Central Government may, by notification, set up or cause to be

setup from such date as it may specify in such notification, a registry to
be known as the Central Registry with its own seal for the purposes of
registration of transaction of securitisation and reconstruction of financial
assets and creation of security interest under this Act.

(2) The head office of the Central Registry shall be at such place as the
Central Government may specify and for the purpose of facilitating
registration of transactions referred to in sub-section (1), there may be
established at such other places as the Central Government may think fit,
branch offices of the Central Registry.

(3) The Central Government may, by notification, define the territorial

limits within which an office of the Central Registry may exercise its
functions.

(4) The provisions of this Act pertaining to the Central Registry shall be
in addition to and not in derogation of any of the provisions contained in
the Registration Act, 1908, the Companies Act, 1956, the Merchant
Shipping Act, 1958, the Patents Act, 1970, the Motor Vehicles Act, 1988
and the Designs Act, 2000 or any other law requiring registration of
 charges and shall not affect the priority of charges or validity thereof
under those Acts 25 or laws.

21.Central Registrar.--

(1) The Central Government may, by notification, appoint a person for

the purpose of registration of transactions relating to securitisation,
reconstruction of financial assets and security interest created over
properties, to be known as the Central Registrar.

(2) The Central Government may appoint such other officers with such
designations as it thinks fit for the purpose of discharging under the
superintendence and direction of the Central Registrar, such functions of
the Central Registrar under this Act as he may, from time to time,
authorise them to discharge.

22.Register of securitisation, reconstruction and security interest

transactions.--

(1) For the purposes of this Act, a record called the Central Register shall
be kept at the head office of the Central Registry for entering the
particulars of the transactions relating to--

(a) securitisation of financial assets;

(b) reconstruction of financial assets; and

(c) creation of security interest.

(2) Notwithstanding anything contained in sub-section (1), it shall be

lawful for the Central Registrar to keep the records wholly or partly in
computer, floppies, diskettes or in any other electronic form subject to
such safeguards as may be prescribed.

(3) Where such register is maintained wholly or partly in computer,

floppies, diskettes or in any other electronic form, under sub-section (2),
any reference in this Act to entry in the Central Register shall be
construed as a reference to any entry as maintained in computer or in any
other electronic form.

(4) The register shall be kept under the control and management of the
Central Registrar.

23.Filing of transactions of securitisation, reconstruction and creation of

security interest.--

The particulars of every transaction of securitisation, asset reconstruction

or creation of security interest shall be filed, with the Central Registrar in
the manner and onpayment of such fee as may be prescribed, within
thirty days after the date of such transaction or creation of security, by
the securitisation company or reconstruction company or thesecured
creditor, as the case may be:
 Provided that the Central Registrar may allow the filing of the particulars
of such transaction or creation of security interest within thirty days next
following the expiry of the said period of thirty days on payment of such
additional fee not exceeding ten times the amount of such fee.

24.Modification of security interest registered under this Act.--

Whenever the terms or conditions, or the extent or operation, of any

security interest registered under this Chapter, are, or is, modified, it shall
be the duty of the securitisation company or the reconstruction company
or the secured creditor, as the case may be, to send to the Central
Registrar, the particulars of such modification, and the provisions of this
Chapter as to registration of a security interest shall apply to such
modification of such security interest.

25.Securitisation company or reconstruction company or secured creditor

to report satisfaction of security interest.--

(1) The securitisation company or the reconstruction company or the

secured creditor as the case may be, shall give intimation to the Central
Registrar of the payment or satisfaction in full, of any security interest
relating to the securitisation company or the reconstruction company or
the secured creditor and requiring registration under this Chapter, within
thirty days from the date of such payment or satisfaction.
24
[(1A) On receipt of intimation under sub-section (1), the Central
Registrar shall order that a memorandum of satisfaction shall be entered
in the Central Register.".]

(2) 25[If the concerned borrower gives an intimation to the Central

Registrar for not recording the payment or satisfaction referred to in sub-
section (1), the Central Registrar shall on receipt of such intimation,]
cause a notice to be sent to the securitisation company or reconstruction
company or the secured creditor calling upon it to show cause within a
time not exceeding fourteen days specified in such notice, as to why
payment or satisfaction should not be received as intimated to the Central
Registrar.

(3) If no cause is shown, the Central Registrar shall order that a

memorandum of satisfaction shall be entered in the Central Register.

(4) If cause is shown, the Central Registrar shall record a note to that
effect in the Central Register, and shall inform the borrower that he has
done so.

26.Right to inspect particulars of securitisation, reconstruction and security

interest transactions.--

(1) The particulars of securitisation or reconstruction or security interest

entered in the Central Register of such transactions kept under section 22
shall be open during the business hours for inspection by any person on
payment of such fee as may be prescribed.
 (2) The Central Register, referred to in sub-section (1) maintained in
electronic form, shall also be open during the business hours for the
inspection by any person through electronic media on payment of such
fee as may be prescribed,

CHAPTER V
OFFENCES AND PENALTIES

27.Penalties.--

If a default is made--

(a) in filing under section 23, the particulars of every transaction

of any securitisation or asset reconstruction or security interest
created by a securitisation company or reconstruction company or
secured creditor; or

(b) in sending under section 24, the particulars of the modification

referred to in that section; or

(c) in giving intimation under section 25,

every company and every officer of the company or the secured creditor
and every officer of the secured creditor who is in default shall be
punishable with fine which may extend to five thousand rupees for every
day during which the default continues.

28.Penalties for non-compliance of direction of Reserve Bank.--

If any securitisation company or reconstruction company fails to comply

with any direction issued by the Reserve Bank 26[under section 12 or
section 12A,] such company and every officer of the company who is in
default, shall be punishable with fine which may extend to five lakh
rupees and in the case of a continuing offence, with an additional fine
which may extend to ten thousand rupees for every day during which the
default continues.

29.Offences.--

If any person contravenes or attempts to contravene or abets the

contravention of the provisions of this Act or of any rules made
thereunder, he shall be punishable with imprisonment for a term which
may extend to one year, or with fine, or with both.

30.Cognizance of offence.--

No court inferior to that of a Metropolitan Magistrate or a Judicial

Magistrate of the First Class shall try any offence punishable under this
Act.

CHAPTER VI
 MISCELLANEOUS

31.Provisions of this Act not to apply in certain cases.--

The provisions of this Act shall not apply to--

(a) a lien on any goods, money or security given by or under the

Indian Contract Act, 1872 or the Sale of Goods Act, 1930 or any
other law for the time being in force;

(b) a pledge of movables within the meaning of section 172 of the

Indian Contract Act, 1872;

(c) creation of any security in any aircraft as defined in clause (1)

of section 2 of the Aircraft Act, 1934;

(d) creation of security interest in any vessel as defined in clause

(55) of section 3 of the Merchant Shipping Act, 1958;

(e) any conditional sale, hire-purchase or lease or any other

contract in which no security interest has been created;

(f) any rights of unpaid seller under section 47 of the Sale of

Goods Act, 1930;

(g) 27[any properties not liable to attachment ( excluding the

properties specifically charged with the debt recoverable under
this Act)] or sale under the first proviso to sub-section (1) of
section 60 of the Code of Civil Procedure, 1908;

(h) any security interest for securing repayment of any financial

asset not exceeding one lakh rupees;

(i) any security interest created in agricultural land;

(j) any case in which the amount due is less than twenty per cent.
of the principal amount and interest thereon.

32.Protection of action taken in good faith.--

No suit, prosecution or other legal proceedings shall lie against any

secured creditor or any of his officers or manager exercising any of the
rights of the secured creditor or borrower for anything done or omitted to
be done in good faith under this Act.

33.Offences by companies.--

(1) Where an offence under this Act has been committed by a company,
every person who at the time the offence was committed was in charge
of, and was responsible to, the company, for the conduct of the business
of the company, as well as the company, shall be deemed to be guilty of
the offence and shall be liable to be proceeded against and punished
accordingly:
 Provided that nothing contained in this sub-section shall render any such
person liable to any punishment provided in this Act, if he proves that the
offence was committed without his knowledge or that he had exercised
all due diligence to prevent the commission of such offence.

(2) Notwithstanding anything contained in sub-section (1), where an

offence under this Act has been committed by a company and it is proved
that the offence has been committed with the consent or connivance of,
or is attributable to any neglect on the part of,any director, manager,
secretary or other officer of the company, such director,
manager,secretary or other officer shall also be deemed to be guilty of the
offence and shall be liableto be proceeded against and punished
accordingly.

Explanation.---For the purposes of this section,--

(a) "company" means any body corporate and includes a firm or

other association of individuals; and

(b) "director", in relation to a firm, means a partner in the firm.

34.Civil court not to have jurisdiction.--

No civil court shall have jurisdiction to entertain any suit or proceeding

in respect of any matter which a Debts Recovery Tribunal or the
Appellate Tribunal is empowered by or under this Act to determine and
no injunction shall be granted by any court or other authority in respect
of any action taken or to be taken in pursuance of any power conferred
by or under this Act or under the Recovery of Debts Due to Banks and
Financial Institutions Act, 1993.

35.The provisions of this Act to override other laws.--

The provisions of this Act shall have effect, notwithstanding anything

inconsistent therewith contained in any other law for the time being in
force or any instrument having effect by virtue of any such law.

36.Limitation.--

No secured creditor shall be entitled to take all or any of the measures

under subsection (4) of section 13, unless his claim in respect of the
financial asset is made within the period of limitation prescribed under
the Limitation Act, 1963.

37.Application of other laws not barred.--

The provisions of this Act or the rules made thereunder shall be in

addition to and not in derogation of, the Companies Act, 1956, the
Securities Contracts (Regulation ; Act, 1956, the Securities and Exchange
Board of India Act, 1992, the Recovery of Debts Due to Banks and
 Financial Institutions Act, 1993 or any other law for the time being in
force.

38.Power of Central Government to make rules.--

(1) The Central Government may, by notification and in the Electronic

Gazette as defined in clause (s) of section 2 of the Information
Technology Act, 2000, make rules for carrying out the provisions of this
Act.

(2) In particular, and without prejudice to the generality of the foregoing

power, such rules may provide for all or any of the following matters,
namely:--

(a) the form and manner in which an application may be fifed

under sub-section (10) of section 13;

(b) the manner in which the rights of a secured creditor may be

exercised by one or more of his officers under sub-section (12) of
section 13;
28
[(ba) the fee fee making an application to the Debts Recovery
Tribunal under sub-section (1) of section 17;

(bb) the form of making an application to the Appellate Tribunal

under sub-section (6) of section 17;

(bc) the fee for preferring an appeal to the Appellate Tribunal

under sub-section (1) of section 18;".]

(c) the safeguards subject to which the records may be kept under
sub-section (2) of section 22;

(d) the manner in which the particulars of every transaction of

securitisation shall be filed under section 23 and fee for filing
such transaction;

(e) the fee for inspecting the particulars of transactions kept under
section 22 and entered in the Central Register under sub-section
(1) of section 26;

(f) the fee for inspecting the Central Register maintained in

electronic form under sub-section (2) of section 26;

(g) any other matter which is required to be, or may be,

prescribed, in respect of which provision is to be, or may be,
made by rules.

(3) Every rule made under this Act shall be laid, as soon as may be after
it is made, before each House of Parliament, while it is in session, for a
total period of thirty days which may be comprised in one session or in
two or more successive sessions, and if, before the expiry of the session
immediately following the session or the successive sessions aforesaid,
 both Houses agree to making any modification in the rule or both Houses
agree that the rule should not be made, the rule shall thereafter have
effect only in such modified form or be of no effect, as the case may be
so, however, that any such modification or annulment shall be without
prejudice to the validity of anything previously done under that rule.

39.Certain provisions of this Act to apply after Central Registry is set up or

cause to be set up.--

The provisions of sub-sections (2), (3) and (4) of section 20 and sections
21, 22, 23, 24, 25, 26 and 27 shall apply after the Central Registry is set
up or cause to be set up under sub-section (1) of section 20.

40.POWER to remove difficulties.--

(1) If any difficulty arises in giving effect to the provisions of this Act,
the Central Government may, by order published in the Official Gazette,
make such provisions not inconsistent with the provisions of this Act as
may appear to be necessary for removing the difficulty:

Provided that no order shall be made under this section after the expiry of
a period of two years from the commencement of this Act.

(2) Every order made under this section shall be laid, as soon as may be
after it is made, before each House of Parliament.

41.Amendments of certain enactments.--

The enactments specified in the Schedule shall be amended in the manner

specified therein.

42.Repeal and saving.--

(1) The Securitisation and Reconstruction of Financial Assets and

Enforcement of Security Interest (Second) Ordinance, 2002 is hereby
repealed.

(2) Notwithstanding such repeal, anything done or any action taken under
the said Ordinance shall be deemed to have been done or taken under the
corresponding provisions of this Act.

THE SCHEDULE
(See section 41)

Year Act Short title Amendment

No.

1956 1 The Companies Act, In section 4A, in sub-section (1),

1956. after clause (vi), insert the
 following: --

"(vii) the securitisation company or

the reconstruction company which
has obtained a certificate of
registration under sub-section (4) of
section 3 of the Securitisation and
Reconstruction of Financial Assets
and Enforcement of Security
Interest Act, 2002.".

1956 42 The Securities In section 2, in clause (h), after sub-

Contracts clause (ib) insert the following: --

(Regulation) Act,
1956.

"(ic) security receipt as defined in

clause (zg) of section 2 of the
Securitisation and Reconstruction of
Financial Assets and Enforcement
of Security Interest Act, 2002.".

1986 1 The Sick Industrial In section 15, in sub-section (1),

after the proviso, insert the
Companies (Special following: --

Provisions) Act, 1985.

"Provided further that no reference

shall be made to the Board for
Industrial and Financial Reconstruc-
tion after the commencement of the
Securitisation and Reconstruction of
Financial Assets and Enforcement
of Security Interest Act, 2002,
where financial assets have been
acquired by any securitisation com-
pany or reconstruction company
under sub-section (1) of section 5 of
that Act:
 Provided also that on or after the
commencement of the Securitisation
and Reconstruction of Financial
Assets and Enforcement of Security
Interest Act, 2002, where a
reference is pending before the
Board for Industrial and Financial
Reconstruction, such reference shall
abate if the secured creditors,
representing not less than three-
fourth in value of the amount
outstanding against financial
assistance disbursed to the borrower
of such secured creditors, have
taken any measures to recover their
secured debt under sub-section (4)
of section 13 of that Act".

1. Inserted vide The Enforcement of Security Interest and Recovery of

Debts Laws (Amendment) Act, 2004

2 The words "in accordance with the directions or guidelines issued by

the Reserve Bank;" Omittted by The Enforcement of Security Interest
and Recovery of Debts Laws (Amendment) Act, 2004

3. Substituted for " doubtful or loss asset in accordance with the

directions or under guidelines relating to assets classifications issued by
the Reserve Bank" by The Enforcement of Security Interest and
Recovery of Debts Laws (Amendment) Act, 2004

4. Substituted for "trustee or any asset management company making

investment on behalf of mutual fund or provident fund or gratuity fund or
pension fund " by The Enforcement of Security Interest and Recovery of
Debts Laws (Amendment) Act, 2004

5. Substituted for "any other trustee holding securities on behalf of a

bank or financial institution, in whose favour security interest is created
for due repayment by any borrower of any financial assistance;" by The
Enforcement of Security Interest and Recovery of Debts Laws
(Amendment) Act, 2004

6. Inserted vide The Enforcement of Security Interest and Recovery of

Debts Laws (Amendment) Act, 2004

7. The words "rejection of application for registration" Omittted by The

Enforcement of Security Interest and Recovery of Debts Laws
(Amendment) Act, 2004
8. Substituted for "such order of rejection or cancellation" by The
Enforcement of Security Interest and Recovery of Debts Laws
(Amendment) Act, 2004

9. Inserted vide The Enforcement of Security Interest and Recovery of

Debts Laws (Amendment) Act, 2004

10. Inserted vide The Enforcement of Security Interest and Recovery of

Debts Laws (Amendment) Act, 2004

11. Substituted for the words "security receipts issued by such company"
vide The Enforcement of Security Interest and Recovery of Debts Laws
(Amendment) Act, 2004

12. Inserted vide The Enforcement of Security Interest and Recovery of

Debts Laws (Amendment) Act, 2004

13. Inserted vide The Enforcement of Security Interest and Recovery of

Debts Laws (Amendment) Act, 2004

14. Substituted for "(b) lake over the management of the secured assets
of the borrower including the right to transfer by way of lease,
assignment or sale and realise the secured asset; by The Enforcement of
Security Interest and Recovery of Debts Laws (Amendment) Act, 2004

15. Substituted for "When the management of business of a borrower is

taken over by a secured creditor, the secured creditor" by The
Enforcement of Security Interest and Recovery of Debts Laws
(Amendment) Act, 2004

16. Substituted with effect from 21st day of June, 2002 for "may prefer
an appeal" by The Enforcement of Security Interest and Recovery of
Debts Laws (Amendment) Act, 2004

17. Inserted with effect from 21st day of June, 2002 by The Enforcement
of Security Interest and Recovery of Debts Laws (Amendment) Act,
2004

18. Substituted by The Enforcement of Security Interest and Recovery of

Debts Laws (Amendment) Act, 2004

19. Inserted by The Enforcement of Security Interest and Recovery of

Debts Laws (Amendment) Act, 2004

20.Substituted with effect from 21st day of June, 2002 for ""under
section 17, may prefer an appeal" by The Enforcement of Security
Interest and Recovery of Debts Laws (Amendment) Act, 2004

21. Inserted with effect from 21st day of June, 2002 by The Enforcement
of Security Interest and Recovery of Debts Laws (Amendment) Act,
2004
22. Inserted by The Enforcement of Security Interest and Recovery of
Debts Laws (Amendment) Act, 2004

23. Substituted for " If the Debts Recovery Tribunal or the Appellate
Tribunal, as the case may be on an appeal filed Under section 17 or
section 18 holds the possession of secured assets by the secured creditor
as wrongful and directs the secured creditor to return such secured assets
to the concerned borrower, such borrower shall be entitled to payment of
such compensation and costs as may be determined by such Tribunal or
Appellate Tribunal." by The Enforcement of Security Interest and
Recovery of Debts Laws (Amendment) Act, 2004

24. Inserted by The Enforcement of Security Interest and Recovery of

Debts Laws (Amendment) Act, 2004

25. Substituted for "The Central Registrar shall, on receipt of such

intimation" by The Enforcement of Security Interest and Recovery of
Debts Laws (Amendment) Act, 2004

26. Substituted for "under Section 12" by The Enforcement of Security

Interest and Recovery of Debts Laws (Amendment) Act, 2004

27. Substituted for "any properties not liable to attachment" by The

Enforcement of Security Interest and Recovery of Debts Laws
(Amendment) Act, 2004

28. Inserted by The Enforcement of Security Interest and Recovery of

Debts Laws (Amendment) Act, 2004

29. Inserted by The Enforcement of Security Interest and Recovery of

Debts Laws (Amendment) Act, 2004