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Short Title:The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
Long Title:An Act to regulate securitisation and reconstruction of financial assets and enforcement of security interest and for matters connected therewith or incidental thereto.
There are six chapters; 42 sections; 1 schedule in this Act.
This Act came on 17th of December 2002.
Chapter I mainly contains definitions.
S.1-Name of the Act, its extent and date of commencement. It extends to the whole of India.
S.2-Definitions:
Some of the important terms are contained as follows:-
2(a) -Asset reconstructions.
2(l)-Financial asset
2(f)-borrower
2(o)-non-performing asset
2(z)-securitisation
2(zc)-secured asset
2(zf)-security interest
Chapter II deals with the regulation of securitisation and reconstruction of financial assets of banks and financial institutions.
S.3 deals with registration of securitisation company. Reserve Bank of India has some powers in the registration of such companies. The RBI can inspect the business of such companies. This section also lays down certain conditions to be fulfilled. Then RBI grants certificate.
S.4-This section lays down certain criteria which enables the RBI to cancel the registration certificate already granted. An appeal is provided to Central Government against the order of cancellation.
S.5-It deals with acquisition of rights or interests in financial assets.
S.5A-It deals with transfer of applications in any tribunals to DRT.
S.6-It deals with giving notice to obligor and payment made by him.
S.9-It details the different measures for asset reconstruction. In this six measures are stated.
S.10-It deals with other functions of securitisation/reconstruction companies.
S.12-&12A deals with powers of RBI to determine policies, issue directions calling for statements etc.
Chapter III
S.13-deals with different stages of process of enforcing security interest. Sub-section 1 says that the security interest may be enforced without intervention of court or tribunal.
Sub-section 2 says that in case of NPA account the secured creditor may ask the borrower to discharge his full liabilities by notice in writing within 60 days of receipt.
Sub-section 3 refers to the contents of notice.
Sub-section 3A deals with representation by borrower.
S.13(4)-If borrower fails to discharge his full liability within the notice period actions can be taken. Certain measures are given which can be taken to recover the secured debt.
S.14-It deals with power of Chief Metropolitan Magistrate and District Magistrate to assist secured creditor to take possession of secured asset.
S.15-Deals with manner and effect of takeover of management. Publishing notice in newspaper is detailed in this section.
S.17-It deals with Appeals to DRT.
S.18-Appeal to Appellate Tribunal from DRT.
S.18B-Appeal  to High court.
Chapter IV
S.20 deals with Central Registry for the purposes of registration of transaction of securitisation and reconstruction of financial assets and creation of security interest.
Chapter V deals with penalties.
S.27&28 deals with penalties where 29 deals with imprisonment. 30 deals with taking cognizance.
Chapter VI are miscellaneous things.
In this S.31 details the circumstances in which the provisions of the Act do not apply. There are 10 things.
In S.34 civil court's jurisdiction is barred.
S.36 deals with limitation period.

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  1. sarfesi act is one sided without giving sny opportunity to the agreived borrowers to explain and hear what he has to say. Banks and financial institutions are not to decide unilateraly. There are instances wherein the financial institutions backtracked from their commitments and this resulted in failure of the project. There are also instances wherein the govt. agencies take their own sweet time to sanction/give approval by which the project implementation gets delayed inordinately and the borrower will not be able to meet his commentments to the financial institutions I know one case wherein the State Electricity Board has taken over two and half years to give power connection and the bank refused to provide working capital though the Unit could work with its captive power This Act should be amended in such a way that the decision to enforce the securities be taken after giving a fair chance to the borrowers to explain the reasons before a competant third party.

    K.S. NAIR ksnair@indu.com

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