Re: SCM on SALIENT FEATURES OF SARFAESI ACT - 14.5.2012 - 6 PM - ICSI-SIRC HOUSE, Chennai

[Palani...@bluedart.com]

Dear Friends,

 

Yesterday, I have attended a study circle meeting on ‘The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002,(shortly called ‘SARFAssssSI ACT’). The meeting was addressed by Mr. Dhanraj, learned Advocate, who has been practicing in this area for long time. He addressed the meeting for nearly two hours on the said subject without making any Power Point Presentation and not even had a piece of paper for his reference. Following are few important points put forth by him in the meeting;

 

1. The SARFASI Act was enacted to enable the banks and financial institutions to recover their money dues from borrowers without any hassles.  NBFC were not covered under this Act.
2. The said act is a draconian legislation and there was no proper remedy available to the borrower to contest the bank action. The provision of the said act overrides all other legislation and hence borrower cannot take shelter under any other Act like SICA act.
3. There are en-number of writ petition filed before various high courts and Supreme Court questioning the constitution validity of the said act. But Supreme Court upheld the constitution validity of the act.
4. Banks can classify an Asset as NPA, if the borrower has defaulted for 90 days. If the asset is classified as NPA then banker can proceed against the borrower under SARFASI Act.
5. Section 13 of the SARFASI act is the major section.  The banker will issue a notice to the borrower under Section 13(2) of the said act asking the borrower to settle all his liabilities within 60 days or else the action will be taken against him under SARFASI act.
6. The borrower can object the notice. But Banker can dismiss their objection without giving any reason.
7. Any letter issued by the banker for taking over the asset is similar to a super decree obtained from the court. The same cannot be contested in any court.
8. The borrower can approach the Debt Recovery Tribunal (DRT) for any objection. But he needs to deposit 25% of the disputed amount for considering his appeal. Further appeal lies to Debt Recovery Appellate Tribunal and then to Supreme Court. But there are hardly any cases were borrower has succeeded on his appeal.
9. Most of the appeals to DRT are on the procedural lapses of the banker in following the SARFASI Act.  If the borrower requires some time, then defense lawyer can buy them some time by making appeal to DRT and DRAT.
10. There are many Asset Reconstruction Company (ARC) have been formed under this act. ARC will acquire the asset from the banks and sell the same through private sale or auction. Many ARC have made hefty profits by buying the assets at lower value and selling the same at the higher value. The banker actually assigns all rights in favour of ARC and ARC get into the foot of banker and sells the assets. The asset can be sold through private sale or auction.  
11. The asset are sold under SARFASI act in ‘as is where is’ condition with all liabilities attached to it. The Banker or ARC will issue a sale certificate for the sale. The sale certificate needs to be registered by paying necessary stamp duty for transfer asset to the buyer’s name.

 

Rgds…Pal

N. Palaniappan     │ Company Secretary & Manager - Finance  │ Blue Dart Aviation Limited.

88-89, Old International Terminal, Meenambakkam, Chennai – 600 027

'  +91 44 22568242 │ F  +91 44 22560259 │ *   palani...@bluedart.com │ www.bluedartaviation.com

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From: Siro [mailto:si...@icsi.edu]
Sent: Saturday, May 12, 2012 11:18 AM
To:
Subject: SCM on SALIENT FEATURES OF SARFAESI ACT - 14.5.2012 - 6 PM - ICSI-SIRC HOUSE, Chennai

 

 

 

 

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[CS A Rengarajan]

Thanks mr.palaniappan to enlighten us in this subject.

 

Whether the same has been implemented and any latest figures banks are succeeded in recovering their dues.  If it has been followed with letter and spirit then why no action has not taken for kingfisher airlines?  The said airlines has defaulted in payment for more than 90 days and struggling for survival. Many more kingfishers in the country who are fighting with banks for non payment of their loans. The billion dollar question who will succedd whether bank or borrower?

 

Finally india we are having more legislations but there is no full fledged implementation.

 

Regards

 

 

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[BALAJI S]

Thanks for sharing 

Regards,

Balaji.S

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[Indrani Sanka]

Thanks for sharing....

Regards,
Indrani

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Thanks,

Indrani

[K Degaleeswaran]

Dear Sir,

Thanks for highlighting the presentation.

I too attended the program and it is very impressive and useful. 

He also informed in his speech that in near future Secularization Companies going to be huge profit making company. Hence, we need to update our knowledge on this subject to play key role in this area.

 

Thank you once again.

K Degaleeswaran

[Astarag]

is there any minimum pecuniary limit(i.e. size of the loan or NPA?)  under the act for its applicability to a particular case

With 

Cs. P.A. Patnaik

[K Degaleeswaran]

Dear Sir,

Provisions of SARFASI Act not applicable to the following cases:

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 (9 of

1872; or the Sale of Goods Act, 1930 (3 of 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 (9

of 1872);

(c) creation of any security in any aircraft as defined in clause (1) of section 2 of the Aircraft

Act, 1934 (24 of 1934);

(d) creation of security interest in any vessel as defined in clause (55) of section 3 of the

Merchant Shipping Act, 1958 (44 of 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 (3 of 1930);

(g) 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 (5 of 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.