Sarfaesi act

Querist : Anonymous (Querist) 11 August 2023 This query is : Resolved
Whether SARFAESI will be applicable in case of property categorised as POND?

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T. Kalaiselvan, Advocate (Expert) 12 August 2023
The SARFAESI Act isn't applicable for: Money or security issued under the Indian Contract Act or the Sale of Goods Act, 1930. Any conditional sale, hire-purchase, lease or any other contract in which no security interest has been created. Any rights of the unpaid seller under Section 47 of the Sale of Goods Act, 1930.

Dr. J C Vashista (Expert) 12 August 2023
No
“Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act”. 2002 deals with the following:

• Registration and regulation of Asset Reconstruction Companies (ARCs) by the Reserve Bank of India.
• Facilitating Securitization of financial assets of banks and financial institutions with or without the benefit of underlying securities.
• Promotion of seamless transferability of financial assets by the ARC to acquire financial assets of banks and financial institutions through the issuance of debentures or bonds or any other security as a debenture.
• Entrusting the Asset Reconstruction Companies to raise funds by issue of security receipts to qualified buyers.
• Facilitating the reconstruction of financial assets which are acquired while 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.
• Presentation of any securitization company or asset reconstruction company registered with the Reserve Bank of India as a public financial institution.
• Defining ‘security interest’ to be 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.
• Classification of the borrower’s account as a non-performing asset in accordance with the directions given or under guidelines issued by the Reserve Bank of India from time to time.
• The officers authorized will exercise the rights of a secured creditor in this behalf in accordance with the rules made by the Central Government.
• 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.
• The Central Government may set up or cause to be set up a Central Registry for the purpose of registration of transactions relating to securitization, asset reconstruction and creation of the security interest.
• 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.
• Non-application of the proposed legislation to security interests in agricultural lands, loans less than rupees one lakh and cases where eighty per cent, of the loans, is repaid by the borrower

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