Comments on Borrower's Concise Guide to Bank Loan

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Deepak Dang

Deepak Dang

Wrote on 12 October 2016  

After amendment it should be taken carefully by all concerned: SARFAESI ACT: AMMENDED: SARFAESI Act, 2002, RDDB Act, 1993, Indian Stamp Act, 1899 and the Depositories Act, 1996. SARFAESI ACT: Section 2: Unpaid portion of purchase price of tangible securities and intangible assets within the term “Debt”; properties obtained by way of hire-purchase or financial lease or under any other contract including intangible assets within “Security Interest”; debenture trustees appointed by company in “Secured Creditors”; “Financial Assistance” also includes funds provided for acquiring any tangible asset by way of hire-purchase/financial lease / conditional sale or under any other contract including assignment or licence of an intangible asset or purchase of debt securities. Section 2: • Unpaid portion of purchase price of tangible securities & intangible assets are "debt" • Properties or financial lease under any other contract including intangible assets within “Security Interest” • debenture trustees appointed by company in “Secured Creditors” • “Financial Assistance” also includes funds provided for acquiring any tangible asset by way of hire-purchase/financial lease / conditional sale or under any other contract including assignment or licence of an intangible asset or purchase of debt securities. • “Securitization Company, “Reconstruction Company” wherever used, be changed to “Asset Reconstruction Company” (ARC). Section 5: for the purpose of asset reconstruction or securitization, • New sub-section “(l A) has been inserted providing that stamp duty on documents executed by banks/FIs in favour of Asset Reconstruction Companies (ARCs) shall be exempted on transactions undertaken for transfer/assignment of financial assets in favour of ARCs. Section 13(3): Reducing cases of stay after publication of notice • The date of publication of notice for public auction/inviting quotation towards enforcement of secured assets has been made a crystal point when the banks/FIs as secured creditors will not proceed further for sale of properties if the entire amount due is tendered before the date of publication of notice for sale. Section 14: DM to pass orders within 30 days max. 60 days. • On application/affidavit of the bank, the DM/CMM will henceforth pass suitable orders for taking possession of the secured assets within a period of 30 days. For reasons beyond his control, he may, after recording reasons, will pass orders within such further period but not exceeding in aggregate 60 days. Section 15: Sub-Section 4 Proviso: If secured creditors convert debt to equity & acquired controlling interest, will not restore management of the business to such borrower. Section 17: Sub-Section 4A inserted. • Empowered DRT exclusively to take cognizance of claims of tenancy/lease hold rights upon the "secured assets" and adjudicate in the matter. Section 20: special Section 20A inserted: • Integrate to Establish a Central Database (Central Registry) Registration Act,1908, Merchant Shipping Act,1958, the Motor Vehicles Act,1988, the Patents Act,1970,the Designs Act,2000 or other such records under any other law for the time being in force. (i) Essentiality of filing of every transaction of creation of security interest with the Central Registrar within 30 days modified by deleting the time limit of 30 days (Section 23). (ii) No secured creditor shall be entitled to exercise the right of enforcement of securities unless registered with Central Registry (Section 26D). (iii) After registration of security interest, debts due to secured creditors shall be paid in priority over all other debts and all revenues/ taxes/cesses and other rates payable to Government/Authority (Section 26E). Section 31: exemptions has been modified by deleting clause 31(e) • Exemption earlier regarding secured assets obtained by conditional sale, hire-purchase or lease or any other contract. RDDBFI Act, 1993: Amended • Section 2(g)- terms “Debt” widened as per SARFAESI ACT-2002. • Section 2(h) - definition of “Financial Institution", inserted sub-clause (ib)-include a "debenture trustee" registered with the Board and appointed for secured debt securities. • Clauses (jb), (la) & (lb) inserted in Section 2: terms “property”, “secured creditor” & “security interest” now defined as per SARFAESI Act New Section 19A has been inserted: a) OA/WS/Other Pleadings/Documents be filed in Electronic Form by the parties duly authenticated with their Digital Signature. Govt. may specify that the electronic form will be exclusive/alternate or in addition to the physical form. b) Summons/Notices/Communications etc. may also be served in Electronic Form. c) DRT/DRAT, for the purpose of adopting Electronic Filing d) Any Interim/Final Order passed by DRT/DRAT & displayed on the Website shall be deemed to be Public Notice of such order and transmission thereof by email to the registered address of the party(ies) to the proceedings shall be deemed to be served on such party(ies). e) Amending Section 20(3), the time limit to file an appeal before DRAT, against order of DRT, has been reduced to 30 days. (v) Amending Section 21: No appeal shall be entertained by DRAT unless such person deposits 50% of the debt so due from him as per order of DRT. DRAT Emowered to waive or reduce the amount to not less than 25% with reasons. (vi) Amending Section 25, a new sub-section 1(aa) is inserted: Empowered Recovery Officer of the DRT to take possession of charged properties or any other property of the defendants and appointing Receiver for such property and to sell the same. The Recovery Officer have also authority to make recovery by any other mode, as may be prescribed by the Central Government. (vii) Amending Sub-Section 1 of Section 27: The Presiding Officer, , authorized to grant time for payment of the amount, if down payment of not less than twenty-five per cent of the amount as per recovery certificate paid and gives an unconditional undertaking to pay the balance within a reasonable time acceptable to the applicant bank/ FI, holding Recovery Certificate. RO will stay proceedings. If the defendant shall not deposit rest amount his right to file appeal against the orders of the Tribunal forfeited . (viii) A new Section inserted as Section 30A: any appeal before DRT by the debtor against any order of the RO shall not be entertained by DRT unless such person deposits minimum 50% of debt due. (ix) A new Section inserted as S-31B That the secured creditor(s) shall have priority over all 'other debts' and 'Government dues' of what ever nature/Authority. DRT Act (i) Jurisdiction: Bank or FI may now make an application before the Tribunal within the local limits of whose jurisdiction the branch or any other Office of the bank or financial institution is maintaining an account in which debt claimed is outstanding, for the time being (Section 19). (ii) True copies of documents/estimated value of securities, affidavits verifying facts & pleadings & affidavit of witnesses , to be relied upon shall be filed along with OA (recovery application). If the estimated value of such securities is not sufficient to recover the debt, then particulars of other assets/properties of defendants are to be stated {Section 19(3)}. (iii) OA/WS/pleadings if submitted without affidavit of applicant/defendant, shall not be allowed to be relied upon as evidence by the said party to the proceedings {Section 19(10A)}. (iv) An order can also be sought directing the defendants to disclose the details of other assets other than those already mentioned by the applicant in OA. DRT can direct the defendants to disclose such other assets and can also pass an interim order of restraint. In case of non-compliance of any of order passed by DRT directing the defendants to disclose assets under Clause (ii) Sub-section (iv) of Section 19, the person/officer in default can be detained in civil prison for a term not exceeding 3 months {Section 19(5)}. (v) On service of summons, defendant(s) shall not transfer any secured and other asset specified or disclosed, by way of sale/lease/otherwise except in the ordinary course of business, without prior approval of DRT {Section 19(4a)}. (vi) The defendant(s) to file written statement (WS) within a period of 30 days from the date of service of Summons. DRT can extend the said period not exceeding 15 days, in exceptional cases {Section 19(5)}. (vii) In case of admission of debt, DRT shall order such defendant to pay the amount, to the extent of the admission within a period of 30 days from the date of such order, failing which DRT may issue a Certificate in accordance with Sub-Section 22,to the extent of the amount of debt admitted {Section 19(5B)}. (viii) DRT shall pass interim or final order within 30 days from the date of conclusion of the hearings {Section 19(20)}. (ix) Every effort shall be made by DRT to complete the recovery proceedings in two hearings, finally within a period of 180 days from the date of filing the application {Section 19(24)}. (x) Any RC issued by the PO of DRT shall be deemed to be Decree or Order of the Court for the purposes of initiation of winding up proceedings against a company registered under the Companies Act, 2013 or Limited Liability Partnership registered under the Limited Liability Partnership Act, 2008 or insolvency proceedings against any individual or partnership firm under any law for the time being in force, as the case may be {S-19(22A)}. 3. Indian Stamp Act Amending Section 8, a new Section 8F inserted providing relaxation of stamp duty on any agreement/document or transfer/ assignment of any right or interest of bank/FI in financial assets in favour of any ARC. 4. The Depositories Act: Amending Section 7, sub-sections 1A and 1B have been inserted facilitating transfer of shares or conversion of debt into equity shares in favour of bank/FI pursuant to reconstruction of debt.



Narendra Sharma

Narendra Sharma

Wrote on 11 December 2014  

I will be on a visit to Mumbai from 12.12.14 to 21.12.2014. Any member may please contact me at 9229574214 / 8982321310, if interested for a meeting.



Narendra Sharma

Narendra Sharma

Wrote on 13 January 2014  

I will be on a visit to Mumbai from 15.01.14 to 18.01.14.Any member interested for a meeting may kindly contact me at Mobile nos. 9229574214/8982321310.



RAJU O.F.,

RAJU O.F.,

Wrote on 07 January 2014  

Thank you for providing detailed notes. Bankers must desist from accepting mortgage of properties of third parties, obtined through agents. In many cases innocent property owners are cheated and their properties are sold for the sake of unknown persons. Similarly over valuation of properties before granting of loan and under valuation while putting the same for sales also seen for illegal gains to bank officials and middlemen.



slakshmanrao

slakshmanrao

Wrote on 02 January 2014  

In the matters relating to Loan Obligations,The Rule of Law is to watch for the Prior permission.This practice is already in force in all the government Organisations...


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