The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002

Pages: 62 (20498 words) Published: September 4, 2013
The Securitisation & Reconstruction of Financial Assets & Enforcement of Security Interest Act 2002[SARFAESI]

Asset reconstruction – acquisition by any securitisation Co or reconstruction Co, of any right or interest of any bank/financial institution, in any financial assistance, for the purpose of realization of such financial assistance

Financial assistance – means any loan/advance granted or any debenture/bond subscribed /any guarantees given / LOC established/any other credit facility extended by any bank/financial institution

Originator – owner of financial asset

Securitisation – acquisition of financial asset, by any securitisation Co/reconstruction Co, from any originator, whether by raising of funds by such securitisation Co/ reconstruction Co from qualified institutional buyers, by issue of security receipts representing undivided interest in such financial asset/otherwise.

Obligator – person liable to originator

No securitisation Co/reconstruction Co shall commence /carry on business of securitisation /asset reconstruction without certificate of registration granted by RBI & having the owned fund of not less than Rs.2crore or such other amount not exceeding 15% of total financial assets acquired/ to be acquired. Application for registration shall be made to reserve bank in such specified form & manner. RBI shall cancel certificate of incorporation, if it ceases to carry on business of securitisation & asset reconstruction or ceases to receive/hold any investment from qualified institutional buyer or failed to comply with any conditions subject to which certificate of registration is granted to it, or fail to comply with directions of RBI, maintain account in accordance with requirement of law or RBI directions, submit/offer books of accounts /documents for inspection when demanded by RBI, obtain prior approval of RBI for any substantial change in its management/change of location of registered office/ change in its name. An opportunity of being heard to be given before cancellation. Appeal can be given to CG within 30days from date of communication of cancellation order.

Any securitisation Co/reconstruction Co. , may after acquisition of any financial asset, offer security receipts to qualified institutional buyers to subscription.

Exemption from registration of security receipt
Any security issued as in above point or any transfer of security receipts need not require compulsory registration.

Measures for Asset Reconstruction
(a) Proper management of business of borrower, by change in, or takeover of the management of business of borrower (b) Sale/lease of part/whole of business of borrower
(c) Rescheduling of payment of debts payment of debts payables by borrower (d) Enforcement of security interest
(e) Settlement of dues payable by borrower
(f) Taking possession of secured assets

No securitisation Co/reconstruction Co which has been granted a certificate of registration shall commence /carry on, without prior approval of reserve bank, any business other than that of securitisation /asset reconstruction. It shall act as a) Manager

b) Agent – of bank/financial institution for receiving due of borrower for payment of fee/charges c) Receiver – if appointed by court /tribunal

No MD, director, manager, or any other person in charge of management shall be entitled to any compensation for premature termination of his contract with borrower. But nothing shall effect their right to recover from business of borrower, money recoverable, otherwise than by way of compensation.

Particulars of every transaction of securitisation, asset reconstruction or creation of security interest shall be filed with central registrar in prescribed manner along with fee within 30days after transaction date or creation of security, by securitisation or reconstruction Co or secured creditor.

Provisions of this Act shall not apply to:

a) A lien on...
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