Securitization and
Reconstruction of
Financial Assets and
Enforcement of Security
Interest Act, 2002
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
1
Application to Banks
Section 2(1)(c)
 All the Banking Companies,
Nationalized Banks, the State Bank of
India as well as its subsidiary Banks
and Co-operative Banks are within
the meaning of the word bank for the
purpose of this Act.
(Co-operative banks are specified as included in definition
section 2(1)(c) by Gazette publication dated 28/01/2003)
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
2
Act not applicable in certain cases
(Section 31)
 Any security interest for securing repayment of any
financial asset not exceeding one lakh rupees.
 Any security interest created in agricultural land.
 Any case in which the amount due is less than 20% of the
principal amount and interest thereon.
 Pledge of movables.
 Any conditional sale, hire-purchase or lease or any other
contract where no security interest has been created.
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
3
ASSET RECONSTRUCTION
Section 2(2)(b)
 Acquisition of any right or interest, in
the security, by any bank or by any
securitization company or
reconstruction company for the
purpose of realization of such
financial assistance is called as asset
reconstruction.
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
4
SECURITIZATION
Section 2(1)(z)
 Securitization means acquisition of
financial asset by securitization or
reconstruction company from the
Bank for realization of debt. It is also
called asset reconstruction
 It also includes change or take over
of the management of the business of
the borrower for proper management
of business of the borrower.
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
5
BORROWER
Section 2(1)(f)
The borrower means,




any person who has been granted financial
assistance by any bank or
who has given any guarantee or
who has created any mortgage, hypothecation or
pledge as security for the financial assistance
granted by any bank or
a person who becomes borrower of a securitization
company or reconstruction company consequent
upon acquisition by it of any right or interest of any
bank or financial institution in relation to such
financial assistance.
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
6
CENTRAL REGISTRY
Section 2(1)(g) and 20
 The registering office set up or caused to be set up by
the Central Government.
 With this set up all the transactions of asset
securitization, reconstruction as well as transactions
of creation of security interests shall have to be
registered with this authority, as prescribed.
 The Central Registry shall be in addition to and not in
derogation / substitute of any of the provisions
contained in the Registration Act, the Companies Act,
the Motor Vehicles Act and some such other Acts.
 The registry will serve the purpose of maintaining
credit information for the lenders.
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
7
Central Registry – CERSAI
 The Central Registry of Securitization, Asset
Reconstruction and Security Interest of India (CERSAI) is
set up under section 20 of the SARFAESI Act.
 Indian Banks’ Association has initiated the incorporation of
Central Registry under Companies Act.
 The said company shall be maintaining and operating the
Central Registry for and on behalf of the Central
Government.
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
8
Central Registry - Rules
 To regulate the Central Registration issues
rules named ‘The Securitization and
Reconstruction of Financial Assets and
Enforcement of Security Interest (Central
Registry) Rule, 2011’ are introduced. The
rules are published in Gazette of India
dated 31st March, 2011.
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
9
Central Registry - Rules
 The rules have defined ‘transaction’
to mean as any transaction of
securitization of financial assets or
reconstruction of financial assets or
security interest created over the
property and also modification and
satisfaction thereof. (Rule 2(e))
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
10
Central Registry - Rules
 As of now, only transaction by way of
equitable mortgage / mortgage by way of
deposit of title deeds is required to be filed
– Rule 4(2).




Form – I is for creation and modification of security interest
with fee of Rs. 500/- for loan above Rs. 5.00 lakh and Rs.
250/- for loan below Rs. 5.00/- lakh.
Form – II is for satisfaction of security interest with fee of Rs.
250/-.
Form – III is for securitization or reconstruction of asset with
fee of Rs. 1000/-.
Form – IV for satisfaction of securitization or reconstruction
with fee of Rs. 50/-.
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
11
Central Registry - Rules
 Though section 23, 24 and 25 and rule 4(1) say that
particulars of all the ‘transactions’ shall be filed before
the Central Registrar, currently only equitable
mortgage transactions are covered for filing. For
remaining transactions rule 4(3) says that Govt. may
specify the forms.
 Rule 4(4) says that the inter se priority or pari passu
status of security interest, as the case my be, in case of
two or more lenders must be specified.
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
12
DEBT RECOVERY TRIBUNAL and DEBT
Section 2(1)(i) and 2(1)(ha)
 Debt Recovery Tribunal shall mean Tribunal
established under the Recovery of Debts
Due to Banks and Financial Institutions Act,
1993.
 Debt shall have the meaning assigned to it
in section 2(g) of the Debts Due to Banks
and Financial Institutions Act, 1993. (Debt
means any liability, inclusive of interest, which is claimed
as due from a person by a bank or financial institution or
consortium of them, whether secured or unsecured.)
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
13
DEFAULT
Section 2(1)(j)
 When the borrower does not pay any
principal debt or any interest on the
principle debt or any other amount
payable to the secured creditor and
due to such non-payment the account
of such borrower is classified as nonperforming asset (NPA) in the books
of accounts of the secured creditor it
is called default.
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
14
FINANCIAL ASSET
Section 2(1)(l)






a claim to any debt or receivables or part thereof
whether secured or unsecured or
any debt or receivable secured by mortgage of
immovable property or
hypothecation or pledge of movable property or
any right or interest in the security, whether full or
part, securing debt or
any beneficial interest in any movable or immovable
property or in debt, receivables, whether such
interest is existing, future, accruing, conditional or
contingent or
any financial assistance
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
15
HYPOTHECATION
Section2(1)(n)
Hypothecation means,
a charge in or upon any movable property
- existing or future
- created by a borrower
- in favour of a secured creditor
- without delivery of possession of the
movable property to such creditor
- as a security for financial assistance
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
16
NON PERFORMING ASSET
Section 2(1)(o)
An asset or account of a borrower
classified by a bank as sub-standard,
doubtful or loss-asset in accordance
with the directions or under
guidelines relating to asset
classification issued by the Reserve
Bank of India.
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
17
PROPERTY
Section 2(1)(t)





Property means,
immovable property,
movable property,
any debt or any right to receive payment
of money whether secured or unsecured,
receivables, whether existing or future,
intangible assets such as known-how,
patent, copyright, trade mark, license,
franchise or any other business or
commercial right of similar nature.
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
18
SECURITY AGREEMENT
Section 2(1)(zb)
 Security agreement means an
agreement, instrument or any other
document or arrangement under
which security interest is created in
favour of secured creditor. This
includes creation of mortgage by
deposit of title deeds with the secured
creditors.
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
19
SECURED ASSET
Section 2 (1)(zc)
 Secured Asset means the property on
which security interest is created.
 The powers given by SARFAESI Act for
enforcement of securities are against
secured assets only.
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
20
SECURED CREDITOR and SECURED DEBT
Section 2 (1)(zd) and 2(1)(ze)
 Any bank or any consortium or group
of banks in whose favour security
interest is created by the borrower for
due repayment is called as secured
creditor.
 Secured debt means a debt which is
secured by any security interest.
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
21
SECURITY INTEREST
Section 2(1)(zf)
 Any right, title and interest of any kind
whatsoever upon the property created in
favour of any secured creditor is called as
security interest. This includes any charge,
hypothecation, assignment other than
those specified in section 31.
 Section 31 specifies lien, pledge,
conditional sale, hire-purchase, lease and
any security interest in agricultural land
etc. as excluded.
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
22
Taking the asset for securitization
 When the bank or financial institution
decides that the financial asset be
now acquired by the securitization
company or reconstruction company
a notice may be given about such
acquisition to the obligor i.e.
borrower or any other person liable to
repay to the bank.
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
23
ENFORCEMENT OF SECURITY INTEREST
Section 13(1)
 Under the SARFAESI Act a secured
creditor can enforce the security
interest created in his favors without
the intervention of the Court or
Tribunal. This power given to the
secured creditor has overriding effect
over the provisions related to
mortgage in the Transfer of Property
Act, 1882 as in that Act Court
intervention is required.
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
24
NOTICE FOR ENFOIRCEMENT OF SECURITY
 Section 13(2) of the SARFAESI Act
speaks about the notice to be given by
the secured creditor to the borrower
who has defaulted in making the
repayment and whose account is
classified as NPA.
Contd. ……..
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
25
NOTICE FOR ENFOIRCEMENT OF SECURITY
 The precondition to get the right to serve
this notice is that the notice should be
asking the borrower to discharge in full his
liabilities to the secured creditors within
sixty days from the date of notice. Failing
to pay so by the borrower the secured
creditor gets further rights as detailed in the
Act.
Contd. …….
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
26
NOTICE FOR ENFOIRCEMENT OF SECURITY
 The notice should give the details
of the amount payable by the
borrower and the secured asset
intended to be enforced by the
secured creditor in the event of
non-payment of secured debt by
the borrower.
Contd. ……..
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
27
NOTICE FOR ENFOIRCEMENT OF SECURITY
 Though the Act contemplates giving of only
two particulars, viz. details of amount
payable and details of securities, in the notice
said above, it is more proper to give the
details of defaults, overdue period and the
date from which the account is classified as
NPA, facility-wise securities and particulars of
security documents executed by the
borrower.
Contd. ……
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
28
NOTICE FOR ENFOIRCEMENT OF SECURITY
 The Act or the rules made there under
has not prescribed any format of notice
to be given. However, this notice is a
statutory notice having consequence
that the borrower is prohibited from
transferring the property mentioned in
the notice in any way.
Contd. ……
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
29
NOTICE FOR ENFOIRCEMENT OF SECURITY
 Any contravention of these legal
consequences if made by the
borrower is punishable under the
SARFESI Act. So it is advisable
that the notice mentions about
the legal consequences and penal
provisions.
Contd. ……
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
30
NOTICE FOR ENFOIRCEMENT OF SECURITY
The Act does not contemplate
a reply from the borrower to
the notice. But the borrower
may reply or make
representation to the notice
so received by him.
Contd. ……
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
31
NOTICE FOR ENFOIRCEMENT OF SECURITY
If the borrower submits any
reply to the said notice, the
Bank is required to give reply
to that notice under Section
13(3A) within a week.
Contd. ….
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
32
NOTICE FOR ENFOIRCEMENT OF SECURITY
 The secured creditor must apply
his mind to the objection raised
by the borrower in reply to the
notice served on him by the
secured creditor and reasons for
rejection must be conveyed to
the borrower.
Contd. ….
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
33
NOTICE FOR ENFOIRCEMENT OF SECURITY
 The reply to the borrower giving the
reasons for not accepting the
objections of the borrower does not
give an occasion to resort to any
proceedings, such as stay application,
injunction etc. to restrain creditor’s
actions.
Contd. ….
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
34
NOTICE FOR ENFOIRCEMENT OF SECURITY
 The reply to the borrower giving the
reasons for not accepting the
objections of the borrower does not
give an occasion to resort to any
proceedings, such as stay application,
injunction etc. to restrain creditor’s
actions.
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
35
Borrower not paying as per notice
 Bank can take possession of the secured
assets of the borrower including the right to
transfer by way of lease, assignment or
sale for realization of money from the
secured asset. This right can be exercised
only when substantial part of the business
of the borrower is held as security for the
debt.
 Take over the management of the secured
asset of the borrower including the right to
transfer by way of lease, assignment or
sale and realize the secured asset.
Contd. …..
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
36
Borrower not paying as per notice
 Appoint any person as manager to manage
the security assets the possession of which
has been taken over by the secured
creditor.
 Require at any time, by giving notice in
writing, any person who has acquired the
secured asset from the borrower and from
whom any money is due or may become
due to the borrower, to pay to the secured
creditor. Such demands from the other
person will be to the extent of secured
debt.
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
37
How to appropriate sale proceeds
Section 13(7)
When sale of secured asset is made the appropriation of
sale proceeds realized are required to be made in the
following order,
 Firstly, towards costs, charges and expenses
incidental towards preservation and protection of
securities, insurance premiums etc. that are
recoverable from the borrower.
 Secondly, towards the due of the secured creditors.
 Thirdly, if there is any surplus it will be paid to the
person entitled there to in accordance with the right
and interests.
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
38
Who should exercise powers from Bank
 The SARFAESI Act has given different rights to the
secured creditor. The rights of a secured creditor
under the Act need be exercised by one or more of its
officers authorized in this behalf in such manner as
may be prescribed.
 The powers of enforcing securities need to be
exercised prudently, fairly and with due care and
caution the Rules framed under SARFESI act say, rule
2(a), that Authorized Officer should be of the level
equivalent to Chief Manager of a public sector bank or
equivalent or any other authorized person exercising
powers of superintendence, direction and control of
the business or affairs of the creditors.
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
39
Restrictions on borrower on receiving
notice u/s. 13(2)
Section 13(13)
 When the borrower receives the notice from
the creditor under section 13(2) the
borrower shall not transfer by way of sale,
lease or otherwise, other than in the
ordinary course of business, any of his
secured assets referred to in the notice
without prior written consent of the secured
creditor.
 Non compliance with this provision attracts
penal provisions under SARFAESI Act that
provide punishment of imprisonment of one
year or fine or both.
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
40
Procedure to sale the property
 The provisions of section 13 at different sub sections
give power to the secured creditor for taking into
possession of the security and then sell the same.
 This entire process involves several factors of fairness
and technicalities. Therefore, the Rules framed under
SARFAESI Act have laid down below mentioned
procedural aspect in this connection. Some broad
procedures and precautions as per Rules are as under,
 i. Inventory of the property taken into possession be
made and the property must be entrusted to any person
authorized or appointed by the secured creditor.
Contd. ……
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
41
Procedure to sale the property

ii. The secured creditor shall take care of the property under
his possession as an owner of ordinary prudence, preserve and
protect the secured assets and insure the same if necessary till
they are sold.

iii. If the property is subject to speedy or natural decay or the
expense of keeping such property in custody are likely to
exceed its value, the authorized officer can sell it at once.

iv. For taking possession and then sale of immovable property,
the secured creditor is required to serve a possession notice as
nearly as possible as given in Appendix iv to the Rules on the
borrower and by affixing the possession notice on the outer
door or at the conspicuous place at the property.
Contd.……
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
42
Procedure to sale the property
 v. The authorized officer is required to obtain valuation
of immovable property before sale, fix the reserve price
after consulting secured creditor and sell it by methods
permitted under Rule 8.
 The valuation must be done by the ‘approved valuer’. He
must be a registered as a valuer under section 34-AB of
the Wealth Tax Act, 1957 and approved by the Board.
(Definition of Valuer rule 2(d)).
 vi. The authorized officer is required to publish the
possession notice in two leading newspapers, one of
which should be in vernacular language.
Contd.…
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
43
Procedure to sale the property
 vii. Before 30 days of sale of immovable
property the borrower should be given
notice about the sale. If the sale is by
public auction or inviting tenders from
public, notice is required to be published
in two leading news-papers, one of
which should be in vernacular language,
detailing the terms of sale.
Contd. ….
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
44
Procedure to sale the property
 viii. If the price for secured asset is coming less than
the reserve price, the authorized officer can sell the
asset at a lower price with the consent of the borrower
and secured creditor.
 ix. When the offer of sale of property is accepted by the
purchaser and the secured creditor accepting the offer
confirms the sale, the purchaser has to deposit 25% of
the offer price.

x. In case of immovable property, the purchaser
has to deposit the amount required to clear the
encumbrance. The authorized officer then has to pay and
remove encumbrance after giving notice to the
concerned parties.
Contd.…..
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
45
Sale Certificate for property sold by Bank
Rules 7, 8 and 9
 On payment of sale price, the authorized
officer shall issue sale certificate in
prescribed format Appendix – III for
movable property and Appendix – IV for
immovable property.
 For immovable property such certificate is
conveyance and requires stamping as may
be required under the relevant State laws.
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
46
Judicial Authority’s help to Bank for taking
possession
Section 14




When the secured creditor is required to take possession or
control of the secured asset or when the secured asset is
required to be sold or transferred under the provisions of
the SARFAESI Act, the secured creditor can take help of the
Chief Metropolitan Magistrate or the District Magistrate by
making request in writing.
On such request being made the Chief Metropolitan
Magistrate or the District Magistrate, as the case may be,
shall take possession of security asset and documents
relating thereto.
The Metropolitan Magistrate or the District Magistrate may
take or cause to be taken such steps and use or cause to be
used such force as may be in his opinion necessary.
Any act of the Metropolitan Magistrate or the District
Magistrate for and while taking possession of the security
shall not be called in question in any court or before any
authority.
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
47
Notice on taking Management of the borrower concern



When the secured creditor takes over the
management of business of a borrower, he may
publish a notice in a news paper published in English
language and in a news paper published in Indian
language in circulation in the place where the
principal office of the borrower is situated, for
appointment of,
Director - if the borrower is a company as defined in
the companies Act, 1956, to be the directors of such
company or
Administrator - in any other case, to be the
administrator of the business of borrower.
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
48
Effect of notice and taking over the
management
 On publication of such notice, the directors of the
company in case the borrower is a company and in other
cases person holding any office having power of
superintendence, direction and control of the business of
the borrower immediately before publication of the
notice, shall be deemed to have vacated their offices.
 As effect of this, any contract or management between
the borrower and any directors or manager thereof shall
be deemed to be terminated.
 On publication of the above said notice and then after
the appointments of directors or the administrators as
stated above, all the property and effects of the business
of borrower is deemed to be in the custody of the
directors or the administrators so appointed, as the case
may be.
Contd. …..
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
49
Effect of notice and taking over the
management
 All the directors or the administrators are empowered
to take such steps as may be necessary to take into
their custody or under their control all the property,
effects and actionable claims to which the borrower is
entitled.
 Thereafter, the directors or the administrators are
alone entitled to exercise all the powers of
superintendence, direction and control of the business
of the borrower.
 Such powers are derived as if from the memorandum
or articles of association of the company or from any
other source whatsoever.
Contd. ….
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
50
Effect of notice and taking over the
management




Where the management of the business of a borrower
which is a company as defined in the Companies Act,
1956 is taken over by the secured creditor, then,
notwithstanding anything contained in the Companies
Act 1956 or the memorandum or in the articles of
association following effects apply;
The shareholders of the company can lawfully appoint
any person to be a director of the company.
No resolution passed by the shareholders of the
company shall be given effect to unless approved by
the secured creditor.
No proceeding for the winding up of such company or
for the appointment of a receiver for the company shall
lie in any court, except with the consent of the secured
creditor.
Contd. …..
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
51
Effect of notice and taking over the
management
 No managing director or director or any person in
charge of management of the business of the
borrower shall be entitled to any compensation for the
loss of office or for premature termination of any
contract of management entered into by him with the
borrower. This provision has a overriding effect over
any other laws or contract.
 However, if any director or any other person
controlling the management has to recover any
amount from borrower, it can be recovered.
 Where the management of the business of a borrower
has been taken over by the secured creditor, on
realization of the debt in full the secured creditor shall
restore the management of the business of the
borrower to him.
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
52
Challenging before DRT Bank’s action to
take possession
Section 17
 Any person, including borrower, aggrieved by any of
the measures taken by the secured creditor or his
authorized officer for taking possession of the security
may make an application along with the prescribed
fees to the Debts Recovery Tribunal having
jurisdiction within forty five days from the date on
which such measure are taken.
 The Debts Recovery Tribunal has to dispose of the
application, as far as may be, in accordance with the
provisions of the recovery of Debts Due to Banks and
Financial Institutions Act, 1993 and rules made there
under. The application has to be disposed as early as
possible but within sixty days.
Contd. ….
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
53
Challenging before DRT Bank’s action to
take possession
Section 17
 If for any reason it is not possible to so
dispose the application, the Tribunal has to
record the reasons for delay but such delay
should not be beyond four months from the
date of filing of the application.
 If any such application is not disposed so
within four months, the aggrieved party
can prefer an application to the Appellate
Tribunal for seeking directions for the early
disposal of the application.
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
54
Appeal to Appellate DRT
Section 18
 Any person aggrieved by any order made
by the Debts Recovery Tribunal can prefer
appeal along with the prescribed fees to the
appellate Tribunal within thirty days from
the date of receipt of the order of Debts
Recovery Tribunal.
 No appeal can lie unless the borrower
deposits 50% of the debt claimed by the
secured creditor. The Tribunal has powers
for reasons to be recorded to reduce this
amount to 25% of the claim amount.
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
55
Filing of security interest etc. before
Central Registrar
Section 23
 Filing of details of transactions of securitization,
reconstruction and creation of security interest is
required to be filed with the Central Registrar.
 The period of filing such details in prescribed form
with prescribed fees is thirty days after the date of
transaction or creation of security.
 The particulars are required to be filed as stated
above by the securitization company or the
reconstruction company or the secured creditor, as
the case may be.
 The delay in filing the said particulars can be
condoned by the Central Registrar for a period of next
thirty days after the first thirty days prescribed, on
payment of fees not more than ten times of the
prescribed fees.
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
56
Filing of modification and satisfaction of
security interest etc.
Section 24
 On modification of the security
interest etc., it is required to be filed
before the Central Registrar.
 On satisfaction of the security interest
etc., the same is also required to be
filed before the Central Registrar.
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
57
PROTECTION OF ACTION TAKEN IN
GOOD FAITH
Section 32
 The secured creditors and their officers are protected
by the provisions made in the Act for actions taken in
good faith.
 For initiating actions by the secured creditor under the
Act no suit, prosecution or any other legal proceeding
can be taken against the secured creditor or his
officers.
 This protection is given so that actions contemplated
and authorized under SARFAESI Act can be taken
without fear of counter action from the borrower or
any other person having interest in the property.
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
58
Civil Courts no jurisdiction
Section 34
 The SARFAESI Act has conferred jurisdiction on many
matters to the Debts Recovery Tribunal or the
Appellate Tribunal. Therefore, for any such matters
where empowerment and jurisdiction is to the Debts
Recovery Tribunal or the Appellate Tribunal, no Civil
Court shall have jurisdiction to entertain any suit or
proceeding.
 Similarly, any Court or Authority cannot grant
injunction in such matters and actions taken or to be
taken under this Act as well as under Recovery of
Debts Due to Banks and Financial Institutions Act,
1993. Due to such provisions the implementation of
the Act becomes effective.
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
59
Limitation Act – applicable
Section 36
 The actions, the secured creditor can
take against the security under the
SARFAESI Act, are required to be
taken within the limitation period
prescribed under the Limitation Act.
That means the action has to be
taken within three years from the
date on which cause of action arose.
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
60
Dues after the SARFAESI actions
 If after sale of securities the claim is not fully satisfied
and still there are any dues to be recovered from the
borrower, the creditor is required to file civil suit
before the Civil Court or a claim before the Debt
Recovery Tribunal or the Authorities / Courts under
the Co-operative Societies Act, as may be, within
limitation period, as applicable.
 Therefore, the secured creditor will have to make an
assessment, before taking possession of the security,
whether it would be possible to sell the security and
make eventual claim for shortfall within the limitation
period.
P. R. Kulkarni, Consultant Banking, Law and Banking
Technology and Author,Pune
61
Thank you
Presentation and Training by
P. R. Kulkarni
Consultant
Banking, Law and Banking Technology and
Author
Pune.
9850812443
kingbankers@rediffmail.com
www.prkulkarni.com
P. R. Kulkarni, Consultant - Banking,
Law and Banking Technology and
62