Amendments in the SARFAESI Act, 2002
The Supreme Court, in its judgement in the matter of
Mardia Chemicals Ltd. and Others Vs Union of India and
Others upheld the constitutional validity of the
SARFAESI Act but struck down Sub-Section (2) of
Section 17 which provides for a deposit of 75% of the
claimed amount before the appeal is admitted by DRT.
The Supreme Court also held that after the service
notice, if the borrower raises any objection or places
facts for consideration of the creditor, the same may
be considered with due application of mind and the
reasons for not accepting the objection must be
communicated to the borrower. However, the borrower
will be able to move the Secured Creditor has taken
the DRT only after the possession of secured asset.
2. To bring the provisions of the Act in conformity
with the Judgement of the Hon'ble Supreme Court Order,
to dissuade the borrower from indulging in dilatory
tactics with a view to postpone the repayment of dues
and to enable secured creditors to make speedy
recovery by enforcement of securities, the
Securitisation and Reconstruction of Financial Assets
and Enforcement of Security Interest Act, 2002 has
been amended by promulgation of the Enforcement of
Security Interest and Recovery of Debt Laws
(Amendment) Ordinance, 2004 (Ord. 5 of 2004) on
11.11.2004.
3. The salient amendments are as under:-
(i) The Secured Creditor will be able to take
possession of the secured assets only after reasons
for not accepting the objections of the borrower have
been communicated to him in writing. After possession
of the secured asset has been taken, the borrower can
file an application before the DRT without any
deposit. If the DRT does not dispose off the petition
within 4 months, the borrower or the Secured Creditor
can move the Debt Recovery Appellate Tribunal (DRAT)
for directing the DRT for expeditious disposal of the
application.
After the disposal of the case by the DRT the
borrower, if aggrieved, can appeal to the DRAT with a
deposit of 50% of the decreed amount or as determined
by the DRT but not lower than 25%.
(ii) To confer power upon the Appellate Tribunal to
transfer all pending applications before different
DRTs to one DRT.
(iii) To empower RBI to call for periodic returns and
information from Securitisation Companies and Asset
Re-construction Companies.
(iv) To provide for taking over of management of the
business of the borrower under Section 13(4). This
was omitted in the original Act. Though Section 15
provides for the manner and effect of take over of
management of business, Section 13(4) did not provide
for taking over the borrower's business by the Secured
Creditor.
4. Other amendments are of clarificatory and
consequential nature.
(Release ID :4921)