Question
Consider the following statements regarding Sarfaesi
Act I. It was brought in to guard financial institutions against loan defaulters. II. Co-operative banks and NBFCs cannot invoke Sarfaesi Act. III. The law is applicable throughout the country and covers both movable an immovable assets. Which of the following statements is/are correct?Solution
Banks have invoked the Sarfaesi Act against telecom infrastructure provider GTL to recover their pending dues. Aim: 路聽聽聽聽聽聽聽聽 It was brought in to guard financial institutions against loan defaulters. 路聽聽聽聽聽聽聽聽 Taking control of the secured assets 路聽聽聽聽聽聽聽聽 Take over management of the secured assets, as well as the right to transfer the secured assets via lease, assignment, or sale 路聽聽聽聽聽聽聽聽 Designate someone to administer the secured assets 路聽聽聽聽聽聽聽聽 To recover their bad debts, the banks under this law can take control of securities pledged against the loan, manage or sell them to recover dues without court intervention. Coverage: Co-operative banks can also invoke Sarfaesi Act. 路聽聽聽聽聽聽聽聽 The non-banking financial companies (NBFCs) can initiate recovery in Rs 20 lakh loan default cases. 路聽聽聽聽聽聽聽聽 Application: The law is applicable throughout the country and covers all assets, movable or immovable, promised as security to the lender. Powers: 路聽聽聽聽聽聽聽聽 The Act comes into play if a borrower defaults on his or her payments for more than six months. 路聽聽聽聽聽聽聽聽 The lender then can send a notice to the borrower to clear the dues within 60 days. 路聽聽聽聽聽聽聽聽 In case that doesn鈥檛 happen, the financial institution has the right to take possession of the secured assets and sell, transfer or manage them. 路聽聽聽聽聽聽聽聽 The defaulter, meanwhile, has recourse to move an appellate authority set up under the law within 30 days of receiving a notice from the lender. Modes of recovery under the SARFAESI Act 路聽聽聽聽聽聽聽聽 Securitisation 路聽聽聽聽聽聽聽聽 Asset reconstruction 路聽聽聽聽聽聽聽聽 Enforcement of security without the interruption of the court
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