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      Question

      Section 13(6) of the SARFAESI Act deals with the legal

      effect of a transfer of secured assets made by the secured creditor (or the manager on its behalf) after taking possession. What right does the transferee receive?
      A The transferee receives title subject to the borrower's right of redemption Correct Answer Incorrect Answer
      B The transferee acquires only a leasehold interest, not a freehold title Correct Answer Incorrect Answer
      C The transferee's title is valid only upon court confirmation Correct Answer Incorrect Answer
      D The transferee acquires title only to the extent of the secured debt outstanding Correct Answer Incorrect Answer
      E All rights in or in relation to the secured asset vest in the transferee as if the transfer had been made by the owner of such secured asset Correct Answer Incorrect Answer

      Solution

      Section 13(6) provides that any transfer of a secured asset after taking possession or takeover of management by the secured creditor (or by the manager on behalf of the secured creditor) under Section 13(4) shall vest in the transferee 'all rights in, or in relation to, the secured asset transferred as if the transfer had been made by the owner of such secured asset.' This is a crucial provision that gives the purchaser at an enforcement sale a clean, indefeasible title equivalent to that of the owner - removing any cloud arising from the fact that the seller was the bank/creditor and not the legal owner. This clean title provision is essential for creating a viable market for distressed asset sales under SARFAESI.

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