The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002

(1) This Act may be called the Securitisation andReconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. (2) It extends to the whole of India. (3) It shall be deemed to have come into force on the 21st day of June, 2002.

(1) In this Act, unless the context otherwise requires,-- (a) Appellate Tribunal means a Debts Recovery Appellate Tribunal established undersub-section (1) of section 8 of the Recovery of Debts Due to Banks and Financial Institutions Act,1993 (51 of 1993); (b) asset reconstruction means acquisition by any 1[asset reconstruction company]of any rightor interest of any bank or financial institution in any financial assistance for the purpose of realisationof such financial assistance; 2[(ba) asset reconstruction company means a company registered with Reserve Bank undersection 3 for the purposes of carrying on the business of asset reconstruction or securitisation, orboth;] (c) bank means-- (i) a banking company; or (ii) a corresponding new bank; or (iii) the State Bank of India; or (iv) a subsidiary bank; or 3[(iva) a multi-State co-operative bank; or] (v) such other bank which the Central Government may, by notification, specify for thepurposes of this Act; (d) banking company shall have the meaning assigned to it in clause (c) of section 5 of theBanking Regulation Act, 1949 (10 of 1949); (e) Board means the Securities and Exchange Board of India established under section 3 of theSecurities and Exchange Board of India Act, 1992 (15 of 1992); (f) borrower means 4[any person who, or a pooled investment vehicle as defined in clause (da)of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) which,] has been granted financial assistance by any bank orfinancial institution or who has given any guarantee or created any mortgage or pledge as security forthe financial assistance granted by any bank or financial institution 5[and includes a person who, or a pooled investment vehicle which,]becomes borrower of a 6[asset reconstruction company]consequent upon acquisition by it of anyrights or interest of any bank or financial institution in relation to such financial assistance7[or whohas raised funds through issue of debt securities]; (g) Central Registry means the registry set up or cause to be set up under sub-section (1) ofsection 20; 7[(ga) company means a company as defined in clause (20) of section 2 of the CompaniesAct, 2013 (18 of 2013);] (h) corresponding new bank shall have the meaning assigned to it in clause (da) of section 5 ofthe Banking Regulation Act, 1949 (10 of 1949); 8[(ha) debt shall have the meaning assigned to it in clause (g) of section 2 of the Recovery ofDebts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) and includes-- (i) unpaid portion of the purchase price of any tangible asset given on hire or financial leaseor conditional sale or under any other contract; (ii) any right, title or interest on any intangible asset or licence or assignment of suchintangible asset, which secures the obligation to pay any unpaid portion of the purchase price ofsuch intangible asset or an obligation incurred or credit otherwise extended to enable anyborrower to acquire the intangible asset or obtain licence of such asset;] (i) Debts Recovery Tribunal means the Tribunal established under sub-section (1) of section 3of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 (51 of 1993); 9[(ia) debt securities means debt securities listed in accordance with the regulations made bythe Board under the Securities and Exchange Board of India Act,1992 (15 of 1992);] 10[(j) default means-- (i) non-payment of any debt or any other amount payable by the borrower to any securedcreditor consequent upon which the account of such borrower is classified as non-performingasset in the books of account of the secured creditor; or (ii) non-payment of any debt or any other amount payable by the borrower with respect todebt securities after notice of ninety days demanding payment of dues served upon such borrowerby the debenture trustee or any other authority in whose favour security interest is created for thebenefit of holders of such debt securities;] (k) financial assistance means any loan or advance granted or any debentures or bondssubscribed or any guarantees given or letters of credit established or any other credit facility extendedby any bank or financial institution11[including funds provided for the purpose of acquisition of any tangible asset on hire or financial lease or conditional sale or under any other contract or obtainingassignment or licence of any intangible asset or purchase of debt securities;] (l) financial asset means debt or receivables and includes-- (i) a claim to any debt or receivables or part thereof, whether secured or unsecured; or (ii) any debt or receivables secured by, mortgage of, or charge on, immovable property; or (iii) a mortgage, charge, hypothecation or pledge of movable property; or (iv) any right or interest in the security, whether full or part underlying such debt orreceivables; or (v) any beneficial interest in property, whether movable or immovable, or in such debt,receivables, whether such interest is existing, future, accruing, conditional or contingent; or 12[(va) any beneficial right, title or interest in any tangible asset given on hire or financial leaseor conditional sale or under any other contract which secures the obligation to pay any unpaidportion of the purchase price of such asset or an obligation incurred or credit otherwise providedto enable the borrower to acquire such tangible asset; or (vb) any right, title or interest on any intangible asset or licence or assignment of suchintangible asset, which secures the obligation to pay any unpaid portion of the purchase price ofsuch intangible asset or an obligation incurred or credit otherwise extended to enable theborrower to acquire such intangible asset or obtain licence of the intangible asset; or] (vi) any financial assistance; (m)financial institution means-- (i) a public financial institution within the meaning of section 4A of the Companies Act, 1956(1 of 1956); (ii) any institution specified by the Central Government under sub-clause (ii) of clause (h) ofsection 2 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993(51 of 1993); (iii) the International Finance Corporation established under the International FinanceCorporation (Status, Immunities and Privileges ) Act, 1958 (42 of 1958); 13[(iiia) a debenture trustee registered with the Board and appointed for secured debtsecurities; (iiib) asset reconstruction company, whether acting as such or managing a trust created forthe purpose of securitisation or asset reconstruction, as the case may be;] (iv) any other institution or non-banking financial company as defined in clause (f) of section45-I of the Reserve Bank of India Act, 1934 (2 of 1934), which the Central Government may, bynotification, specify as financial institution for the purposes of this Act; 14[(ma) financial lease means a lease under any lease agreement of tangible asset, other thannegotiable instrument or negotiable document, for transfer of lessor's right therein to the lessee for acertain time in consideration of payment of agreed amount periodically and where the lessee becomesthe owner of the such assets at the expiry of the term of lease or on payment of the agreed residualamount, as the case may be;] (n) hypothecation means a charge in or upon any movable property, existing or future, createdby a borrower in favour of a secured creditor without delivery of possession of the movable propertyto such creditor, as a security for financial assistance and includes floating charge and crystallizationof such charge into fixed charge on movable property; 15[(na) negotiable document means a document, which embodies a right to delivery of tangibleassets and satisfies the requirements for negotiability under any law for the time being in forceincluding warehouse receipt and bill of lading;] (o) non-performing asset means an asset or account of a borrower, which has been classified bya bank or financial institution as sub-standard, 16[doubtful or loss asset, (a) in case such bank or financial institution is administered or regulated by any authority orbody established, constituted or appointed by any law for the time being in force, in accordancewith the directions or guidelines relating to assets classifications issued by such authority or body; (b) in any other case, in accordance with the directions or guidelines relating to assetsclassifications issued by the Reserve Bank]; (p) notification means a notification published in the Official Gazette; (q) obligor means a person liable to the originator, whether under a contract or otherwise, topay a financial asset or to discharge any obligation in respect of a financial asset, whether existing,future, conditional or contingent and includes the borrower; (r) originator means the owner of a financial asset which is acquired by a 17[asset reconstructioncompany]for the purpose of securitisation or asset reconstruction; (s) prescribed means prescribed by rules made under this Act; (t) property means-- (i) immovable property; (ii) movable property; (iii) any debt or any right to receive payment of money, whether secured or unsecured; (iv) receivables, whether existing or future; (v) intangible assets, being know-how, patent, copyright, trade mark, licence, franchise or anyother business or commercial right of similar nature18[as may be prescribed by the CentralGovernment in consultation with Reserve Bank]; (u) 19[qualified buyer] means a financial institution, insurance company, bank, statefinancial corporation, state industrial development corporation, 20[trustee or 21[asset reconstructioncompany]which has been granted a certificate of registration under sub-section (4) of section 3 orany asset management company making investment on behalf of mutual fund] or a foreigninstitutional investor registered under the Securities and Exchange Board of India Act, 1992(15 of 1992) or regulations made thereunder,22[any category of non-institutional investors as maybe specified by the Reserve Bank under sub-section (1) of section 7] or any other body corporateas may be specified by the Board; 13* * * * * (w) Registrar of Companies means the Registrar defined in clause (40) of section 2 of theCompanies Act, 1956 (1 of 1956); (x) Reserve Bank means the Reserve Bank of India constituted under section 3 of the ReserveBank of India Act, 1934 (2 of 1934); (y) scheme means a scheme inviting subscription to security receipts proposed to be issued by a14[asset reconstruction company]under that scheme; (z) securitisation means acquisition of financial assets by any 14[asset reconstructioncompany]from any originator, whether by raising of funds by such 14[asset reconstructioncompany]from 15[qualified buyers]by issue of security receipts representing undivided interest in suchfinancial assets or otherwise; 13* * * * * (zb) security agreement means an agreement, instrument or any other document or arrangementunder which security interest is created in favour of the secured creditor including the creation ofmortgage by deposit of title deeds with the secured creditor; (zc) secured asset means the property on which security interest is created; 16[(zd) secured creditor' means-- (i) any bank or financial institution or any consortium or group of banks or financialinstitutions holding any right, title or interest upon any tangible asset or intangible asset asspecified in clause (l); (ii) debenture trustee appointed by any bank or financial institution; or (iii) an asset reconstruction company whether acting as such or managing a trust set up bysuch asset reconstruction company for the securitisation or reconstruction, as the case may be; or (iv) debenture trustee registered with 17[the Board and appointed] for secured debtsecurities; or (v) any other trustee holding securities on behalf of a bank or financial institution,in whose favour security interest is created by any borrower for due repayment of any financialassistance.] (ze) secured debt means a debt which is secured by any security interest; 18[(zf) security interest means right, title or interest of any kind, other than those specified insection 31, upon property created in favour of any secured creditor and includes-- (i) any mortgage, charge, hypothecation, assignment or any right, title or interest of any kind,on tangible asset, retained by the secured creditor as an owner of the property, given on hire orfinancial lease or conditional sale or under any other contract which secures the obligation to payany unpaid portion of the purchase price of the asset or an obligation incurred or credit providedto enable the borrower to acquire the tangible asset; or (ii) such right, title or interest in any intangible asset or assignment or licence of suchintangible asset which secures the obligation to pay any unpaid portion of the purchase price ofthe intangible asset or the obligation incurred or any credit provided to enable the borrower toacquire the intangible asset or licence of intangible asset;] (zg) security receipt means a receipt or other security, issued by a 19[asset reconstructioncompany]to any 20[qualified buyer]pursuant to a scheme, evidencing the purchase oracquisition by theholder thereof, of an undivided right, title orinterest in the financial asset involved in securitisation; (zh) sponsor means any person holding not less than ten per cent. of the paid-up equity capitalof a 21[asset reconstruction company]; (zi) State Bank of India means the State Bank of India constituted under section 3 of the StateBank of India Act, 1955 (23 of 1955); (zj) subsidiary bank shall have the meaning assigned to it in clause (k) of section 2 of the StateBank of India (Subsidiary Banks) Act, 1959 (38 of 1959). (2) Words and expressions used and not defined in this Act but defined in the Indian Contract Act,1872 (9 of 1872) or the transfer of Property Act, 1882 (4 of 1882) or the Companies Act, 1956(1 of 1956) or the Securities and Exchange Board of India Act 1992 (15 of 1992) shall have the samemeanings respectively assigned to them in those Acts.

3. Registration of 1[asset reconstruction companies].--(1) No 2[asset reconstruction company] shallcommence or carry on the business of securitisation or asset reconstruction without-- (a) obtaining a certificate of registration granted under this section; and 3[(b) having net owned fund of not less than two crore rupees or such other higher amount as theReserve Bank, may, by notification, specify;] Provided that the Reserve Bank may, by notification, specify different amounts of owned fund fordifferent class or classes of 2[asset reconstruction companies]: Provided further that a 1[asset reconstruction company], existing on the commencement of this Act,shall make an application for registration to the Reserve Bank before the expiry of six months from suchcommencement and notwithstanding anything contained in this sub-section may continue to carry on thebusiness of securitisation or asset reconstruction until a certificate of registration is granted to it or, as thecase may be, rejection of application for registration is communicated to it. (2) Every 1[asset reconstruction company] shall make an application for registration to the ReserveBank in such form and manner as it may specify. (3) The Reserve Bank may, for the purpose of considering the application for registration of a 1[asset reconstruction company] to commence or carry on the business of securitisation or asset reconstruction, asthe case may be, require to be satisfied, by an inspection of records or books of such 1[asset reconstructioncompany], or otherwise, that the following conditions are fulfilled, namely:-- (a) that the 1[asset reconstruction company] has not incurred losses in any of the three precedingfinancial years; (b) that such 1[asset reconstruction company] has made adequate arrangements for realisation of the financial assets acquired for the purpose of securitisation or asset reconstruction and shall be ableto pay periodical returns and redeem on respective due dates on the investments made in the companyby the 4[qualified buyers]or other persons; (c) that the directors of 1[asset reconstruction company] have adequate professional experience inmatters related to finance, securitisation and reconstruction; 5* * * * * (e) that any of its directors has not been convicted of any offence involving moral turpitude; 6[(f) that a sponsor of an asset reconstruction company is a fit and proper person in accordancewith the criteria as may be specified in the guidelines issued by the Reserve Bank for such persons;] (g) that 1[asset reconstruction company] has complied with or is in a position to comply withprudential norms specified by the Reserve Bank; 7[(h) that 1[asset reconstruction company] has complied with one or more conditions specified inthe guidelines issued by the Reserve Bank for the said purpose.] (4) The Reserve Bank may, after being satisfied that the conditions specified in sub-section (3) arefulfilled, grant a certificate of registration to the 1[asset reconstruction company] to commence or carry onon business of securitisation or asset reconstruction, subject to such conditions, which it may consider, fit to impose. (5) The Reserve Bank may reject the application made under sub-section (2) if it is satisfied that theconditions specified in sub-section (3) are not fulfilled: Provided that before rejecting the application, the applicant shall be given a reasonable opportunity ofbeing heard. (6) Every 1[asset reconstruction company] shall obtain prior approval of the Reserve Bank for anysubstantial change in its management 8[including appointment of any director on the board of directors ofthe asset reconstruction company or managing director or chief executive officer thereof] or change oflocation of its registered office or change in its name: Provided that the decision of the Reserve Bank, whether the change in management of a 1[assetreconstruction company] is a substantial change in its management or not, shall be final. Explanation.--For the purposes of this section, the expression "substantial change in management"means the change in the management by way of transfer of shares or 8[change affecting the sponsorship inin the company by way of transfer of shares or] amalgamation or transfer of the business of the company.

(1) The Reserve Bank may cancel a certificate ofregistration granted to a 1[asset reconstruction company], if such company-- (a) ceases to carry on the business of securitisation or asset reconstruction; or (b) ceases to receive or hold any investment from a 2[qualified buyer]; or (c) has failed to comply with any conditions subject to which the certificate of registration hasbeen granted to it; or (d) at any time fails to fulfil any of the conditions referred to in clauses (a) to (g) of sub-section(3) of section 3; or (e) fails to-- (i) comply with any direction issued by the Reserve Bank under the provisions of this Act; or (ii) maintain accounts in accordance with the requirements of any law or any direction ororder issued by the Reserve Bank under the provisions of this Act; or (iii) submit or offer for inspection its books of account or other relevant documents when so demanded by the Reserve Bank; or (iv) obtain prior approval of the Reserve Bank required under sub-section (6) of section 3: Provided that before cancelling a certificate of registration on the ground that the 3[asset reconstruction company] has failed to comply with the provisions of clause (c) or has failed to fulfil anyof the conditions referred to in clause (d) or sub-clause (iv) of clause (e), the Reserve Bank, unless it is ofthe opinion that the delay in cancelling the certificate of registration granted undersub-section (4) of section 3 shall be prejudicial to the public interest or the interests of the investors or the3[asset reconstruction company], shall give an opportunity to such company on such terms as the ReserveBank may specify for taking necessary steps to comply with such provisions or fulfilment of suchconditions. (2) A 3[asset reconstruction company] aggrieved by the order of 5*** cancellation of certificate ofregistration may prefer an appeal, within a period of thirty days from the date on which 6[such order ofcancellation] is communicated to it, to the Central Government: Provided that before rejecting an appeal such company shall be given a reasonable opportunity ofbeing heard. (3) A 3[asset reconstruction company], which is holding investments of 7[qualified buyers] and whosewhose application for grant of certificate of registration has been rejected or certificate of registration hasbeen cancelled shall, notwithstanding such rejection or cancellation be deemed to be a 3[assetreconstruction company]until it repays the entire investments held by it (together with interest, if any)within such period as the Reserve Bank may direct.

(1) Notwithstanding anything contained inany agreement or any other law for the time being in force, any 1[asset reconstruction company] mayacquire financial assets of any bank or financial institution-- (a) by issuing a debenture or bond or any other security in the nature of debenture, forconsideration agreed upon between such company and the bank or financial institution, incorporatingtherein such terms and conditions as may be agreed upon between them; or (b) by entering into an agreement with such bank or financial institution for the transfer of suchfinancial assets to such company on such terms and conditions as may be agreed upon between them. 2[(1A) Any document executed by any bank or financial institution under sub-section (1) in favour ofthe asset reconstruction company acquiring financial assets for the purposes of asset reconstruction orsecuritisation shall be exempted from stamp duty in accordance with the provisions of section 8F of theIndian Stamp Act, 1899 (2 of 1899): Provided that the provisions of this sub-section shall not apply where the acquisition of the financialassets by the asset reconstruction company is for the purposes other than asset reconstruction orsecuritisation.] (2) If the bank or financial institution is a lender in relation to any financial assets acquired undersub-section (1) by the 3[asset reconstruction company], such 4[asset reconstruction company] shall, onsuch acquisition, be deemed to be the lender and all the rights of such bank or financial institution shallvest in such company in relation to such financial assets. 2[(2A) If the bank or financial institution is holding any right, title or interest upon any tangible assetor intangible asset to secure payment of any unpaid portion of the purchase price of such asset or anobligation incurred or credit otherwise provided to enable the borrower to acquire the tangible asset orassignment or licence of intangible asset, such right, title or interest shall vest in the asset reconstructioncompany on acquisition of such assets under sub-section (1).] (3) Unless otherwise expressly provided by this Act, all contracts, deeds, bonds, agreements, powers of-attorney,grants of legal representation, permissions, approvals, consents or no-objections under any law or otherwise and other instruments of whatever nature which relate to the said financial asset andwhich are subsisting or having effect immediately before the acquisition of financial asset undersub-section (1) and to which the concerned bank or financial institution is a party or which are in favourof such bank or financial institution shall, after the acquisition of the financial assets, be of as full forceand effect against or in favour of the 4[asset reconstruction company], as the case may be, and may beenforced or acted upon as fully and effectually as if, in the place of the said bank or financial institution, 4[asset reconstruction company], as the case may be, had been a party thereto or as if they had been issuedin favour of 4[asset reconstruction company], as the case may be. (4) If, on the date of acquisition of financial asset under sub-section (1), any suit, appeal or otherproceeding of whatever nature relating to the said financial asset is pending by or against the bank orfinancial institution, save as provided in the third proviso to sub-section (1) of section 15 of the SickIndustrial Companies (Special Provisions) Act, 1985 (1 of 1986) the same shall not abate, or bediscontinued or be, in any way, prejudicially affected by reason of the acquisition of financial asset bythe4[asset reconstruction company], as the case may be, but the suit, appeal or other proceeding may becontinued, prosecuted and enforced by or against the 4[asset reconstruction company], as the case may be. 5[(5) On acquisition of financial assets under sub-section (1), the 4[asset reconstruction company],may with the consent of the originator, file an application before the Debts Recovery Tribunal or theAppellate Tribunal or any court or other Authority for the purpose of substitution of its name in anypending suit, appeal or other proceedings and on receipt of such application, such Debts RecoveryTribunal or the Appellate Tribunal or court or Authority shall pass orders for the substitution of the 4[asset reconstruction company] in such pending suit, appeal or other proceedings.]