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TMI BlogEnforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016X X X X Extracts X X X X X X X X Extracts X X X X ..... he Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016. (2) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint: Provided that different dates may be appointed for different provisions of this Act, and any reference in any such provision to the commencement of this Act shall be construed as a reference to the coming into force of that provision. CHAPTER II AMENDMENTS TO THE SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT, 2002 Amendment of long title. 2. In the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 [54 of 2002], (hereinafter referred to in this Chapter as the principal Act), for the long title, the following shall be substituted, namely: An Act to regulate securitisation and reconstruction of financial assets and enforcement of security interest and to provide for a Central database of security interests created on property rights, and for matters connected therewith or incidental thereto. . Substitution of references to certain expressions by other e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the Board under the Securities and Exchange Board of India Act,1992 (15 of 1992) ;'; (vi) for clause (j), the following clause shall be substituted, namely: '(j) default means (i) non-payment of any debt or any other amount payable by the borrower to any secured creditor consequent upon which the account of such borrower is classified as non-performing asset 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 to debt securities after notice of ninety days demanding payment of dues served upon such borrower by the debenture trustee or any other authority in whose favour security interest is created for the benefit of holders of such debt securities;'; (vii) in clause (k), after the words any bank or financial institution , the following words shall be inserted, namely: 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 obtaining assignment or licence of any intangible asset or purchase of debt securities; ; (viii) in clause (l), after sub-clause (v), the following sub-clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted; (xv) clause (za) shall be omitted; (xvi) for clause (zd), the following clause shall be substituted, namely: '(zd) secured creditor means (i) any bank or financial institution or any consortium or group of banks or financial institutions holding any right, title or interest upon any tangible asset or intangible asset as specified 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 by such asset reconstruction company for the securitisation or reconstruction, as the case may be; or (iv) debenture trustee registered with the Board appointed by any company for secured debt securities; 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 financial assistance.'; (xvii) for clause (zf), the following clause shall be substituted, namely: '(zf) security interest means right, title or interest of any kind, other than those specified in section 31, upon property created in favour of any secured creditor and includes (i) any mortg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction shall not apply where the acquisition of the financial assets by the asset reconstruction company is for the purposes other than asset reconstruction or securitisation. ; (ii) after sub-section (2), the following sub-section shall be inserted, namely: (2A) If the bank or financial institution is holding any right, title or interest upon any tangible asset or intangible asset to secure payment of any unpaid portion of the purchase price of such asset or an obligation incurred or credit otherwise provided to enable the borrower to acquire the tangible asset or assignment or licence of intangible asset, such right, title or interest shall vest in the asset reconstruction company on acquisition of such assets under sub-section (1). ; Amendment of section 7. 7. In the principal Act, in section 7, in sub-section (1), for the brackets and words (other than by offer to public) , the words or such other category of investors including non-institutional investors as may be specified by the Reserve Bank in consultation with the Board, from time to time, shall be substituted. Substitution of new section for section 9. 8. In the principal Act, for section 9, the following section shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or otherwise, the Reserve Bank is satisfied that business of an asset reconstruction company is being conducted in a manner detrimental to public interest or to the interests of investors in security receipts issued by such asset reconstruction company, the Reserve Bank may, for securing proper management of an asset reconstruction company, by an order (a) remove the Chairman or any director or appoint additional directors on the board of directors of the asset reconstruction company; or (b) appoint any of its officers as an observer to observe the working of the board of directors of such asset reconstruction company: Provided that no order for removal of Chairman or director under clause (a) shall be made except after giving him an opportunity of being heard. (4) It shall be the duty of every director or other officer or employee of the asset reconstruction company to produce before the person, conducting an audit or inspection under sub-section (1), all such books, accounts and other documents in his custody or control and to provide him such statements and information relating to the affairs of the asset reconstruction company as may be required by such person within the stipu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y asset reconstruction company or financial institution or any other assignee has converted part of its debt into shares of a borrower company and thereby acquired controlling interest in the borrower company, such secured creditors shall not be liable to restore the management of the business to such borrower. . Amendment of section 17. 14. In the principal Act, in section 17, (i) for the marginal heading Right to appeal , the words Application against measures to recover secured debts shall be substituted; (ii) after sub-section (1), the following sub-sections shall be inserted, namely: (1A) An application under sub-section (1) shall be filed before the Debts Recovery Tribunal within the local limits of whose jurisdiction (a) the cause of action, wholly or in part, arises; (b) where the secured asset is located; or (c) the branch or any other office of a bank or financial institution is maintaining an account in which debt claimed is outstanding for the time being. ; (iii) for sub-section (3), the following sub-section shall be substituted, namely: (3) If, the Debts Recovery Tribunal, after examining the facts and circumstances of the case and evidence produced by the parties, co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erson shall be substituted. Insertion of new sections 20A and 20B. 16. In the principal Act, after section 20, the following sections shall be inserted, namely: Integration of registration systems with Central Registry. 20A. (1) The Central Government may, for the purpose of providing a Central database, in consultation with State Governments or other authorities operating registration system for recording rights over any property or creation, modification or satisfaction of any security interest on such property, integrate the registration records of such registration systems with the records of Central Registry established under section 20, in such manner as may be prescribed. Explanation. For the purpose of this sub-section, the registration records includes records of registration under the Companies Act, 2013 (18 of 2013.), the Registration Act, 1908 (16 of 1908), the Merchant Shipping Act, 1958 (44 of 1958), the Motor Vehicles Act, 1988 (59 of 1988.), the Patents Act, 1970 (39 of 1970), the Designs Act, 2000 (16 of 2000) or other such records under any other law for the time being in force. (2) The Central Government shall after integration of records of various registration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation under sub-section (1), any creditor including the secured creditor may file particulars of transactions of creation, modification or satisfaction of any security interest with the Central Registry in such form and manner as may be prescribed. (3) A creditor other than the secured creditor filing particulars of transactions of creation, modification and satisfaction of security interest over properties created in its favour shall not be entitled to exercise any right of enforcement of securities under this Act. (4) Every authority or officer of the Central Government or any State Government or local authority, entrusted with the function of recovery of tax or other Government dues and for issuing any order for attachment of any property of any person liable to pay the tax or Government dues, shall file with the Central Registry such attachment order with particulars of the assessee and details of tax or other Government dues from such date as may be notified by the Central Government, in such form and manner as may be prescribed. (5) If any person, having any claim against any borrower, obtains orders for attachment of property from any court or other authority empowered to i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here insolvency or bankruptcy proceedings are pending in respect of secured assets of the borrower, priority to secured creditors in payment of debt shall be subject to the provisions of that Code. . Amendment of section 27. 19. In section 27, the following proviso shall be inserted, namely: Provided that provisions of this section shall be deemed to have been omitted from the date of coming into force of the provisions of this Chapter and section 23 as amended by the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016. . Omission of section 28. 20. In the principal Act, section 28, shall be omitted. Insertion of new sections 30A, 30B, 30C and 30D. 21. In the principal Act, after section 30, the following sections shall be inserted, namely: Power of adjudicating authority to impose penalty. 30A. (1) Where any asset reconstruction company or any person fails to comply with any direction issued by the Reserve Bank under this Act the adjudicating authority may, by an order, impose on such company or person in default, a penalty not exceeding one crore rupees or twice the amount involved in such failure where such amount is qua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an appeal after the expiry of the said period of thirty days, if it is satisfied that there was sufficient cause for not filing it within such period. Appellate Authority 30C. (1) The Central Board of Reserve Bank may designate such officer or committee of officers as it deems fit to exercise the power of Appellate Authority. (2) The Appellate Authority shall have power to pass such order as it deems fit after providing a reasonable opportunity of being heard to the person in default. (3) The Appellate Authority may, by an order stay the enforcement of the order passed by the adjudicating authority under section 30A, subject to such terms and conditions, as it deems fit. (4) Where the person in default fails to comply with the terms and conditions imposed by order under sub-section (3) without reasonable cause, the Appellate Authority may dismiss the appeal. Recovery of penalties. 30D. (1) Any penalty imposed under section 30A shall be recovered as a recoverable sum and shall be payable within a period of thirty days from the date on which notice demanding payment of the recoverable sum is served upon the person in default and, in the case of failure of payment by such person with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid. (8) Any person discharging any liability to the person in default after the receipt of a notice under this section shall be personally liable to the Reserve Bank (a) to the extent of his own liability to the person in default so discharged; or (b) to the extent of the recoverable sum payable by the person in default to the Reserve Bank, whichever is less. (9) Where the person to whom the notice is sent under this section, fails to make payment in pursuance thereof to the Reserve Bank, he shall be deemed to be the person in default in respect of the amount specified in the notice and action or proceedings may be taken or instituted against him for the realisation of the amount in the manner provided in this section. (10) The Reserve Bank may enforce recovery of recoverable sum through the principal civil court having jurisdiction in the area where the registered office or the head office or the principal place of business of the person in default or the usual place of residence of such person is situated as if the notice issued by the Reserve Bank were a decree of the Court. (11) No recovery under sub-section (10) shall be enforced, except on an application made to the princip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterests and fee thereof under sub-section (3) of section 23; ;` (iv) after clause (f), the following clauses shall be inserted, namely: (fa) the form and the manner for filing particulars of transactions under sub-section (2) of section 26B; (fb) the form and manner of filing attachment orders with the Central Registry and the date under sub-section (4) of section 26B; (fc) the form and manner of filing particulars of attachment order with the Central Registry and the fee under sub-section (5) of section 26B. . CHAPTER III AMENDMENTS TO THE RECOVERY OF DEBTS DUE TO BANKS AND FINANCIAL INSTITUTIONS ACT, 1993 Amendment of section 2. 26. In the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) (hereinafter in this Chapter referred to as the principal Act), in section 2, (i) in clause (g), after the words the date of the application , the following words shall be inserted, namely: and includes any liability towards debt securities which remains unpaid in full or part after notice of ninety days served upon the borrower by the debenture trustee or any other authority in whose favour security interest is created for the benefit of holders of debt securitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight, title or interest in any intangible asset or licence of any intangible asset, which secures the obligation to pay any unpaid portion of the purchase price of the intangible asset or the obligation incurred or any credit extended to enable the borrower to acquire the intangible asset or licence of intangible asset;'. Amendment of section 4. 27. In the principal Act, in section 4, for sub-section (2), the following sub-section shall be substituted, namely: (2) Notwithstanding anything contained in sub-section (1), the Central Government may (a) authorise the Presiding Officer of any other Tribunal established under any other law for the time being in force to discharge the function of the Presiding Officer of a Debt Recovery Tribunal under this Act in addition to his being the Presiding Officer of that Tribunal; or (b) authorise the judicial Member holding post as such in any other Tribunal, established under any other law for the time being in force, to discharge the functions of the Presiding Officer of Debts Recovery Tribunal under this Act, in addition to his being the judicial Member of that Tribunal. . Amendment of section 6. 28. In the principal Act, for section 6, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or misbehaviour or incapacity, he shall submit a report to the Central Government recommending action against such Presiding Officer, if any, under section 15, and for reasons to be recorded in writing for the same. . Amendment of section 19. 32. In the principal Act, in section 19, (i) in sub-section (1), clause (a) shall be renumbered as clause (aa) and before clause (aa) so renumbered, the following clause shall be inserted, namely: (a) the branch or any other office of the bank or financial institution is maintaining an account in which debt claimed is outstanding, for the time being; or ; (ii) for sub-section (3), the following sub-section shall be substituted, namely: (3) Every application under sub-section (1) or sub-section (2) shall be in such form, and shall be accompanied with true copies of all documents relied on in support of the claim along with such fee, as may be prescribed. . (iii) in sub-section (3), after the second proviso, the following Explanation shall be inserted, namely: Explanation. For the purposes of this section, documents includes statement of account or any entry in banker s book duly certified under the Bankers' Books Evidence Act, 1891 (18 of 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceeds realised by sale of secured assets in the ordinary course of business and deposit such sale proceeds in the account maintained with the bank or financial institution holding security interest over such assets. ; (vii) for sub-section (5), the following sub-section shall be substituted, namely: (5) (i) the defendant shall within a period of thirty days from the date of service of summons, present a written statement of his defence including claim for set-off under sub-section (6) or a counter-claim under sub-section (8), if any, and such written statement shall be accompanied with original documents or true copies thereof with the leave of the Tribunal, relied on by the defendant in his defence: Provided that where the defendant fails to file the written statement within the said period of thirty days, the Presiding Officer may, in exceptional cases and in special circumstances to be recorded in writing, extend the said period by such further period not exceeding fifteen days to file the written statement of his defence; (ii) where the defendant makes a disclosure of any property or asset pursuant to orders passed by the Tribunal, the provisions of sub-section (4A) of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g whatsoever, shall be supported by an affidavit sworn in by the applicant or defendant verifying all the facts and pleadings, the statements pleading documents and other documentary evidence annexed to the application or written statement or reply to set-off or counter-claim, as the case may be: Provided that if there is any evidence of witnesses to be led by any party, the affidavits of such witnesses shall be filed simultaneously by the party with the application or written statement or replies filed under sub-section (10A). (10B) If any of the facts or pleadings in the application or written statement are not verified in the manner provided under sub-section (10A), a party to the proceedings shall not be allowed to rely on such facts or pleadings as evidence or any of the matters set out therein. ; (xii) for sub-section (11), the following sub-section shall be substituted, namely: (11)Where a defendant sets up a counter-claim in the written statement and in reply to such claim the applicant contends that the claim thereby raised ought not to be disposed of by way of counter-claim but in an independent action, the Tribunal shall decide such issue along with the claim of the appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the bank or financial institution. Explanation. For the purposes of this sub section, it is hereby clarified that on or after the commencement of the Insolvency and Bankruptcy Code, 2016 (31 of 2016.), in cases where insolvency and bankruptcy proceedings are pending in respect of secured assets of the borrower, the distribution of proceeds from sale of secured assets shall be subject to the order of priority as provided in that Code. . (xx) for sub-section (21), the following sub-section shall be substituted, namely: (21) (i) The Tribunal shall send a copy of its final order and the recovery certificate, to the applicant and defendant. (ii) The applicant and the defendant may obtain copy of any order passed by the Tribunal on payment on such fee as may be prescribed. ; (xxi) for sub-section (22), the following sub-section shall be substituted, namely: (22) The Presiding Officer shall issue a certificate of recovery along with the final order, under sub-section (20), for payment of debt with interest under his signature to the Recovery Officer for recovery of the amount of debt specified in the certificate. ; (xxii) after sub-section (22), the following sub-section shall be inser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal notified under sub-section (1), for the purpose of adopting electronic filing, shall maintain its own website or common website with other Tribunals and Appellate Tribunal or such other universally accessible repositories of electronic information and ensure that all orders or directions issued by the Tribunal or Appellate Tribunal are displayed on the website of the Tribunal or Appellate Tribunal, in such manner as may be prescribed. Explanation. For the purpose of this section, (a) 'digital signature' means the digital signature as defined under clause (p) of section 2 of the Information Technology Act, 2000 (21 of 2000.); (b) 'electronic form' with reference to an information or a document means the electronic form as defined under clause (r) of section 2 of the Information Technology Act, 2000 (21 of 2000). . Amendment of section 20. 34. In the principal Act, in section 20 in sub-section (3), for the words forty-five days , at both the places where they occur, the words thirty days shall be substituted. Amendment of section 21. 35. In the principal Act, in section 21, (i) for the words seventy-five per cent. , the words fifty per cent. shall be substituted; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endant shall forfeit right to file appeal against the orders of the Tribunal. (1C) Where the defendant commits any default in payment of the amount under sub-section (1), the stay of recovery proceedings shall stand withdrawn and the Recovery Officer shall take steps for recovery of remaining amount of debt due and payable. . Insertion of new section 30A. 40. In the principal Act, after section 30, the following section shall be inserted, namely: Deposit of amount of debt due for filing appeal against orders of the Recovery Officer. 30A. Where an appeal is preferred against any order of the Recovery Officer, under section 30, by any person from whom the amount of debt is due to a bank or financial institution or consortium of banks or financial institutions, such appeal shall not be entertained by the Tribunal unless such person has deposited with the Tribunal fifty per cent. of the amount of debt due as determined by the Tribunal. . Insertion of new section 31B. 41. In the principal Act, after section 31A, the following section shall be inserted, namely: Priority to secured creditors. 31B. Notwithstanding anything contained in any other law for the time being in force, the rights ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Amendment of Act 22 of 1996. 44. The Depositories Act, 1996 shall be amended in the manner specified in the Second Schedule. THE FIRST SCHEDULE (See section 43) AMENDMENT TO THE INDIAN STAMP ACT, 1899 (2 OF 1899) After section 8E, the following section shall be inserted, namely: Agreement or document for transfer or assignment of rights or interest in financial assets not liable to stamp duty. 8F. Notwithstanding anything contained in this Act or any other law for the time being in force, any agreement or other document for transfer or assignment of rights or interest in financial assets of banks or financial institutions under section 5 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002), in favour of any asset reconstruction company, as defined in clause (ba) of sub-section (1) of section 2 of that Act, shall not be liable to duty under this Act. . THE SECOND SCHEDULE (See section 44) AMENDMENT TO THE DEPOSITORIES ACT, 1996 (22 OF 1996) In section 7, after sub-section (1), the following sub-sections shall be inserted, namely: (1A) Every depository on receipt of intimation from a participant register any transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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