TaxTMI 
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TaxTMI 
Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016
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....d the 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 certa....
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....se extended to enable any borrower to acquire the intangible asset or obtain licence of such asset;'; (v) after clause (i), the following clause shall be inserted, namely:-- '(ia) "debt securities" means debt securities listed in accordance with the regulations 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, na....
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....e words "right of similar nature", the words "as may be prescribed by the Central Government in consultation with Reserve Bank" shall be inserted; (xiii) in clause (u), after the words "regulations made thereunder,", the words, figures and brackets " any category of non-institutional investors as may be specified by the Reserve Bank under sub-section (1) of section 7" shall be inserted; (xiv) clause (v) shall be omitted; (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 deb....
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....e sponsorship in the company by way of transfer of shares or" shall be inserted. Amendment of section 5. 6. In the principal Act, in section 5,-- (i) after sub-section (1), the following sub-section shall be inserted, namely:-- "(1A) Any document executed by any bank or financial institution under sub-section (1) in favour of the asset reconstruction company acquiring financial assets for the purposes of asset reconstruction or securitisation shall be exempted from stamp duty in accordance with the provisions of section 8F of the Indian Stamp Act, 1899 (2 of 1899): Provided that the provisions of this sub-section 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 t....
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....incurred for management of financial assets acquired by any asset reconstruction company; (d) transfer of security receipts issued to qualified buyers.". Insertion of new section 12B. 10. In the principal Act, after section 12A, the following section shall be inserted, namely:-- Power of Reserve Bank to carry out audit and inspection. "12B. (1) The Reserve Bank may, for the purposes of this Act, carry out or caused to be carried out audit and inspection of an asset reconstruction company from time to time. (2) It shall be the duty of an asset reconstruction company and its officers to provide assistance and cooperation to the Reserve Bank to carry out audit or inspection under sub-section (1). (3) Where on audit or inspection 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....
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....12. In the principal Act, in section 14, in sub-section (1),-- (i) in the second proviso, after the words "secured assets", the words "within a period of thirty days from the date of application" shall be inserted; (ii) after the second proviso, the following proviso shall be inserted, namely:-- "Provided further that if no order is passed by the Chief Metropolitan Magistrate or District Magistrate within the said period of thirty days for reasons beyond his control, he may, after recording reasons in writing for the same, pass the order within such further period but not exceeding in aggregate sixty days.". Amendment of section 15. 13. In the principal Act, in section 15, in sub-section (4), the following proviso shall be inserted, namely:-- "Provided that if any secured creditor jointly with other secured creditors or any 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.". ....
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....65A of the Transfer of Property Act, 1882 (4 of 1882.); or (c) is contrary to terms of mortgage; or (d) is created after the issuance of notice of default and demand by the Bank under sub-section (2) of section 13 of the Act; and (ii) the Debt Recovery Tribunal is satisfied that tenancy right or leasehold rights claimed in secured asset falls under the sub-clause (a) or sub-clause (b) or sub-clause (c) or sub-clause (d) of clause (i), then notwithstanding anything to the contrary contained in any other law for the time being in force, the Debt Recovery Tribunal may pass such order as it deems fit in accordance with the provisions of this Act.". Amendment of section 19. 15. In the principal Act, in section 19, for the words "concerned borrowers, such borrowers", the words "concerned borrowers or any other aggrieved person, who has filed the application under section 17 or section 17A or appeal under section 18 or section 18A, as the case may be, the borrower or such other person" 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....
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....quot;(2) The Central Government may, by notification, require the registration of transaction relating to different types of security interest created on different kinds of property with the Central Registry. (3) The Central Government may, by rules, prescribe forms for registration for different types of security interest under this section and fee to be charged for such registration.". Insertion of new Chapter IVA. 18. In the principal Act, after section 26A, the following chapter shall be inserted, namely:-- "CHAPTER IVA REGISTRATION BY SECURED CREDITORS AND OTHER CREDITORS Registration by secured creditors and other creditors. 26B. (1) The Central Government may by notification, extend the provisions of Chapter IV relating to Central Registry to all creditors other than secured creditors as defined in clause (zd) of sub-section (1) of section 2, for creation, modification or satisfaction of any security interest over any property of the borrower for the purpose of securing due repayment of any financial assistance granted by such creditor to the borrower. (2) From the date of notification under sub-section (1), any creditor including the secured creditor may f....
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.... shall be subject to such claim: Provided that nothing contained in this sub-section shall apply to transactions carried on by the borrower in the ordinary course of business. Right of enforcement of securities. 26D. Notwithstanding anything contained in any other law for the time being in force, from the date of commencement of the provisions of this Chapter, no secured creditor shall be entitled to exercise the rights of enforcement of securities under Chapter III unless the security interest created in its favour by the borrower has been registered with the Central Registry. Priority to secured creditors. 26E. Notwithstanding anything contained in any other law for the time being in force, after the registration of security interest, the debts due to any secured creditor shall be paid in priority over all other debts and all revenues, taxes, cesses and other rates payable to the Central Government or State Government or local authority. Explanation.--For the purposes of this 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 or bankruptcy proceedings are pending in respect of....
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....he Reserve Bank under this section. (6) Where any complaint has been filed against a person in default in the court having jurisdiction no proceeding for imposition of penalty against that person shall be taken under this section. Explanation.--For the purposes of this section and sections 30B, 30C and 30D,-- (i) "adjudicating authority" means such officer or a committee of officers of the Reserve Bank, designated as such from time to time, by notification, by the Central Board of Reserve Bank; (ii) "person in default" means the asset reconstruction company or any person which has committed any failure, contravention or default under this Act and any person incharge of such company or such other person, as the case may be, shall be liable to be proceeded against and punished under section 33 for such failure or contravention or default committed by such company or person. Appeal against penalties. 30B. A person in default, aggrieved by an order passed under sub-section (4) of section 30A, may, within a period of thirty days from the date on which such order is passed, prefer an appeal to the Appellate Authority: Provided that the Appellate Authority may e....
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.... against the demand contained in such notice. (4) Any person, to whom the notice is sent under sub-section (1), objects to such notice by a statement on oath that the sum demanded or any part thereof is not due to the person in default or that he does not hold any money for or on account of the person in default, then nothing contained in this section shall be deemed to require, such person to pay such sum or part thereof, as the case may be. (5) Where it is found that statement made by the person under sub-section (4) is false in material particulars, such person shall be personally liable to the Reserve Bank to the extent of his own liability to the person in default on the date of the notice, or to the extent of the recoverable sum payable by the person in default to the Reserve Bank, whichever is less. (6) The Reserve Bank may, at any time, amend or revoke any notice issued under sub-section (1) or extend the time for making the payment in pursuance of such notice. (7) The Reserve Bank shall grant a receipt for any amount paid to it in compliance with a notice issued under this section and the person so paying shall be fully discharged from his liability to the person in de....
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.... of every notification issued under this section shall, as soon as may be after it has been issued, be laid before each House of Parliament.". Amendment of section 32. 24. In the principal Act, in section 32, for the words "any secured creditor or any of his officers or manager exercising any of the rights of the secured creditor or borrower", the words "the Reserve Bank or the Central Registry or any secured creditor or any of its officers" shall be substituted. Amendment of section 38. 25. In the principal Act, in section 38, in sub-section (2),-- (i) clause (a) shall be numbered as clause (aa) and before clause (aa) as so renumbered, the following clause shall be inserted, namely:-- "(a) other business or commercial rights of similar nature under clause (t) of section 2;"; (ii) after clause (bc), the following clauses shall be inserted, namely:-- "(bca) the manner of integration of records of various registration systems with the records of Central Registry under sub-section (1) of section 20A; (bcb) the terms and conditions of delegation of powers by the Central Government to the Reserve Bank under section 20B."; (iii) afte....
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....e case may be;'; (v) after clause (ja), the following clause shall be inserted, namely:-- '(jb) "property" means-- (a)immovable property; (b)movable property; (c) any debt or any right to receive payment of money, whether secured or unsecured; (d) receivables, whether existing or future; (e) intangible assets, being know-how, patent, copyright, trade mark, licence, franchise or any other business or commercial right of similar nature, as may be prescribed by the Central Government in consultation with Reserve Bank;'; (vi) after clause (l), the following clauses shall be inserted, namely:-- '(la) "secured creditor" shall have the meaning as assigned to it in clause (zd) of sub-section (1) of section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002); (lb) "security interest" means mortgage, charge, hypothecation, assignment or any other right, title or interest of any kind whatsoever upon property, created in favour of any bank or financial institution and includes-- (a) such right, title or interest upon tangible asset, retained by the bank or financial insti....
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....". Amendment of section 11 30. In the Principal Act, for section 11, the following section shall be substituted, namely:-- Term of office of Chairperson of Appellate Tribunal. "11. The Chairperson of an Appellate Tribunal shall hold office for a term of five years from the date on which he enters upon his office and shall be eligible for reappointment: Provided that no person shall hold office as the Chairperson of a Appellate Tribunal after he has attained the age of seventy years.". Amendment of section 17A. 31. In the principal Act, in section 17A, after sub-section (1), the following sub-sections shall be inserted, namely:-- "(1A) For the purpose of exercise of general powers of superintendence and control over Tribunals under sub-section (1), the Chairperson may-- (i) direct the Tribunals to furnish, in such form, at such intervals and within such time, information relating to pending cases both under this Act and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002.), or under any other law for the time being in force, number of cases disposed of, number of new cases filed and such ot....
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....n order directing the defendant to disclose to the Tribunal particulars of other properties or assets owned by the defendants."; (v) for sub-section (4), the following sub-section shall be substituted, namely:-- "(4) On receipt of application under sub-section (1) or sub-section (2), the Tribunal shall issue summons with following directions to the defendant-- (i) to show cause within thirty days of the service of summons as to why relief prayed for should not be granted; (ii) direct the defendant to disclose particulars of properties or assets other than properties and assets specified by the applicant under clauses (a) and (b) of sub-section (3A); and (iii) to restrain the defendant from dealing with or disposing of such assets and properties disclosed under clause (c) of sub-section (3A) pending the hearing and disposal of the application for attachment of properties."; (vi) after sub-section (4), the following sub-section shall be inserted namely:-- "(4A) Notwithstanding anything contained in section 65A of the Transfer of Property Act, 1882 (4 of 1882), the defendant, on service of summons, shall not transfer by way of sale, lease or otherwise except....
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.... 2013 (18 of 2013)."; (viii) for sub-section (5A), the following sub-section shall be substituted namely:-- "(5A) On receipt of the written statement of defendant or on expiry of time granted by the Tribunal to file the written statement, the Tribunal shall fix a date of hearing for admission or denial of documents produced by the parties to the proceedings and also for continuation or vacation of the interim order passed under sub-section (4). (5B) Where a defendant makes an admission of the full or part of the amount of debt due to a bank or financial institution, the Tribunal shall order such defendant to pay the amount, to the extent of the admission within a period of thirty days from the date of such order failing which the Tribunal may issue a certificate in accordance with the provisions of sub-section (22) to the extent of the amount of debt due admitted by the defendant."; (ix) in sub-section (6), after the words "the debt sought to be set-off", the words "the debt sought to be set-off along with original documents and other evidence relied on in support of claim of set-off in relation to any ascertained sum of money, against the applican....
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.... be substituted. (xvii) for sub-section (19), the following sub-section shall be substituted namely:-- "(19) Where a certificate of recovery is issued against a company as defined under the Companies Act, 2013 (18 of 2013) and such company is under liquidation, the Tribunal may by an order direct that the sale proceeds of secured assets of such company be distributed in the same manner as provided in section 326 of the Companies Act, 2013 or under any other law for the time being in force."; (xviii) for sub-section (20), the following sub-section shall be substituted, namely:-- "(20) The Tribunal may, after giving the applicant and the defendant, an opportunity of being heard, in respect of all claims, set-off or counter-claim, if any, and interest on such claims, within thirty days from the date of conclusion of the hearings, pass interim or final order as it deems fit which may include order for payment of interest from the date on which payment of the amount is found due up to the date of realisation or actual payment."; (xix) after sub-section (20A), the following sub-sections shall be inserted, namely:-- "(20AA) While passing the final order unde....
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....ership firm under any law for the time being in force, as the case may be."; (xxiii) in sub-section (24), for the words "endeavour shall be made by it", the following words "every effort shall be made by it to complete the proceedings in two hearings, and" shall be substituted. Insertion of new section 19A. 33. After section 19 of the principal Act, the following sections shall be inserted, namely:-- Filing of recovery applications, documents and written statements in electronic form. "19A. (1) Notwithstanding anything to the contrary contained in this Act, and without prejudice to the provisions contained in section 6 of the Information Technology Act, 2000 (21 of 2000.), the Central Government may by rules provide that from such date and before such Tribunal and Appellate Tribunal, as may be notified,-- (a) application or written statement or any other pleadings and the documents to be annexed thereto required to be filed shall be submitted in the electronic form and authenticated with digital signature of the applicant, defendant or any other petitioner in such form and manner as may be prescribed; (b) any summons, notice or communication or ....
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....ub-section (3), the following sub-section shall be inserted, namely:-- "(4) For the purpose of proof of any entry in the 'bankers books', the provisions of the Bankers' Books Evidence Act, 1891 (18 of 1891) shall apply to all the proceedings before the Tribunal or Appellate Tribunal.". Insertion of new section 22A. 37. In the principal Act, after section 22, the following section shall be inserted, namely:-- Uniform procedure for conduct of proceedings. "22A. The Central government may, for the purpose of this Act, by rules, lay down uniform procedure consistent with the provisions of this Act for conducting the proceedings before the Tribunals and Appellate Tribunals.". Amendment of section 25. 38. In the principal Act, in section 25,-- (i) after clause (a), the following clause shall be inserted, namely:-- "(aa) taking possession of property over which security interest is created or any other property of the defendant and appointing receiver for such property and to sell the same;". (ii) after clause (c), the following clause shall be inserted, namely:-- "(d) any other mode of recovery as may be prescribed by the Central ....
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....er debts and Government dues including revenues, taxes, cesses and rates due to the Central Government, State Government or local authority. Explanation.--For the purposes of this 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 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 36. 42. In the principal Act, in section 36, in sub-section (2),-- (i) clause (a) shall be numbered as clause (aa) and before clause (aa) as so renumbered, the following clause shall be inserted, namely:-- "(a) other business or commercial rights of similar nature under clause (jb) of section 2;"; (ii) after clause (c), the following clause shall be inserted, namely:-- "(ca) the form of application and the fee for filing application under sub-section (3) of section 19; (iii) in clause (cc), for the brackets, figure and letter "(3A)", the brackets, figure and letter "(3B)" shall be substituted; (iv) after clau....