TaxTMI 
TaxTMI 
Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016
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....cement. 1. (1) This Act may be called 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 ....
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....ny 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, namely:- ....
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....b-clause (v), after the 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 ....
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....he Explanation, after the words "by way of transfer of shares or", the words "change affecting the 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 purcha....
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.... Act, in section 12, in sub-section (2), after clause (b), the following clauses shall be inserted, namely:- "(c) the fee and other charges which may be charged or 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 co....
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....e or assignment or sale of the assets before tendering of such amount under this subsection, no further step shall be taken by such secured creditor for transfer by way of lease or assignment or sale of such secured assets.". Amendment of section 14. 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 a....
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.... after examining the facts of the case and evidence produced by the parties in relation to such claims shall, for the purposes of enforcement of security interest, have the jurisdiction to examine whether lease or tenancy,- (a) has expired or stood determined; or (b) is contrary to section 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 t....
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....on company or the secured creditor, as the case may be" shall be omitted; (b) the first proviso shall be omitted; (c) in the second proviso, the word "further" shall be omitted; (ii) in section 23, after sub-section (1) so renumbered, the following sub-sections shall be inserted, namely:- "(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, modifi....
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.... and this Chapter, the claim of such secured creditor or other creditor holding attachment order shall have priority over any subsequent security interest created upon such property and any transfer by way of sale, lease or assignment or licence of such property or attachment order subsequent to such registration, 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 ot....
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....n: Provided that an opportunity of being heard shall be given to such asset reconstruction company before cancellation of registration. (5) No complaint shall be filed against any person in default in any court pertaining to any failure under sub-section (1) in respect of which any penalty has been imposed and recovered by the 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 ....
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....produce any pass book, deposit receipt, policy or any other document for the purpose of any entry or endorsement thereof before payment is made, notwithstanding any rule, practice or requirement to the contrary. (3) Any claim in respect of any amount, arising after the date of issue of notice under sub-section (1) shall be void as 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,....
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....he case may be, shall be issued only in such modified form as may be agreed upon by both the Houses. (3) In reckoning any such period of thirty days as is referred to in sub-section (2), no account shall be taken of any period during which the House referred to in sub-section (2) is prorogued or adjourned for more than four consecutive days. (4) The copies 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 fo....
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.... negotiable document, for transfer of lessor's right therein to the lessee for a certain time in consideration of payment of agreed amount periodically and where lessee becomes the owner of the such assets at the expiry of the term of lease or on payment of the agreed residual amount, as the 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 mor....
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....e the Chairperson of any other Appellate Tribunal, established under any other law for the time being in force, to discharge the functions of the Chairperson of the Debts Recovery Appellate Tribunal under this Act in addition to his being the Chairperson of that Appellate Tribunal.". 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....
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.... value of securities is not sufficient to satisfy the debt claimed, state particulars of any other properties or assets owned by any of the defendants, if any; and (c) if the estimated value of such other assets is not sufficient to recover the debt, seek an 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 follow....
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.... without giving an opportunity of being heard to such person or officer. Explanation.-For the purpose of this section, the expression 'officer who is in default' shall mean such officer as defined in clause (60) of section 2 of the Companies Act, 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 w....
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....ection (14) shall be omitted. (xvi) in sub-section (15), for the word bracket and figure "sub-section (14)", the word bracket and figure "sub-section (13)" shall 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 actu....
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....artnership registered under the Limited Liability Partnership Act, 2008 (9 of 2008) or insolvency proceedings against any individual or partnership 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, defe....
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....ed. Amendment of section 22. 36. In the principal Act, in section 22, after sub-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....
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....all have priority and shall be paid in priority over all other 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 ....