securitisation & reconstruction





Detailed Contents.....

Terminology used in the commentary


Table of Cases...



Division I

Frequently Asked Questions

Division II

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




1. Short title, extent and commencement

2.. Definitions.



3.. Registration of securitisation companies or reconstruction companies.

4.. Cancellation of certificate of registration.

5.. Acquisition of rights or interest in financial assets.

5-A.. Transfer of pending applications to any one of Debts Recovery tribunals in certain cases.

6.. Notice to obligor and discharge of obligation of such obligor

7. Issue of security by raising of receipts or funds by securitisation company or reconstruction company.

8.. Exemption from registration of security receipt

9.. Measures for assets reconstruction.

10.. Other functions of securitisation company or reconstruction company.

11.. Resolution of disputes.

12.. Power of Reserve Bank to determine policy and issue directions.

12-A.. Power of Reserve Bank to call for statements and information.



13.. Enforcement of security interest

14.. Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking possession of secured asset..

15.. Manner and effect of takeover of management

16.. No compensation to directors for loss of office.

17.. Right to appeal

17-A.. Making of application to Court of District Judge in certain cases.

18.. Appeal to Appellate Tribunal

18-A.. Validation of fees levied.

18-B.. Appeal to High Court in certain cases.

19.. Right of borrower to receive compensation and costs in certain cases.

Chapter IV

Central Registry

20.. Central Registry.

21.. Central Registrar

22.. Register of securitisation, reconstruction and security interest, transactions.

23. Filing of transactions of securitisation, reconstruction and creation of security interest

24.. Modification of security interest registered under this Act

25. Securitisation company or reconstruction company or secured creditors to report satisfaction of security interest

26.. Right to inspect particulars of securitisation, reconstruction and security interest transactions.



27.. Penalties.

28.. Penalties for non-compliance of direction of Reserve Bank.

29.. Offences.

30.. Cognizance of offence.



31.. Provisions of this Act not to apply in certain cases.

32.. Protection of action taken in good faith.

33.. Offences by companies.

34.. Civil Court not to have jurisdiction.

35.. The provisions of this Act to override other laws.

36.. Limitation.

37.. Application of other laws not barred.

38.. Power of Central Government to make rules.

39.. Certain provisions of this Act to apply after Central Registry is set up or caused to be set up.

40.. Power to remove difficulties.

41.. Amendments of certain enactments.

42.. Repeal and Saving.

Division III

............. Appendices.


Detailed Contents


Division I

Frequently asked questions


Asset liability Management (ALM)

Q. 1. What are the possible risks associated with the players in the financial markets?

Q. 2. What is the precise definition of ALM?

Q. 3. Why do we need Asset Liability Management?

Q. 4. What is the scope of ALM ? Illustrate ALM with help of an example.


Q. 1. What is mortgage?

Q. 2. What are the various kinds of mortgages which are considered for the purpose of security by the banks /FIs ?

Q. 3. How is the mortgage effected?

Q. 4. What are the rights of the mortgagor in case of the payment of the full dues of the banks /FIs?

Q. 5. Is the mortgagor under obligation to transfer the mortgage to a third party as desired by the mortgagor?

Q. 6. What are the rights of the mortgagor in case of the  inspection and production of documents?

Q. 7. What are the specific rights of the mortgagor in case of two or more mortgages?

Q. 8. What are the rights of mortgagor under the usufructuary mortgage to recover possession.

Q. 9. What are the liabilities in case the mortgagee carries out improvement in the mortgaged property?

Q. 10. What are the implied features of the mortgages?

Q. 11. What are the mortgagors power to lease the mortgaged property?

Q. 12. What are the responsibilities of the mortgagor who is in possession of the mortgaged property?

Q. 13. What is the right of foreclosure or sale?

Q. 14. What are the general rights of the mortgagee at present besides the right made available under the SARFAESI Act, 2002?

Q. 15. What are the powers of mortgagee for affecting the sale?

Q. 16. What are the general responsibilities of the mortgagee in possession?


           Q. What is the general meaning of the charge?


Q. 1. What is the definition of securitisation as per the Act? Define briefly.

Q. 2. Explain securitisation and mention the agencies involved in the process.

Q. 3. What are the major agencies involved in the process of securitisation?


Q. 1. What is the geographic jurisdiction of the SARFAESI Act, 2002?

Q. 2. What are the broad features of the Act?

Q. 3. What are the main features of the enforcement of security interests as far as the applicability of the Act is concerned?

Q. 4. What is the effective date of the Act?

Q. 5. Explain the typical qualities of securitisation

Q. 6. What are the major motivations of the securitisation so far as the originator is concerned?

Q. 7. What is the generic  structure of securitisation?

Q. 8. What are the kinds of receivables/assets which can be securitised?

Q. 9. How does the process help the originator?

Q. 10. Is the securitisation transaction to be treated as a financing transaction or otherwise so far as the originator is concerned?

Q. 11. What is the general format of the instruments issued in the case of securitisation?

Q. 12. Which are the classes of the securities which are originated in the securitisation transaction?

Q. 13. What are the parties involved in the securitisation transaction?

Q. 14. Is it essential to transfer the property by the originator to the SPV? Explain the role of SPV/SPE

Q. 15. Who would subscribe to the securities generated out of securitisation?

Q. 16. What is meant by senior-subordinate structure?

Q. 17. What are some of the different types of securitisations?

Q. 18. Enumerate the various stpes involved in the process of securitisation

Q. 19. Explain as to how securitisation can be viewed as a three step process?

Q. 20. Illustrate the process of securitisation as explained above

Q. 21. Summarize the process of securitisation?

Q. 22. Explain the role of SPV

Q. 23. What are the major characteristics of an SPV?

Q. 24. Illustrate as to how SPV acts as a conduit between the QIB and the originator?

Q. 25. Explain as to how NPAs can be securitised?

Q. 26. What is credit enhancement in relation to securitisation?

Q. 27. Explain in details the various types of credit enhancements

Q. 28. What are the external forms of bringing in credit enhancements in the securitisation transactions?

Q. 29. What are the various forms of internal credit enhancements ?

Q. 30. How does credit rating serve to replace the credit enhancement?

Q. 31. Can the process of credit enhancement be varied as per the needs?

Q. 32. Is it necessary to resort to credit enhancement in all cases of securitisation besides credit rating?

Q. 33. How does an originator act as receiving and paying  agent/ servicer?

Q. 34. What is the role of Legal Advisor in the securitisation deals?

Q. 35. What is the role of a structurer of the securitisation deals?

Q. 36. Explain the general nature of a securitisation transaction in the light of the SARFAESI Act, 2002

Q. 37. How securitisation is a method of financing the receivables?

Q. 38. Enumerate the steps involved in the process of securitisation and also outline the functions of the major agencies involved

Q. 39. Enumerate various parties and players to the securitisation transaction

Q. 40. Tabluate the activities of securitisation

Q. 41. Explain the process of creation of financial assets

Q. 42. Explain the provisions of the the Securitisation Act in connection with the creation of the financial assets so far as the securitisation company is concerned

Q. 43. Explain the process of transfer of financial assets

Q. 44. How is originator paid for by the purchaser?

Asset Reconstruction Company (ARC)

Q. 1. Why should Banks/FIs sell NPAs to Arcil rather than resolving on their own?

Q. 2. Do the lenders need to have a policy in relation to transfer of assets to Arcil? What are the key components of such a policy? 43

Q. 3. Will Arcil acquire debt with a second charge on fixed assets/first charge on working capital or vice versa? Will Arcil acquire unsecured debt? Will debenture holders also be able to transfer their holdings to Arcil?

Q. 4. If Arcil acquires 75% of the secured debt, what are the options available to the lenders who have not transferred their share of the debt to Arcil?

Q. 5. Can the borrower have any say in the transfer of assets to Arcil? What are the remedies available to the borrower to oppose such a transfer?

Q. 6. In case additional funding is required to reconstruct an asset, will the existing lenders need to contribute?

Q. 7. How does the asset resolution strategy of Arcil differ from that under the Corporate Debt Restructuring (CDR) mechanism?

Transfer of Assets and Consideration

Q. 1. What is the asset acquisition and asset holding structure of Arcil?

Q. 2. Why does Arcil propose to adopt portfolio approach for acquisition of financial assets?

Q. 3. How will Arcil discharge the consideration for transfer of financial assets? What will be the sources of funds for Arcil to effect the payment?

Q. 4. What are Security Receipts (SRs)?

Q. 5. How will the Security Receipts (SRs) be treated in the books of the subscriber? Do the subscribers need to "mark to market" the SRs? How will Arcil determine the Net Asset Value (NAV) of the SRs and at what intervals will the NAV be declared?

Q. 6. How will the transfer of Financial Assets (FAs) from the Bank / FI to Arcil be effected? Why is assignment of debt required?

Q. 7. What is the stamp duty payable on transfer of assets to Arcil? Are any stamp duty concessions available for such transfer?

Q. 8. Do the lenders need to take any action against the borrower under the SARFAESI Act, 2002 or otherwise prior to transfer to Arcil?

Q. 9. Do the loan documents for assets being proposed to be transferred to Arcil need to carry any covenants to enable such transfer? Should all future documents entered between lenders and borrowers contain any specific covenants to enable ease of transfer of assets to an ARC?

Q. 10. What will be the status of BIFR proceedings on acquisition of 75% of secured debt by Arcil?


Securitisation in IndiA : Next Steps


Features of Securitisation


Securitisation in India

Legal and Regulatory issues in Securitisation

Special Purpose Vehicle as a Company

Next Steps

Legal Framework

Regulatory Framework

Widening Investor Base

Market Orientation

Role of RBI

Facts about Securitisation—A Glimpse and Reckoner

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


Registration of securitisation companies or reconstruction companies

Requirement for registration of securitisation or reconstruction company

            (i) Company has not incurred losses

          (ii) Adequate arrangements for realisation of financial assets

         (iii) Professional directors

          (iv) At least half independent directors

           (v) Directors not convicted of offence involving moral turpitude

          (vi) Sponsor company does not hold any controlling interest

        (vii) Compliance of prudential norms

       (viii) Compliance of conditions specified in the guidelines

Grant of certificate of registration to securitisation company or reconstruction company

Rejection of application of registration

Prior approval of Reserve Bank for substantial change in management or location of registered office of the company

Cancellation of certificate of registration

Appeal against rejection of application for registration or cancellation of registration certificate

Securitisation or reconstruction will deemed to be such company, until it repays the entire investments held by it

Acquisition of rights or interest in financial assets

Registration of agreement for securitisaton with Central Registry

Rights of securitisation company or reconstruction company on acquisition of financial assets

Enforcement of security by securitisation or reconstruction company

Continuation of suits or proceedings by or against the bank or financial institution

Transfer of pending application to any one of Debts Recovery Tribunals in certain cases

Notice to obligor and discharge of obligation of such obligor

Issue of security by raising of receipts or funds by securitisation or reconstruction company

Raising of funds by securitisation company or reconstruction company

Scheme for the purpose of offering security receipts

Meeting of qualified institutional buyers in case of non-realisation of financial assets

Exemption from registration of security receipt

Measures for asset reconstruction

Other functions of securitisation company or reconstruction company

Resolution of disputes by conciliation or arbitration

Power of Reserve Bank to determine policy and issue directions

Power of Reserve Bank to call for statements and information.

Registration of charges with Central Registry

Register of securitisation, reconstruction and security interest transactions

Filing of transactions of securitisation, reconstruction, and creation of security interest

Modification of security interest to be registered with Central

Securitisation or reconstruction company to report satisfaction of security interest

Notice by Central Registrar to securitisation or reconstruction company on receipt of intimation of satisfaction or payment of  security interest

Recording of memorandum of satisfaction, if no cause shown

Recording of note, if cause is shown

Inspection of Central Register

Penalty for default

Penalties for non-compliance of direction of Reserve Bank

Enforcement of security interest

When security interest can be enforced

Contents of notice

Service of demand notice

Where finance is by more than one secured creditors

Measures that can be taken for recovery of secured debt

Procedure after issue of demand notice

Procedure after receipt of demand notice by borrower

Valuation of movable secured assets

Sale of movable secured assets

Issue of certificate of sale

Sale of immovable secured assets

Valuation of immovable property

Service of notice to borrower for sale of property

Time of sale, issue of sale certificate and delivery of possession etc.

Payment of price by the purchaser

Issue of certificate of sale of immovable property

Property sold subject to encumbrances

Delivery of possession of immovable property

Appointment of Manager

Payment made by the person, from whom money is due to the  borrower

Vesting of rights  in transferee on transfer of secured asset by the secured creditor

Costs, charges and expenses to be recovered from the borrower

Borrower can take back  possession of the secured assets before sale or transfer, on payment of amount

Secured creditor can proceed against borrower for balance dues

Procedure for recovery of short-fall of secured debt

Secured creditor can proceed against the guarantor or sell pledged assets

Exercise of rights by secured creditor

Borrower cannot transfer the assets, after receipt of notice

Enforcement of security if the borrower company is under winding up

Chief Metropolitan Magistrate or District Magistrate to assist secured  creditor  in taking  possession

Manner and effect of takeover of management

No compensation to directors for loss of office

Validation of fees levied

Appeal to High Court in certain cases

Right to Appeal—Appeal to Debts Recovery Tribunal

Disposal of appeal by Debts Recovery Tribunal

Appeal to Appellate Tribunal

Disposal of appeal by Appellate Tribunal

Making of application to Court of District Judge in certain cases

Right of borrower to receive compensation and costs in certain cases


Division II

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

Statement of Objects and Reasons.......




1. Short title, extent and commencement

Interpretation of an Act—Common Rules of Construction


Preamble—Long title

Preamble and the present Act

Preamble—Amalgamation of many complicated enactments

Preamble—Means to establish the intent of legislation

Three specific objectives of Securitisation and Reconstruction Act (SARFAESI Act, 2002)

Interpretation of Statute—Relevance to SArfaesi Act, 2002

Judiciary and interpretation of statute—Omissions are not to be interpreted

Words have their meanings in the statutes

Mischief rule

Short title of the Act

Statement of Objects and Reasons—Not appropriate for interpretation

Words and judgments cannot define the phrases

Interpretation of lengthy expressions

Background—Reforms prior and till June 2002

Legal reform measures

Capital needs, NPAs and asset liability management

SFCs Act and SARFAESI Act—Observations of Supreme Court

SICA, 1985 and NPAs

Construction of the Act—Words and definitions

Headings in Statutes

Marginal notes

Non obstante clause

Casus omissus

Omissions not to be inferred

Statute to be read as a whole

Rule of expressio unius est exclusio alterius

Construction leading to absurdity

Two special enactments and non obstante clause

Broad scope of the Securitisation Act, 2002

Organisation of the statute

Need for a clear definitions

Non-clarity and ambiguity

Similar provisions—Enforcement of security

Natural justice—Edifice of the Act

SARFAESI Act, 2002—Remedy against the secured creditor

SARFAESI Act, 2002—Rationale—Some observations

Vires of the Act—Security enforcement

Constitutional validity of Section 138, N. I. Act, 1881

Comparison with similar provisions of the SFCs Act, 1951

sarfaesi Act valid legislation

Powers not arbitrary

Provisions not violative of Article 14

Offending but valid legislation

Enforcement of security interests

Notice—A pre-requisite

Courts not to interfere

Two special enactments (SFCs Act, 1951 and SICA, 1985)

Special enactment—Observations of  judiciary

Securitisation Act—An additional remedy

Period of limitation

Enactment and effects on other Acts

Amendments in the Securitisation Act, 2002

Territorial jurisdiction

Date of commencement of the Act

2. Definitions

Appellate Tribunal

Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (DRT Act, 1993/ DRT Act)—Preamble

Objects of the DRT Act

Setting up of the Appellate Tribunals

Appellate Tribunal—Composition thereof

Appellate Tribunal—Jurisdiction under DRT Act, 1993

Appeal to Tribunal (DRT)—When to be preferred under SARFAESI Act, 2002

Appeal to Appellate Tribunal (DRAT)—SARFAESI Act, 2002

Proceedings of Appellate Tribunal—Judicial.

Appellate Tribunal—Scope thereof

Appellate Tribunal—Role thereof under SARFAESI Act, 2002

Review of appellate decisions

asset reconstruction

Asset reconstruction—Meaning thereof

Asset reconstruction—Essential ingredients

Acquisition of right or interest

Acquisition of interest—Modes

Legal transfer of assets

Equitable transfer of assets

Asset reconstruction—Realisation of financial assistance

Asset reconstruction—Securitisation Act

Assets reconstruction—Measures of

Asset reconstruction—Practical measures

Acquisition price—Determination thereof

Acquistion price of assets—An illustration

Acquisition price—Determination of the NPV of likely cash-flows

Asset Reconstruction Mechanism—Control of NPAs—Restructuring of banks—Broad framework

Financial objectives of reconstruction company

Restructuring of banks—A schematic diagram

Restructuring of individual transactions

Asset reconstruction/management—Theoritical concepts

Reconstruction compnay—SARFAESI Act, 2002

Asset reconstruction and BIFR—Similar provisions


Bank to include

Banking company—Some essential characteristics

Corresponding new bank

Major provisions of Banking Regulation Act, 1949

banking company

Banking and banking company—Definition thereof

Bank, banker or banking company

Banking policy

Other categories of banks

Banks to be notified

SARFAESI Act, 2002 and banks—Applicability

Bank and banking comapny—DRT Act

Regional Rural Bank and SArfaesi Act, 2002



SEBI Act, 1992—Objects

SEBI Act, 1992—Preamble

SARFAESI Act, 2002 and SEBI, Act, 1992



Borrower—Includes guarantor also

Borrower—In relation to security

Borrower—In relation to financial assistance

Borrower—In relation to securitisation/reconstruction company

Acquisition of rights or interest—Consequences

Borrower—In nutshell.

Central Registry


Provisions of SArfaesi Act, 2002


Corresponding new Bank

Banking Regulation Act, 1949

Corresponding new bank—SARFAESI Act, 2002


Debt defined

Debt classified

Debt explained

Debt RecoverY Tribunal

Evolution of Debts Recovery Tribunal (DRT)

Establishment of Tribunal

Composition of Tribunal

Debts Recovery Tribunal—SArfaesi Act, 2002

Right to appeal


Default—Meaning in financial parlance

Default—What it is?

Default—Calculation thereof

Quantification of default—An illustration

Rebate—An incentive to repay the dues in time

Interest on default amount

Default—Addition to the financial parlance

Default—Secured creditor

Default—Security interest

Default—Consequence thereof

“Any other amount payable”—Meaning thereof

Default—In nutshell

Financial Assistance

 Financial assistance—Meaning thereof

"Any other credit facility"—Includes

Financial assistance—Classification thereof

Financial assistance—Generic term

Financial assistance—A financial asset

Debt—Meaning thereof


Loan and deposit

Loan and security

Loan and default

Advances—Meaning thereof

Term loan and working capital

Security—Working capital

Collateral security

Consortium financing

Lead institution

Sharing of securities

Indicative business of SFCs/FIs

Power to acquire rights

Business of banking companies

Guarantees—A type of financial assistance

Consideration of guarantee

Writing not necessary

Surety's liability

Surety's liability—Conditions

Unconditional guarantee

Surety and Notice

Continuing guarantee

Bank guarantee

Bank guarantee and arbitration

Joint debtor and guarantee

Guarantee and limitation period

Guarantor and Securitisation Act, 2002

Discharge of surety

Discharge of surety on account of variance in terms

Discharge of principal debtor

Principles of  invocation of bank guarantee

Constitution and precedent

Guarantees and the Contract Act

Precedent—Some set backs

Right to indemnity

Financial assistance—Classification of

Approach I

Approach II

Overdraft facility—Characteristics thereof

Cash-credit limits—Meaning and nature

Bills facility—A novel method of financing

Demand and usance bill—A brief look

Clean and documentary bills—Explanation

Export Packing Credit Facility—Meaning thereof

Prayed finance—A long term loan

Promoter's calculation—An illustration

Institutional appraisal—Methodology

Joint appraisals—Methodology

Consortium financing

Term loans—General classification

Short term loan or demand loan

Medium term loan

Long-term loans

Bridge loans—Sanctions and conversion thereof

Bridge loan against public issue

Non-fund based activities—Letter of credits

Parties to a letter of credit

Fair Practice Code on Lender's Liability

Various types of securities


Advantages of shares as security

Valuation of security

Stability in prices

Easy to ascertain title

Less formalities for creation of charge

Easy realisation

Easy transferability

Income yielding securities

Easy releas

Disadvantages of shares as security

Fraud pron

Risk in partly paid shares

Forged scrips

Company’s lien

Precautions to be taken by the banks while accepting shares as securities

Partly paid shares should not be accepted

Shares of private limited companies should not be accepted

Bank cannot grant loan on its own shares

Ceiling on holding of shares

Restriction in holding securities of the company, in which managing director or manager of the bank is interested

Ascertainment of market price of the shares

The scrips should be examined

Shares should be transferred in bank’s name, if required

In case of composite security, the advances should be segregated


Advantages of debentures as security

Easy to transfer or sell

Risk of price fluctuation is less

In case of liquidation, debenture holders have a priority

Disadvantages of debentures as security

In case debentures are not charged, further charge by the company will get a priority

Transfer becomes difficult, in case of non-payment of interest on debentures

Precautions to be taken while accepting debentures as securities

Terms and conditions of issue of debentures should be examined

The borrowing power of the company to issue debentures should be examined

Factors like financial position etc. of the company should also be examined

Land and Building

Advantages of land and building as security

Value of immovable property never decreases

Disadvantages of land and building as security

Ascertaining the title of the property

 Valuation of the propert

Charging security is costly

Nature of various types of land

Restrictions on transfer of properties

Precautions to be taken while accepting lands and buildings as securities

Title report from Solicitor or Advocate

Valuation of the property

Obtaining of uptodate non-encumbrance certificate

Financial soundness of the borrower

Documentation and registration

Insurance of the property

Goods and commodities

Advantages of goods as security

Tangible security

Valuation of goods

Goods can be sold easily

Creation of security is cheap and involves minimum formalities

Disadvantages of goods as security

Deterioration of goods

Storage of goods is difficult

Risk of fraud

Value of goods fluctuating

Warehouse charges

Precautions to be taken while accepting goods as securities

Bank should accept goods from the genuine traders

Bank should study the market

Title of goods should be verified

The bank should collect sufficient information about the goods

 Selection of godown keeper and watchmen for godown

Bank should take proper care of goods in case of pledge

Undertaking from the borrower, in case of hypothecated goods

Necessary margin should be taken

RBI’s Directives regarding restrictions on advances against commodities should be complied with

 Requirement of licences from Government

Documents of title to goods

Advantages of documents of title as security

Pledge of goods by pledge of documents

Goods can be easily transferred

Documents easily transferable

Disadvantages of documents of title as security

Fraud and dishonesty by borrower

Forgery and alteration in documents

Bank does not get better title than the transferor

Right of stoppage in transit by unpaid seller

Delivery of goods without document of title to good

Precautions to be taken while accepting documents of title as securities

Advances against documents of title should be granted to well  known customers

All copies of bill of lading should be obtained

Certificate from reliable packer should be asked

Carrier should be advised about the pledge of goods

Goods should be insured

Bill of lading endorsed in blank should be obtained

Trust receipts

Fixed Deposit Receipts

Precautions to be taken while granting loan against the Fixed Deposit Receipts

Life Insurance Policies

Advantages of Life Insurance Policies as security

Disadvantages of Life Insurance policy as security

Precautions to be taken while accepting life insurance policies as securities

Government Supply Bills

Disadvantages of granting advance against supply bills

The security suffers from drawbacks of assignment of debts

 Government department or agency directly making payment to borrower

Payment of bills is delayed

Precautions to be taken while granting advances against supply bills

Advance should be granted to a reliable and honest supplier

Terms/conditions of the contract should be checked

Power-of-Attorney should be obtained from the borrower

Undertaking to pay balance amount of the bill should be obtained

Book Debts

 Precautions to be taken while granting advance against book debts

The advance against book debts should be granted to first class parties

 Bank should ascertain solvency of the debtor and right of set off if any

Instrument of assignment of debt should be in writing and signed by the assignor or his duly athorised agent

Notice of assignment should be served to debtors

Bank should obtain power-of-attorney authorising it to collect book debts

In case of assignment of book debts of company, the charge should be registered with Registrar of Companies

Undertaking to repay amount of debts collected to the bank

Government Securities

Financial Assets

Financial asset

Financial asset—Acquisition thereof

Financial asset—Property

Financial asset—Subject matter of acquisition

Debt—Clarification and meaning of

Security—Some judgments and rulings

Need for co-ordination—Banks/FIs

Claim to 'debt receivables'

Secured or unsecured

Debt or receivables—A part thereof—Actionable claims

Actionable claim—Meaning thereof

Transfer of actionable claim

Notice—Conditions of

Liability of transferee of actionable claim

Debt, securities and actionable claims

Actionable claim and assignment

Financial Institution

Public financial institutions

List of notified institutions

Financial Institutions and DRT Act, 1993

Public financial institutions—Relevance

State Financial Corporation—Covered

State Industrial and Investment Corporations included

Any other financial institution—Inclusion by notification


Hypothecation—Meaning thereof


Right of possession

Hypothecation agreement

Provisions of Transfer of Property Act—Mortgages of movables

Hypothecation—Charge thereof

Advance against the document of title—Sale of Goods Act

Bill of lading

Dock warrant

Hypothecation—Crystallisation of charge

Hypothcation and Pledge—Nature thereof

Non-Performing Asset

NPA and banking—A study

Summary of the study


What is NPA

NPAs in Indian Banking Industry

NPAs in Indian banks vis-a-vis other countries

NPA norms across the world

Loss assets

Historical conceptualisation of problem loans in Indian banking

Health Code System

Efficacy of the Health Code System

Prudential Norms on Income Recognition, Asset Classification and Provisioning

Steps/initiatives taken by RBI to contain NPAs

Historical nature of NPAs in Indian banks

NPAs in Indian banks across the years

Originating factors for the NPAs

Study findings

Sick/weakness/NPA reasons

Conclusion regarding contributory reasons

Segmentation of the NPAs

Impact of priority sector advances on NPAs

Findings of separate survey of industrial sickness

Internal factors

External factors (other than marketing)

Recovery tools and their effectiveness

State Financial Corporations

Other supplementary enactments/powers

Exercise of the recovery measures by SFCs

Effectiveness of the Recovery Measures in SFCs

Commercial banks

Extent of suit filing/recovery etc. by bank

Effectiveness of suit-filing/Legal recovery measures in banks

Time taken for settlement of suits

Time taken due to BIFR/AAIFR references

Debt Recovery Tribunals

Other vehicles

Debt Settlement Tribunals

Lok Adalats

Asset Reconstruction Company

Amendment to banking related laws

Revenue Recovery Act

Devising policies with a long term perspective

Gross and Net NPAs of Public Sector Banks - 1992-93 to 1997-98

Sector-Wise NPA of Public Sector Banks: 1994-95 to 1997-98

Frequency Distribution of Net NPAs : Public Sector, Indian Private Sector and Foreign Banks : 1996 to 1998

Classification of Loan Assets : Public Sector Banks - 1992-93 to 1997-98 (As at end-March)

NPA—Post 1998 developments

Present prudential regulations

Movement of NPAs over the years

Causes of NPA

Internal study of RBI

Internal factors

External factors

Other implications

Measures for faster legal process

Circulation of information on defaulters

Asset Reconstruction Company

Other reforms


Notification—Meaning thereof

Date of publication—Implied


Obligor—Meaning thereof


Originator—Meaning thereof

Process of Acquisition of Financial Asset

What is Financial Asset

Obligor-Orginator Relationship

Future Receivable Actionable Claims

Orginator—The Servicer

Servicer and Charges

Originator—Transfer of assets

Without recourse—Essence of securitisation

Credit enhancement

Credit Rating Process—An Illustration

Finance (India) Limited and X Bank N.A.


Summary of related deal

Collection performance

Conversion of NPAs to cash


Prescribed explained


Property—Includes financial assets

Property—Subject matter of secured assets

Properety—Types excluded from the purview

Secured asset—Acquisitions

Financial assets and property—A distinct difference

Financial assets


'Property' may include the financial asset—Acquisitions thereof

Immovable property—Definition thereof

Immovable property—The Registration Act, 1908

Immovable property—The General Clauses Act, 1897

Transfer of immovable property

Interest of mortgagee—Whether immovable property

Immovable property—Mortgage debt and actionable Claims

Operation of transfer

Transfer of interests

Movable property—Definition

Movable property—Banking transactions

Any debt or any right to receive payment of money, whether secured or unsecured

Equitable mortgages

Essentials of mortgage

Equitable mortgage to cover debts

Equitable mortgage—Stamp implications

Equitable mortgage—Physical delivery thereof

Mortgage of movables

Mortgage—Registration thereof

Mortgagor's right to redeem

Mortgage—Equity of  redemption


Pari passu charge—Meaning thereof


Mortgage—Some important rulings

Power of sale out of Court

Essentials of mortgage

Consideration—A feature of mortgage

Charge—Mortgaged property

Mortgage—Transfer therof

Intangible assets—Property

Meaning of copyright

Special provision regarding copyright in designs registered or capable of being registered under the Indian Patents and Designs Act, 1911

No copyright except as provided in Copyright Act

First owner of copyright

Assignment of copyright

Mode of assignment of copyright

Transmission of copyright in manuscript by testamentary disposition

Right of author to relinquish copyright

Term of copyright in published literary, dramatic, musical and artistic works

Term of copyright in anonymous and pseudonymous works

Term of copyright in posthumous work

Term of copyright in photographs

Term of copyright in cinematograph films

Term of copyright in records

Term of copyright in Government works

Term of copyright in works of international organization

Licences by owners of copyright

Compulsory licence in works withheld from public

Licence to produce and publish translations

What is patent

Date of patent

Form, extent and effect of patent

Grant of patents to be subject to certain conditions

Rights of patentees

Term of patent

Patents of addition

Term of patents of addition

Validity of patents of addition

Assignments of patent

Registration of assignments

Power of registered grantee or proprietor to deal with patent

Rectification of register by High Court

Register to be open for inspection

What is trade mark under Trade Marks Act, 1999

Duration, renewal, removal and restoration of registration

Rights conferred by registration

Infringement of registered trade marks

Assignability and transmissibility of registered trade marks

Restriction on assignment or transmission where multiple exclusive rights would be created

Restriction on assignment or transmission when exclusive rights would be created in different parts of India

Conditions for assignment otherwise than in connection with the goodwill of a business

Registration of assignments and transmissions

Copyrights, patents, trade marks—Securitisation Act, 2002

Qualified Institutional Buyer (QIB)

Qualified Institutional Buyer (QIB)—Meaning thereof

Qualified Instituitonal Buyer—Securitisation Act

Qualified Institutional Buyer—A financial institution

Qualified Institutional Buyer to act as securitisation company

Qualified Institutional Buyer—To include

Mutual Funds—To be QIB

Reconstruction company

Reconstruction Company—Explained

Registrar of Companies

Registration of Companies—Explained

Reserve Bank


RBI—Role of central bankers in emerging economy like India

Central Banking Functions

Institution building

Monetary policy


Scheme—Meaning thereof

Scheme—Formulation thereof

Scheme—To include securitisation/reconstruction

Scheme—Not feasible in certain cases


Securitisation—Meaning thereof

Securitisation—Essentials illustrated

Securitisation to include the following activities

Creation of financial assets—Process

Transfer of financial assets

Payment of financial assets

Securitisation.—Three Step Process

Borrower—Process of securitisation company

Originator—Receiving and paying agent

Securitisation process—Block diagram

Securitisation Block Diagram

Securitisation company—Special purpose vehicle

SPV Characteristics

Securitisation company—A conduit—Block diagram

Figure : Securitisation—Conceptualisation and a simplified View

NPA—Securitisation where feasible

Credit enhancement and securitisation

Credit rating—Simple process of credit enhancement

Credit enhancement—Variation according to the needs

Credit enhancement when not required

Originator—Receiving and paying  agent/servicer

Legal Advisor

Structurer of the deals

Securitisation—General nature of transaction

Securitisation company—Borrower

Steps in securitisation

Backup  of assets—Securitisation types

Pass and pay through  structures

securitisation company

Securitisation—Possible through a company

Securitisation—A view of United Nations Commission on International Trade Law

Securitisation company—Main functions

Acquisition of financial assets—Securitisation company

Securitisation company—Notice to obligor

Security receipt and issuance

Securitisation compainies—As a conduit

Securitisation companies—Service functions

Securitisation—Benefits to the originator

Adjustments in the Capital Structure

Controlling the Cash-flows

Structure deabs

Securitisation incentives for better quality credit

Improving the balance-sheet

Assets Liability Management

Benefits to the financial system

Securitisation company—SPV

Securitisation company—Essential features

Why should the corporate securities? Advantages of securitisation

ABS ratings need not be similar to the underlying corporate  ratings

Securitisation—Issuer defined market

Investor's outlook [QIB]

Insolvency remote feature

Role of co-ordinating agent

Collateral—Meaning Thereof

Ability to structure the deal

Credit enhancement—Credit support

Credit rating

Rapport with the investor

Capacity to plan for the contengencies of default

Managerial considerations

Bankruptcy remote—Explanation thereof winding up petitions not a legitimate means for recovery of debts

Public interest and winding-up of securitisation companies

Judgemts on winding-up and insolvency remote

Complicated structures—An example

Special Purpose Vehicle as a company—Contemporary views

Securitisation company

Suggested Structure

Suggerted Structure II

Practice in USA

Interests in the residual receipts

Changing accounting practices to govern the structures

Securitisation—Need of complex structures

Realisation of financial assets—Securitisation company

Servicing of Investor

Structuring securitisation transactions

Securitisations and CDO structures—Some differences

Collateralisation in the recent past in the various markets

Example : Some essential characteristics of CDOs and normal securitisation structures

CDOs—Some other classifications and definitions

Understanding terminology

Types of CDOs —A Tabulation

Balance sheet CDOs

Classification of CDOs

"Cash flow"CDOs—General characteristics

"Market value" CDOs

MBS and CDO structures—Similarities

Cash-flow CDOs—As type of balance sheet CDOs

"Cash Flow Structure"—Management risk of default

Synthetic CDO Structure

Treatment of  loans in the books

Responsibilities of originator

Generation of new asset—Food for thought

Noteworthy features of synthetic CDO structures

Arbitrage CDOs

Arbitraging—Major feature of CDO

ArbitageAn example

CDO—New methodology—Development of secondary markets

Credit enhancers—Objective

External credit enhancements—Insurance

Third party guarantee

Letter of Credit

Internal credit enhancements—Credit Tranching (senior/subordinate structure)


Cash collateral

Spread account

Triggered amortisation and future flow Securitisation structures

Future flow securitisation—Existing assets securitisations

Future flow securitisation—A rationale

Future flow securitisation—A typical structure

Credit card securitisations—Analysing structure

ICAIs Guidance Note—Credit enhancements

Credit Enhancement Features : An example of securitisation of HDFC Banks Securitisation Scheme

Credit Rating—Conditional rating


Originator and servicer

Asset pool

Credit enhancement features

Securitisation—With recourse

Securitisation—Without recourse

Marketing of securities

Security Agreement

‘Securitisation agreement’ to include

‘Securitisation agreement’—Commonly employed terms

Mortgage—Evidence of security interest

Guarantee—Securitisation agreement

Deed of hypothecation—Security agreement

Loan agreement is as a security agreement

secured asset

Secured asset—Meaning

Secured asset—Synonym to security

Secured assets—Agricultural land excluded

Secured creditor

'Secured creditor' to include

Securitisation/Reconstruction companies—Secured creditors

Debenture Trustee—Secured creditor

Intention of the legislature—Any trustee

Secured creditor—In ordinary course

Secured creditor—Not to be recognized in some cases

Secured debt

Secured debt—A  clasification

Unsecured debt—Meaning thereof

Security interest

Security interest—Meaning thereof

Exclusion of certain transactions

Scope of present sub-section

security receipt

Security receipt—Meaning thereof

Amendment in the Securities Contracts (Regulation) Act, 1956

Securities and SCRA, 1956

Security—Definitions of

Government security

Securities to include

SCRA and Scheme of Act



Sponsor in relation to Act

Sponsor—Restriction on the composition of Board

Sponsor and companies

‘Sponsor'—Not to be a holding company

Sponsor and individual

State Bank of India

State Bank of India—Means

Subsidiary Bank

Subsidiary Bank—Means



3. Registration of securitisation companies or reconstruction companies

Certificate of Registration—Commencement or carrying on business

Certificate of Registration—Conditions thereof

Owned funds

Owned funds—Existing companies

Inclusion of convertible preference capital—A question mark

Exclusion of Revaluation Reserves—Reasons thereof

Exclusion of intangibles

Owned funds—New companies

RBI powered to specify amount of ‘owned funds

Registration mandatory—For existing companies

Transitional arrangements

Application of Registration

Owned funds—Relation to quantum of business

Owned funds—In relation to acquisition of financial assets

Consideration of application by RBI

Essential conditions to be complied with

Condition of no loss for last three years

Adequate arrangements of realisation of assets

Difference between securitisation and reconstruction

Asset reconstruction to include securitisation

Securitisation of NPAs

Asset reconstruction—Steps involved

Evaluation of realisable value of assets

Securitisation of the NPA—Process of asset reconstruction

Realisation of financial assets—Pre-requisite for registration

Qualification of the directors of companies

Composition of Board

Disqualification of director

Sponsor and controlling interest

Compliance of prudential norms

Powers of RBI to inspect books

Existing companies to carry on business

Companies to make arrangements for realisation of assets

Acquisition of financial assets

Issue of security receipts

Arrangements for realisation of financial assets

Issue of security receipts—Eligible ‘other persons’

“Associated in any manner”—Meaning thereof

“Holding company” and “subsidiary company”—Meaning of

Subsidiary company—Existence of

Subsidiary company—Basis of

Subsidiary company—Some basic conditions

Half the nominal value of share—Department’s view : Question

Grant of certificate of registration

RBI's power to impose additional conditions

RBI's power to reject the application

Opportunity of being heard—Principle of natural justice

Change of management—Prior approval of RBI

Change in Registered Office—Prior approval of RBI

Substantial change—Meaning thereof

The Securitisation Companies and Reconstruction Companies (Reserve Bank) Guidelines and Directions, 2003

Short title and commencement

Applicability of the directions


Registration and matters incidental thereto

Owned Fund

Permissible Business

Asset Reconstruction


Requirement as to capital adequacy

Deployment of Funds

Accounting Year

Asset Classification


Income recognition

Disclosures in the balance sheet

Internal Audit


Disclosure in Offer Document

Disclosure on quarterly basis

4. Cancellation of certificate of registration

Cancellation of Certificate of Registration—Reasons thereof

Failure to carry on business—Guidelines to define

Cease to receive or hold investment—Meaning thereof

Failure to comply with conditions

Failure to comply with provisions of Section 3

Other non-compliances—Consequences

Non-compliance of Directions by RBI

Non-compliance of requirement of law

Non-compliance of the submission of books

Non-compliances of Section 3 (6)

Cancellation of Registration Certificate

Principles of natural justice to be followed in cancellation

Cancellation—Consequences thereof

5. Acquisition of rights or interest in financial assets.

Acquisition of financial assets

Whose assets may be acquired

Acquisition of financial assets—Modes

Acquisition of financial assets—Securitisation

Acquisition of financial assets—Reconstruction

Acquisition—Non-obstante clause

Non obstante clause—Scope thereof in Securitisation Act

Non obstante clause—A saving feature of clauses (a) and (b)

Acquisition of financial assets

Acquisition of financial assets—Provisions of Transfer of Property

Actionable claim—Definition thereof

Debt—Transferability thereof

What may be transferred

Transferability of property—Financial assets

Secured debts and actionable claims

Mortgages and transfers

Transfer of actionable claims

Chose in possession and action

Actionable claim—Meaning thereof

Actionable claim—Transfer process

Actionable claim—Effects thereof

Actionable claim—Transferee’s liabilities

Actionable claim—Transfer the liabilities

Issue of debentures

Debentures—Kinds and qualities

Secured debentures

Unsecured debentures

Bearer debentures

Registered debentures

Redeemable debentures

Convertible debentures

Remedies of the debenture-holders

Duties of debenture trustees

Inspection of trust-deed

Acquisition of financial assets—Consequences thereof

Acquisition of financial assets—To be with the liabilities

Lender in relation to financial assets—Meaning thereof

Acquisition of financial assets—A golden rule

Need for better co-ordination between banks and FIs

Asset securitisation—Standard Accounts

Polling of cash flows

Packing of receivables

Marketing of receivables

Acquisition of financial assets—Asset reconstruction

Acquisition of financial assets—Secured assets

Acquisition of financial assets—Consequences—Agreement to be in full force

Consequences of transfer of agreements and debts

Acquisitions of financial assets—SICA provisions

Securitisation Act—Amending effect on SICA, 1985

Asset Liabilty Management (ALM) system for NBFCs Guidelines—An Introduction

Guidelines for Asset Liability Management (ALM) system in Non-Banking Financial Companies (NBFCs)

ALM Information systems

ALM Organisation

Liquidity Risk Management

Currency Risk

Interest Rate Risk (IRR)


5-A. Transfer of pending applications to any one of Debts Recovery Tribunals in certain cases

DRAT and powers for transfer of cases to one tribunal

Transfer of pending cases and consequence

DRAT and jurisdictions for transfer of pending cases

Award execution by DRT

Transfer of pending applications

Procedure for disposal of pending cases

Jurisdiction of Appellate Tribunal in transfer of pending cases

6. Notice to obligor and discharge of obligation of such obligor

Notice of acquisition—Not mandatory

Acquisition of NPAs—Consequences and problems

Acquisition of assets—Principles of natural justice

Principles of natural justice—On giving reasons

Acquisition to be free from bias

Transfer of NPAs of running unit

Acquisition of financial assets—Notice to the Registrar

Charge—Definition thereof

Charges to be void—Conditions thereof

Pledge of movable assets, the registration of charge, though  not mandatory, is permissible at the instance of the company or interested person—Department’s view

Charge—Subsequently registered

Charge—Effect of non-registration

Effect of non-registration—Charge created by a Liquidator not registrable— Department’s view

Delay in registration of charges—Documents certified by Chartered Accountant/Cost Accountant/Company Secretary to be taken on record within a reasonable time—Department’s view

Delay in filing Form No. 13—Department’s view

Date of Notice of Charge

Particulars in case of Series of Debentures

Registrar to maintain Register of Charges

Registration of Charge—Satisfaction thereof

Registration of modification of charges as a result of change in law— Department’s view

Modification of charge

Other cases of change of rate of interest

Filing of modification of charge by an interested person, under Section 134/135 of the Companies Act, 1956—Department’s view

Companies in Liquidation—Appointment of Receivers—Applicability of Sections 137 and 421 of the Companies Act, 1956—Department’s view

Reckoning of period of 30 days within which satisfaction is to be reported to Registrar—Department’s view

Satisfaction of charges—Notice to the holder—Department’s view

Registrar cannot accept instrument of creation or satisfaction of charges, etc. without the Company Law Board’s order—Department’s view

Application to the Company Law Board for condoning delay in filing particulars of charges

Delay in filling Form No. 13 pursuant to Section 130 does not attract Section 141

Acquisitation of financial assets and notice to concerned persons

Guarantee—Some Court Rulings

Notice to guarantor to be carefully drafted

Transfer of actionable claim

Notice to be in writing, signed

Liability of transferee of actionable claim

Warranty of solvency of debtor

Mortgaged debt

Assignment of rights under policy of insurance against fire

Incapacity of officers connected with courts of justice

Notice of acquisition—Meaning of ‘if it considers appropriate

Notice to obligor—Consequences thereof

General paraphrasing of  the section

Notice—Necessity in case of asset reconstruction

Notice—Non-payment and consequences

Reschedulement request—Reconstruction company

Debt Service Coverage Ratio (DSCR) : Definition

Restructuring of the loans/dues

Case of no notice

Absence of notice—A case of securitisation

Originator—To hold money in trust

Originator—Collecting and paying agent

Registration of Companies—Issue of Certificate of Registration of Charges

Procedure under Companies Act for Registration of Charges

Charge creation for Debenture Issue—Procedure thereof

Satisfaction of charge—Procedure thereof

Guidance Note on Certification of Documents for Registration of Charges


Provisions of Law

Forms and Documents

Verification of Forms

Format of Certificate

7. Issue of security by raising of receipts or funds by securitisation company or reconstruction company

Amendment to Section 7

Issue of security receipts

Security receipts to be issued to qualified institutional buyer

Securities to be issued without public offer

Issue of security to be as per other Acts

Debenture—Provisions of Companies Act

Debenture trust deed

Appointment of debenture trustees and duties of debenture trustees

Liability of company to create security and debenture redemption reserve

Right to obtain copies of and inspect trust deed

Liability of trustees for debenture holders

Power to re-issue redeemed debentures in certain cases

Particulars in case of series of debentures entitling holders pari passu

Debenture Trustees—Provisions of Companies Act

Contents of Trust Deed

Code of Conduct of Debentere Trustee

Formulation of Schemes

Scheme—Purpose of

Scheme  formulation—Practical suggestions

Scheme—Identification of financial assets

Scheme—Purpose of acquisition

Scheme—Analysing the security underlying the financial assets

Scheme—Estimation of the ‘Acquisition cost’

Scheme—Designing broad features of the security receipts

Scheme—Analysis of the borrower/obligor and track record

Borrowers Track Record—Some Golden Rules

Details of Schemes—Maintained separately

Securitisation company—Duties and obligations


Trust—Meaning thereof

Securitisation transaction—Revisited

Pooling of Assets

Packing of financial assets

Appointment of a debenture-trustee

Debenture trustee—Not to act on behalf of an associate

Debenture trustee—To maintain books of accounts

Meaning of trust.

Author of trust and trustee

Beneficiary and beneficial interest

Trust property and trust money

Trust of immovable property

Creation of trust

Trustee to execute the trust

Trustee to inform the state of property

Conversion of perishable property

Trustee to be impartial

Trustee to prevent waste

Trustee—Accounts Information

Trustee—Liability on breach of trust

No set-off allowed to trustee

Non-liability for co-trustees defaults

Rights and powers of the trustee

Right to title deed

Right to reimbursement of expenses

Right to indemnity  from the gainer of breach of trust

General authority of a trustee

Disabilities of the trustees

Trustee—Not to renounce after acceptance

Trustee—Not to delegate

Co-trustee—Not to act singly

Trustee—Discretionary powers

Trustee—Not to buy beneficiaries interests

Rights and liabilities of beneficiary

Trustee—Who may be appointed

Securitisation company/Reconstruction companyEligible to be trustees

Placement of Security Receipts with QIB

Servicing of Securities

Realisation of financial assets

Trust features—Apex Court

Locus standi of debenture-holder vis-a-vis debenture-trustees

Consequence of default

Acquisition of AssetsMethod of




AssignmentKinds of

AssignmentActionable claims thereof

AssignmentContract thereof

AssignmentStamp duty implications


Conceptualising securitisation

SecuritisationA backdrop

Asset Liability MistmatchA problem

SecuritisationA generic tool

Securitisation definition

Securitisation—Accounting angle

Securitisation—Types of

Mortgage Backed Securitisation (MBS)

Asset Backed Securitisation (ABS)


Securitisation—Environment and conditions

Fixed cash flows

Homogeneity assets

Low default rate

Securitisation mechanics—Origination

Transfer of financial assets

Process of credit rating

Credit enhancement—How achieved

Guarantee for repayment

Collateral cash


Placement of securities

Servicing of the ‘Security-Receipts’—Servicing agreement

Security—Types thereof

Pass through transactions

Pay through transactions

Derived structures

Securities—Classification thereof

Asset backed securities (ABS)

Asset backed obligations (ABO)

Securitisation—Advantages to the investor

Asset reconstruction—At macro-level


Non-realisation—In the event of default

Qualified Institutional Buyer and default

QIB in default—Exercise of rights

Trust—Essential ingredients

Rule of super-majority

Security margin—An essence of security enforcement

Resolution—Binding on the company

Security—Types of, and industrial advancs

Mortgage—As security for financial assistance

Mortgagor—Rights and liabilities thereof

Mortgagees—Rights and liabilities

Right to foreclosure for sale

Right to sue for mortgage money

Right of power of sale of mortgaged property

Right to appoint a receiver

Right to accession to mortgaged property

Rights of mortgagee in possession

Mortgage—How created

Mortgage deed—Essentials of drafting

In case of mortgage deed—HUF/owner through guardian, manager, trustees

Mortgage—Deposit of title deeds

Equitable mortgages—Registration thereof

Legal mortgage v. Equitable mortgage

Equitable mortgage—Advantages thereof

Sub-mortgages—Meaning thereof

Pledge—Definition thereof

Pledge—Essential characteristics

Hypothecatee—Rights thereof

Hypothecatee—Sale and consequences thereof

Pledge—Who can create

Pledge by pledgee

Pledge and Hypothecation—Difference between

Difference between various securities

Securities and Exchange Board of India (Debenture Trustees) Rules, 1993

Short title and commencement


Not to act as debenture trustee without obtaining certificate

Conditions of grant or renewal of certificate

Period of validity of the certificate

Securities and Exchange Board of India (Debenture Trustees) Regulations, 1993

Short title and commencement

Application for grant of certificate

Power of the Board to issue clarification

Furnishing of further information, clarification, etc.

Application to conform to the requirements

Consideration of application

Applicability of Securities and Exchange Board of India (Criteria for fit and proper person) Regulations, 2004

Eligibility for being debenture trustee

Capital Adequacy Requirement

Procedure for registration

Renewal of certificate

Procedure where registration is not granted

Effect of refusal to grant certificate or renew certificate

Payment of fees and the consequences of failure to pay fees

Obligation before appointment as debenture trustee

Obligation of the debenture trustees

Code of Conduct

Maintenance of books of accounts, records, documents, etc.

Appointment of compliance officer

Information to the Board

Board’s right to inspect

Procedure for inspection

Obligations of debenture trustee on inspection by the Board

Submission of report to the Board

Action on inspection or investigation report

Appointment of Auditor

Liability for action in case of default

Suspension, cancellation of certificate

Manner of order of suspension and cancellation of certificate

Manner of holding enquiry

Show cause notice and order

Effect of suspension and cancellation or certificate of debenure

Publication of order of suspension or cancellation

8. Exemption from registration of security receipt

Security receipt—Exemption from registration

Documents which require compulsory registration

Security transferNot to be registered

Immovable property—Explanation thereo

9. Measures for assets reconstruction

Asset reconstruction—Meaning thereof

Asset reconstruction—Non obstante clause

Asset reconstruction—Securitisation company

Asset reconstruction—Measures thereof

Similar provisions of SICA and IDRA

Management takeover/merger/amalgamation/reconstruction, etc.

Management takeover

IDRA and provisions with regard to management takeover

Process of takeover under IDRA

Management take-over—Past experiences

Change-in-management—Procedure thereof

Similar provisions—Section 29, SFCs Act

Takeover of management if defaulter—Vires

Securitisation Act—Principles of audi altrem partem

Securitisation Act—Rules of natural justice implied

Asset reconstruction—Whether decision ‘biased’?

Asset reconstruction—Remedy with the borrower

Asset reconstruction—Provisions not violative of Articles 14, 19 and 21 of Constitution

Rules of Application—Article 14

Article 14—U.P. Public Moneys (Recovery of Dues) Act

Article 14—Minimum Wages

In the matter of discretion

In the matter of SFCs Act

SFCs—Bankers Book Evidence Act and sale of mortgaged property

SFCs Act—Section 29 and Section 31

SFCs Act—Securitisation Act—Importance thereof

Enforcement of security

Sales of assets—Provisions of public auction

Sale of assets—Discretion thereof

10. Other functions of securitisation company or reconstruction company

Securitisation/reconstruction company to act as agent

Agent for recovery of dues

Manager in case of enforcement of securities

Certificate of Registration—A pre-requisite

Transitional provisions for existing companies

11. Resolution of disputes

Dispute—Resolution thereof

Default—A basic presumption

Arbitration Act—Broad features

12. Power of Reserve Bank to determine policy and issue directions

Issue of General Directions—RBI's power thereof

Issue of Specific Guidelines—Powers of RBI

RBI Directions—An outside interference

12-A. Power of Reserve Bank to call for statements and information.



13. Enforcement of security interest

Effect of amendment

Section 13 of Securitisation Act, 2002—Validity

Is the natural justice is hit by the provisions of Section 13

Invokation of provisions of section—Permission of DRT not necessary

Provisions of Section 13 constitutionally valid

Reasonable protection to the borrower

Remedy available under Section 13 is additional

Securitisation Act to have overriding effects

Writ jurisdiction under the Act

Objection by the borrower and procedure

Similar provisions—Precedence thereof

Similar provisions— Likely precedence for Section 13

SFC’s Act—Broad features and similarity with SRA, 2002

Provisions not violative of Article 14

Secured creditor to have access to remedies in case of default

Secured creditor's power not barred because civil Court had been moved

Non obstante clause—Enforcement of security

Simultaneous proceedings—Permissible

Notice to borrower

Notice to borrower—Objection to

Notice to borrower—Objection to, must be decided by reasoned order

Notice to guarantor also

Notice—Content thereof

Notice—Nature of

Notice—Mandatory or discretionary

Notice—Statutory and non-statutory—Difference between

Notice serving—Methods thereof

Notice —Natural justice to prevail

Notice—Bank holding decree and execution petition pending—Validity of notice

Notice—Some express provisions

Notice—Not required in certain cases

Notice—Consequences of non-compliance

Notice—Non-compliance with provisions of Section 13 (2)—Notice quashed

Liability of borrower and amount

Taking possession /management of busines/assets—Meaning thereof

Express provisious

Appointment of manager

Rights of secured creditor—‘Any money is due

Wide ranging powers and implications

Takeover—In case of consortium financing

‘Discharge liability in full’—Meaning thereof

Workers rights—Enforcement of security

Power to notify the borrower the total loan not yet released

Provisions of Section 13 to be legal

Sale of Assets—Companies in liquidation

On limitation period

Take over—When not proper in case of revival packages

Role of SFCs

Take over—Judicial review under Article 226

High Court not to act as appellate Court over creditors

High Court cannot re-schedule the loan

Take-overrights against tenant tenanted premises

Sale of Assets—When valid

Sale of Assets—Guidelines of Supreme Court

Sale of assets—Some basic principles

Sale of assets—Bonafide

Debtor's plea cannot be ignored

Secured creditor—Responsibility to be fair

Sale of assets—Loss of lien by secured creditor

Sale of assets—Right of auction purchaser

Sale of assets—Publicity and public auction

Sale of assets—Sales Tax

Valid discharge—Meeting thereof

Consequences of takeover

Cost, charges and expenses—Recoverable

Remedy available to the borrower

Date of sale—Intimation to borrower

Joint financing—Invoking of security interests

Guarantor—Recovery proceedings against

Record date—Meaning thereof

Secured creditors—In case of companies in liquidation—Provisions of the Companies Act

Rights and conditions—Secured creditor thereof

Liability—In liquidation

Sections 529 and 529-A, Companies Act, 1956—Provision thereof

Winding up—Rights of workers

Taking over possession, winding up and sale of assets

Sale of assets of company in winding-up

Pari passu charge holder—Rights thereof

Co-mortgages—Rights thereof

Two pari passu charge holders—Modes of effecting recovery

Secured creditor—Right to proceed against borrower

Secured creditor—Rights against the guarantor

Guarantor—Liability — Some well established principles

Doctrine of Election and Guarantee

Unsecured assets—Procedure for recovery

Rights to be exercised by officers

Restriction on borrower

14. Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking possession of secured asset.

Possession of the Assets—Role of District Magistrate

Use of force by District Administration

Power of District Administration

No forcible dispossession

15. Manner and effect of takeover of management

Appointment of Director and Administrator

Administrator—Meaning thereof

Publication of notice—Consequences thereof

Case of control of management—Deeming provision

Effect of publication of proposed sale

Director—Definition thereof

Manager—Definition thereof

Duties of Directors/Administrators

Custody—Meaning thereof

Powers of Directors/Administrators

Similar provisions

Take-over of business—Consequences thereof

Bar on winding-up

Applicability of provisions of Companies Act

Similar provisions

Realisation of dues—Consequences thereof

16. No compensation to directors for loss of office

Premature termination of Directors—Consequences thereof

Recovery of personal dues—Provisions thereof

Similar provisions

17.. Right to appeal

Right of borrower to approach the DRT after the secured creditor has taken steps under Section 13 (4)

Vires of the Section 17

Condition  with regard to payment of fee alongwith application

Action by DRT on application

Power of DRT—SARFAESI Act and Recovery of Debt Act

Restoration of assets management to borrower

Entitlement of the secured creditors

Disposal of application

Application to be disposed of within 4 months

Consequence of not disposing application within four months

Right to appeal and consequences

Appeal only after action taken

Alternative remedy to approach DRT

Court fee or ad-valorem court fee—Fixation of

17-A. Making of application to Court of District Judge in certain cases

18. Appeal to Appellate Tribunal

Appellate Tribunal—Rule thereof

Period of making an appeal

Dealing with Appeal (DRT)—Procedure thereof

18-A. Validation of fees levied

Levy of fees

18-B. Appeal to High Court in certain cases


Quantum of fee

Reduction of fee

19. Right of borrower to receive compensation and costs in certain cases

Consequence of wrongful possession—To be settled in appeal

Writ the ultimate remedy

Secured creditor to compensate the borrower

Chapter IV

Central Registry

20. Central Registry

21. Central Registrar

Central Registrar—Appointment thereof

Appointment to be notified

Central Registrar—Power of superintendence

22. Register of securitisation, reconstruction and security interest, transactions

Central register—Maintenance thereof

23. Filing of transactions of securitisation, reconstruction and creation of security interest

Filing of particulars—Mandatory

Responsibility of filing particulars

Time period of filing the particulars

Delayed filing of returns and consequence

24. Modification of security interest registered under this Act

Security interest—Modification thereof

Security interest—Secured creditor

Security interest—Securitisation company

25. Securitisation company or reconstruction company or secured creditors to report satisfaction of security interest

Intimation of satisfaction

Satisfaction of security interest—Procedure thereof

26. Right to inspect particulars of securitisation, reconstruction and security interest transactions

Records—Right of Inspection

‘Any persons’—Meaning thereof



27. Penalties

Penal provisions

28. Penalties for non-compliance of direction of Reserve Bank

Directions of RBI

Non-compliance of directions—Consequences thereof

29. Offences

Offence—Meaning of

30. Cognizance of offence

Trial for offence



31. Provisions of this Act not to apply in certain cases

Non-applicability of the provisions of Act—Rationale

Lien on goods or security—Exclusion

General lien—Defined

Pledge of movables

“Pledged assets”—Interpretation of

Hire-purchase/Lease conditional sale

Rights of unpaid seller

Properties not liable to attachment

Residential property mortgaged—Exemption in clause (g) not applicable

32. Protection of action taken in good faith

Similar provisions

Immunity and extent thereof

Legal proceedings—Meaning thereof

Saving from actual proceedings

33. Offences by companies

Offence—Meaning thereof

Offence—Consequences thereof

Offence—Who shall be guilty thereof

A company—Meaning thereof

Director—Meaning thereof

34. Civil Court not to have jurisdiction

Bar of jurisdiction

Bar of jurisdiction—Implications thereof

Existence of alternative remedy—Not a bar for exercise of writ jurisdiction

“Who is person aggrieved”

Civil Court jurisdiction—Extent of exclusion

Constitutional remedies—Article 32 and Article 136

Discretionary jurisdiction and Article 136

Writ jurisdiction of High Court.

Object of Writs

Court rules

In the matters of recovery

Alteration of order by Writs

Grounds for Judicial Review

35. The provisions of this Act to override other laws

Meaning of inconsistency

Section 37 and implications thereof

Provisions of Recovery Act, 1993 cannot control the SARFAESI Act

36. Limitation

Period of limitation—Meaning thereof

SFCs and Limitation Act

37. Application of other laws not barred

Specific laws not barred

In case of inconsistency

Any other Act —Meaning thereof

38. Power of Central Government to make rules

Making of Rules—Provisions thereof

Rule—Meaning thereof

‘May’—Used in imperative mode

Without prejudice to the power—Explained

Any other matter—Rules thereof

Laying of Rules—Procedures thereof

Validity of an act previously done

39. Certain provisions of this Act to apply after Central Registry is set up or caused to be set up

Applicability of provisions of Central Registry

Examination of the provisions

40. Power to remove difficulties

Power to remove difficulty—Specific feature of delegated legislation

Laying down—procedure

41. Amendments of certain enactments

Amending provisions

Companies Act—Amendments thereto

SCRA—Amendments thereto

SICA—Amendment thereto

42. Repeal and Saving

Repeal of Ordinance

Regularisation of acts done under the Ordinance



Division III


    Appendix I : Revised Guidelines for Compromise Settlement of Chronic Non-Performing Assets (NPAs)  of Public Sector Banks

    Appendix II : Upgradation of Loan Accounts Classified as Non-Performing Assets (NPSs)

    Appendix III : Form of Application for Certificate of Registration to Commence/Carry on the Business of A Securitisation Company or Reconstruction Company

    Appendix IV : Guidance Notes for Securitisation Companies and Reconstruction Companies

    Appendix V : Guidelines to banks/FIs on sale of Financial Assets to Securitisation Company (SC)/Reconstruction Company (RC)

    Appendix VI : ICAI's—‘Guidance Note on Accounting for Securitisation

    Appendix VII : Guidelines of Fair Practices Code for Lenders

    Appendix VIII : Security Interest (Enforcement) Rules, 2002

    Appendix IX : The Recovery of Debts Due to Banks and Financial Institutions Act, 1993

    Appendix X : The Debts Recovery Tribunal (Procedure) Rules, 1993

    Appendix XI : The Debts Recovery Appellate Tribunal (Procedure) Rules, 1994

    Appendix XII : Exemption to Securitisation or Reconstruction Companies From RBI Act

    Appendix XIII : The Transfer of Property Act, 1882 [Relevant Extract]

    Appendix XIV : Indian Contract Act, 1872 [Relevant Extract]

    Appendix XV : Risk Weight on Housing Finance and Mortgage Backed Securities

    Appendix XVI : Report of the In-House Working  Group on Asset Securitisation

    Appendix XVII : The Securities Contracts (Regulation) Act, 1956

    Appendix XVIII : Genesis of Asset Reconstruction Company

    Appendix XIX : Capital Adequacy Norms-Risk Weight for Housing Loans and Mortgage Backed Securities

    Appendix XX : Draft Guidelines on Purchase/Sale of Non-Performing Financial Assets

    Appendix XXI : Draft Guidelines on Securitisation of Standard


    Appendix XXII : The State Financial Corporations Act, 1951

    Appendix XXIII : The Credit Information Companies (Regulation) Act, 2005

    Appendix XXIV : The Banking Ombudsman Scheme, 2006

    Appendix XXV : Guidelines on Securitisation of Standard Assets

    Appendix XXVI : Notice to the Borrower

    Appendix XXVII : Notice to the Guarantor

    Appendix XXVIII : Foreign Investments in Asset Reconstruction Companies (ARC)

    Appendix XXIX : FDI In Asset Reconstruction Companies

    Appendix XXX : Supreme Court Judgment in Mardia Chemicals Ltd. Case

               l Index