Unit – 20 : Definitions at SARFAESI ACT, 2002

Unit – 20 : Definitions at SARFAESI ACT, 2002

1. Preamble – An act to regulate Securitisation and reconstruction of financial assets and enforcement of security interest and for matters connected therewith or incidental thereto
2. Appellate Tribunal – Any person aggrieved by the order passed by DRT can file an appeal to the authority called as Appellate Tribunal.

• Asset Reconstruction –
• Bank – All the banking companies, Nationalised banks, Cooperative banks and RRBs.
• Board – SEBI under SEBI Act 1992.
• Borrower – granted financial assistance, given guarantee, has
• Central Registry – All the transactions of asset Securitisation, reconstruction as well as transactions of creating security interest will have to be registered with this authority.
• Debt Recovery Tribunal – these tribunals deal with the cases of recovery of debts. Above Rs. 10 Lakh due to banks and financial institutions.
• Default
• Financial Assistance

1. Financial Asset – a claim to any debt or receivables and includes :
   1. A claim to any debt or receivables or part thereof whether secured or unsecured, or
   2. Any debt or receivable secured by mortgage of or charge on immovable property or
   3. A mortgage, charge, hypothecation or pledge of moveable property, or
   4. Any right of interest in the security, whether full or part, securing debt, or
2. Financial Institution
3. Hypothecation
4. Non-Performing Asset
5. Originator
6. Obligor – Borrower or any other person liable to pay to the bank
7. Property

1. Qualified Institutional Buyer
2. Reconstruction Company

• Scheme
• Securitisation
• Securitisation Company : The minimum capital requirement is Rs.200 Crore at the time of registration, and these companies are required to maintain minimum capital adequacy ratio of 15% of total asset acquired or Rs.100 crore whichever is less. It is company registered under companies act 1956 for the purpose of securitisation. The company also needs registration with RBI.
• Security Agreement means an agreement, instrument or any other document under which security interest is created.
• Secured Asset means property on which security interest is created. The powers given by SARFAESI Act for enforcement of securities are against secured assets only.
• Secured Creditor
• Secured Debt means a debt which is secured by any security interest.
• Secured Interest – Any right, title and interest of any kind whatsoever upon the property created in favour of any secured creditor is called as secured Interest.

1. Security Receipt
2. Sponsor is a person holding not less than 10% of the paid up equity capital of securitisation company.
3. When any bank or financial institutions creates a charge against property, with which authority the transaction will have to be registered under the SARFAESI Act, 2002 – With the Central Registry

• When the provisions of SARFAESI Act, 2002 can be invoked for proceeding against the charged property – When there is default in repayment and the bank declares the account as NPA.
• Acquisition of financial asset from the originator is the main function of securitisation company.
• If the borrower does not pay within 60 days after notice by the secured creditor the creditor can take possession of the security.
• Enforcement of SARFAESI Act only if security is not in possession of the bank and financial institution.