Table of Contents
Securitisation Law and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), with a special focus on the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDB Act) and the Debt Recovery Tribunal (DRT) procedure rules.
SARFAESI Act (2002) – Securitisation Law
Purpose: The SARFAESI Act aims to regulate securitisation law and reconstruction of financial assets and enforce security interests. It also establishes a central database for recording security interests created on property rights.
Key Provisions:
- Enforcement of Security Interest: The Act empowers banks and financial institutions to take possession of secured assets and sell them without court intervention. Borrowers cannot seek refuge under provisions like the Sick Industrial Companies (Special Provisions) Act (SICA) or the Board for Industrial and Financial Reconstruction (BIFR).
- Central Registry: The Act mandates the establishment of a Central Registry to maintain records of security interests.
- Securitisation law and Reconstruction Companies (SC/RC): These entities are authorized to acquire financial assets from banks and FIs.
- Debt Recovery Tribunals (DRTs): Borrowers, guarantors, and other aggrieved parties can approach DRTs to challenge actions taken by banks or FIs under the SARFAESI Act .
RDB Act (1993)
Purpose: The RDB Act provides a mechanism for banks and financial institutions to recover debts due to them.
Key Features:
- DRTs: Under the RDB Act, banks and FIs approach Debt Recovery Tribunals (DRTs) to recover outstanding debts.
- Jurisdiction: DRTs have jurisdiction over cases related to recovery of debts from borrowers.
- Speedy Resolution: The Act emphasizes speedy resolution of debt recovery cases.
- Appeals: Aggrieved parties can appeal to the Debt Recovery Appellate Tribunal (DRAT) against DRT orders.
- Non-Applicability of Civil Courts: The Act bars civil courts from entertaining matters related to debt recovery.
- Priority: The RDB Act gives priority to debt recovery over other legal proceedings .
DRT Procedure Rules
- Procedural Guidelines: The DRT procedure rules outline the process for filing applications, hearings, evidence, and execution of orders before the Debt Recovery Tribunals.
- Adjudication: DRTs adjudicate disputes between banks/FIs and borrowers, ensuring fair proceedings.
- Enforcement: Once a DRT passes an order, it can be enforced through various means, including attachment and sale of assets.
- Appeals: Parties dissatisfied with DRT orders can appeal to the DRAT.
- Efficiency: The rules aim to expedite debt recovery proceedings while maintaining due process.
In summary, the SARFAESI Act empowers banks and FIs to enforce security interests, while the RDB Act establishes the framework for debt recovery through DRTs. The DRT procedure rules guide the process for efficient resolution of debt-related disputes.
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