GOVERNMENT OF KERALA

Law (Leg.-Publication) Department

NOTIFICATION

No. 18569/Leg.Pbn.2/2013/Law.

Dated, Thiruvananthapuram, 5th October 2013.

The following Act of Parliament published in the Gazette of India

Extraordinary, Part II, Section I dated 4th January, 2013 is hereby republished for

general information. The Bill as passed by the Houses of Parliament received the

assent of the President on 3rd January, 2013.

By order of the Governor,

C. P. RAMARAJA PREMA PRASAD,

Law Secretary.

Kerala Gazette No. 45 dated 12th November 2013.

PART I

Section i

THE ENFORCEMENT OF SECURITY INTEREST AND RECOVERY

OF DEBTS LAWS (AMENDMENT) ACT, 2012

[ACT No. 1 OF 2013]

ACT

further to amend the Securitisation and Reconstruction of Financial Assets and

Enforcement of Security Interest Act, 2002 and the Recovery of Debts

Due to Banks and Financial Institutions, Act, 1993.

BE it enacted by Parliament in the Sixty-third Year of the Republic of India

as follows:—

CHAPTER I

PRELIMINARY

Short title and commencement.—(1) This Act may be called the

Enforcement of Security Interest and Recovery of Debts Laws (Amendment)

Act, 2012.

(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 section 2.—In section 2 of the Securitisation and

Reconstruction of Financial Assets and Enforcement of Security Interest Act,

2002, (54 of 2002) (hereafter in this Chapter referred to as the principal Act),

in clause (c), after sub-clause (iv), the following sub-clause shall be inserted,

namely:—

“(iva) a multi-State co-operative bank; or”.

Amendment of section 5.—In section 5 of the principal Act, after sub-

section (4), the following sub-section shall be inserted, namely:—

“(5) On acquisition of financial assets under sub-section (1), the

securitisation campany or reconstruction company, may with the consent

of the originator, file an applicaion before the Debts Recovery Tribunal

or the Appellate Tribunal or any court or other Authority for the

purpose of substitution of its name in any pending suit, appeal or other

proceedings and on receipt of such application, such Debts Recovery

Tribunal or the Appellate Tribunal or Court or Authority shall pass

orders for the substitution of the securitisation company or

reconstruction company in such pending suit, appeal or other

proceedings.”.

Amendment of section 9.—In section 9 of the principal Act, after

clause (f), the following clause shall be inserted, namely:—

“(g) to convert any portion of debt into shares of a borrower

company:

Provided that conversion of any part of debt into shares of a

borrower company shall be deemed always to have been valid, as if the

provisions of this clause were in force at all material times.”.

Amendment of section 13.—In section 13 of the principal Act,—

(a) in sub-section (3A), for the words “within one week”, the

words “within fifteen days” shall be substituted;

(b) after sub-section (5), the following sub-sections shall be

inserted, namely:—

“(5A) Where the sale of an immovable property, for which a

reserve price has been specified, has been postponed for want of

a bid of an amount not less than such reserve price, it shall be

lawful for any officer of the secured creditor, if so authorised by

the secured creditor in this behalf, to bid for the immovable

property on behalf of the secured creditor at any subsequent sale.

(5B) Where the secured creditor, referred to in sub-section

(5A), is declared to be the purchaser of the immovable property at

any subsequent sale, the amount of the purchase price shall

adjusted towards the amount of the claim of the secured

creditor for which the auction of enforcement of security interest is

taken by the secured creditor, under sub-section (4) of section 13.

(5C) The provisions of section 9 of the Banking Regulatian Act,

1949 (10 of 1949) shall, as far as may be, apply to the immovable

property acquired by secured creditor under sub-section (5A).”.

(c) In the opening Portion of sub-section (9), and in the

Explanation thereto, for the word “three-fourth”, occurring at

both the places, the words “sixty per cent.” shall be substituted.

Amendment of section 14.—In section 14 of the principal Act,—

(a) in sub-section (1), the following provisos shall be inserted,

namely:—

“Provided that any application by the secured creditor shall be

accompanied by an affidavit duly affirmed by the authorised officer of

the secured creditor, declaring that—

(i) The aggregate amount of financial assistance granted and the

total claim of the Bank as on the date of filing the application;

(ii) The borrower has created security interest over various

properties and that the Bank or Financial Institution is holding a valid

and subsisting security interest over such properties and the claim of

the Bank or Financial Institution is within the limitation period;

(iii) The borrower has created security interest over various

properties giving the details of properties referred to in sub-clause (ii)

above;

(iv) The borrower has committed default in repayment of the

financial assistance granted aggregating the specified amount;

(v) Consequent upon such default in repayment of the financial

assistance the account of the borrower has been classified as a

non-performing asset;

(vi) Affirming that the period of sixty days notice as required by

the provisions of sub-section (2) of section 13, demanding payment of

the defaulted financial assistance has been served on the borrower;

(vii) The objection or representation in reply to the notice

received from the borrower has been considered by the secured creditor

and reasons for non-acceptance of such objection or representation

had been communicated to the borrower;

(viii) the borrower has not made any repayment of the

financial assistance in spite of the above notice and the Authorised

Officer is, therefore, entitled to take possession of the secured assets

under the provisions of sub-section (4) of section 13 read with section

14 of the principal Act;

(ix) that the provisions of this Act and the rules made thereunder

had been complied with:

Provided further that on receipt of the affidavit from the Authorised

Officer, the District Magistrate or the Chief Metropolitan Magistrate, as the

case may be, shall after satisfying the contents of the affidavit pass suitable

orders for the purpose of taking possession of the secured assets:

Provided also that the requirement of filing affidavit stated in the first

proviso shall not apply to proceeding pending before any District

Magistrate or the Chief Metropolitan Magistrate, as the case may be, on

the date of commencement of this Act.”;

(b) after sub-section (1), the following sub-section shall be inserted,

namely:—

“(1A) The District Magistrate or the Chief Metropolitan Magistrate

may authorise any officer subordinate to him,—

(i) to take possession of such assets and documents

relating thereto; and

(ii) to forward such assets and documents to the secured

creditor.”;

(c) in sub-section (3), after the words “the District Magistrate”, the

words “any officer authorised by the Chief Metropolitan Magistrate or

District Magistrate” shall be inserted.

Insertion of new section 18C.—After section 18B of the principal Act,

the following section shall be inserted, namely:—

“18C. Right to lodge a caveat. (1) Where an application or an appeal is

expected to be made or has been made under sub-section (1) of section 17

or section 17 A or sub-section (1) of section 18 or section 18B, the secured

creditor or any person claiming a right to appear before the Tribunal or the

Court of District Judge or the Appellate Tribunal or the High Court, as the

case may be, on the hearing of such application or appeal, may lodge a

caveat in respect thereof.

(2) Where a caveat has been lodged under sub~section (1),—

(a) the secured creditor by whom the caveat has been lodged

(hereafter in this section referred to as the caveator) shall serve notice

of the caveat by registered post, acknowledgement due, on the person

by whom the application has been or is expected to be made under

sub-section (1);

(b) any person by whom the caveat has been lodged (hereafter in

this section referred to as the caveator) shall serve notice of the caveat

by registered post, acknowledgement due, on the person by whom the

application has been or is expected to be made under sub-section (1).

(3) Where after a caveat has been lodged under sub-section (1), any

application or appeal is filed before the Tribunal or the court of District

Judge or the Appellate Tripunal or the High Court, as the case may be, the

Tribunal or the District Judge or the Appellate Tribunal or the High Court,

as the case may be, shall serve a notice of application or appeal filed by

the applicant or the appellant on the caveator.

(4) Where a notice of any caveat has been served on the applicant or

the Appellant, he shall periodically furnish the caveator with a copy of the

application or the appeal made by him and also with copies of any paper or

document which has been or may be filed by him in support of the

application or the appeal.

(5) Where a caveat has been lodged under sub-section (1), such caveat

shall not remain in force after the expiry of the period of ninety days from

the date on which it was lodged unless the application or appeal referred to

in sub-section (1) has been made before the expiry of the said period.”.

Amendment of section 23.—In section 23 of the principal Act, after

the proviso, the following proviso shall be inserted, namely:—

“Provided further that the Central Government may, by notification,

require registration of all transactions of securitisation, or asset

reconstruction or creation of security interest which are subsisting on or

before the date of establishment of the Central Registry under Sub-section

(1) of section 20 within such period and on payment of such fees as may

be prescribed.”.

Insertion of new section 26A.—After section 26 of the principal Act,

the following section shall be inserted, namely:—

“26A.Rectification by Central Government in matters of

registration, modification and satisfaction, etc. (1) The Central

Government, on being satisfied.

(a) that the omission to file with the Registrar the particulars of

any transaction of securitisation, asset reconstruction or security

interest or modification or satisfaction of such transaction or; the

omission or mis-statement of any particular with respect to any such

transaction or modification or with respect to any satisfaction or other

entry made in pursuance of section 23 or section 24 or section 25 of

the principal Act was accidental or due to inadvertence or some other

sufficient cause or it is not of a nature to prejudice the position of

creditors; or

(b) that on other grounds, it is just and equitable to grant relief,

may, on the application of a secured creditor or securitisation company

or reconstruction company or any other person interested on such

terms and conditions as it may seem to the Central Government just

and expedient direct that the time for filing of the particulars of the

transaction for registration or modification or satisfaction shall be

extended or, as the case may require, the omission or mis-statement

shall be rectified.

(2) Where the Central Government extends the time for the

registration of transaction of security interest or securitisation or asset

reconstruction or modification or satisfaction thereof, the order shall not

prejudice any rights acquired in respect of the property concerned or

financial asset before the transaction is actually registered.’’.

10. Substitution of new section for section 30.—For section 30 of the

Principal Act, the folIowing section shall be substituted, namely:—

“30. Cognizance of offences.— (1) No court shall take cognizance of

any offence punishable under section 27 in relation to non-compliance

with the provisions of section 23, section 24 or section 25 or under

section 28 or section 29 or any other provisions of the Act, except

upon a complaint in writing made by an officer of the Central Registry

or an officer of the Reserve Bank, generally or specially authorised in

writing in this behalf by the Central Registrar or, as the case may be,

the Reserve Bank.

(2) No court inferior to that of a Metropolitan Magistrate or a

Judicial Magistrate of the first class shall try any offence punishable

under this Act.”.

11. Insertion of new section 31 A.—After section 31 of the principal Act,

the folIowing section shall be inserted, namely:—

“31 A. Power to exempt a class or classes of banks or financial

institutions.—(1) The Central Government may, by notification in the

public

interest, direct that any of the provisions of this Act,—

(a) shall not apply to such class or classes of banks or financial

institutions; or

(b) shall apply to the class or classes of banks or financial

institutions with such exceptions, modifications and adaptations,

as may be specified in the notification.

(2) A copy of every notification proposed to be issued under

sub-section (I), shall be laid in draft before each House of Parliament,

while it is in session, for a total period of thirty days which may be

comprised in one session or in two or more successive sessions, and

if, before the expiry of the session immediately following the session or

the successive sessions aforesaid, both Houses agree in disapproving

the issue of the notification or both Houses agree in making any

modification in the notification, the notification shall not be issued or,

as the case may be, shall be issued only in such modified form as may

be agreed upon by both the Houses.”.

CHAPTER III

AMENDMENTS TO THE RECOVERY OF DEBTS DUE TO BANKS AND

FINANCIAL INSTITUTIONS ACT, 1993

12.

Amendment of section 2.—In the Recovery of Debts Due to Banks

and Financial Institutions Act, 1993 (51 of 1993) (hereafter in this Chapter

referred to as the principal Act), in section 2, in clause (d), after sub-clause (v),

the following sub-clause shall be inserted, namely:—

“(vi) a multi-State co-operative bank;”.

13. Amendment of section 15.—In section 15 of the principal Act, in

sub-section (2), the following proviso shall be inserted, namely:—

“Provided that the Central Government, during the pendency of the inquiry

against the Presiding Officer or a Chairperson, as the case may be, may, after

consulting the Chairperson of the Selection Committee constituted for selection

of Presiding Officer or Chairperson, pass an order suspending the Presiding

Officer or the Chairperson, if it is satisfied that he should cease to discharge his

functions as a Presiding Officer or Chairperson, as the case may be.”.

14. Amendment of section 18.—In section 18 of the principal Act, the

following proviso shall be inserted, namely:—

“Provided that any proceedings in relation to the recovery of debts

due to any multi-State co-operative bank pending before the date of

commencement of the Enforcement of Security Interest and Recovery of

Debts Laws (Amendment) Act, 2012 under the Multi-State Co-operative

Societies Act, 2002 (39 of 2002) shall be continued and nothing contained

in this section shall, after such commencement, apply to such proceedings.”.

15. Amendment of section 19.—In section 19 of the principal Act,—

(a) After sub-section (1), the following Sub Sections shall be

inserted, namely:—

“(1A) Every bank being, multi-State co-operative bank referred

to in sub-clause (VI) of clause (d) of section 2, may, at its option, opt

to initiate proceedings under the Multi-State Co-operative Societies Act,

2002 (39 of 2002) to recover debts, whether due before or after the date

of commencement of the Enforcement of the Security Interest and

Recovery of Debts Laws (Amendment) Act, 2012 from any person

instead of making an application under this Chapter.

(1B) In case, a bank being, multi-State co-operative bank

referred to in sub-clause (vi) of clause (d) of section 2 has filed an

application under this Chapter and subsequently opts to withdraw the

application for the purpose of intiating proceeding under the Multi-State

Co-operative Societies Act, 2002 (39 of 2002) to recover debts, it may

do so with the permission of the Tribunal and every such application

seeking permission from the Tribunal to withdraw the application made

under sub-section (1A) shall be dealt with by it as expeditiously as

possible and disposed of within thirty days from

the date of such

application:

Provided that in case the Tribunal refuses to grant permission for

withdrawal of the application filed under this sub-section, it shall pass

such orders after recording the reasons therefor.”;

(b) after sub-section (3), the following sub-section shall be

inserted, namely:—

“(3A)If any application filed before the Tribunal for recovery of any

debt is settled prior to the commencement of the hearing before that

Tribunal or at any stage of the proceedings before the final order is

passed, the applicant may be granted refund of the fees paid by him

at such rates as may be prescribed.”;

(c) for sub-section (5), the following sub-section shall be substituted,

namely:—

“(5) The defendant shall, within a period of thirty days from the

date of service of summons, present a written statement of this defence:

Provided that where the defendant fails to file the written

statement within the said period of thirty days, the Presiding Officer

may, in exceptional cases and in special circumstances to be recorded

in writing, allow not more than two extensions to the defendant to file

the written statement.”;

(d) after sub-section (5), the following sub-section shall be inserted,

namely:—

“(5A) After hearing of the application has commenced, it shall be

continued from day-to-day until the hearing is concluded:

Provided that the Tribunal may grant adjournments if sufficient

cause is shown, but no such adjournment shall be granted more than

three times to a party and where there are three or more parties, the

total number of such adjournments shall not exceed six:

Provided further that, the Presiding Officer may grant such

adjournments on imposing such costs as may be considered

necessary.”;

(e) after sub-section (20), the following sub-section shall be inserted,

namely:—

“(20A) Where it is proved to the satisfaction of the Tribunal that

the claim of the applicant has been adjusted wholly or in part by any

lawful agreement or compromise in writing and signed by the parties or

where the defendant has repaid or agreed to repay the claim of the

applicant, the Tribunal shall pass orders recording such agreement,

compromise or satisfaction of the claim.”.

16. Amendment of section 31.—In section 31 of the principal Act, after

the proviso, the following proviso shall be inserted, namely:—

“Provided further that any recovery proceedings in relation to the

recovery of debts due to any multi-State co-operative bank pending

before the date of commencement of the Enforcement of Security

Interest and Recovery of Debts Laws (Amendment) Act, 2012 under

the Multi-State Co-operative Societies Act, 2002, (39 of 2002) shall be

continued and nothing contained in this section shall apply to such

proceedings.”.

17. Amendment of section 36.—In section 36 of the principal Act, in

sub-section (2), after clause (c), the following clause shall be inserted,

namely:—

“(cc) the rate of fee to be refunded to the applicant under

sub-section (3A) of section 19 of the Act.”.