86540
Lawyers Network
103860
Users
630
Cities Serving
114
Law Schools Network
59824
THE SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ORDINANCE, 2002
No. 2 of 2002
Promulgated by the President in the Fifty-third Year of the Republic of India.
An Ordinance to regulate securitisation and reconstruction of financial assets and enforcement of security interest and for matters connected therewith or incidental thereto.
WHEREAS Parliament is not in session and the President is satisfied that circumstances exist which render it necessary for him to take immediate action;
Now, THEREFORE, in exercise of the powers conferred by clause (1) of article 123 of the Constitution, the President is pleased to promulgate the following Ordinance:—
CHAPTER I
PRELIMINARY
Short title, extent and commencement.
1. (1) This Ordinance may be called the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Ordinance, 2002.
(2) It extends to the whole of India.
(3) It shall come into force at once.
2 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
Definitions. 2. (1) In this Ordinance, unless the context otherwise requires,—
(a) "Appellate Tribunal" means a Debts Recovery Appellate Tribunal established under sub-section (1) of section 8 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993;
(b) "asset reconstruction" means acquisition by any securitisation company or reconstruction company of any right or interest of any bank or financial institution in any financial assistance for the purpose of realisation of such financial assistance;
(c) "bank" means—
(i) a banking company; or
(ii) a corresponding new bank; or
(iii) the State Bank of India; or
(iv) a subsidiary bank or
(v) such other bank which the Central Government may, by notification, specify for the purposes of this Ordinance;
(d) "banking company" shall have the meaning assigned to it in clause (c) of section 5 of the Banking Regulation Act, 1949; 10 of 1949.
(e) "Roard" mean.1; the Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992;
(f) "borrower" means any person who has been granted financial assistance by any bank or financial institution or who has given any guarantee or created any mortgage or pledge as security for the financial assistance granted by any bank or financial institution and includes a person who becomes borrower of a securitization company or reconstruction company consequent upon acquisition by it of any rights or interest of any bank or financial institution in relation to such financial assistance;
(g) "Central Registry" means the registry set up or cause to be set up under subsection (7) of section 20;
(h) "corresponding new bank" shall have the meaning assigned to it in clause (da) of section 5 of the Banking Regulation Act: 1949; 10 of 1949
(i) "Debts Recovery Tribunal" means the Tribunal established under sub-section (1) of section 3 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993;
(j) "default" means non-payment of any principal debt or interest thereon or any other amount payable by a borrower to any secured creditor consequent upon which the account of such borrower is classified as non-performing asset in the books of account of the secured creditor in accordance with the directions or guidelines issued by the Reserve Bank;
(k) "financial assistance" means any loan or advance granted or any debentures or bonds subscribed or any guarantees given or letters of credit established or any other credit facility extended by any bank or financial institution;
(l) "financial asset" means debt or receivables and includes—
(i) a claim to any debt or receivables or part thereof, whether secured or unsecured; or
(ii) any debt or receivables secured by, mortgage of, or charge on, immovable property; or
(iii) a mortgage, charge, hypothecation or pledge of movable property; or
(iv) any right or interest in the security, whether full or part underlying such debt or receivables; or
(v) any beneficial interest in property, whether movable or immovable, or in such debt, receivables, whether such interest is existing, future, accruing, conditional or contingent; or
(v) any financial assistance;
(m) "financial institution" means—
(i) a public Financial institution within the meaning ot section 4A or the Companies Act, 1956;
(ii) any institution specified by the Central Government under subclause (ii) of clause (h) of section 2 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993;
(iii) International Finance Corporation established under the International Finance Corporation (Status, Immunities and Privileges) Act, 1958;
(iv) any other institution or non-banking financial company as defined in clause (1) of section 45-1 of the Reserve Bank of India Act, 1934, which the Central Government may, by notification, specify as financial institution for the' purposes of this Ordinance;
(n) "hypothecation" means a charge in or upon any movable property, existing or future, created by a borrower in favour of a secured creditor without delivery of possession of the movable property to such creditor, as a security for financial assistance and includes floating charge and crystallization of such charge into fixed charge on movable property;
(o) "non-performing asset" means an asset or account of a borrower, which has been classified by a bank or financial institution as sub-standard, doubtful or loss asset, in accordance with the directions or guidelines relating to asset classifications issued by the Reserve Bank;
(p) "notification" means a notification published in the Official Gazette;
(q) "obligor" means a person liable to the originator, whether under a contract or otherwise, to pay a financial asset or to discharge any obligation in respect of a financial asset, whether existing, future, conditional or contingent and includes the borrower;
(r) "originator" means the owner of a financial asset which is acquired by a securitisation company or reconstruction company tor the purpose of securitization or asset reconstruction;
(s) "prescribed" means prescribed by rules made under this Ordinance;
(t) "property" means—
(i) immovable property;
(ii) movable property;
(iii) any debt or any right to receive payment of money, whether secured or unsecured;
(iv) receivables, whether existing or future;
(v) intangible assets, being know-how, patent, copyright, trade mark, licence, franchise or any other business or commercial right of similar nature;
(u) "qualified institutional buyer" means a financial institution, insurance company, bank, state financial corporation, state industrial development corporation, trustee or any asset management company making investment on behalf of mutual fund or provident fund or gratuity fund or pension fund or a foreign institutional investor registered under the Securities and Exchange Board of India Act, 1992 or regulations made thereunder, or any other body corporate as may be specified by the Board;
(v) "reconstruction company" means a company formed and registered under the Companies Act, 1956 for the purpose of asset reconstruction;- 1 of 1956.
(w) "Registrar of Companies" means the Registrar defined in clause (40) of section 2 of the Companies Act, 1956; I ul' 1956,
(x) "Reserve Bank" means the Reserve Bank of India constituted under section 3 of the Reserve Bank of India Act, 1934;
(y) "scheme" means a scheme inviting subscription to security receipts proposed to be issued by a securitisation company or reconstruction company under that scheme;
(z) "securitisation" means acquisition of financial assets by any securitization company or reconstruction company from any originator, whether by raising of funds by such securitisation company or reconstruction company from qualified institutional buyers by issue of security receipts representing undivided interest in such financial assets or otherwise;
(za) "securitisation company" means any company tomaed and registered under the Companies Act, 1956 for the purpose of securitisation;
(zb) "security agreement" means an agreement, instrument or any other document or arrangement under which security interest is created in favour of the secured creditor including the creation of mortgage by deposit of title deeds with the secured creditor;
(zc) "secured asset" means the property on which security interest is created;
(zd) "secured creditor" means any bank or financial institution or any consortium or group of banks or financial institutions and includes—
(i) debenture trustee appointed by any bank or financial institution; or
(ii) securitisation company or reconstruction company; or
(iii) any other trustee holding securities on behalf of a bank or financial institution, in whose favour security interest is created for due repayment by any borrower of any financial assistance;
(ze) 'secured debt" means a debt which is secured by any security interest;"
(zf) "security interest" means right, title and interest of any kind whatsoever upon property, created in favour of any secured creditor and includes any mortgage, charge, hypothecation, assignment other than those specified in section 31;
(zg) "security receipt" means a receipt or other security, issued by a securitization company or reconstruction company to any qualified institutional buyer pursuant to a scheme, evidencing the purchase or acquisition by the holder thereof, of an undivided right, title or interest in the financial asset involved in securitisation;
(zh) "sponsor" means any person holding not less than ten per cent, of the paidup equity capital of a securitisation company or reconstruction company;
(zi) "State Bank of India" means the State Bank of India constituted under section 3 of the State Bank of India Act, 1955; 23 of 1955.
(zj) "subsidiary bank" shall have the meaning assigned to. it in clause (k) ot section 2 of the State Bank of India (Subsidiary Banks) Act, 1959.
(2) Words and expressions used and not defined in this Ordinance but defined in the Indian Contract Act, 1872 or the Transfer of Property Act, 1882 or the Companies Act, 1956 or the Securities and Exchange Board of India Act, 1992 shall have the same meanings respectively assigned to them in those Acts.
CHAPTER II
REGULATION OF SECimrnsATioN AND RECONSTRUCTION OF FINANCIAL ASSETS OF BANKS AND FINANCIAL
INSTITUTIONS
Registration of securitization companies or reconstruction companies.
3. (1) No securitisation company or reconstruction company shall commence or carry on the business of securitisation or asset reconstruction without—
(a) obtaining a certificate of registration granted under this section; and
(b) having the owned fund of not less than two crore rupees or such other amount not exceeding fifteen per cent, of total financial assets acquired or to be acquired by the securitisation company or reconstruction company, as the Reserve Bank may, by notification, specify:
Provided that the Reserve Bank may, by notification, specify different amounts of owned fund for different class or classes of securitisation companies or reconstruction companies:
Provided further that a securitisation company or reconstruction company, existing on the commencement of this Ordinance, shall make an application for registration to the Reserve Bank before the expiry of six months from such commencement and notwithstanding anything contained in this sub-section may continue to carry on the business of securitisation or asset reconstruction until a certificate of registration is granted to il or, as the case may be, rejection of application for registration is communicated to it.
(2) Every securitisation company or reconstruction company shall make an application for registration to the Reserve Bank in such form and manner as it may specify.
(3) The Reserve Bank may, for the purpose of considering the application for registration of a securitisation company or reconstruction company to carry on the business of securitisation or asset reconstruction, as the case may be, require '-."» be satisfied, by an inspection of records or books of such securitisation company or reconstruction company, or otherwise, that the following conditions are fulfilled, namely:—
(a) that the securitisation company or reconstruction company has not incurred losses in any of the three preceding financial years;
(b) that such securitisation company or reconstruction company has made adequate arrangements for realisation of the financial assets acquired for the purpose of securitisation or asset reconstruction and shall be able to pay periodical returns and redeem on respective due dates on the investments made in the company by the qualified institutional buyers or other persons;
(c) that the directors of securitisation company or reconstruction company have adequate professional experience in matters related to finance, securitisation and reconstruction;
(d) that the board of directors of such securitisation company or reconstruction company does not consist of more than half of its total number of directors who are either nominees of any sponsor or associated in any manner with the sponsor or any of its subsidiaries;
(e) that any of its directors has not been convicted of any offence involving moral turpitude;
(f) that a sponsor, is not a holding company of the securitisation company or reconstruction company, as the case may be, or, does not otherwise hold any controlling interest in such securitisation company or reconstruction company;
(g) that securitisation company or reconstruction company has complied with or is in a position to comply with prudential norms specified by the Reserve Bank,
(4) The Reserve Bank may, after being satisfied that the conditions specified in subsection (5) are fulfilled, grant a certificate of registration to the securitization company or the reconstruction company to carry on or commence business of securitisation or asset reconstruction, subject to such conditions, which it may consider, fit to impose.
(5) The Reserve Bank may reject the application made under sub-section (2) if it is satisfied that the conditions specified in sub-section (3) are not fulfilled:
Provided that before rejecting the application, the applicant shall be given a reasonable opportunity of being heard.
(6) Every securitisation company or reconstruction company shall obtain prior approval of the Reserve Bank for any substantial change in its management or change of location of its registered office or change in its name:
Provided that the decision of the Reserve Bank, whether the change in management of a securitisation company or a reconstruction company is a substantial change in its management or not, shall be final.
Explanation.—For the purposes of this section, the expression "substantial change in management" means the change in the management by way of transfer of shares or amalgamation or transfer of the business of the company.
Cancellation of certificate of registration.
4. (1) The Reserve Bank may cancel a certificate of registration granted to a securitization company or a reconstruction company, if such company—
(a) ceases to carry on the business of securitisation or asset reconstruction; or
(b) ceases to receive or hold any investment from a qualified institutional buyer; or
(c) has failed to comply with any conditions subject to which the certificate of registration has been granted to it; or
(d) at any time fails to fulfil any of the conditions referred to in clauses (a) to (g) of sub-section (3) of section 3; or
(e) fails t o –
(i) comply with any direction issued by the Reserve Bank under the provisions of this Ordinance; or
(ii) maintain accounts in accordance with the requirements of any law or any direction or order issued by the Reserve Bank under the provisions of this Ordinance; or
(iii) submit or offer for inspection its books of account or other relevant documents when so demanded by the Reserve Bank; or
(iv) obtain prior approval of the Reserve Bank required under sub-section, (6) of section 3:
Provided that before cancelling a certificate of registration on the ground that the securitisation company or reconstruction company has failed to comply with the provisions of clause (c) or has failed to fulfil any of the conditions referred to in clause (d) or sub-clause (iv) of clause (e), the Reserve Bank, unless it is of the opinion that the delay in cancelling the certificate of registration granted under sub-section (4) of section 3 shall be prejudicial to the public interest or the interests of the investors or the securitisation company or the reconstruction company, shall give an opportunity to such company on such terms as the Reserve Bank may specify for taking necessary steps to comply with such provisions or fulfilment of such conditions.
(2) A securitisation company or reconstruction company aggrieved by the order of rejection of application for registration or conciliation of certificate of registration may prefer an appeal, within a period of thirty days from the date on which such order of rejection or cancellation is communicated to it, to the Central Government:
Provided that before rejecting an appeal such company shall be given a reasonable opportunity of being heard.
86540
103860
630
114
59824