BANKING REGULATION AND BUSINESS LAWS UNIT-15 INTEGRATED OMBUDSMAN SCHEME, 2021 > The Reserve Bank - Integrated Ombudsman Scheme, 2021 has been launched in virtual mode by the Prime Minister Shri Narendra Modi. The Scheme integrates the existing three Ombudsman schemes of RBI namely 1) The Banking Ombudsman Scheme, 2006; 1l) The Ombudsman Scheme for Non-Banking Financial Companies, 2018; and Ill) The Ombudsman Scheme for Digital Transactions, 2019. ; > The Scheme, framed by the Reserve Bank is under Section 354 of the Banking Regulation Act, 1949, Section 45L ofthe Reserve Bank of India Act, 1984, and Section 18 of the Payment and Settlement Systems Act, 2007, to provide cost-ree redress of customer complaints involving deficiency in services rendered by entities regulated by RBI. In addition to integrating the three existing schemes, the Scheme also includes under its ambit Non-Scheduled Primary Co-operative Banks with @ deposit size of Rs.50 crore and above. The Scheme adopts ‘One Nation One Ombudsman’ approach by making the RBI Ombudsman mechanism jurisdiction neutral ‘Appointment and Tenure of Ombudsman and Deptity Oribudsman: the Reserve Bank may appoint one or mote ofits officers as Ombudsman and Deputy Ombudsmén for a period no exceeding three years ata time @centralised Receipt & Processing Centre:/ 7 » The Reserve Bank shall establish the Centralised Receipt and Processing Centre to receive the complaints filed under the Scheme and process them. > The complaints under the Scheme made online shall be registered on the portal (https/icms.rbi.org.in). Complaints in electronic mode (E-mail) and physical form, including postal and hand-delivered complaints, shall be addressed and sent to the place where the Centralised Receipt and Processing Centre ofthe RBI is established, for scrutiny and inital processing 1 The complaints that are received directly in any of the offices of the RBI shall be forwarded to the Centralised Receipt and Processing Centre for further action ‘Powers and Function J o™\ \/ / > The OmbudsmarvDeputy Ombudsman shall consider the complaints of Customers of Regulated Entities relating to deficiency in service 1» There is no limit on the amount in a dispute that can be brought before the Ombudsman for which the Ombudsman can pass an Award, However, for any consequential loss suffered by the complainant, the Ombudsman shall have the power to provide a compensation up to Rupees 20 lakh, in addition to, up to Rupees One lakh for the loss of the complainant's time, ‘expenses incurred and for harassmentimental anguish suffered by the complainant. > While the Ombudsman shall have the power to address and close all complaints, the Deputy Ombudsman shall have the power to close those complaints. "> The Ombudsman shall send to the Deputy Governor, RBI, a report, a& on March 31st every year, containing a general feview of the activities ofthe office during he preceding fnancial year, @Redressal of Grievance under the Scheme: / Any Lustomerdegieved by an ect or ossion of Regulated Ely resulting in deficiency inservice may fle @ complaint under the Scheme personally or throug an authorised representative Grounds fohnon-maintainability of a Complaint: No complaint for deficiency in service shall lie under the Schemne in matters involving: a)Commercialjudgment/commercial decision of a Regulated Ent b)A dispute between a vendor and a Regulated Entity relating o an outsourcing contract; ‘A grievance not addressed to the Ombudsman directly, <)General grievances against Management or Executives of a Regulated Entity, e)A dispute in which action is initiated by @ Regulated Entity in compliance with the orders of a statutory or law enforcing authority; and 4) A dispute involving the employee-employer relationship of a Regulated Entity, A complaint under the Scheme shalll not lie unles: (2) The complainant had, before making a complaint under the Scheme, made a written complaint to the Regulated Entity ‘concerned, and () The complaint was rejected wholly or partly by the Regulated Entity, and the complainant is not satisfied with the reply; or the complainant had not received any reply within 30 days after the Regulated Entity received the complaint; and (i) The complaint is made to the Ombudsman within one year after the complainant has received the reply from the Regulated Entity to the complaint or, where no reply is received, within one year and 30 days from the date ofthe complaint. (b) The complain is notin respect of the same cause of action which is already: () Pending before an Ombudsman or setled or dealt with on merits, by an Ombudsman; (i) Pending before any Court, Tribunal or Arbitrator or any other Forum or Authorily; or, settled or dealt with on merits, by any Court, Tribunal or Arbitrator or any other Forum or Authority, whether or not received from the same complainant or along with one or more of the complainantsiparties concerned; (©) The complaint is not abusive or frivolous or vexatious in nature: SCO, 1" & 2" Floor), Near PNB, SECTOR 47-D, CHANDIGARH-160047BANKING REGULATION AND BUSINESS LAWS wa (@) The complaint to the Regulated Entity was made before the expiry of the period of limitation prescribed under the Limitation Act, 1963, for such claims; (©) The complaint is lodged by the complainant personally or through an authorised representative other than an ‘advocateunless the advocale is the aggrieved person. A complaint in respect ofthe same cause of action does not include criminal proceedings pending or decided before a Court or Tribunal or any police investigation initiated in a criminal offence. Resolution of Complaints: The Ombudsman/Deputy Ombudsman shall endeavour to promote settlement of a complaint by agreement between the complainant and the Regulated Entity through facilitation or conciliation or mediation. ‘The proceedings before the Ombudsman shall be summary in nature and shall not be bound by any rules of evidence. > The Regulated Entity shal, on receipt of the complaint, ile its written version in reply to the averments in the complaint enclosing therewith copies of the documents relied upon, within 15 days before the Ombudsman for resolution. > Incase the Regulated Entity omits or fails to file its writen version and documents within the time, the Ombudsman may proceed ex-parte based on the evidence available on record and pass appropriate Order or issue an Award, There shall be fo right of appeal to the Regulated Enity in respect of the Award issued on account of non-response or non-urnishing of information sought within the stipulated time. > If any amicable settlement ofthe complaint is arrived at between the parties, the same shall be recorded and signed by both the parties and thereafter, the fact of settlement may be recorded ‘@Award by the Ombudsman A copy of the Award shall be sent to the complainant and the Regulated Entity. The Award passed shall lapse and be of no effect unless the complainant furnishes a letter of acceptance of the Award in full and final settlement of the claim to the Regulated Entity concemed, within a period of 30 days from the date of receipt ofthe copy of the Award. > The Regulated Entity shall comply with the Award and intimate compliance to the Ombudsman within 30 days from the date of receipt ofthe letter of acceptance from the complainant, unless it has preferred an appeal Rejection of a Complaint: The Deputy Ombudsman or the Ombudsman may reject a complaint at any stage ift 2) In his opinion there is no deficiency in service; or ) The compensation sought for the consequential loss is beyond the power of the Ombudsman to award the compensation, of ©). The complaint is not pursued by the complainant with reasonable diligence: or 4) The complaint is without any sufficient cause; or ) The complaint requires consideration of elaborate documentary and oral evidence and the proceedings before the Ombudsman are not appropriate for adjudication; or 4) In the opinion of the Ombudsman there is no financial loss or damage, or inconvenience caused to the complainant Appeal before the Appellate Authority: > The Regulated Entity may, aggrieved by an Award or closure of a complaint within 30 days of the date of receipt of Communication of Award or closure ofthe complaint, prefer an appeal before the Appellate Authority. The period of 30 days for fling an appeal shall commence from the date on which the Regulated Entity receives the letter of acceptance of Award by the complainant: "> An appeal may be filed by a Regulated Entity only with the previous sanction of the Chairman or the Managing Director Chief Executive Oficer or, in their absence, the Executive DirectoriOficial of equal rank 1 The Appellate Authority (AA) if satisfied that the Regulated Entity had sufficient cause for not making the appeal within the time, may allow a futher period nol exceeding 30 days {> The complainant may, aggrieved by an Award or rejection of a complaint, within 30 days of the date of receipt of the ‘Award or rejection of the complaint, prefer an appeal before the Appellate Authority. The AA may, if satisfied that the Complainant had sufficient cause for not making the appeal within the time, may allow a further period not exceeding 30 days. Fhe order of the Appellate Authority shell have the same effect as the Award passed by Ombudsman or the order ejecting the complaint, as the case may be. Regulated Entity to Display Salient Features of the Scheme: + The Regulated Eniity to which the Scheme is applicable shall facilitate the smooth conduct of the Scheme. The Regulated Entity shall appoint a Principal Nodal Officer at their head office who shall not be a rank less than a General Manager or an officer of equivalent rank and shall be responsible for representing the Regulated Entity and furnishing formation on behalf of the Regulated Entity in respect of complaints filed against the Regulated Entily INTERNAL OMBUDSMAN ‘@ The nomenclature of Chief Customer Service Officer has been changed to intemal Ombudsman (IO). Appointment of 10 as per Damodaran Committee recommendation. IO reports directly to CMD of bank. @As per the internal Ombudsman Scheme 2018, all SCBs in India having more than 10 banking outlets (excluding regional rural banks), are required to appoint internal Ombudsman (IO) in their banks, The IO shall examine customer complaints ‘which are in the nature of deficiency in service on the part ofthe bank, that are partly or wholly rejected by the bank. As the banks shall internally escalate all complaints, which are not fully redressed to their respective IOs before conveying the final ‘decision to the complainant, the customers of banks need not approach the IO directly. A consumer may fie @ complaint in relation to any deficiency of service withthe Intemal Ombudsman, if a) His complaint under the Internal Grievance Machinery of the Bank remains pending or not resolved to his satisfaction ‘even after expiry of 21 days from the date of his representation to the Chief Grievances Officer of the Bank; and ) The Complainant has not taken recourse to any other legal remedy before the Banking Ombudsman or consumer forum or civil court or any other adjudicating authority; and ©) The Complaint does not relate to services provided more than two years ago. 0047 5C0 91, (1 & 2" Floor), Near PNB,BANKING REGULATION AND BUSINESS LAWS 1a) Rejection of complaint should be communicated by intemal Ombudsman within 15 days of receipt of complaint from the complainant. b) Settlement of complaint as per para from the complainant. «) For any specific reason, for collection of documents or information if additional time is required, Internal Ombudsman will ‘communicate the requirements of such additional period which is justifiable for arriving at a decision. 11 will be completed within a period of 30 days from the date of receipt of complaintBANKING REGULATION AND BUSINESS LAWS ud UNIT-16 LENDING TO MICRO, SMALL & MEDIUM ENTERPRISES (MSME) SECTOR-RBI MASTER DIRECTIONS-2017 Micro, Small and Medium Enterprises’ mean the enterprises as defined in the MSMED Act, 2006 and the amendments, if ‘ny, cared out therein by the Government of Inaia from time to time NEW DEFINITION OF MICRO, SMALL AND MEDIUM ENTERPRISES: All bank loans to MSMEs conforming to the revised guidelines wth effect rom 1st July 2020 would qualify for classification under Priory Sector Lending 4. MICRO ENTERPRISE: Where the investment in plant and machinery or equipment does not exceed one crore rupees and turnover does not exceed five crore rupees. 2, SMALL ENTERPRISE: Where the investment in plant and machinery or equipment does not exceed ten crore rupees and tumover does not exceed fity crore rupees, 3. MEDIUM ENTERPRISE: Where the investment in plant and machinery or equipment does not exceed fy crore rupees and tumover does not exceed two hundred and fity crore rupees. COMPOSITE CRITERIA OF INVESTMENT AND TURNOVER FOR CLASSIFICATION: A composite criterion of investment and turover shall apply fr classification of an enterprise as micro, smal or medium. if an enterprise crosses the celing limits specified for its present category in ether of the two citria of investment or turnover, it will cease to exist in that category and be placed in the next higher category but no enterprise shall be placed in the lower category unless it oes below the ceiling limits specified for its present category in both the criteria of investment as well as tumover. All units with Goods and Services Tax Identification Number (GSTIN) listed against the same Permanent Account Number (PAN) shall be collectively treated as one enterprise and tumover and investment figure forall of such entities shall be seen together and only the agaregate values will be considered for deciding the category 2s micro, small or medium enterprise CALCULATION OF INVESTMENT IN PLANT AND MACHINERY OR EQUIPMENT: The calculation of investment in plant and machinery or equipment will be linked to the Income Tax Retum (TTR) of the previous years fled Under the Income Tax Act, 1961.in case ofa new enterprise, where no prio Tis available, the investment will be based on self-declaation ofthe promoter of the enterprise and such relaxation shall end after the 3ist March of the financial year in which it files its first ITR. ‘The expression “plant and machinery or equipment” ofthe enterprise, shall be calculate following the Income Tax Act, 1961 and shal include al tangible assets (other then land and building, fumiture and fitings). ‘The purchase (invoice) value ofa plant and machinery or equipment, whether purchased fst hand or second hand, shal be taken into account excluding GST. on self-disclosure basis, if the enterprise is a new one without any ITR. CALCULATION OF TURNOVER: Exports of goods oF services or both, shall be excluded while calculating the turnover ny enterprise tn cate of an upward change in terms of investment in plant and machinery or equipment or turnover or both, and onsequent reclassification. an enterprise will mainiain is prevaing status til expiry of one year from the close of the year Sf registration, In case of reverse-gfaduation of an enterprise, whelher as a result of re-classifcation or due to actual Changes in investment In plant and machinery or equipment or turnover or both, and whether the enterprise is registered nder the Act or Not the enterprise will continue ini present category til the closure ofthe financial year and it will be {ven the benef of the chenged status only with effect from 1st Api ofthe financial year folowing the year in which such change took place. THE COST OF THE ITEMS TO BE EXCLUDED WHILE CALCULATING INVESTMENT IN PLANT AND MACHINERY: Cost of following items to be excluded while calculating the value of Plant and machinery as per Section (@) of the MSMED Act 2008: « Tools, jigs, dyes, moulds and spare parts for maintenance and the cost of consumables slores; « Installation of plant and machinery * Research and development equipment and pollution-controled equipment { Power generation set end extra transformer installed by the enterprise as per regulations ofthe State Electrity Board Bank charges and service charges paid to the National Small Industries Corporation or the State ‘Small industries Corporation: Procurement or instatiztion of cables, wiring, bus bars, electrical contval panels (not mounted on individual machines), oi Greait breakers or miniature circuit breakers which are necessarily to be used for providing electrical power to the plant ‘and machinery or for safely measures {92s producer plants: transportation charges (excluding sales-tex or value added of their manufacture tothe site ofthe enterprise Charges paid for technical knaw-now for erection of plant and machinery. such storage tanks which store raw materia and finished products and are not linked with the manufacturing process| and firefighting equipment «+ Impor duty (excluding miscellaneous expenses such as transportation from the port to the site of the factory, demurrage paléat the pon), Shipping charges, Customs clearance charges; and Sales tax or value added tax. KHADI AND VILLAGE INDUSTRIES SECTOR (KV): {Al loans to units in the KVI sector will be eligible for classification under the sub-target of Enterprises under prionity sector. Bank loans to food and agro processing units shal form part of agriculture. OTHER FINANCE TO MSMEs: tax and excise duty) for indigenous machinery from the place f 7.5 percent prescribed for Micro Floor), Near PNB,BANKING REGULATION AND BUSINESS LAWS aud Loans to entities involved in assisting the decentralized sector in the supply of inputs to and marketing of outputs of sans, vi cottage industries aren eos tives of prowucers inthe decentralized sector vi, artisans, vilage and cotage industries. Lane sanctoned by banks fo MF for ondending to MSME secor as pe te contions specified inthe extant Master ‘rection on Priory Sector Lending - Targets and Classification. Brean on Paty Sect andra Tal ns ect ar, Lag Uda Crt, Swe ret Gard and Weavers Card etc. in existence and catering to the non-farm entrepreneurial credit needs of individuals), «+ Overdrafis extended by banks after April 8, 2015 up to Rs.5,000/- under PMJDY accounts provided the borrower's ousehold annual income does not exceed Rs,100,000/- for rural areas and Rs.1,60,000)- for non-rural areas. These overdrafts will qualify 28 achievement of the target for lending to Mioro Enterprises. «+ Outstanding deposits with SIOBI and MUDRA Lid. on account of prioty sector short RECOMMENDATIONS OF PRIME MINISTER'S TASK FORCE ON MSME: A High-Level Task Force was constituted by the Government of India (Chairman: Shri T K A Nair), in January 2010, to consider various issues raised by MSMEs. In terms of the recommendations of the Prime Minister's Task Force on MSMEs, banks are advised to achieve 20 per cent year-on-year growth in credit fo micro and small enterprises, 10 per cent annual growth in the number of micro enterprise accounts and 60 per cent of total lending to MSE sector as on corresponding quarter of the previous year Micro enterprises. COMMON GUIDELINES/ INSTRUCTIONS FOR LENDING TO MSME SECTOR: E Banks should mandatorily acknowledge all loan applications, submitted manually or online, by their MISME borrowers and ensure that @ running serial number is recorded on the application form as well as on the acknowledgement receipt Banks are mandated not to accept collateral security in the case of loans up to Rs.10 lakh extended to units in the MSE sector / PMEGP and on the basis of good track record and financial postion of the MSE units, Banks may increase the limit to dispense with the collateral requirement for 9C loans up to Rs 25 lakh (with the approval of the appropriate authority). Banks are advised to strongly encourage their branch level functionaries to avail of the Credit Guarentee Scheme cover, including making performance in this regard a criterion in the evaluation of their field staf. A composite loan limit of Rs.1 crore can be sanctioned by banks to enable the MSE entrepreneurs to avail of their working ‘capital and term loan requirement through Single Window. CREDIT LINKED CAPITAL SUBSIDY SCHEME (CLSS): Goverment of India, Ministry of Micro, Small and Medium Enterprises had launched Credit Linked Capital Subsidy Scheme (CLSS) for Technology Upgradation of Micro and Small Enterprises subject to the following terms and conditions: Ceiling on the loan under the scheme is RS.1 crore The rate of subsidy is 15% forall units of micro and small enterprises up to loan celing as above Calculation of admissible subsidy will be done with reference to the purchase price of plant and machinery instead of term loan disbursed to the 1 beneficiary unit SIDBI and NABARD will continue fo be implementing agencies ofthe scheme. STRUCTURED MECHANISM FOR MONITORING THE CREDIT GROWTH TO THE MSE SECTOR: in view of ‘the concerns emerging from the deceleration in credit growth to the MSE sector, an Indian Banking Association-led Sub- Committee (Chairman’ Shri KR. Kamath) was sel up to suggest a structured mechanism to be put in place by banks to monitor the entire gamut of credit related issues perlaining to the sector Based on the recommendations of the Committee, banks are advised to strengthen their existing systems of monitoring credit growth to the sector and put in place a system riven comprehensive performance management information system (MIS at every supervisory level (branch, region, zone, head office) which should be critically evaluated on a regular basis, put in place a system of e-tracking of MSE loan applications land monitor the lean applcalion disposal process in banks, giving branch-wise, region-wise, zone-wise and State-wise by banks on their websites. INSTITUTIONAL ARRANGEMENTS: + Public sector banks are advised to open at leas! one specialised branch in each district. Further, banks have been permitted to categorise their general banking branches having 60% or more of their advances (o MSME sector as specialized MSME branches + State Level Inter Institutional Committee (SLIC): In o'der to deal with the problems of coordination for rehabiliation of sick micro and small units, State Level Inter-institutional Committees were set up in the States. However, the matter of continuation or otherwise, of the SLIIC Forum has been left to the individual States / Union Territory + Empowered Committee on MSMEs: As part of the announcement made by the Union Finance Minister, Empowered Committees on MSMEs are constituted at the Regional Offices of Reserve Bank of India, under the Chairmanship of the Regional Directors with the representatives of SLBC Convenor, senior level officers from two banks having predominant share in MSME financing in the state, representative of SIDBI Regional Office, the Director of MSME or Industries of the State Goverment, one or two senior level representatives from the MSME Associations in the state, and a senior level officer from SC/SIDC as members. The Committee would meet periodically and review the progress in MSME financing as also revival and rehabilitation of stressed Micro, Small and Medium units. It would also coordinate with other banks/financial institutions and the state government in removing bottlenecks, if any, to ensure smooth flow of credit to the sector. Banking Codes and Standards Board of India (BCSBI): The Banking Codes and. Standards Board of India (GCSB) has formulated a Code of Bank’s Commitment io Mico and Small Enterprises. The Code mentions, inter alia, ‘s are expected to dispose of MSE loan application for a credit limit or enhancement in the existing credit limit up to Rs.5 lakh within two weeks; and for credit limit above Rs.5 lakh and up to Rs.25 lakh within 3 weeks; and for credit sco 9 (U8 2 Floor), Near PNB, SECTOR 47 'HANDIGARH-160047BANKING REGULATION AND BUSINESS LAWS —— limit above Rs.25 lakh within 6 weeks from the date of receipt, provided the application is complete in all respects and is ‘accompanied by documents as per check list provided. CLUSTER APPROACH: All SLBC Convenor banks are advised to incorporate in their Annual Credit Plans, the credit requirement in the clusters identified by the Ministry of Micro, Small and Medium Enterprises, Government of India. They are also encouraged to extend banking services in such clusters/ agglomerations which have come up and identified Subsequently by SLBC / DCC members. As per Ganguly Committee recommendations (September 4. 2004), banks are ‘advised that a full-service approach to cater to the diverse needs of the SSI sector (now MSE sector) may be achieved through extending banking services to recognized MSE clusters by adopting a 4-C approach namely, Customer focus, Cost control, Gross sell and Contain risk. A cluster-based approach to lending may be more beneficial: (a) in dealing with well-defined and recognized groups; (b) for making available of appropriate information for risk assessment and (c) for ‘monitoring by the lending institutions. The Ministry of Micro, Small and Medium Enterprises has approved a list of clusters under the Scheme of Fund for Regeneration of Traditional Industries (SFURTI) and Micro and Small Enterprises Cluster Development Programme (MSE- COP) located in 121 Minority Concentration Districts. In terms of recommendations of the Prime Minister's Task Force on MSMEs banks should open more MSE focused branch offices at diferent MSE clusters which can also act as Counselling Centres for MSES. Each lead bank of a district may adopt at least one MSE cluster DELAYED PAYMENT: In the Micro, Small and Medium Enterprises Development (MSMEO), Act 2006, the provisions of the Interest on Delayed Payment Act, 1998 to Small Scale and Ancillary Industrial Undertakings, have been strengthened as Under: «The buyer has to make payment to the supplier on or before the date agreed upon between him and the supplier in writing or, in case of no agreement, before the appointed day. The period agreed upon between the supplier and the buyer shall ‘not exceed forty-five days from the date of acceptance or the day of deemed acceptance * In case the buyer fails to make payment of the amount to the supplier, he shall be liable to pay compound interest with ‘monthly rests to the supplier on the amount from the appointed day or, on the date agreed on, at three times ‘+ In case of dispute with regard fo any amount due, a reference shall be made to the Micro and Small Enterprises Facilitation Council, constituted by the respective State Government Further, banks are advised to fix sub-limits within the overall working capital limits to the large borrowers specifically for ‘meeting the payment obligation in respect of purchases from MSMEs. COMMITTEES ON FLOW OF CREDIT TO MSE SECTOR: The highlights of various committees formulated for extending credit to MSE sector are: High Level Committee on Credit to SSI (now MSE) (Kapur Committee) Committee to Examine the Adequacy of Institutional Credit to SSI Sector (now MSE) and Related Aspects (Nayak Committee) Working Group on Flow of Credit to SSI (now MSE) Sector (Ganguly Committee). Working Group on Rehabilitation of Sick SMEs (Chairman: Dr. K.C. Chakrabarty): Banks were advised to consider that lending in case of all advances upto Rs. 2 crores may be done on the basis of scoring model. Banks have further been advised to undertake a review of ineir loan policy governing extension of credit facies to the MSE sector, wth 2 view to using Board approved credit scoring models in their evaluation of the loan proposals of MSE borrowers. Working Group to Review the Credit Guarantee Scheme for Micro and Small Enterprises: A Working Group was constituted by the Reserve Bank of India under the Chairmanship of Shri VK. Sharma, Executive Director, to review the working of the Credit Guarantee Scheme (CGS) of GTMSE and suggest measures to enhance its usage and facilitate increased flow of collateral tree loans to MSEs. The recommendations of the Working Group included, inter alia, mandatory doubling ofthe limit for collateral tiee loans to micro and small enterprises (MSEs) sector from Rs.5 lakh to Rs. 410 lakh and enjoining upon the Chief Executive Officers of banks to strongly encourage the branch level functionaries to avail ofthe CGS cover and making performance inthis regard a citerion in the evaluation of thei field staf, etc. have been advised to all banks. (CHANDIGARH-160047 SCO 91, (1 & 2" Floor), NBANKING REGULATION AND BUSINESS LAWS SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS & ENFORCEMENT OF SECURI INTEREST ACT) ‘The SARFAESI Act 2002 was enacted to strengthen the creditors right - the ability of lenders in India to recover dues from borrowers. Earlier when a borrower defaulted, it was operationally dificult for lenders to take control of collateral, of to utilize recovery procedures designed for a company that goes into bankruptcy. The enactment of this act made it possible for Creditors to take over the assets without court intervention. The Act supersedes Section 69-A of the Transfer of Property ‘ct, 1882, which shielded borrowers from creditors by disallowing the confiscation of immovable property. This act ‘empowers lenders to take over immovable properties also. and registered under the Companies Act, 1956 for the purpose of sec; banksiFis by conversion of receivables into debt instrument. Securitisation: It means acquisition of financial assets by any SC oP RC from any beginator, whether by raising of funds by such SC or RC from quaified institutional buyers by issue of secdhly receipts representing undivided interest in such financial assets or otherwise; @Secured asset: It means the property on which secur @Secured ereditor: It means any bank or financial ‘and includes: a) Debenture trustee appointed by/any bank or financial insti olding secysties-on behalf of a favour secur interest is created for due repayient by any bOrrower of any financial abeistan eSecurity interest: It means right, file anchinterest of dhy_kind upom property, Wreated ji of any secured creditor and includes mortgage, charge, hypathecation, assignment other than those spetified in Section 31; eSecurity receipt (SR): It means a receipt dc other security, issed by a SC br RC to any qualified institutional buyer pursvent to scheme, evidencing thé purchase opinterest inthe francial aspet ivoled in secursatin; acquisition by the holder thereot, of an undyded right o, fe. Even though the seculy abe reprpsent the transfer of inert on immovable property, he Act exempts them frort compulsory registration. (Se). : @ Sponsor: It means any péson holding nctjess than ten per cent ofthe paid-up equly Capital of a SC_ or RC @Appellate Tribunali It means a Debts Recovery Appellate Tribunal established under Recovery of Debts Due to Banks and Financial inéitutions Act, 1993, : y ‘@Board; it means SEB!; \ \/ @Central Registry: It méaps‘the Registry set up or to'be set up under sub“Sec (1) of Section 20, @Financiat‘asset: it ineans debt or receivables and includes, (a) a claim to any debt or receivables or part thereof, whether secured or unsecured; or (b) any debhgr receivable secured by mortgage of, or charge on immovable property; or) 9forgage, charge, ypotecatenoredae of mevable property: ot (6) ary Fah or erst the secur wheter full oF part undgalying such debt or receivables, of td) any beneficial interest in property, whether movable or immovable, or i such debt, receivables, whether such interest \s_ existing, future, accruing, conditional or contingent, or (@) any financial assistance. 7 @Hypothecation: It means acctiarge in or upon any movable property, existing or future, created by a borrower in favout of a secixed creditor witout delivery of possession of the movable property to such creditor, as a security for financial assistanceand includes Noating charge and crystallization of such charge into fixed charge on movable property, rr It means person lable to the ofiginator, whether under a contract or otherwise, to pay a financial asset or to @Obligor Sechonte any obigaton in respett ofa finarcal asset, whether exsting, future, conditional or contingent and includes the borrower; @ Originator: t.means the owner of a firancial asset which is acquited by a SC or RC for the purpose of securitisation or asset reconstruction: 2 ‘e Property: It means immovable property, movable property, any debt or any right lo receive payment of money, whether secured or unsecured; receivables, whether existing or future; intangible assets such as know-how, patent, copyright, trade mark, license, franchise or any other business or commercial right of similar nature; ‘@ Qualified institutional Buyer (QIB): |i means a financial institution, insurance company, bank, SFC, SIDC, 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 SEB! Act ‘SUMMARY OF HIGHLIGHTS: SARFAESI Act is effective from 21" Aug 2002 (Ordinance promulgated on 21-6-2002) and is applicable to the whole of India including the state of J & K. In the event of default by a borrower, secured creditor has the following powers: 2) To take possession, sell or lease the secured assets ( both moveable and immoveable assets); b) To take over the management of the business of the borrower. ©) To appoint a Manager. 4) Torecover any money payable by third parties to the borrower. SCO91, (I &BANKING REGULATION AND BUSINESS LAWS a €) in case of jont fnanong under consortum or mutiple lending arrangements, # 60% of the secured cectors in value ayes very aco the same shall be nding on 2 ine seowed weators The aus partaly reruepectve '€. cases at have aready Deen refered io BIFR can be called tack M te mayer leroers crouse ts 29 $0 Recayrment of above Rs. lac wil be covered by the provisions of tis Act © Sank ater grng 60 days notce. in wring can take the possession of the assets. If ne borrower makes an chyecton te bark to gve te reply wine 15 cave. © AS per te Rue 22 an Autrorzed Ofice (AO) is an offcer not less than the rank of Chie! Manager of @ puck sector Dank [Le. Scale IV offce'] or of equivalent thereof who is specified by the Board of Directors of the bank to act in sux capacty The nobce can be sent by registered post, speed post or by courier or even by fax or any electronic mail service [Rule if the porower avoids to receive the notice, it can be served by affixing @ copy of the notice on the outer door of the. house in which the notice nas to be served and also by publishing the contents of the demand notice in tac leading which one should be in veriscular having sufficept To ensure that such appeal s’ovision is noyabused to delay or x/Gaimed with the DRT before fling an appeal has been gives the powers to lower the upfront 12 cost of removing ces and contngences out of the 1b the pusetaser within 15 days Kom the Gralzation of action of fe secured creditors can Re 9 petton to the co ed Debt made requiring the oefauit DAT for recovery of dues, 2%¢ ti f unpaid seler - / fi ding in the NBAtS be recovered abes nol exceed Rs 1 ac Further @ CC account which is not out of order is "ot covered under Sarfaes Act (because 1 s stancard asset) ig) The amount due is less than 29 percent cf ie prnogal amount and interest thereof (implying 80% nas been recavered) (n) Property not lable to attagpiment o” sale under code of Civil Procedure CONSTITUTIONAL VALIDITY OF SECURITISATION ACT 2002: ‘The Securiisltion Act 2002 was challenged in various courts on grounds that it was loaded heavily in favour of lenders. The Supreme Court in its jzégment in the matter of Mardia Chemical Ltd. upheld the constitution validity of the SARFAES'-Act-buf struck down sub-section (2) of Section 17, which provides for a deposit of 75% of the claimed amount before the appeal is admitted by DRT. After the Supreme Court decision in Mardia case, GOI issued a notification amending Sec 17(2) of the act, such that only 50% of the claimed amount should be deposited instead of 75% as stipulated before to bring the provision of the act in conformity with the Supreme Court judgment. The deposit is stipulated to dissuade the borrower from indulging in delay tactics and enable secured creditors to make speedy recovery by enforcement of securities. ‘SECURITIZATION OF LOAN ASSETS - CONCEPT: Securitization of assets could be a new source for recycling of funds, supplemental to the usual recovery method. Securitisation covers steps such as. 2) Packaging the long-term loans and offering package to investors; b) Selected / approved investors have liquid funds, CHANDIGARH-160047 SCO 91, (1" & 2" Floor), Near PNB, SECTOR 4’BANKING REGULATION AND BUSINESS LAWS ad ) Long term loans are distributed among the selected investors and the reverse fund-flows liquidate the term loans; d) The investors are given Coupons or Pass Through Certificates (PTCs); ) Investors can also be given marketable securities through Special Purpose Vehicles (SPVs); f)_ Issuing document contains provisions that recoveries of loans will be distributed pro-rata to the coupon holders. While securitisation against current and movable fixed assets is known as securitisation ‘backed by assets’, the securitisation based on immovable fixed assets is known as ‘backed by mortgage’. In debt market, @ pool of loans should be of perfect homogeneity, Le. uniform maturity period and near equal credit rating of the borrower-organizations, and offered in tranches. In short, the receivables from loans are pooled and packaged in marketable form; assets charged to secure them back. MECHANISM OF SECURITISATION: The lender institution creates loan assets in its books: a) As per accounting convenience and credit standing of the borrowers, some loans are segregated for selling to the issuer of securities; b) The issuer pays the loan amounts to the lender institution, ne{6f discou ¢) The issuer (organisation) converts these loans into pool of sedurity for iss Security Receipts; d) The Security Receipts or PTCs are sold to the individual investors Wanting to make investments, e) Meanwhile, the original lending institution receives-repayments and\keeps sending pro rata amount of installments to the issuer, 4 ~ S )_ Issuer passes on the recovery amounts to individual investors; \ g) APTC can be “with recourse” or "without recourse”. PTCs can be made negotiable and issued / traded on stock exchange, thereby providing depth to the secondary market. Nee \ REGULATION OF SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS. 1s or ‘Reconstrubtion Companies?\As ‘er the act, n0 tion Companysshall comménce or carry\on the business of sécuritisation or asset charges / fees; 1g Pass Through Certificates or \ securitisation company or Reconstruct reconstruction without: / \. \ 2) Obtaining a cetficte of repisrsen granted under hi section, and. } 'b) Each securitization company should have mifimum net worth as RS™100 cfores or ary amount as to be specified by the RBI subject to condition that its net worth af any time shoultsnot be less than 15% of the financial assets being held in its books (Sec. 3} ¢) In case of any substant’al change in management or change in the location of is registered office or change in its name, each securitization company has to obtain prior approval of the Reserve Bank of I 4d) As per Sec 12 of the ‘Act, RBI has power to give Girection to securitization company as it deems fit and the latter is bound to comply with the same. / \ €) As per Sec 28.of the Act, ifthe securitization company of reconstruction company or any of its officers fail 10 comply with the directions given by the Reserve Bank they'can be fined Up to an amount of Rs. 5 lac. And in case of continuing offence they car/be charged with additional fine of Rs. 10;000)- for every day during which the offence continues. f) Evers securitization corppany/teconstruction company has to igvest in Security Receipt an amount not less than 5% issued by the Special Pursose Vehicle formed for taking over bacitoans banks 8) Documentation: The Securitization or the Reconstfuctiox Company can acquire the financial assets without any deed of Assignment or Transfer in its favout by, the transferring bank or financial institution. Assignment is deemed complete by the acquiring company's act of iSsuing a debenture or bond and incorporating the terms and conditions of acquisition. Thus there le no need for any other document. This document requires payment of stamp duty as per the Indian Stamp Act, which is an act of the Union of India. it dogs not require to be stamped as per the State Stamp duty laws. C) Notice to Obligor-and discharge of Obligation of such Obligor: The bank or financial institution securtizing its assets may, ifit considers appropriate, giye a notice tothe concemed obligor and any other concerned person and to the corcaed een eutory (sein Reger, of Compuin) wrens frctin e onaegy cia hypothecation, assignment or other inefest created on the financial assets had been registered. ( Note: Notice is not mandatory) 4 D) Originator can receive payment from the Obligor in Trust and pass it on to the Securitization Company: Where no notice of acquisition of financial asset under is given by any bank or financial institution, any money fr other properties subsequently received by the bank or financial institution, will constitute monies or properties held in trust for the benefit of and on behalf of the Securitisation company or Reconstruction company, as the case may be. E) Issue of Security Receipts by SC Or RC: A Securitisation company or Reconstruction company, may, after acquisition of any financial asset offer security receipts to qualified institutional buyers (other than by offer to public) for ‘subscription in accordance with the provisions of Acls such as Companies Act 1956, SEBI Act etc. The Securitization / Reconstruction Company can offer Security Receipts to Qualified institutional Buyers only. Even this is not by Public offer. They can not offer these Security Receipts to the Retail Investor at all. As the transactions involved here are complicated ‘and the market dynamics for these instruments need a professional understanding, the provision to allow a retail investor to investin these securties is not made. This is to protect the Retail investor. DOCUMENTS IN CONNECTION WITH SECURITIZATION TRANSACTION: $CO91, (1 & oor), Near PNB,BANKING REGULATION AND BUSINESS LAWS for calling for investments. As per this, Offer Document: RBI has given guidelines with regards to the offer document trite deta abou the undesyng financial asset, concerned bank, deal of defaults, scuries avaiable et oe fo be learly mentioned. - : is ition of financial asset from it, current Debenture: For payment of consideration to be paid to the bank or F's for acquisition of RBI guidelines stipulate that the interest quoted on such debentures cannot be less than 1.5% above Bank rate and also that the period of redemption can not exceed six years. : f securitization, Agreement: With Originator to continue to service the assets of : Security Receipt: instruments issued in favour of Qualified Institutional buyers (QIBs) who invest in the Securitization Company against the Securities taken over. EXEMPTION FROM REGISTRATION OF SECURITY RECEIPT: Any Security Receipt issued by the Securitisation Company or Reconstruction Company, entitles the holder of such as a ‘eceipt fo an undivided interest in the financial asset. in such a case, the Security receipt does not require registration (which is otherwise compulsory under Registration Act 1908). However, Registration is required i 41) There is transfer of security receipts, or 2) The security asset relates to an immoveable property (That is if the Spetrity r& extinguishes any righ, tile or interest to or in an immoveable propery) OTHER FUNCTIONS OF SECURITISATION COMPANY OR RE. IN COMPANY: ‘Any registered Securtisation Company or Reconstruction company may’ 4) Act as an Agent for any bank or financial institution for the purpose of ¥ payment of such fees or charges as may be mutually agrsec-upon-between th b) Act as a Manager referred on such fee as may be mulfally agreed upombetweer ©) Act as Receiver if appointed by any court or tribunal” ~ However that Ro Securtsation company or Reconstuction company shal act a manager i acting 3s guch gives rise to any pecuniary liability. ; LON & \ ENFORCEMENT OF SECURITY INTEREST: g 7 \ Any security interest created in favour of any Secured creditdy. may be effarced, withdyt the interventjoh of the court or tribunal, by such creditor in accordance wis We prbisions of thi Act. (notwithstanding ering conaed in section 69 of Sec 68-A of the Transfer of Property Act” 1882 \ AS per Section 13 (3A), if the borrower on receiptof tha notice undeh Section 13(2) from the secured creditor makes any representation or raises any objection, the secured creditor as to consider the representatign or the objection and if itis not {enable or acceptable it has to bé communicated within 15 days to the borrower’ The borrower has to be communicated the feasons for non-acceptance ct the representation or the objections. However, such conynuication or reasons mentioned therein by the secured creditor othe likely action as contemplatet\does not confer ay rght upon the borrower to prefer en ‘appeal to the DRT or to any Civil Court \ / In case the borrower fis to discharge his liabiit\n full within the Patiod specifed (60 days) the secured creditor may take recourse to one or mare of the folowing measures o recover his secured debt, namely. a) Take possession ofthe secured assets ofthe bortawer including the right fo transfer by way of lease, assignment or sale for zeatizing the secured asset 1) Takeover the management of the secured assets of he borrower including the right to transfer by way of lease, assignment or sale and realize the secured asset, Appoint aay person fo manage the Secured assets the poescssicn of which has been takenvover by the secured creditor ele APPROPRIATION: 4 \Wheh the sale of Securities takes place, tne appropriation of he sale proceeds are to be made as under. 2) Allcosts, charges and expenses or any expenses incidental thereto, b) Secondly, to discharge of the dues of the secured creditor. and ) Balance remaining if any should be paid o the person entilled thereto in accordance with his rights and interests 4) ithe dues of the secured creitor together wth all cosis, charges and expenses incutred by him are leeeiced to the Secured creditor at any time before the date fixed for sale or transfer, the secured asset should wot be seid transfetced by the securec.credtor. and po futher step shall be taken by him for transfer or sale of thal secure asses ©) ne ca8e of fnancing ofa financial aeset by more than one secured credo’ a joint fnancing of afinanel see by secured creditors, no secured crediot can take action of taking possession of Secured assets unless arco wr coc, Gait agreed pan by the secure creditors representing nt less than 60% invalue of the amount eulstardlee on mrccord date and’ such action shall be binding on all he secured creditors. (Care should be taken tornote trot tes three-fourth mentioned here isin terms of value and not in terms of numbers) ‘In the case of 2 company in liquidation. the amount realzed from the sale of secured assets shall be distibuted in Ghee tthe cyte Proisons of Section 629A of the Companies Act, 1956. (Thal means pririy or senotty sal be finan fo te creditors as per the provisions of Company Act wth the equiy holder receiving the lal preference) RIGHTS AGAINST THE GUARANTOR: fame 6 abrrant 6 Surly and or may be Secured by pledge of moveable asset. In such a case, the Secured creditor is rae8 gsant {0 Proceed against the Guarantor. The rights of @ secured creditor under this Act may be enone by one or tansier bs Gat autersed in this behalf in such manner as may be prescribed. No borower shal afer rosso enn, Feterted tain erin’ ease OF otherwise (other than inthe ordinary courae of his business) any‘of he eee ee teferred to in the notice, without prior written consent ofthe secured eredlton TRS TANCE OF CHIEF METROPOLITAN MAGISTRATE OR DISTRICT MAGISTRAT es is Fequred toe Sots sees, asses is required to be. taken by the secured creditor of any ofthe secured prmmpurgt7 be sold or rans bythe secured cedtor under the provisions of ihe ner mayo ne Secured 10 pt creates, declares, assigns, limits or SCO 9,BANKING REGULATION AND BUSINESS LAWS Gr may, for the purpose of taking possession or control of any such secured assets, request, in writing, the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction any such secured asset or other documents felating thereto may be situated or found, to take possession thereof ‘The Chief Metropolitan Magistrate or the District Magistrate may take or cause to be taken such steps and use, or cause to be used, such force, as may. in his opinion, be necessary. No act of the Chief Metropolitan Magistrate or the District Magistrate done in pursuance of this section shall be called in question in any court or before any authority. MANNER AND EFFECT OF TAKE OVER OF MANAGEMENT: a) When the management of business of a borrower is taken over by a secured creditor, the secured creditor may, by publishing @ notice in a newspaper published in English language and in a newspaper published in an Indian language in Circulation in the place where the principal office of the borrower is situated, appoint as many persons as it thinks fi- ‘and on publication of such a notice. 'b) The directors or the administrators appointed under this section, shall take such steps as may be necessary to take into their custody or under their control all the property, effects and actionable claims to which the business of the borrower is, or appears to be, entitled and all the property and effects of the business of the borrower shall be deemed to be inthe cutiody of he rectors or acrirsratra, asthe care maybe, a rom mate ofthe publication of he notice: ¢) The directors appointed under this section, shall for all purposes. We the Wiirectors of the company of the borrower ‘and such directors or as the case may be, the administrators appoirted under this section shall alone be entitled to exercise all the powers of the directors or as the case may be, of thé\persons exefxising powers of superintendence, direction and control, of the business of the borrower whether such powers.are derived from the memorandum or articles ‘of association of the company of the borrower or from any other source whatsever. 4d) No managing director or any other dtector or a manager or any person in charge of management of the business of the borrower shall be entiled to any compensation for the loss of office or forthe premature termination under this Act of any contract of management entered into by him with the borrower \ RIGHT TO FILE PETITION: \ \. ‘Any person (including borrower), aggrieved by any of the measures taken bythe sétured creditor ar his authorised officer. may prefer an appeal to the Debts Recovery Tribunal’ having jucsdiction in the matter within fortysive days from the date on which such measure had been takes APPEAL TO APPELLATE TRIBUNAL: Any person aggri2ved, by any o(der made by the Dats Recovery Tribunal under Section 17, may prefer an appea'‘o the ppeligte Tribunal thin thity days from the date of receipt of the order of Debts Recovery Tribunal. After the Supreme Court decision in Mardia case, GO! has issued a notification amending Sec 17(2) of the act, such that the boriower will have fo deposi only 50% di.the claimed amount before filing the appeal. The DRAT has the discretion to reduce this deposit to 25% CENTRAL REGISTRY The Central Government “can by notification, set a registry 1o be known as the Central Registry with its own seal for the purposes of registration of transaction of Securitisation and Recanstruction of financial assets and creation of security interest under the Act\The Registration before the Central registry will be in addition to the registration required under different acts, or any othés law requiring cegistration of charges and shail mat affect the priory of charges or validity thereof under the Acts FORMATION OF CENTRAL REGISTRY [SEC 20 TO 26) The Act provides for the establishment of a Central Registry to cegister the transaction of securitization and reconstruction of assets and also the creation of security interest under the Act Accordingly the Gol has notified in May 2011 the formation of the registry called “The Central Registry of Securitization Asset Reconstruction and Security interest of India (CERSAI)’ — a government company licensed under sec 25 of the Companies Act. 1956. HIGHLIGHTS 7 © Availabilty of such records preveis frduds involving multiple lending against the security of same property. © Capital of this company is contributed by Central Government 51% and balance by National Housing Bank and other banks. © Conical Registry maintains a register called Central Register in electronic form to enter particulars relating to creation modification and satisfaction of transactions like (a) securitization of financial assets, (b) reconstruction of financial assets and (c) creation of secunty interest by way of mortgage. © For registering a mortgage transaction by a bank in the books of CERSAI the bank has to file digitally singed Form No ! online in the web site of CERSAI, within/0 days of the creation of charge, pay fee of Rs 500. [Rs 250 for loans upto Rs § lakh], For modification-of charge the form to be filed is also digitally signed from -time limit is 30 days from the date of modification and fee is same to that for registration of charge. In case of delay in registering the charge the form to be used is Form No Il. Fee payable is Rs 250. OFFENCES AND PENALTIES: ~ Any person who contravenes or attempts to contravene or abets to contravene the provisions of this Act or any rules made under the Act can be punished with imprisonment for a term which may extend to one year or with fine or with both ~ Aay delay in fling securty transaction, modification/satisfaction will attract a penalty which can extend to Rs 6,000!- per ay. As per Sec 28 of the Act, if the securitization company or reconstruction company or any of is officers fail to comply with {he directions given by the RBI they can be fined up to an amount of Rs. 5 lacs and in case of continuing offence they can be charged with additional fine of Rs. 10,000/- for every day during which the offence continues. No court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the first class shall try any offence unishable under this Act. ~ Where an offence under this Act has been committed by a company, every person who at the time the offence was Committed was in charge of, and was responsible to the company. for the conduct of the business of the company, as well — sco 9 (1" & 2" Floor), Near PNBANKING REGULATION AND BUSINESS LAWS deemed to be guilty of the offence and shall be liable to be proceeded against and punished ‘proves that the offence was committed without his knowledge or that he had exercised all due dligence to prevent the commission of such offence, he is not liable where an offence under this Act >No civifcourt shall have jurisdiction to entertain any suit or proceeding in respect of any matter which a Debts Recovery Tribunal or the Appellate Tribunal is empowered by or under this Act to determine and no injunction shall be ‘granted by any court or other authority in respect of any action taken. ‘The secured creditor has to take action against the security within the limitation as per Sec 36 of the Limitation Act. If after the sale of secures, the claim is not satisfied fully and there are dues, they may have to file @ civil suit or a claim before the DRT as the case may be within the limitation period as the company, shall be accordingly. However, if he SS SCO 91, ( 12 2" Floor), NBANKING REGULATION AND BUSINESS LAWS Gr alee A THE RECOVERY OF DEBTS (& BANKRUPTCY) ACT, 1993 jpanks and financial institutions have been experiencing considerable diffcuities in recovering loans and enforcement of seuNNes charged with them. The procedure for recovery of debts due to the banks and financial institutions, which is being flowed, has resulted in a significant portion ofthe funds being blocked. An urgent need was, therefore, felt 10 work out a suitable mechanism through which the dues, to the banks and financial institutions could be realized. : ee The Committee on the Financial System headed by Shri M. Narasimham has considered the setting up of the Special Tribunals with special powers for adjudication of such matters and speedy recovery as critical to the successful implementation of the financial sector reforms. > In 1981 a committee under the chairmanship of Mr. T.Tiwari had examined the legal and other difficulties, faced by banks and financial institutions and suggested remedial measures including changes in law. This committee also suggested setting up of Special Tribunals for recovery of dues of the banks and financial institutions by following a ‘summary procedure. Keeping in view of the recommendations of the aboya Committees, the Recovery of Debts due to Bank and Financial Institutions Bill, 1993 was introduced and passed jrt th®\Parliament and came into effect from 27 ‘August 1883. it shall be deemed to have come into force on the 24th day of Junie, 1993. > The act was extended to whole of India excluding the state of —— ut at present it extends to whole of India > The Actis applicable to cases where the amount of debt due to any banker financial in a consortium of banks or nancial institutions is Rs.20 lakh or more. ESTABLISHMENT OF TRIBUNAL (DRT): The Centrat Government shall\py notification, establish one or more Tribunals, to be known as the Debts Recovery Tribuna)/(DRT). Central Government shall also Specify, the areas within which the Tnbunal may exercise jurisciction for entertaising and deciding teaspoon le before i. Presiding Officer (ORT): ORT is headed by the Presiding Officer fo € appointed, by the Central Govemrhent. A persomeppointed / to be appointed as Presiding Officer shall be qualified to'be, a District Judge. The Presiding Office shall hold o five years from the date of his appointment ana’shall be an reappointment provided thado person e tution defined under the Act or as the Presiding Officer after he has attained theage of si years. The Presiding Officer shall be assisted by One or more Recovery Officers and one registrar provided By Central Government. / APPLICATION TO DRT: A bank or a financia\ institution may make an application to the Tribunal within the local limits of whose jurisdiction (I) The branch of the bank or nancial institution is, maintaining an account in which debt claimed is, ‘outstanding, or (ll) where any of the defendant, cr each olthe defendants where there are more than one, at the time of making the application, actually and voluntarily fesides, or carries on business. or personally works for gain or (Ill) where the ‘cause of action, wholly or in part anses. Every applicant in the application filed for recovery of debt. shall- + State particulars of the debt secured by secuty interest over properties or assets belonging to any of the defendants and the estimated value of such securities. \ = Ifthe estimated value cf secunties 1s not sufficient 10 satisfy the debt Selmed, sfate particulars of any other properties or assets owned by any of the defendants, any. and + If the estimated value of such other assets is not sufficient to recover the ebt, seek an order directing the defendant to Gisclose to the Tribunal paciculars of other properties or assets ovined by the defendants. APPLICATION FEES (DRT): The fee payable for fling an Orginal Application (OA) before tne Tribunal is Rs.12,000/- where an amount of debt due is Rs.10.06 lakhs, Rs. 12.000 plus Rs. 1000 for every one lakh of debt due or part thereof in excess of RS.10.00 lakhs subject to 2 maximum of Rs, 1-50,000/- If any application fled before the Tribunal for recovery of any debit is settled prior to the commencement of the hearing or at any stage of the proceedings before the final order 's passed. ‘he applicant may be granted refund to the fees paid by him at such rates as may be prescribed PROCEDURE ON RECEIPT OF APP! 101 (On receipt of applisation, the Tribunal shail issue summons with following directions to the defendant. To shovhcause withinhirty days of the service of summons as to why relief prayed for should not be granted. + Direct the defendant to disclose particulars of properties or assets other than properties and assets specified by the applicant + To restrain the defendant from dealing with or disposing of such assets and properties disclosed pending the hearing and disposal of the application for attachment of properties > The defendant shall within a pericd of thirty days from the date of service of summons, present @ written statement of his defense including clair’ for set-off or a counter-claim, if any, accompanied with original documents or true copies. thereof. falling which, the Presiding Officer may. in exceptional cases, extend the said period by further period of not exceeding fifteen days. > In case of non-compliance of any order made under the above clauses, the Presiding Officer may, by an order, direct that the person or officer who is in default, be detained in civil prison for a term not exceeding three months unless in the meantime the Presiding Officer directs his release. > On receipt of the written statement of defendant or on expiry of time granted by the Tribunal to file the written statement, the Tribunal shall fx a date of hearing for admission or denial of documents produced by the parties to the proceedings and also for continuation or vacation of the interim order passed. > Where a defendant makes an admission of the full or part of the amount of debt due to a bank or financial institution, the Tribunal shall order such defendant to pay the amount, to the extent of the admission within a period of thirty days from the date of such order failing which the Tribunal may issue a certificate to the extent of the amount of debt due ‘admitted by the defendant 13 (CHANDIGARH-160047BANKING REGULATION AND BUSINESS LAWS * While passing the final order under sub-section (20), the Tribunal shall clearly specify the assets of th SF Whi Secunty interests created in favour of any bank or fnancalinsttion and deck he Recovery Oftors enone sale proceeds of such assets. The Tribunal shall send a copy of its final order and the recovery certifeate, to the applicant and defendant. Any recovery certificate issued by the Presiding Officer under sub-section (22) hall be deemed to be decree or order of the Court for the purposes of initiation of winding up proceedings against © company or Limited Liability Partnership or insolvency proceedings against any individual or partnership firm under any law for the time being in force, as the case may be. > The proceeds from sale of secured assets shall be distributed in the following orders of priority : -- () The costs incurred for preservation and protection of secured assets, the costs of valuation, public notice for possession and auction and other expenses for sale of assets shall be paid in full, (i) Debts owed to the bank or financial institution. However, affer the commencement of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), in cases where insolvency and bankruptcy proceedings are pending in respect of secured assets of the borrower, the distribution of proceeds from the sale of secured assets shall be subject to the order of priority as provided in that Code. The application made to the Tribunal under sub-section (1) or sub-section (2) shall be dealt with by it as expeditiousij,as possible and every effort shall be made by it to complete the proceedings in two hearings, and to dispose of the finally within one hundred and eighty days from the date of receipt of the application APPEAL AGAINST THE ORDER OF RECOVERY OFFICER: Ajy person ag) Officer made under this Act may, within thirty days from the date on appeal to the Tribunal by depositing fifty per cent of the amount du APPELLATE TRIBUNAL (DRAT): An Appeliate Tribunal shal-be headed By the Chairperson, who is appointed, by Central Government. A person for appointment as the Chairperson of aimAppella’® Tribunal shduld be qualified to be, a Judge of a High Court; or has been a member of the Indian Legal Service and-has heldha post in Grade | of that service for at least three years; or has held office as the Presiding Officer of a Tribunal for atleast three years. The.Chairperson of an Appellate Tribunal shall hold office for a term of fivé years from_the-date on which he enters upon his ofice and shall be eligible for reappointment: Provided that no person shall hold ofce as Ihe Charperson ofa Appelate ee after he has attained the age of seventy years. C 7 ‘ The Chairperson of an Appellate Tribunal shell Gkercise generai.power of sUnerintendente and cdntrg/~6ver the Tribunals Under his jurisdiction. The Chairperson may, on the application of any ofthe parties or on his awn motion transfer any case from one Tribunal to any other Tribune . APPEAL TO THE APPELLATE TRIBUNAL? Any pe(son aggrieved by an/order malie by the DRT, may prefer an appeal to an Appellate Tribung|-aving jurisdiction in the matter. Every abpesi’shall be filed within a period of thirty days from the date of receipt of the copy of the order made by the Tribunal. Provided that the Appellate Tribunal may entertain an appeal afer the expiry of the said period i itis satisfied that there was sufficient cause fot not filing it within that period. The appeal filed before the S¢pellate Tribunal shall be dealt with by it as expeditiously as-Possible and endeavor shall be made by it to dispose of the appeal finally within six months from the date of receipt of the appeal ‘An appeal shall not be entertaines! by the Appeliale Tribunal unless such person has deposited fity per cent of the amount due as determined by the Tribunal, However, the Appellate Tribunal may, redice the amount to be deposited to not be less than twenty-five-per cent_of te amount of such debt so due. Fees for making appeal.before DRAT: oe Amount ofdebtdue : nount of fees payable Less jhan rupees 1Qlakhs” | Rupees 12,000 : Rupges 10 lakhs or more bul Less than rupees 30 lakh | Rupees 20,000 ~~ “Rupées 30 lakiis or more _ {Rupees 30,000 The [ribunal ard the Appellale Tiibunal shall have, for the purposes of discharging their functions under this Act, the same powels as are vasted in a civil court under the Code of Civil Procedure, 1908 itation: The provisions of the Limitatioh Act, 1963 shall apply to an application made to a Tribunal. MODES\OF RECOVERY OF DEBTS: The Recovery Officer shall, on receipt of the copy of the certificate, proceed to recover the amount of debt by ong or more ofthe following modes, namely * Attachntent and sale of the movable or immovable property of the defendant, > Taking possession of property over which securty interest is created or any other property of the defendant and appointing receiver for such property and to sell the same. > Arrest of the defendant and his defention in prison > Appointing a receiver for the management of the movable or immovable properties of the defendant ‘Any other mode of recovery as may be prescribed by the Central Government. The Pres Officer may grant time for payment of the amount, provided the defendant makes a down payment of not less than twenty-five per cent. of the amount specified in the recovery certificate and gives an unconditional undertaking to pay the balance within a reasonable time, which is acceptable to the applicant bank or financial institution holding recovery certificate. Where defendant agrees to pay the amount specified in the Recovery Certificate and proceeding are stayed by the Recovery Officer, the defendant shall forfeit right to file appeal against the orders of the Tribunal. The Recovery Officer may, require any person from whom money is due or may become due to the defendant or to any person whe holds money forthe defendant, to pay fo the Recovery Officer (not being before the money becomes due or is held). A notice under this sub-section may be issued to any person who holds or may subsequently hold any money for ff on account of the defendant. PRIORITY OF PAYMENT OF RECOVERY PROCEEDINGS: The rights of secured creditors to realize secured debts by sale of assets over which security interest is created, shall have priority over all other debts and Government duesIN AND BUSINESS LAWS BANKING REGULA’ ‘TIME LIMIT FOR DISPOSAL OF CASES: When an application is made under the normal application route, then the {ime frame to complete the case is 180 days. However, i the application is made to the DRT under the SARFAESI Act, then the cases are needed to be disposed off within 60 days to 4 months. ‘SCO 91, (1" & 2" Floor 15 CHANDIGARH-160047BANKING REGULATION AND BUSINESS LAWS aud a UNIT 19 INSOLVENCY AND BANKRUPTCY CODE, 2016 © Bankruptcy is a legal status of @ person or other entity that cannot repay the debts it owes tocreditors. In most jurisdictions, Bankrupty is imposed by a court order, often ited bythe debtor, ‘@The Code offers a uniform, comprehensive insolvency legislation encompassing all Co's, Partnerships and individuals. (other than financial firms). One of the fundamental features of the Code is that it allows creditors to assess the viability of a debtor as a business decision, and agree upon a plan for is revival of a speedy lquation, The Code creates & aa insitonal framework, consising of a regulator, insolvency professionals, Information ilies, and ‘adjedeator, mechanisms, that wil feciitate a formal and time bound insoWeney resolution process and lquation APPLICABILITY: Co's, limited liability partnerships, partnership firms, other Corporate persons, and individuals, and any other body spected by Govt KEY FEATURES: orporate Debtors: Two-Stage Process: To initiate an insolvency process for corporate debtors, the default should be at least INR 4 crore. The Code proposes two independent stages: 4) Insolvency Resolution Process; & b) Liquidation (a) THE INSOLVENCY RESOLUTION PROCESS (IRP): ‘The IRP provides a collective mechanism to lenders to deal wth the overall distressed poston of a corporate debtor. This is 2 Significant departure from the existing legal framework under which the primary onus to initiate a reorganisation process. lies withthe debtor, and lenders may pursue distin! actions for recovery, secunly enforcement and debt reatuctarng The Code envisages the following steps in the IRP. i) Commencement of the IRP: A financial creditor (for @ defaulted financial debt) or an operational creditor (for an Unpaid operational debt) can inate an |RP against a corporate debior at the National Company Law Tribunal (NCL¥), The defaulting corporate debtor, its shareholders or employees, may also initiate voluntary insolvency proceedings. {i) Moratorium: The NCLT orders a moratorium on the debtors operations forthe period of the IRP. This operates as @ ‘Calm period’ during which no judicial proceedings for recovery, enforcement of security interest, sale or transfer of assets, of termination of essential contracts can take place iii) eintment_of Resolution Professional: The NCLT appoints an insolvency professional or ‘Resolution Professional’ to administer the IRP. The Resolution Professional's primary function is to take over the management of the otporate borrower and operate its business as a going concem under the broad dretions of a committee of cedars ‘SEQUENCE OF STEPS UNDER THE IB Nout has © On Day 1 of the default, a creditor or a borrower can approach NCLT 10 iitiaje insolvency proceedings. The NCLT has to Accept Feet he les wd days na" PROREN NCLT Sas nsoency © Once the case is admitted, lenders will Constitute commits. of creditors (CoC), a¢point an IRP which will run the borrowers’ company in the interim period. Ss Ye © Within 180 days, the CoC has to decide on debt recast plan Lenders will be’Given additional 180 days (total 330 days) to arrive ata thal resolution plan \ Me 1 the lenders agree (by voting), the.CoC would'go ahead with debt\restfucturing. Otherwise, after 180 days, the company’s / borrower's assets will be Liquidated, iv © Home buyérs would-be treated as finantial creditors Bod shall have the ight to be represented in the Committee of Crise (CoC) © Reldted party’ now defined in relation to the individual as Wel, in addition of the Co only previously, to bar it from bidding under the IRP/ * Vote shareyCoC to decide on extension of msolvendy practss beyond 180 days upto 330 days and for appointment of |P by 66% vole share (from earlier 75%); other decisions‘can be laken by 81% vole ( 75% earlier). The process can be withdrawn aliogether by 90% vafe share, © Promotors and guarantors of the MSMEs are exempted from disqualification trom bidding; it further empowers the Cerire to allow further exemptions or modjfications wrt. the MSME sector im from parallel proceedings wi not be available 10 guarantors of the company. Ha financial creditor or its authorised representative is “elated pany to the company facing insolvency, it shallot have any participation or voting during @rheeting of the Coc © A.Co can fisan insolvency application, provided i seeks shareholders’ approval and at least 3/4 of the stakeholders ‘approve the proposal 4 ‘© Many of changes were made on the basis of the recommendations ofthe IBC review committee headed by Corporate Alfairs Secretary, © Once the NCLT passes an order of liquidation, a moratorium is imposed on the pending legal proceedings against the Corporate debtor, and the assets ofthe debtor ves in the liquidation estate PRIORITY OF CLAIMS: The Code significantly changes the priority waterfall for distribution of liquidation proceeds, After the costs of insolvency resolution (including any interim finance), secured debt together with workmen dues for the Preceding 24 months rank highest in prionly. Central and state Government dues stand below the claims of secured Creditors, workmen dues, employee dues and other unsecured financial creditors, Upon liquidation, a secured creditor may choose to realise his security and receive proceeds from the sale of the secured assets in fst priorty. i the secured creditor enforces his claims outside the liquidation, he must contribute any excess proceeds fo the liquidation trust. Further, in case of any shortall in recovery, the secured creditors will be junior to the unsecured creditors tothe extent of the shortfall 2) IRP for Individuals/Unlimited Partnerships: /SCO 91, (1" & 2" Floor), Near PNB, SECTOR 4 16BANKING REGULATION AND BUSINESS LAWS Gr For individuals and unlimited partnerships, the Code applies in all cases where the minimum default areunt s INR 1,000 For Mowe. The Code envisages {wo distinct processes in case of insolvences: automatic Wesh, Shy and insolvency and above der the automa res start process, eligible debtors (basis gross income) can apply to the DRT for discharge {eS ebis not exceeding a speciedthresholg allowing them to start afresh f approved. the DFT passes Ot order Trias the debtor and creditor to the repayment plan. the plan is rejected or fais, the debtor or Creditors may apply for a rate restructuring through merger, am: tion and demerger undor a Resolution plan: The Amendment clarifes that @ Yesoluton plan’ may include provisions for Festructuring by way of merger, amalgamation, and demerger. {) Time:bound disposal of the resolution application: In order to intiate a CIRP in respect of @ corporale debtor, 2a adie! corporate debior may fle an application (Resolution Appicaton) before the National Compary Law Tribunal Gut), The Gove provides a period of 14 days forthe NCLT to ‘ascertain the existence of default! and aémit or releck Resolution Application for initiating insolvency proceedings. Resolution Appi atroduicesjudical discpine in this respect by making it mrGatdy forthe NCLT to pass an order acrnting Tre jong Resolution Application within 14 days from the date ofits recep. n the event fa faire todo go, he NEL 1s orreiec Sf record the Feasons in wring forthe delay in determination of default This amendment therefore seeks 10 ensure that the 14 day period is only extended in exceptional cases and nofas a matter ofyoutine. ¢) Timeline for completion of CIRP increased to an overall limi Prior to the Amendment, the Gode required that the CIRP should be concluded within a maxim f 180 days Ywith a maximum one-time extension of 90 days) from the insolvency commencement- The Chief Justice of Incia shall be the Patron-in’ Chief and a serving or retired Judge of the Supreme Court to be nominated by the President, in consultation with the Chief Justice of India, shall be its Executive Chairman. > The Central Authority shall, actin coordination with other governmental and non-governmental agencies, for promoting the cause of legal services to the poor. Every State Government shall constitute a body to be called the Legal Services Authority. The state authority shall conduct the Lok Adalats. > The State Government shall, in consultation with the Chief Justice of the High Court, constitute a body to be called the Distict Legal Services Authority for every District in the State to exercise the powers and perform the functions conferred on. The District Judge shall be the Chairman of the District Authority. > The District authority organizes Lok Adalats within the District > The State Authority may constitute a Committee, to be called the Taluk mandal or for group of taluks or mandels who organizes Lok Adela ‘operating within the jurisdiction of the Commitee shall be the ex officg LOK ADALATS > Lok Adalats are established under Legal Services Authorities Act 198 ‘Supreme Court Legel Services Committee or every High Court Legal Committee may organize Lok Adalats at such intervals and places and fo ‘areas asi thinks fi. oI .gal Services Commitee, for each taluk or Taluk. The senior-most Judicial Oficer Authority or District Authority or the mittee or Taluk Legal Services > Certain advantages are there for Banks for rnon-suit fled accounts with amount due up dues above Rs 20.00 Lacs can be filed if "doubtful" and "loss" category should be r > there are no court fees involved whi continue with court proceedings. I putes are referred to it legal status\and are binding. Sincelthe decisions of Lok Adalat are and leftto the Board of Directors of | suggested that in order to be within one to three years. in terms of which if the borrower , the entire debt will fall due for ts séitle cases on the spot, The Officers {he compromises worked out within the The negotiated agreement with the barrier does not pay the inétallments due regularly, within the repa) payment and bank hay ing legal proceedings. The Lok Ad representing the institutings Should Rave sufficient powers to acce| policy framework Tatd-dqwn by the Board:of Directors af each institution, + Filing-& case with Lok Pidalat doesn't extend limitation period SCO 91, (1 & 2" Floor), *BANKING REGULATION AND BUSINESS LAWS Gr CONSUMER PROTECTION ACT 2019 UPDATED} Consumer Protection Act was enacted on 9” August 2018 replacing the old Consumer Protection Act 1988, The act came into force with effect from 20” July 2020 and on 24th July 2020 for some other provisions. COMPLAINANT: A complaint against any entity/individual for deficiency of any goods and services can be fled by any consumer (one oF more) or any voluntary registered consumer association, or the Central Government or any State Government: or the Central Authority; or in case of death of a consumer, his legal heir or legal representative, or in case of a ‘consumer being @ minor, his parent or legal guardian. COMPLAINT: Any allegation can be made for an unfair contract or unfair trade practice or a restrictive trade practice that hhas been adopted by any trader or service provider, the goods and services purchased are having deficiency, a trader or a service provider, has charged excess price for the goods or services against the price fixed under any law forthe time being in force; or displayed on the products, displayed on the price list exhibited by him; or agreed between the parties, or the {g00ds which are hazardous to life and safely when used, are being offered for sale tothe public. 1) CONSUMER PROTECTION COUNCIL: A) CENTRAL CONSUMER PROTECTION COUNCIL: The Central Government has established the Central Consumer Protect known as the Central Counci for a Period of three years with the objective to render advice on promotion and consumers rights under tis Act. The Central Council shall consist of the Minister of Consumer Affairs ofthe entral Govetwment, as the Chairperson; and other offcial or non-official members not exceeding thirty-six. The Central Cobgcil shall meekas and when necessary, but at least one meeting ofthe Council shall be held every year. B) STATE CONSUMER PROTECTION COUNCIL: Every State Government shall have a State Consu fe Council with the objective to render advice on promotion and protect The State Council shall consist of the Minister-in,efarge of Coy ‘and other offical or non-official members not exceeding ten, Jess than two meetings every year. ©) DISTRICT CONS! The State Government shall establish 2a District Cogsumer Prolgction Coljnci to be known as the District Council withthe objective to render, ‘The District Council shal be an Chairperson; and other official famely: th Collector of the district as the ay be prescribed. The District és and false or misleading advertisements, rotect and enforce the rights of consumers asacacs The Centra)Athonty sHattconsist of @ Chi eset 10d other Commissioners, to be appointed by the Central Govt, ‘The hegduarters ofthe Cefiral Authorty shaihke at New OBlhi, and i shall have regional and other offices in any other place i india. The Chief Gémmissioner shall have the powers akgeneral superintendence, direction and contol in respect Of al Administrative mateo! the Cental uthory ) POWERS AND FUNCTIONS OF CENTRAL abTHoRfTY: The Central adfhoty shal A > Piotect, promote and enforce thé ights of consumers and prevent violation of consumers rights under this Act: > Prevent unfainirade practices end ensure that no person engages himself in unfair trade practices; ensure that no false or milbacing adverigement is made of ny dood or sence, > Inquite or cause an inquiy or iqvestigatiog to be made into violations of consumer righ or unfair trade practices, either ‘suo motu 8¢ on a complaint received or on the directions from the Central Government > fue conblgts belo BET! Connon e Ste Conmason athe Naleal Conse, a fhe cae may be Under this Act \ > intervene n ay proceecings belore he Dist Commission or the State Commission or the National Commision, as the case may be > Review the matters relaling To, and the factors inhibiting enjoyment of, consumer rights, including safeguards provided for the protection of consumers under any other law and recommend appropriate remedial measures c) APPEAL: ‘A person aggrieved by any order passed by the Cenlral Authority may file an appeal to the National Commission within a period of thirty days from the date of receipt of such order. 3) CONSUMER DISPUTES REDRESSAL COMMISSION: 3.1) DISTRICT CONSUMER DISPUTES REDRESSAL COMMISSION: The Siste Government shall establish 2 Distt Consumer Disputes Redressal Commission, to be known as the Distril Commission, in each district of the State ‘The State Govt. may, ifit deems ft, establish more than one District Commission ina astict b) President_& Memb > Each District Commission shall consist of a President, and not less than two and not more than such number of members as may be prescribed, in consultation with the Central Government > For appointment of a person as president, helshe should be or has been or qualified to be a District Judge. 20 60047 TOR 47-D, CHANDIGARI Floor), Near PNIBANKING REGULATION AND BUSINESS LAWS au > For a person to be qualified for appointment as a member should be minimum 35 years age, a bachelor’s degree from a recognised university and is a person of ably, integrity and standing. > Atleast one member or the President of the District Commission shall be a woman. > The President and every member of the State Commission and the District Commission shall hold office for a term of four years or up tothe age of sixty-five years, whichever is earlier. ©) Jurisdi District Commission: - > The District Commission shall have jurisdiction to entertain complaints where the value of the goods or services paid as consideration does not exceed Fifty Lakh rupees. ; > Accomplaint shall be instituted in a District Commission within the local limits of whose jurisiction, the opposite party or teach of the opposite parties, ordinary resides or carries on business or has a branch office or any ofthe opposite parties. 4) Admission of Complaint > Every proceeding before the District Commission shall be conducted by the President of that Commission and at least ‘one member thereof, sitting together. i > The admissibility of the complaint shall ordinarily be decided within twenty-one days from the date on which the complaint was file e) Mediation > At any stage, if it appears to the District Commission that there exist lements of &\gettlement which may be acceptable to both the parties, it may direct the parties to give in writing, within to have their dispute settled by mediation ‘ Disposal of Complaint > On admission of a complaint and its failure for medi any goods, the District Commission shall refer a copy of the admitted compla its admission to the ‘opposite party mentioned in the complaint directing hj ithin a petied of thirty days or party where the complaint does. not require analysis or testing of commodities. 9) Aw: Compensation: a Nn \ \ \ \ > Where the defects specified in the coma cae for compensation under product liability are proved, and if in the ‘pinion of the commission that, loss“or injury has been buffered by a large number of consumers who are not identifiable conveniently, in addition of replacement of good! compehation to the compjdinant, the commission may award to pay Sock minimum amour not Be Tess than Sweny-five per cent oe vale of sich dtecve goods sold of sevice provided, as the case may be, to such consumers. h) Appeal against Order of District Commission: \ > Any person aggrieved by an order made by the District Commission may prefér an appeal against such order to the State Commission onthe grounds fxs ow within a pri of forty-ve dye from the dat of the order > For filing appeal by a person Aiho is required to pajsany amount in tetms.oFan order of the District Commission, shall be required to deposit fity per cént. of that amount in the manner as may be prescribed. ‘CONSUMER DISPUTES REDRESSAL COMMISSION: Government shal, establish a State ‘Consumer Disputes Redressal Commission, to be known as the State Commission, inthe State a) President & Members: > Each State Commission shall consist of a President, and riot less than four or not more than such number of members 288 may be prescrived in consultation wih the Central Government. The State Government may, by notification, make rules to pravide for salaries and allowances and biher terms and conditions of service of the President and members of the State Comrnission > For appoinimentof a person as president he/she should be or has been, a Judge ofthe High Court. > For a\person to be-qualifed for appointment as a member should be minimum 40 years age, have an experience of at least ten years as presiding officer of a distil court or of any tibunal at equivalent level or combined service as such in the Gti! cout and Inbunal ora bachelors degree from a tecogrsed unversly and ls person of elit Iogily and standing > Atleast one member or the Presidgat of the State Commission shall be a woman, 'b) Term of office of President‘or Member: > The President and every member of the State Commission and the Distict Commission shall hold office for a term of four years or up to the age of sixty-five years, whichever is earlier and shall be eligible for reappointment for another term of four years subject fo the age limit of sindy-five years ¢) Jurisdiction of State Commission > The State Commission shall have jurisdiction to entertain @ Complaints where the value of the goods or services paid a consideration, exceeds rupees fity lakh, but does not exceed rupees two crore (i) Appeals against the orders of any District Commission within the State; and to call for the records and pass appropriate Orders in any consumer dispute which is pending before or has been decided by any District Commission within the State. > A complaint shall be instituted in a State Commission within the limits of whose jurisdiction, each of the opposite parties, atthe time of the institution ofthe complaint, ordinal resides or carries on business or has a branch office or personally works for gain. 4d) Transfer of c: 21 SCO 91, (1" & 2" Floor), NeBANKING REGULATION AND BUSINESS LAWS > On the application of the complainant or ofits own motion, the State Commission may, at any stage of the proceeding Tranefer any complaint pending before a District Commission to another Distict Commission within the State i the interest of justice so requires. e) Review of Award by State Commission: > The State Commission shall have the power to review any of the order passed by itf there is an error apparent on the face ofthe record, ether of its own motion or on an application made by any of the parties within thity days of such order ) Appeal against Order of State Commission: > Any person aggrieved by an order made by the State Commission may prefer an appeal against such order to the ‘National Commission within a periad of thirty days from the date ofthe order. } An appeal fled before the State Commission or the National Commission, as the case may be disposed of within a period of ninety days from the date of its admission 3.3 NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION: > The National Commission shall ordinarily function at the National Capital Region and perform its functions at such other places as the Central Govt. may notify in the Official Gazette. a) President & Members: > The National Commission shall consist of a President; and not less t as prescribed, The Central Government may, by notification, make rul method of recruitment, procedure of appointment, term of office, sala President and members ofthe National Commission. b) Jurisdiction Of National Commission: > The National Commission shall have jurisdiction to ente more than such number of members, ¢ the qualification for appointment, c) Review of Award by National Commission: > The National Commission shal have the paver to revienSeny ofthe afer passed by it ith the face fe razr eter of ts own men Sonar appa made By ofthe paris order. / > On the application of the complafant of bt its own motion, tke National Commissjon may, at any stage of the proceeding, transfer any complain pending beforahe Dist Comission of one State to a District Commission of another State or before one State Commission to another State Comission. / d) APPEAL AGAINST ORDER OF NATIONAL COMMI: / > ‘Any person aggrieved bj an order made.ty the National Comission may prefer 1 appeal against such order to the Supreme Court wihin a périod of Thirty days fom the date of he order, Prowded turner that no appeal by @ person, whois unless the appellant has deposited fif/’er cent. of that amount in the mahner asmay be prescribed. e) Limitation Period for.filing Complaint: =. 4 > ‘The Dist Cormssion fe Stale Commission or the National Commission shall not admit a complaint unles ti led Within two years tom the date on which the cause of action hes arisen. However, @ complaint may be entertained after the period srentioned above, if the complainant satisfies the District Commission, the State Commission or the National Zemm(cion a the ease ay be, tha he had uflert cause foro fling he complaint within such period 3.4 ENFORCEMENT OF ORDERS: ; > Elery order made by a District Commission, State Colniséion or the National Commission shall be enforced by itin the fama manner ae it were a decres rade by @ Court na sut before t andthe provisions of Order XX! of he First Schedule {o the Code of Cuil Procedure, 1908 shal 3 fa 2s may be. appicable > Whoever fais fo comply with any order made by the District Commission or the State Commission or the National Gommasion, as the-case may be, shall be punishable with imprisonment fora term which shal not be less than one month but which may extend ta thee yeats, or with fine. which shall nol be les than twenty-five thousand rupees, but which may extend ta one lakh rupees; oc uth both 3.5) OFFENCES AND PENALTIES > Whoever, fails to comply wih any diction of the Central Authorly under Sections 20 and 21, shall be punished with imprisonment for aterm which may extend fo six months or with fine which may extend to twenty lakh rupees, or with both > "Any manufacuter or service prGvider who causes a false of misleading advertisement to be made which i prejudicial to the intrest of consumers shall be punished with imprisonment for aterm which may extend to two years and with fine which may extend to ten lakh rupees, and for every subsequent offence, be punished wth imprisonment for aterm which may extend to five years and with fine which may extend to iy lakh rupees, ‘0 91, (I & 2" Floor), Near PNB, SECTOR 4; 0047BANKING REGULATION AND BUSINESS LAWS LIMITATION ACT - 1963 Law of imitation is based on the principle that law aids only the diligent; those who slept over ther rights will not be allowed to iigate after an unduly longtime. Limitation does not either create or extinguish a right. It simply bars judicial remedy after the prescribed period of time without extinguishing the right. LIMITATION ACT - 1963: Provisions pertaining to limitation of documents, fling of suits and appeals etc are laid down in Limitation Act 1963. The Act is applicable to whole of india except the State of Jammu & Kashmir. LIMITATION OF D‘ ITS: In general, limitation is the period upto which legal remedies are avaliable against or on the strength of some document, in the court of law. When limitation of a particular document stands expired, jionly means that the document cannot be ‘adduced as an evidence in the court. However, other modes of recover, if ary, remain open tothe bankers. For example, i a balance confirmation letter has expired, the banks can exercise the righ) WHY LIMITATION? At first sight, limitation may seem to be an unjust law, since it helps a dishonest debtoMo avoid his liabilties after the prescribed period. Itis true that the rules of limitation may in certain cases cause injustice and kardship to a genuine creditor by barring a remedy at law. However, public policy at large d Id be a specified time limit after which a Person may not be harassed by itgation. In the absence of such a threat of litigation. if LIMITATION IS AN ABSOLUTE LAW: Law of limitation is an absolute law and Pate an evade ib 9 vot private parties that the defendant will not plead rast ion in a suit\brought ageigst him by Yhe othe Sarezment, which itso: extends the tie wiih which a par oe enforc® his rights by the us void by vitue of Sections 23 and 28 oft ind ct Act. \ Section 3 (i) ofthe Limitation Act provides that Subject the provision contaings in Sectigns 4 to 24 of the Act, every suit instituted, appeal preferred and pplication a after the prescribed Period hall er by the court, although limitation has not been set up 6 a defence. $0, courts do no\ave any dierétion in this matter (except in the case of an appeal or application orc in Section & and they have to take notice and give effed to the provisions of the Act even though no plea of limita is raised bythe defendant. The plea oNimitaton may be sised at any stage of a case. It may be raised forthe first tie in an appeal or even ina second appeal, EXTENSION OF PERIOD OF LIMITATION IN‘CASES OF LEGAL DISABILITIE Limitation Actis not harsh dnahde who ae unable to initute a suit due to a visable minorty, lunacy etc. Section 6 of the Act provides, that where a person enlil to institute & sul or make an application for execution of @ decree, i atthe time from ‘hich the preserifed period iso be Yeckoned, amor, insane or an idl, he may intitle the sult or make the appicayion within the same period after the cisabilly has ceased) he would otherwise have been allowed if the disability continues plo the death ofthat person, his legal representative may institute the sult within the same period afer fre deaths would othernse have been alowed iam inetime so specified It should be nated that the disability should be continuous ehd also thal the person should have been under the disabilty wher the night to sue accrued. Further, he disabilly must be of @ person entitled to sue, Le. the privilege is extended only t8 the plaintiff and not to the defendant. IMPORTANT SECTIONS: SECTION 3: Courts cannot condone the defay in fling the suits due to expiry of imitation. SECTION 2: When there happens to be/a court holiday on the day on which the limitation is expiring, then suit can be filed on the next working day of the court pit limitation is not extended SECTION 5: Couri van condone jhe‘delay in preferring appeals. SECTION 9: Where once the time has begun to run, no subsequent disability or inabilly to institute a suit or make an ‘application stops it. This rule is strictly applied. However, there are some exceptions allowed vide Sec 12 to15, wherein running of time is suspended. SECTION 42: In computing the period of limitation for an appeal or application, the time taken for obtaining a copy of the judgement / order shall be excluded, ‘SECTION 44: In computing the period of limitation, the time, diligence, and in good faith, another civil proceeding against the same party for the same relief shall be excluded, SECTION 15(1) : If an institution of a suit or application has been stayed by injunction or ord Continuance of the injunction or order will not be reckoned for the purpose of limitation. SECTION 15(2): When notice has been given or sanction requested from the Govt. before the institution of a suit in ‘accordance with law, limitation will be suspended during the period of notice. the period of the 3 ‘CHANDIGARH-160047 2 5CO 91, (I" & 2" Floor), Near PNB, SECTOR 47.BANKING REGULATION AND BUSINESS LAWS SECTION 15(5): in computing the period of limitation for any suit, time during which the defendant has been absent from India shall be excluded SECTION 17: In case of fraud or mistake, the period of imitation will not begin to run until the plaintif or applicant has discovered the fraud or mistake, or could with reasonable diligence, have discovered it. EXTENSION OF LIMITATION PERIOD: rATIO\ ERIOD EXTENDE! ANY OF THE FOLLOWING WAY: ACKNOWLEDGEMENT OF DEBT: As per Sec 18, by obtaining Leter of Acknowledgement of Debt (LAD) ie. by ‘2cknowledging debt on a revenue stamp. LAD should be signed by al the borrowers and guarantors as in case of Demand Promissory Note. PART PAYMENT: By making part payment of Interest / Install |, by the borrower or his authorised agent. The limitation period will start from the date of such part payment ( pay-in-slip\should be signed by the borrower OBTAINING FRESH DOCUMENTS: By obtaining fre Nee in loan accounts and for the limit in case of CC / OD account. Limitation pey rents. Under Sec 25(3) pay. Thus, labilies BORROWER STAYING ABROAD: Valicty period borrower stayed abroad i.e., for a period he GUARANTOR AND LIMITATION: Undex law, libilt long/with the principal borrower. However, a demand has jo’be made Trom the guaranior for repamnent of tha debt alongwith the borrower. in the absence of such demand Itton espace on Denes of not be alaled against the guarantor. CHECK POINTS: y PN a Balance confirmation letter Should be takef before xi doamens/, Letter of Acknowledgement of Debt shoul be obtained atter Every 2 yrs, / ‘To obtain fresh set of documents within evety 3 years period of Yebt ea no mortgage To obtain fresh BPIED leter of hdertaking for BRIBD facity atthe tine of review. To make a reference df.ll previous acknowledgemient of debts / documibaté in last acknowledgement of debts. When the-torrower-has fot specified the account inthe pay-in-slip, the bank has option to credit any account even lime-péred debt. > In €ase of morigage, no fresh documents to be obtained, but letter of acknowledgement of debts should be obtained wan every 3 years and subsequent tthe vay of the rongage. tn case of crease in limit, documents for increasethlimitofly to be obtained along with acknowledgement of debts for {he existing facilties outstanding *\__In case of dishonour of archeque, for filing of civil sult, imitation period is 3 years from the date of dishonour. For Criminal proteedings, as per Section 142 of NI. Ac, itis to be initiated within one month from the date of the cause of \ action | LIMITATION ACT, 1963 DESCRIPTION OF SUIT PERIOD OF ‘TIME FROM WHICH PERIOD : / LIMITATION BEGINS TO RUN “Aile {For the balance due on a mua) ofen and Curent Nc yeas The dose ofthe year in which the fast Rem where there have been recgfoce!damards belween he paris. acted proved is entered inthe al ‘Aile 19 For money payable for maney lent yeas When the loan is made ‘Article 22 For money deposted under an agreement thal shall Syeas When te demands made be payable on demand, including money of a custome in the hands of is banker so payable | Aticle 34 On a bil of exchange or promissorynole payable aa ‘years ‘When the bil ornoe falls due. fed tine after dae ‘Adicle 32 On a il of exchange payable leigh or afer Sight Bul yeas When te bls presented 1k a fied tne ‘Artile 38 On biol exchange aceped payale a partolar poo Tyears__| When the ils preseried a hal pace ‘Article 34 Or a Bil of exchange or promissory note payable ata yeas Wer te hed time expres fe tine ater sigh o ater demand, Arte 35 On il of exchange o prorissory ote payab on | aya The dee fhe bl ornate ede C0 91, (1" & 2" Floor), Near PNB, SECTOR 47-D, CHANDIGARH-160047 Ed