AMENDMENTS TO SARFAESI ACT/RULES/DRT ACT AND RULES WHICH HAVE BEEN ENFORCED AND THEIR IMPACT

1. Some of the Amendments to Security Interest (Enforcement) (Amendment)
Rules, 2002 which came into effect from November 04, 2016
Rule Changes Effect
3(1) after the word “delivering”, the words,
“including hand delivery,” shall be
inserted
Delivery of notice can be effected by hand delivery.
3(5) New Insertion: New para to be added
in demand notice
New Para to the added in Demand Notice inviting
attention of the borrower to provisions of sub-section
(8) of section 13 of the Act, in respect of time available
to the borrower, to redeem the secured assets.
3A Reply to representation of the
Borrower
Words seven days replaced with the words “fifteen
days” .
4 New sub rule 2A inserted: for effective
service of Panchnama and Inventory on
Borrower
After taking over of possession of movables the
authorized officer to intimate the same by way of notice
to the Borrower along with Panchnama in Appendix I
and inventory made in Appendix II.
New Sub Rule 2B – email service All notices under these rules may also be served upon
the borrower through electronic mode of service, in
addition to the modes specified under rule 3.
6 Public auction through e-auction mode. Public auction by E-auction mode added
“(c) holding public auction including through e-auction
mode.
New proviso inserted to deal with
Notice period in subsequent sale
thereby reducing the notice period in
subsequent sale to 15 days
“Provided further that if sale of movable property by any
one of the methods specified under sub-rule (1) fails and
the sale is required to be conducted again, the
authorised officer shall serve, affix and publish notice of
sale of not less than fifteen days to the borrower for any
subsequent sale.
6(3) Parties defined in sub rule 8 to include
only creditor and proposed purchaser
thus, Consent of Borrower may be
required for sale other than by auction
sale or public tender
In sub-rule (3), for the words “between the parties in
writing”, the words “between the secured creditors and
the proposed purchaser”, have been substituted.
8 New sub rule 2A inserted for service of
notice through email.
All notices under these rules may also be served upon
the borrower through electronic mode of service, in
addition to the modes prescribed under sub-rule (1) and
sub-rule (2) of rule 8.
Provision for e auction inserted Clause ‘c’in Sub rule 5 provisions inserted to hold
auction through e-auction mode.
Parties defined in sub rule 8 to include
only creditor and proposed purchaser.
In sub-rule (8), for the words “between the parties in
writing”, the words “between the secured creditors and
the proposed purchaser”, have been substituted.
9 Sub rule 1 substituted for changes in
Period of sale notice
For first sale notice period would 30 days and for
subsequent sale 15 days notice is to be served on the
Borrower
Sub
rule 3
Payment terms for sale of security 25%
immediate (or by next working day and
balance maximum three months.
(3) On every sale of immovable property, the purchaser
shall immediately, i.e. on the same day or not later than
next working day, as the case may be, pay a deposit of

2. twenty five per cent. of the amount of the sale price,
which is inclusive of earnest money deposited, if any, to
the authorised officer conducting the sale and in default
of such deposit, the property shall be sold again.
Balance amount to be paid as may be agreed upon in
writing between the purchaser and the secured creditor,
in any case not exceeding three months.
13A New rule inserted for
Format of application by
lessee or tenant and fee
to be paid.
Every application under sub-section (1) of section 17 filed by lessee
or tenant of the secured assets shall be accompanied by a fee
specified in sub-clause (c) and sub-clause (d) of sub-rule (2) of rule
13, as the case may be. (2) The application to be made by the lessee
or the tenant under sub-section (1) of section 17, shall be in the
form specified in Appendix X annexed to these rules.
Appendix I New para after first para
to be inserted in the
format of Panchnama
The borrower’s attention is invited to provisions of sub-section (8)
of section 13 of the Act, in respect of time available, to redeem the
secured assets.
Appendix III Minor changes in the
format of certificate of
sale
In the opening paragraph, for the word and figure “rule 9”, the
word and figure “rule 3” shall be substituted.
Appendix
IV
Possession Notice for
immovable property
first para substituted
For the first paragraph, the following paragraph shall be
substituted, namely:- “The borrower having failed to repay the
amount, notice is hereby given to the borrower and the public in
general that the undersigned has taken possession of the property
described herein below in exercise of powers conferred on him
under sub-section (4) of section 13 of Act read with rule 8 of the
Security Interest Enforcement) Rules, 2002 on this the .......day of
….. of the year……”;
New Para after the
second para
After the second paragraph, the following paragraph shall be
inserted, namely:– “The borrower’s attention is invited to
provisions of sub-section (8) of section 13 of the Act, in respect of
time available, to redeem the secured assets.”
Appendix V Minor correction
consequent to change in
numbering of rules ub
the format of Sale
Certificate for
immovable.
For the word and figure “rule 12” the words and figures “rules 8
and 9”, shall be substituted.
Appendix X New Format of applications by lessee or tenant under section 17(4) read
with rule 14.
NEW CHANGES IN DRT ACT / RULES COMING INTO EFFECT FROM NOVEMBER 04, 2016
DRT (Procedure) Rules, 1993
Provision Amendment Change
Rule 5,
after
sub-rule
New Provisions
Format of summons
provided
After registration of the application under sub-rule (2), the Tribunal
shall issue summons to the defendants in Form IV

3. (2)
5A Limitation period for
application for review
Reduced to 30 days from existing 60 days.
6 Jurisdiction provided
where Branch office of
Bank is located and in
case of redemption of
debentures where DT is
has its principal place of
business
the branch or any other office of the applicant is functioning as a
bank or financial institution and maintaining an account in which
debt claimed is outstanding for the time being: Provided that a
Debenture Trustee having a claim against any company for
redemption of secured debt securities, shall file an application at the
place within whose jurisdiction the Debenture Trustee has its
principal place of business or at the place where secured asset is
located.”
12 New time limit for WS
and Counter claim and
reply
Written Statement /counter claim to be filed within 30 days of
service of summons.
Bank to file reply to counter claim within 30 days of filing of claim.
DRT can extend it only in exception circumstance by maximum 15
days.
12(8) Certificate based on
admission
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 such amount, to the extent of the
admission, by the applicant within a period of thirty days from the
date of such order, failing which the Tribunal may issue a certificate
in accordance with section 19 of the Act, to the extent of amount of
debt due admitted by the defendant
12(9) Proving of facts By affidavit. Cross examination to be allowed only if there are
sufficient reasons to be recorded. If after order the witness failed to
appear in DRT, affidavit will not be taken into evidence and no oral
evidence be permitted.
12 (10) Denial of liability by
borrower
DRT to proceed as per the affidavit of applicant acquainted with
facts of the case.
12 (11) Provisions of BB of
Evidence Act
To apply to statement of account
8 Modification in the
format of DRT application
Details of Debt and asset and value to be mentioned as per the
format.
Interim applications To be specifically mentioned along with reasons (at serial number 7
of the format)
Details of Documents to
be given
At serial number 19 of the format of application details of
documents to be mentioned

4. AMENDMENTS IN SARFAESI ACT GIVEN EFFECT TO
SECTION PROVISONS CHANGES EFFECTIVE
FROM
2 Changes in definitions of
ARC, Company, Debt,
Debt securities, Default,
Financial Leas,
Negotiable documents,
Secured Creditor,
Security Interest,
Changes in the definitions September 01,
2016
2(l)(v) Definition of the term
“financial assets”
expanded
The term financial assets expanded to include beneficial
interest in tangible assets given on hire/lease/conditional
sale and in intangible assets or license or assignment of
such intangible assets.
November 04,
2016
3(f) It prohibits sponsor of
ARC from being its
holding company or
holding a controlling
interest.
New amendment paves the way for a sponsor of an ARC
to hold up to a 100% stake in the ARC if the sponsor of
ARC is a fit and proper person in accordance with the
criteria as may be specified in the guidelines issued by the
Reserve Bank for such persons.
September 01,
2016
5 New clause IA inserted in
Section 5
Exemption from payment of stamp duty on assignment of
financial assets in favour of ARC
September 01,
2016
9 Measure for
reconstruction
Additional measures for assets reconstruction provided September 01,
2016
12 New Provisions in the
form of 12 B
Power of RBI to carry out audit of ARCs September 01,
2016
13 Debt Securities (new
provisions) condition of
NPA not to apply
Requirement of classification of secured debt as NPA not
applicable to debt securities; and to debenture trustee.
September 01,
2016
13 (8) Tender of amount by
borrower
Amount can be tender up to sale of assets September 01,
2016
14 Time limit for DM to pass
order
Section 14 amended for passing of order by DM on the
application of secured creditor for assistance, within 30
days of filing of application + another 30 days
September 01,
2016
15 Restoration of
Management
Not to be done where secured creditor acquired
controlling stake on account of conversion of debt into
equity
September 01,
2016
17 (IA) Place for filing of Appeal For application against action under SARFAESI Act: a)
where cause of action has arisen, (b) where secured
assets is located, or the branch where account is
maintained is located.
September 01
2016
17 New provisions for
restoration of possession
of assets to aggrieved
person
The existing section 17 contains provisions only for
restoration of possession of secured assets to borrower
where action of secured creditor under section 13 is held
by DRT to be invalid. Now specific provisions have been
added to include restoration of possession to borrower or
other aggrieved person.
September 01,
2016
17 New Provisions 4A
Powers to DRT to deal
New provisions have been incorporated for conferring
powers on DRTs to pass appropriate order where it is
September 01,
2016

5. with issue of
lease/tenancy over
secured assets
satisfied that tenancy right or leasehold rights claimed in
secured asset (a) has expired or stood determined; or (b)
is contrary to section 65A of the Transfer of Property Act,
1882; or (c) is contrary to terms of mortgage; or (d) is
created after the issuance of notice of default and
demand by the Bank under sub-section (2) of section 13
of the Act.
20A New Provisions : For
establishment of Central
Registry
Central Registry: Power to Central Govt to
extend/integrate provisions for registration of charges
with various registering authorities
September 01,
2016
23 New Provisions
Time limit for filing of
charge to go (as filing
date is now being
recognized as the
effective date of the
charge)
After amendment come into effect, the time limit of 30
days prescribed under section 23 as also the power of the
Central Registry to extend the time for filing of charge will
be removed as the charges will be effective from the date
of registeration with the Central Registry. Further, the
Central Government by notification require registeration
of transaction relating to different types of security
interest created on different kinds of properties (at
present such transactions are limited to mortgages).
YET TO BE
IMPLEMENTED
CHAPTER
IV A
New chapter has been
inserted for registeration
of charges and priority of
charges
Registration of transaction of creation, modification,
satisfaction of charge of security interest by secured
creditor or other creditor or filing of attachment orders to
constitute a Public Notice.
Secured creditors will not be able to take over
possession the securities unless it is registered with the
central registry. Further, these creditors, after
registration of security interest, will have priority over
others in repayment of dues. However, after the
commencement of the Insolvency and Bankruptcy Code,
2016, in cases where insolvency and bankruptcy
proceedings are pending in respect of secured assets of
the borrower, the distribution of proceeds from sale of
secured assets shall be subject to the order of priority as
provided in that Code.
Govt dues/Tax Dues to
be registered with the
Central Registry and will
not have priority
Unless such default /demand is registered with Central
Registry prior to creation of charge in favour of the
Bank/FIs, tax dues will not have priority over the dues of
Banks/FIs. {Now every tax authority of Central
/State/Local Government/authority entitled to issue
attachment order on the defaulter property is required to
file with the Central Registry such attachment orders with
particulars of assessee and details of tax or other
Government Dues.
Attachment orders to be
filed with the Central
Registry
If any person obtains any order for attachment of
property from any court or other authority empowered
to issue attachment order, such person may file
particulars of such attachment order with the Central
Registry on payment of fee
19 Additional New
Provisions:
Application to include the following additional details:
1. True copies of all documents relied upon;

6. Filing of recovery
application before
DRT/DRATs
2. Statement of account duly certified under
Bankers Books of Evidence Act, 1891
3. Particulars of the assets/securities
4. Estimated Value of such securities
5. If the estimated value of the assets is not
sufficient to satisfy the debt claimed, then it
should state the particulars of other properties or
assets owned by any of the defendants and
6. Also seek an order directing the defendants to
disclose to the Tribunal particulars of other
properties or assets owned by defendants
November 04,
2016
19(10A) Pleadings to be
supported by an affidavit
Every application, written statement, claim of set off,
counter claim, reply to the counter claim or any other
pleadings shall need to be supported by an affidavit
sworn by the applicant or defendant verifying the facts
and pleadings, statement, documents and other
documentary evidence.
19(10A) Evidence to be filed
simultaneously along with
application
Any evidence of witnesses to be led by any party,
affidavit of such witness shall be filed simultaneously by
the party with the application or written statement or
replies.
Written statement to be
filed within 30 days &
Declaration of assets
Defendants to file written statement within 30 days of
service of summons and also declare assets;
19(13)A Restraining Orders DRT can also pass order restraining defendants from
transferring or disposing of such assets pending disposal
of application for attachment of assets.
19((4)(v) Interim Order of
attachment and
Prohibition
For interim orders particulars and estimated value of the
property sought to be attached is required to be given.
Defendants cannot sell or transfer their assets after service
of notice, except in the ordinary course of business.
Arrest/Detention in civil
prison
If defendant fails to declare assets after passing of such
an order by DRT, he can be put in civil prison for a term
not exceeding three months.
Certificate on admission DRT can pass order for recovery based on admission of
the party and also order sale of assets.
Appointment of Receiver DRT can now order appointment of Receiver for
attachment and sale of assets of defendants
Company in Liquidation DRT to deal with disposal of assets of a company under
liquidation as per section 326 of the Companies Act
DRT to pass final order
within 30 days of date of
conclusion of hearing
DRT, may after giving the applicant and the defendant, an
opportunity of being heard, in respect of all claims etc,
within thirty days of conclusion of the hearing, pass
interim or final orders as it deem fit which may include
order for payment of interest upto the date of actual
payment/realisation.
DRT to specify the assets In passing order under sub section 20, DRT shall specify

7. the assets of the borrower over which security interest is
created and direct the Recovery Officer to distribute the
sale proceed of such assets as provided in sub section
20AB
20AB PRIORITY OF DUES
Utilisation of sale
proceed of the assets
Sale proceeds from sale of secured assets shall be
distributed in the following orders of priority, namely:—
(i) 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;
(ii) debts owed to the bank or financial institution.
But after IB Code for the cases covered under the code
the proceed with be utilised as per the IB Code
19(22) PO to issue certificate of
recovery along with final
order
DRT is now required to issue RC along with the final order
specifying the amount of recovery.
19(24) Time limit for conclusion
of proceedings before
DRT
At present DRT is required to make endeavour to dispose
of the applications finally within 180 days from the date
of receipt of the application. Now the section is amended
to lay down that every effort shall be made by it to
complete the proceedings in two hearings.
19 (22A) RC to be deemed to be
decree of court
Any recovery certificate issued by the Presiding Officer
under sub-section (22) shall be deemed to be decree or
order of the Court for the purposes of initiation of
winding up proceedings against a company registered
under the Companies Act, 2013 or Limited Liability
Partnership registered under the Limited Liability
Partnership Act, 2008 or insolvency proceedings against
any individual or partnership firm under any law for the
time eing in force, as the case may be.
19A Digital filing of
applications and
documents
New provisions have been inserted for enabling filing of
recovery applications, documents and written statements
in electronic form by using digital signature.
DRT to maintain a common website for this purpose.
Electronic form of documents will be as defined under
clause (p) of section 2 of IT Act, 2000. September 01,
2016Passing of order and
service through online
system
Any summons, notice or communication or intimation as
may be required to be served or delivered under this Act,
may be served or delivered by transmission of pleadings
and documents by electronic form and authenticated in
such manner as may be prescribed.
(2) Any interim or final order passed by the Tribunal or
Appellate Tribunal displayed on the website of such
Tribunal or Appellate Tribunal shall be deemed to be a
public notice of such order and transmission of such
order by electronic mail to the registered address of the
parties to the proceeding shall be deemed to be served
on such party.

8. 20 Limitation for filing of
Appeal in normal cases
Appeals to be filed within 30 days instead of 45 days.
27 DRT to have powers to
grant time to repay dues
Notwithstanding that a certificate has been issued to the
Recovery Officer for the recovery of any amount, the
Presiding Officer, may by an order, 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.
No Appeal: In case defendant agrees to pay the amount and
is allowed time by DRT under the above provisions, he would
forfeit right to file appeal against the order of Tribunal.
In default by the defendant in payment of dues as per above,
stay of proceeding shall be withdrawn and the RO shall take
steps for recovery of remaining amount of debt due and
payable.
31A Minimum Deposit of
50% of the amount of
debt dues as determined
by the Tribunal for filing
of appeal
Where an appeal is preferred against any order of the
Recovery Officer, under section 30, by any person from
whom the amount of debt is due to a bank or financial
institution or consortium of banks or financial
institutions, such appeal shall not be entertained by the
Tribunal unless such person has deposited with the
Tribunal fifty per cent of the amount of debt due as
determined by the Tribunal. DRT can not waive this.
However, could be reduced to 25%.
31B Priority to Secured
Creditors
New provisions in the form of section 31B is being
inserted to provide for priority of rights of secured
creditors to realise the secured debt by sale of assets
over which security interest is created, in priority over all
other debts and Government dues including revenue,
taxes, cesses, and rates due to the Central Government,
State Government or local authority. (But after
implementation of IB code the priority will be as per the
said Act)
September 01,
2016
25 Modes of Recovery At present following modes of recoveries are provided
under section 25 (a) attachment and sale of movable or
immovable properties of the defendant; (b) arrest of the
defendant and his detention in prison (c) appointing
receiver for the management of the movable or
immovable properties of defendant.
Now a new clause (aa) has been inserted providing for
“taking possession of property over which security
interest is created or any other property of the defendant
and appointing receiver for such property and to sell the
same”. Additional clause inserted for the Central
Government to provide for any other mode of recovery.
September 01,
2016