Friday 31 July 2015

ACTIONABLE CLAIM

ACTIONABLE CLAIM

Actionable claim is defined in Section 3 of the Transfer of Property Act as a ‘claim to any debt other than a debt secured by mortgage of immovable property or by hypothecation or pledge of moveable property or to any beneficial interest in the moveable property not in the possession, either actual or constructive of the claimant which the civil courts recognize as affording grounds for relief, whether such debt, or beneficial interest be existent, accruing, conditional or contingent.

Accordingly, this mean, it excludes not only a claim to any immovable property for a debt but also a debt secured or any movable property in possession of the claimant. It follows, therefore that it is a claim for a simple debt or liability and which can be realized by a legal action.  

An actionable claim is called, in English Law, a chose in action or a thing in action as against a chose or money in possession. It denotes incorporeal personal property of all disciplines and an interest in corporeal personal property not in possession of the owner which accordingly can only be claimed or enforced in action. Therefore, while the different types of moveable property governed by the Sale of Goods Act can be called as chose in possession, an actionable claim is also a type of movable property called chose in action.  It is also a moveable property because a debt is a property and anything which is not immovable property is moveable property.

Actionable claim as defined in Section 3 of the Transfer of Property Act, as a chose in action is different from two other such chooses in action namely the right or property by way of copyright, trade-mark, patent, or design, and also to stocks and shares or debentures of a limited Company or the negotiable instruments under the Negotiable Instruments Act, which also evidence a debt and which are recoverable by legal action.

Section 137 of the Transfer of Property Act clearly provides that sections 130 to 136 will not apply to stocks and shares or debentures or to instruments which are negotiable or to mercantile documents of title to goods.  Marine Insurance claim is also excluded by Section 135 A of that Act and is dealt with in the Marine Insurance Act, XI of 1933. They are also governed by independent separate statutes passed in respect thereof and are not, therefore, governed by the Transfer of Property Act.  That Act in Section 130 only provides for transfer of actionable claims as defined and circumscribed by the Transfer of Property Act. As to transfer of the earlier mentioned actionable claims separate provisions are made for transfer thereof by the statutes governing them.

Actionable claims within the meaning of Section 3 of the Transfer of Property Act, therefore, cover 
(i) claims to unsecured debts and 
(ii) claims to beneficial interest in moveable property not in possession actual or constructive whether present or future., conditional or contingent. Such actionable claims could be 
(a) a right to claim maintenance 
(b) a right to arrears of rent 
(c) a right to annuities 
(d) moneys payable under a contract for price or advance 
(e) a right to claim benefit of a contract 
(f) a partner’s claim for accounts and his share therein 
(g) insurance claim, other than marine insurance 
(h) salary in arrears 
(i) book debts 
(j) a fixed deposit receipt, etc.  However, a mere right to sue is not assignable.  

Similarly, a decree is not assignable under this section, as no legal action is required to be taken to recover the claim.  The decree itself can be executed. Similarly any other property which is not transferable, under Section 6 of the Transfer of Property Act is not assignable under Section 130 of the Transfer of Property Act. Marine Insurance Policy, negotiable instrument and documents of title to goods are specifically excluded by Section 135 A and Section 137 of the Transfer of Property Act as stated above.

Assignment:
Every actionable claim or chose in action is assignable except in four cases:
(1)  where the assignment is prohibited by law,
(2) where the terms of the contract under which the claim accrues prohibit such assignment,
(3)  where the contract is of a personal nature, and
(4)  where the assignment would increase the burden on the other party.

An actionable claim can be recovered by a legal action by the person who is the claimant or creditor. Section 130 of the Transfer of Property Act provides that a transfer of an actionable claim shall be effected by execution of an instrument in writing, signed by the transferor or his duly authorized agent in favour of the transferee and in that case all the rights and remedies of the transferor, whether by way of damages or otherwise shall vest in the transferee, whether notice of such transfer is given to the debtor or not. But when no such notice of transfer is given to the debtor and the debtor in ignorance of such transfer repays the debt or claim to the original creditor or claimant, he would be discharged from the liability.  On such transfer the Transferee would get all the rights of the creditor including the right independently to recover the debt without the original claimant’s consent or co-operation.  The deed of transfer need not be signed by the transferee and also does not require attestation or registration.

The written instrument assigning a debt can be in any form, if the intention to transfer is clear. A mere letter to the assignee by the claimant that he has assigned the debt to him is sufficient.

An assignment of a debt may be absolute or by way of security or even as a gift. The words with or without consideration in the definition of actionable claims are used to cover even a gift.

An assignment becomes effective from the date of writing, unlike English Law under which it becomes effective from the date of notice to the debtor.

The provision in the Transfer of Property Act regarding assignment of actionable claim does not apply to claims under Marine Insurance Policy or Fire Insurance Policy or affect any provisions of the Insurance Aft, 1938.

Section 134 of the Transfer of Property Act also shows that assignment of the actionable claim by way of charge is also possible to secure the debt due by the transferor to the transferee and provides how the debt assigned when recovered is to be applied viz., first in payment of costs of recovery, secondly, in satisfaction of the amount secured and thirdly, in payment of the balance if any to the transferor or other person entitled thereto.  Section 136 if the Transfer of Property Act above quoted does not apply to assignment by a charge or security, though such assignment is also recognized in English Law as equitable assignment.

An actionable claim would include

(a)     any debt due to or moneys recoverable by the transferor (except the moneys payable under a negotiable instrument)
(b)     any moveable property belonging to the transferor and not in his possession or power and which he has a right to recover or receive and any claim or benefit under a contract belonging to the transferor but without any liability attached thereto.

An Assignment can be made either by a formal document or even by a letter to the debtor of the transferor but not orally.  An irrevocable Power of Attorney to recover a debt and to adjust it towards the amount due to the done is held as an assignment. An actionable claim can be assigned even as a gift that is without consideration as Section 130 of the Transfer of Property Act in terms so provides.

Apart from what is stated above, the following are held to be actionable claims:

     (1)  a debt due or to become due, or whether conditional or contingent
     (2)  future rents
     (3)  amounts payable under a deed
     (4)  amount due under a policy of life insurance
     (5)  a letter of credit
     (6)  right under a contract
     (7)  beneficial interest in moveable property
     (8)  confirmed sale price
     (9)  earnest money becoming repayable
   (10)  deposit receipt
   (11)  dividend due on shares, etc.
But a mere right to sue or claim for damages or mesne profits are not assignable.As regards transfer of shares, stock and debentures, the provision in respect thereof is made in the Companies Act.

As regards actionable claims in the nature of negotiable instruments, the Negotiable Instruments Act, makes special provision for the transfer thereof by endorsement. It may however be stated that a promissory note whether negotiable or not or other such instruments can be transferred by a separate instrument of transfer instead of by mere endorsement.


An assignment of an actionable claim is not required to be registered under the Registration Act.It is desirable that the document of assignment is executed both by the Assignor and the Assignee and in duplicate, one copy remaining with the Assignor and other with the Assignee.


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FORMALITIESTO BE COMPLETED WHEN PURCHASE OF PROPERTY

FORMALITIESTO BE COMPLETED WHEN PURCHASE OF PROPERTY



Ownership over the immovable property won't be given by mere execution of the sale deed in favor of the client. There square measure several different formalities needed to be completed when the acquisition. Such post registration formalities, succeeding the registration of the sale deed has been mentioned below:

1. Obtain original documents of title from the vendor so as to match and ensure an equivalent with the copies and also the same must be scrutinized by the purchaser's Advocate. When thorough scrutiny by the advocate and if more original documents are necessary, it's recommended to confirm the assembly of such documents in originals solely. If you're availing housing finance, then you've got to use for the certified copy of your sale deed within the involved territorial Sub-Registrar workplace.

2. Apply for the most recent and updated encumbrance certificate within the involved Sub-Registrar workplace. It’s also necessary to verify whether or not such Encumbrance certificate reflects the execution of sale deed in favor of the client in conjunction with the small print relating to the date, number and conjointly the name of the parties to the deed.

3. Possession of property is very necessary. The vendor ought to fork out the vacant possession of the property to the client. So as to confirm that the vendor is in possession of the property, the client ought to examine the property each day before the registration. If the vendor is in physical possession of the property then returning the vacant possession of an equivalent is incredibly straightforward. On the opposite hand, if the property is in occupation of the tenants, it's important to confirm that the tenant’s square measure vacated before registration. However, the very fact that the vendor is in physical or ownership, must be clearly incorporated within the sale agreement. As per the terms of sale agreement, the client ought to receive all the keys of the property at the time of registration. If doable, main door lock are often replaced with the new lock. Just in case the property sent to the purchaser could be a vacant website, it's necessary to place display panel with the wordings “This property is in hand by ‘X’ trespassers are going to be prosecuted”. Further, fencing around such sites or constructing compound wall, tho' expensive, is desirable. Periodical visits to the positioning also are recommended so as to sight encroachment over the site, if any.

Consent Letter

The client ought to verify that each one the taxes, statutory payments in respect of the property together with power, water charges square measure paid up-to-date by the vendor. Further, the purchaser should collect all the receipts for the statutory payments and may conjointly verify at the involved offices, whether or not there square measure any arrears are there or not. Power and water system agencies collect deposits from the customers before providing services. So as to transfer such deposit within the name of the client, consent letter from the seller must be obtained from the seller.

Registration of Khatha:

Khatha Certificate and Khatha Extract are one among the obligatory and necessary documents to prove this possession of the client over the property when execution of the sale deed. Client should make sure that the Khatha within the records of the native bodies, gram Panchayath or the town corporation is transferred to his name.

Both the vendor and client have to be compelled to sign the appliance for transfer of Khatha, that is better if done at the same time whereas language the sale deed so as to avoid any future disputes. Application for Transfer of Khatha must be punctually crammed in conjunction with copy of the sale deed enclosed and also the same must be submitted before the involved authority and to get acknowledgement thereto impact. just in case of the property falling inside the boundaries of BMP, then applications for Khatha transfer could also be filed in any of the subject service centers or any of the 30 revenue offices in conjunction with the documents mentioned in Sarala Khatha scheme Book. Documents needed to be created includes Mother Deed, sale deed, National Savings Certificate of Rs.200, sketch showing the positioning details and Betterment charges paid receipt. If the Khatha must be transferred within the name of 1 of the co-owners, then No Objection legal instrument declaring that they are doing not have any objection for transfer of khatha within the name of the mortal, punctually sworn before the official by the remaining co-owners, must be submitted along with the appliance for transfer of khatha and different needed documents.

Sarala Khatha scheme Book, introduced by BMP, provides all the small print concerning the services of the Revenue Department, documents to be filed, fees needed to be paid, operating hours and conjointly rates for assessment of land tax underneath the Self-Assessment scheme.
For transfer of Khatha within the name of the client, transfer fee are going to be collected and later written confirmation of such transfer endorsement are going to be issued within the name of the client. Throughout the method of transferring Khatha, the property is once more re-assessed on the idea of revised property taxes, if any, so issue assessment notice within the name of the client. It’s important that the tax paid receipt ought to be within the name of the new/present owner.

Khatha Extract:

After issue Khatha Endorsement, we've to use for computerized Khatha Certificate and Khatha Extract. Khatha Extract reflects the name of this Owner, assessment details, sital space and designed up space.

CMC Khatha:

If the property has falling underneath the CMC jurisdiction, Khatha Endorsement is issued within the name of this Owner. Town Municipal Councils (CMC) was issue type No.19, CMC Khatha within the name of this Owner. Now-a-days type No.III Khatha is being issued to the properties falling inside the boundaries of CMC since issue of type No.19 has been stopped from 29/05/2003.

The properties falling inside the limits of Village Panchayath, Form No.9 and ten is issued within the name of this Owner that refers to Assessment Order and Assessment Extract.

Transfer of Electricity offer

After the Municipal authorities transfer the Khatha within the name of the owner, meter and meter put in square measure needed to be transferred in their name. You’ve got to submit the required application along with the deposit transfer letter issued by the previous owner. When completion of all the formalities, water and electricity authority can change this owner name in their records. The authorities can issue written confirmation of transfer and lift the bills within the name of this owner. This may facilitate the owner to verify and check up their electricity and water bills to be raised in future. Annual land tax and periodical Encumbrance Certificate must be often obtained a minimum of once a year.


After completion of all the post registration formalities, absolute title, right over the property are going to be given to the client thereby enabling the client to relish the peaceful and uninterrupted possession of the property.



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Thursday 30 July 2015

PROPERTY EXCHANGE DEED

PROPERTY EXCHANGE DEED



As per provisions contains in Section 118 of Transfer of Property Act, when two persons mutually transfer the ownership of one thing for the ownership of another, neither thing or both the things being money only, such a transaction is called an exchange. This definition is not restricted to immovable property only.

Thus, exchange implies, when two separate property owners mutually agree to transfer the ownership rights by exchanging the property. Further, exchange also mean exchange of lands and barter of goods too.

If one of the items that has been transferred in money, then it is not an exchange but sale, because sale should always be for a price. But money in one form can be exchanged for money in another.

In case of exchange, the transfer of ownership of one thing is not the price paid or promised to pay, but something else in lieu. For example: if a person transfers a land valued Rs.20,00,000/- to another and in return, the other person transfers a shop valued Rs.18,00,000/- and pay Rs.2,00,000/- in cash, it is an exchange.

This type of exchange transactions can be reduced into writing in the form of Property Exchange Deed.  This Exchange Deed document for transfer of property rights need to be registered with the jurisdictional sub Registrar’s Office by paying prescribed stamp duty.  While drafting the exchange deed and its registration including the document execution, its presentation and admission utmost care need to be taken, since this is a complex process.

Before drafting such complex type deed of transfer, it is very important to ensure that all the necessary requirements for the effective enforcement of such deeds are incorporated which only give legal sanctity to the document. The essential requirements for such deeds are discussed below:

Description of the Deed

The deed has to specify the description, such as “This Deed of Property Exchange”, which may not necessarily be in bold letters, but is preferable, in order to highlight the nature of the deed.

Date of execution

It is very important to mention the date of execution of the deed since the same is required to determine the limitation and also for recording of such exchange in the revenue records. Further, the date of execution of the document may vary from the date of registration. However, the documents can be presented for registration, anytime within four months from the date of execution.

Parties to the deed

All the proper and necessary persons pertaining to the property intended to be exchanged have to be mandatorily made as parties to the deed in order to avoid possible future legal disputes, which may likely to be raised by the parties having interest over the exchanged property. It is also important to properly depict the status of each party to the deed.

Recitals

The deed shall contain the previous history pertaining to the property in a precise way, explaining the nature of the interest and motive behind the exchange of property, which only authenticate the title, and is called as Recitals in the legal terminology.

Covenants

A covenant is an agreement wherein either or both the parties to the deed bind themselves to certain terms and conditions, which create an interest over the property, which may either be express or implied. In recent times, with the advent of Apartment culture, it is very necessary to incorporate covenants of various types besides those for maintenance of common areas and facilities in the deed.

Testimonium

This is the part of the deed which states that the parties have signed the deed. This is very important in order to prove the authentication of the execution of the deed and the necessary involvement of the proper parties having interest in the property in legally conveying to the parties of the other part.

Testatum

This is the witnessing clause wherein the witnesses signing the deed are introduced, along with their names, address and signature. This clause is also very important for the reason that the witnesses also play an important role to prove the execution of the document. However, it is advisable that both the witnesses are from purchaser/ transferee’s side.

Operative words

This part of the deed depends upon the nature of conveyance. However, operative words clearly depict the intention of the parties conveying the property in favour of the other party/ies, which is necessary for transfer of rights over the property.

Parcels

This means description of the property following the operative words. Anything intended to be conveyed/assigned has to be specifically mentioned. Every minute detail about the identification of the property has to be clearly incorporated. Any ambiguity about the description of the schedule property may lead to serious problems.

Exceptions and Reservations

Property intended to be transferred by way of exchange must not fall within the ambit of those prohibited under any statute or the Government notification. This part of the deed speaks about the conditions restraining the alienation and assurance that such alienation does not involve any restrictions.

Exception refers to some property or definite right which is existing on the date of conveyance and the same would transfer if not expressly excluded.

Whereas, Reservation refers to the right which is not existing but created at the time of transfer.

Completion of transaction

The deed can be enforceable only if the same is properly stamped under Indian Stamp Act. Apart from this, it is also necessary that the same has to be registered under the Indian Registration Act. Only after the registration of such documents, the right, interest and title over the property is validly transferred from the transferor to the transferee.

Execution

Execution of the document will be complete only after the parties put their signatures on the deed. However, special care should be taken when any of the deed is signed by the party who is an illiterate or blind or Pardanashin lady. 

In case any document is signed by some person by putting thumb impression, the documents has to be signed by the person who has taken the same and if any map or plan sketch is annexed to the document, then the same has to be signed by the parties.

Possession of property

It is very important that the transferor transfers possession of the property in favour of the transferee. It is not necessary that actual possession has to be handed over to the transferee, but even constructive possession will transfer and create right and interest over the property.


Thus, the transfer or assignment of right, title and interest over the property, irrespective of the nature of transfer, entirely depends upon the deed of conveyance. Any ambiguity, inadvertent addition or deletion in the deed may give rise to lot of legal problems, thereby obstructing peaceful possession and enjoyment of the property.

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Tuesday 28 July 2015

BANKS CAN SELL YOUR HOUSE IF YOU DEFAULT IN PAYMENTS

BANKS CAN SELL YOUR HOUSE IF YOU DEFAULT IN PAYMENTS



It is not very easy to defraud the banks and financial institutions by the defaulting borrowers since various statutory protections are provided to the lending banks and financial institutions. The activities of borrowing and lending are inseparable activities and there is a change from Savings based economy to credit based economy not only in individual's budget but also in the budget of a country.

When a person borrows money, a duty is cast on him not only to repay the money borrowed but also to pay interest in time at the agreed rate on the amount borrowed. Therefore, so long as the amount due is not repaid, there remains a liability on the borrower and this liability in other words is called the Debt of the borrower. 

Duty is cast on the lender as well to realize the money lent with interest. In spite of the fact that the lending institutions take precautions and take sufficient security for the money lent, some debts become bad and irrecoverable in the ordinary course of business. Bad debt or non-performing asset would mean an asset or account of a borrower which has been classified by a bank or financial institution as sub-standard, doubtful or loss asset in accordance with the directions or guidelines relating to asset classifications issued by the Reserve Bank of India.

DRT Act, 1993 and SRFAESIAct, 2002

Recovery of debts has become a very difficult task for the banks and financial institutions and their bad debts or non-performing assets are on the rise. The process of realization or recovery of non-performing assets (NPA) through the normal process is time consuming. To hasten or speed up the recovery process and keeping in view the alarming increase in NPAs, the Government of India has enacted the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 popularly known as DRT Act. 

The DRT Act had some deficiencies inasmuch as it did not provide for assignment of debts to securitization companies and the secured assets could not be liquidated in time. Therefore, the Union Government has brought in a legislation called the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 to remedy the deficiency. It is generally referred to as SRFAESI Act. The SRFAESI Act is not in derogation of the DRT Act. The object of the DRT Act as well as SRFAESI Act is recovery of debt through non-adjudicatory process and to provide cumulative remedies to the secured creditors.

The SRFAESI Act provides for setting up of asset reconstruction companies, special purpose vehicles, and asset management companies etc. By removing all fetters on the rights of the secured creditor, he is given a right to choose one or more of the cumulative remedies. To give more teeth to the Act,  the SRFAESI Act, 2002, has been amended in the year 2004 under The Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2004, where under certain changes have been introduced in the Act by insertion of amendment or addition  to the existing sections. It is made specific in the preamble that the Act undertakes to regulate

(1) Securitization;
(2) Reconstruction of financial assets and
(3) Enforcement of security interest.
All these three concepts are independent of each other.

Enforcement of SecurityInterest

As far as the general public are concerned, Chapter III, Enforcement of Security Interest contained in Sections 13 to 19 are very important.   The following are the requirements for initiating action for enforcement of security interest under SRFAESI Act:

[1] The account of the borrower should have been classified as Non-performing Asset, strictly in accordance with the guidelines of the Reserve Bank of India and such other authority;
[2] Assets should not be those which have been accepted under sec.31 of the SRFAESI Act and security interest can be enforced only in respect of assets which are specifically charged;
[3] The action should be initiated well within the limitation period. If the limitation is due to expire shortly, and then it will be proper to institute a suit in a civil court or DRT as per pecuniary limit applicable for such suits.
[4] Action can be initiated only where the N.P.A.is Rs.1lakh and above.

Notice

Section 13 of the Act empowers the secured creditor to enforce the security interest in case the borrower defaults in repayment of secured debts and whose accounts categorized as non-performing asset without the intervention of the court or tribunal. The secured creditor is required to give notice under sec.13 (2) of the Act to the borrower to discharge all his liabilities in full, within 60 days from the date of notice. The notice should be comprehensive furnishing full details of the amount due and secured assets intended to be enforced. Upon receipt of the notice under sec.13 (2) of the Act, no borrower shall transfer by way of sale, lease or otherwise any of his secured assets referred in the notice without prior written consent of the secured creditor. The notice may be served by delivering, or transmitting at a place where borrower or his agent is empowered to accept the notice or documents on behalf of the borrower.

It may also be delivered or transmitted where the borrower actually or voluntarily resides or carries on business or personally works for gain. The notice may be sent by registered post acknowledgment due, by speed post, by courier, or any other means of transmission of documents like fax message or electronic mail service. If it is found that the borrower is avoiding the service of the notice, or the demand notice, or the service cannot be made, a copy of the demand notice may be affixed on the outer door or some other conspicuous part of the house or building of the borrower or his authorized agent. The demand notice may also be published in two leading newspapers having good circulation in the area, out of which one shall be in local language.

If the borrower is a corporate body, the demand notice shall be served on the registered office or any of the branches. In case of more than one borrower, the notice has to be served on each of the borrowers. The notice has to be served on guarantors and on persons who have given security for due repayment of the loan

Under Section 13(3A), if, on receipt of the notice under sub-sec.(2), the borrower makes any representation or raises objection, the secured creditor shall consider such representation or objection and if the secured creditor comes to the conclusion that such representation or objection is not acceptable or tenable, he shall communicate within one week of receipt of such representation or objection the reasons for non-acceptance of the representation or objection to the borrower, provided that the reasons so communicated or the likely action of the secured creditor at the stage of communication of reasons shall not confer any right upon the borrower to prefer an application to the Debt Recovery Tribunal under sec.17 or the Court of District Judge under sec.17A.

Similarly, Sec.19 of theprincipal Act has been substituted with the following:

19. Right of borrower to receive compensation and costs in certain cases: If the Debt Recovery Tribunal or the Court of District Judge, on an application made under sec.17 or sec.17A or the Appellate Tribunal or the High Court on an appeal preferred under sec.18 or sec.18A, holds that the possession of secured assets by the secured creditor is not in accordance with the provisions of the Act and rules and directs the secured creditor to return such secured assets to the concerned borrowers, such borrower shall be entitled to the payment of such compensation and costs as may be determined by such Tribunal or Court of District Judge or Appellate Tribunal or High Court referred to in sec.18B.

If the borrower/guarantor pays the dues in full, no further action under the Act is necessary.  If dues are paid only partly and the borrower/guarantor seeks further time, the authority may decide further action with due consideration of law of limitation and the borrower or guarantor intimated accordingly. If the borrower/guarantor fails to meet their liabilities in full within 60 days from the date of the notice, the bank/financial institution can initiate action to enforce the security rights conferred on it by the Act.

Possession and Sale

The secured creditor or his authorized officer may take recourse to one or more of the measures provided in sec.13(4) of the Act to recover his secured debt who has the following options: He may take possession of the secured assets of the borrower including the rights to transfer by way of lease, assignment or sale. He may take over the management of the secured assets of the borrower, including the right of transfer of lease, assignment, and sale. He may appoint any person as the manager to manage the secured assets, the possession of which has been taken over. 

The secured creditor may require by notice any person who has acquired any secured assets from  the borrower and from whom  any money is due or may become due to the borrower to pay to the secured creditor so much of the money as is sufficient to cover  the secured debt.

Both in the case of movable and immovable properties, it is obligatory to serve a notice of thirty days to the borrower about the sale. The notice of sale shall also be published in two leading widely circulated newspapers, of which one shall be of the local language. The public notice shall contain important details of the property, the debt, reserve price, time and place of public auction, earnest money to be deposited etc. 

The notice shall be affixed on the conspicuous part of the immovable property and may also be put on Website. Sale by any other modes than public auction / tender shall be on terms settled between the parties. After confirmation and completion of sale process, the authorized officer shall issue a sale certificate in favor of the purchaser in the prescribed format.

If the secured assets are movable properties, the authorized officer shall take the possession in the presence of two witnesses and ensure that panchanama is drawn and signed by the said two witnesses. The panchanama shall conform to the prescribed format. After taking possession, the authorized officer, shall prepare an inventory of the property as per the format prescribed and shall deliver a copy of such inventory to the borrower or his authorized agent.

If the property is subject to speedy or natural decay or expenses for keeping such property is likely to exceed the value of the property the authorized officer may sell it at once. It is the duty of the authorized officer to take proper care and take steps for preservation and protection of the assets. If necessary, the assets may be insured until they are sold or disposed of.

While taking possession or sale of the secured asset, the secured creditor may request the help of Chief Metropolitan Magistrate or District Magistrate in whose jurisdictions the secured assets fall.

Right of appeal

Under sec.17 of the Act, the person aggrieved by the actions of the secured creditor, as provided in sec.13(4) may make an application to the Debt Recovery Tribunal, having jurisdiction within 45 days from the date on which action has been taken. Similarly, any person aggrieved by the order made by DRT under section 17 may prefer an appeal to the Appellate Tribunal within 30 days from the date of the order. The party preferring appeal shall deposit 50% of the amount of debt, with a discretion given to the Appellate Tribunal to reduce the amount to not less than 25% of the debt.

Transactions not coveredunder the Act

The following transactions are excluded from the provisions of the SRFAESI Act:

a] A lien on any goods, money or security given by or under the Indian Contract Act, Sale of Goods Act or any other law for the time being in force;
b] Pledge of movables within the meaning of sec.172 of the Indian Contract Act,
c] Any conditional sale, hire purchase or lease or any other contract in which no security interest has been created;
d] Any property not liable to attachment;
e] Any security interest created in agricultural land;
f] Any security interest for securing repayment of any financial asset not exceeding rupees one lakh;

g] Any case in which the amount due is less than twenty per cent of the principal amount and interest thereon;

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