ENFORCEMENT OF SECURITY INTERESTCentral

Section 18C of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002

1[18C. Right to lodge a caveat.--(1) Where an application or an appeal is expected to be made or has been made under sub-section (1) of section 17 or section 17A or sub-section (1) of section 18 or section 18B, the secured creditor or any person claiming a right to appear before the Tribunal or the Court of District Judge or the Appellate Tribunal or the High Court, as the case may be, on the hearing of such application or appeal, may lodge a caveat in respect thereof.

(2)Where a caveat has been lodged under sub-section (1),--
1. (a)the secured creditor by whom the caveat has been lodged (hereafter in this section referred to as the caveator) shall serve notice of the caveat by registered post, acknowledgement due, on the person by whom the application has been or is expected to be made under sub-section (1);
2. (b)any person by whom the caveat has been lodged (hereafter in this section referred to as the caveator) shall serve notice of the caveat by registered post, acknowledgement due, on the person by whom the application has been or is expected to be made under sub-section (1).
(3)Where after a caveat has been lodged under sub-section (1), any application or appeal is filed before the Tribunal or the court of District Judge or the Appellate Tribunal or the High Court, as the case may be, the Tribunal or the District Judge or the Appellate Tribunal or the High Court, as the case may be, shall serve a notice of application or appeal filed by the applicant or the appellant on the caveator.
(4)Where a notice of any caveat has been served on the applicant or the Appellant, he shall periodically furnish the caveator with a copy of the application or the appeal made by him and also with copies of any paper or document which has been or may be filed by him in support of the application or the appeal.
(5)Where a caveat has been lodged under sub-section (1), such caveat shall not remain in force after the expiry of the period of ninety days from the date on which it was lodged unless the application or appeal referred to in sub-section (1) has been made before the expiry of the said period.] STATE AMENDMENTS Jammu and Kashmir (UT).-- Amendment of section 18(C)--(i) in sub-section (1), omit "or section 17A", "or section 18B", "or the court of District Judge" and "or the High Court"; and
1. (ii)in sub-section (3), omit "or the court of District Judge" and "or the High Court". [Vide Order No. 3807(E) dated 26th October, 2020, the Union Territory of Jammu and Kashmir Reorganisation (Adaptation of Central Laws) Third Order, 2020 (w.e.f. 26-10-2020). Ladakh (UT).-- Amendment of section 18(C)--
2. (a)In sub-section (1), omit,--
  1. (i)"or section 17A" and "or section 18B"; and
  2. (ii)"or the court of District Judge" and "or the High Court" whenever they occur;
3. (b)in sub-section (3) omit "or the court of District Judge" and "or the High Court". [Vide Union Territory of Ladakh Reorganisation (Adaptation of Central Laws) Order, 2020, notification No. S.O. 3774(E), dated (23-10-2020).]

Summary

A secured creditor or other interested person can file a formal notice called a caveat if they expect an application or appeal to be filed against them.
The person filing the caveat must send a copy of it by registered post with an acknowledgement due to the person they expect will make the application.
Once the caveat is lodged, the tribunal or court must notify the caveator when the application or appeal is actually filed.
The person making the application must regularly share copies of their documents and the application itself with the caveator.
A caveat expires after ninety days unless the expected application is filed within that timeframe.

Practical examples

1A bank takes over Rajesh's property and expects him to file an appeal. The bank files a caveat so that the tribunal will not hear Rajesh's case without the bank being present to argue its side.

2An asset reconstruction company expects a borrower to challenge their action. They file a caveat, and when the borrower submits the paperwork 45 days later, the tribunal immediately notifies the company.

FAQ

1. What happens if the expected application is not filed within ninety days?

The caveat expires and will no longer remain in force, meaning the person who filed it loses their automatic right to be notified.

2. How must the caveator notify the other party?

The caveator must serve the notice using registered post with an acknowledgement due.

3. Does the person filing the application have any duties towards the caveator?

Yes, they must periodically provide the caveator with a copy of the application and any supporting documents they file.

Test yourself

Q1.Under Section 18C of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, what is the maximum duration a caveat remains in force if no application or appeal is filed?

Q2.Under Section 18C of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, how must the person lodging the caveat notify the person expected to make the application?

Q3.Section 18C of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 allows caveats for appeals made under Section 18. If a borrower appeals to the Appellate Tribunal under Section 18, what obligation does the Tribunal have towards a bank that lodged a caveat under Section 18C?

Q4.Under Section 18C of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, what must the applicant do after being served a notice of a caveat?

18BPreviousSection 18B Appeal to High Court in certain cases.19NextSection 19 Right of borrower to receive compensation and costs in certain cases.

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