REGULATION OF SECURITISATION AND RECONSTRUCTION OF FINANCIALASSETS OF BANKS AND FINANCIALINSTITUTIONSCentral

Section 5A of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002

1[5A.Transfer of pending applications to any one of Debts Recovery Tribunals in certain cases.-- (1) If any financial asset, of a borrower acquired by a 2[asset reconstruction company], comprise of secured debts of more than one bank or financial institution for recovery of which such banks or financial institutions has filed applications before two or more Debts Recovery Tribunals the 2[asset reconstruction company]may file an application to the Appellate Tribunal having jurisdiction over any of such Tribunals in which such applications are pending for transfer of all pending applications to any one of the Debts Recovery Tribunals as it deems fit.

(2)On receipt of such application for transfer of all pending applications under sub-section (1), the Appellate Tribunal may, after giving the parties to the application an opportunity of being heard, pass an order for transfer of the pending applications to any one of the Debts Recovery Tribunals.
(3)Notwithstanding anything contained in the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993), any order passed by the Appellate Tribunal under sub-section (2) shall be binding on all the Debts Recovery Tribunals referred to in sub-section (1) as if such order had been passed by the Appellate Tribunal having jurisdiction on each such Debts Recovery Tribunal.
(4)Any recovery certificate, issued by the Debts Recovery Tribunal to which all the pending applications are transferred under sub-section(2), shall be executed in accordance with the provisions contained in sub-section (23) of section 19 and other provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993)shall, accordingly, apply to such execution.]

Summary

An asset reconstruction company can move multiple legal cases into one single court for easier handling.
This applies when a borrower has debts with several different banks and those banks have started cases in various Debts Recovery Tribunals.
The company must apply to the Appellate Tribunal to request this transfer.
The Appellate Tribunal must give all parties a chance to be heard before deciding to move the cases.
Any order made by the Appellate Tribunal to move these cases is legally binding on all the lower courts involved.

Practical examples

1An asset reconstruction company called Reliable Assets acquires three separate unpaid loans belonging to a businessman named Mr. Kumar. These loans were originally from three different banks which had filed cases in courts in Delhi, Mumbai, and Chennai. Reliable Assets applies to the Appellate Tribunal to move all three cases to the Delhi court to save time and travel costs.

2A company named Fast Recovery buys a set of bad debts from a group of lenders. The lenders have active cases against a factory owner in two different tribunals. Fast Recovery asks the Appellate Tribunal to consolidate these into one tribunal so that one judge can see the full picture of the factory owner's debt.

FAQ

1. Who can ask for cases to be moved under Section 5A of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002?

Only an asset reconstruction company that has acquired the financial assets of a borrower can file an application to move pending cases under Section 5A of the Act.

2. To which authority is the application for moving cases made under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002?

The application must be filed with the Appellate Tribunal that has jurisdiction over any of the tribunals where the cases are currently pending as per Section 5A of the Act.

3. Are the original banks involved in the decision to move cases under Section 5A of this finance law?

Yes, the Appellate Tribunal must give the parties involved in the applications an opportunity to be heard before passing an order to transfer the cases under Section 5A of the Act.

Test yourself

Q1.Under Section 5A of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, which entity is empowered to file for a transfer of pending applications?

Q2.To which body does an asset reconstruction company apply to consolidate cases under Section 5A of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002?

Q3.What is a mandatory requirement before the Appellate Tribunal passes a transfer order under Section 5A of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002?

Q4.Under Section 5A of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, once cases are transferred, how is the recovery certificate executed?

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