The process of acquisition under Section 5 of SARFAESI Act, 2002 is independent of Section 13(4) read with Rule 8(5) of the Security Interest (Enforcement) Rules, 2002 – G. R. Associates and Ors. Vs. Reserve Bank of India and Ors. – Calcutta High Court
June 12, 2024
Hon’ble High Court held that:
(i) ‘Financial asset’ is a concept far more comprehensive than ‘secured asset’.
(ii) The entire provisions of Rule 8 pertain to the sale of immovable secured assets and do not have any connection with the assignment of the debt with its ancillaries, which forms the financial asset.
(iii) Clause (a) of Rule 8(5) of the Security Interest (Enforcement) Rules, 2002 provides, as a method of transfer, obtaining quotations from “the persons dealing with similar secured assets or otherwise interested in buying such assets”. The persons spoken of therein are not necessarily restricted to ARCs, who are specifically equipped to undertake recovery proceedings in lieu of the Bank upon acquisition of financial assets, but the clause hints at persons who deal with assets similar to the secured assets which come up for transfer and/or who are otherwise interested in buying such encumbered/unencumbered assets.
(iv) An acquisition under Section 5 by ARC of the financial assets stands on a different paradigm than a much lesser transfer under Section 13(4), read with Rule 8(5).
