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NOTES ON LRAB | CENTRAL REGISTRY | PENALTIES & OFFENSES | MISCELLANEOUS | JAIIB EXAM 2022

FREE JAIIB NOTES ON LRAB TOPICS: CENTRAL REGISTRY | PENALTIES & OFFENSES | MISCELLANEOUS | JAIIB EXAM 2022

Read the Notes on LRAB Central Registry, penalties & offenses & some miscellaneous provisions from the SARFAESI Act, 2022 of LRAB Exam 2022.

This article is important for the candidates who are preparing for the law paper of JAIIB Exam 2022, the prestigious exams for certificates offered by IIBF, especially for the personnel working in banks. In this article, some of the important topics of SARFAESI act from the prescribed syllabus of JAIIB 2022 have been explained. So, go through the article once & you will know what are the key points which you need to remember from the exam point of view.

UNIT 5: CENTRAL REGISTRY

Central Registry

Central government has the power to set up or make the setup of a ‘central registry’ happen by way of notification from the date as may be specified in the notification so that the following transactions can be registered:

  1. Transactions related for securitisation as well as reconstruction of financial assets
  2. Transactions related to creating security interest under the SARFAESI Act,

Under the following acts, certain things and charges are required to be registered:

  • Registration Act, 1908
  • Merchant Shipping Act, 1958
  • Companies Act, 2013
  • Patents Act, 1970
  • Motor Vehicles Act, 1988
  • Designs Act, 2000

REGISTER OF SECURITISATION, RECONSTRUCTION AND SECURITY INTEREST

Transactions: Record of all the transactions shall be maintained at the Central registry at the head office of such central registry for:

  • the transactions relating to Securitisation of Financial Assets
  • the transactions relating to Reconstruction of Financial Assets
  • the transactions relating to Creation of security interests.

Filing of Transactions of Reconstruction, Securitisation and Creation of security Interest

According to the SARFAESI Act, details of transactions of securitizations, reconstructions, and security interests must be filed with the Central Register 30 days after the date of the transaction or creation of the security interest.

Note: Any modification in the recorded transactions are also required to be filled within 30 days of any change.

PENALTIES

Under SARFAESI Act, sections relating to penalties are mentioned below:

  • A charge must be filed in accordance with section 23 of the Act. 
  • Modification of the charge filed is allowed under Section 24, and the satisfaction of the charge must be communicated to the central registrar under Section 25. 
  • If the securitisation or reconstruction company or secured creditor fails to perform any of the duties described above, as per the provisions of this section, the company and the officers in default can be punished with a fine that can be upto Rs. 5,000.00 per day if the default continues.

PENALTIES FOR NON-COMPLIANCE OF RBI’s DIRECTIONS

  • The Reserve Bank of India has the authority to issue directions to the securitization or reconstruction company by virtue of Section 12 or 12A of SARFAESI Act. 
  • These companies may be fined up to Rs. 5,00,000.00 for failing to comply with any of the directions issued by the Reserve Bank of India. 
  • If the offense is continued, an additional fine of Rs. 10,000.00 can also be imposed for every day of the continued default.

OFFENSES

In case people who contravene, or even attempt to contravene, or aid in the contravention of the provisions of the SARFAESI Act or the rules made thereunder, may be punished with imprisonment for up to 1 year, a fine, or both.

COGNISANCE OF OFFENSES

As per the provision of section 30 of the SARFAESI Act, no court shall pronounce a judgment concerning any offense punishable under section 27 (in connection with non-compliance with any of the provisions of sections 23, 24 or 25, or any of the provisions of sections 28 or 29) except upon a written complaint made by an officer of the Central Registry or an officer of the RBI, generally or specially authorized in writing in this behalf by the Central Register or by the RBI, as the case maybe.

It shall be the sole duty of the Metropolitan Magistrate or first-class Judicial Magistrate to take cognizance of the offense under the SARFAESI Act, the Reserve Bank. Such offenses cannot be taken into consideration by any court lower than this one.

Non-Applicability of the Provisions of the SARFAESI Act in Certain Cases

A key objective of the SARFAESI Act is to grant banks and financial institutions the power to enforce security given in exchange for loans and advances without the intervention of a court. Banks and financial institutions are only covered by this Act for securities not in their possession.

Section 31 of the Act provides for the exclusion for securities which can be taken possession of along with some other specific securities to which this Act is not applicable.

  • Lien imposed on goods, money or security by or under the Indian Contract Act, 1872 or the Sale of Goods Act, 1930 or any other applicable law at the time.
  • A pledge of movable property as defined within the definition of Section 172 of the Indian Contract Act, 1872 
  • Security interest created in any vessel which has been defined in Section 3(55) of the Merchant Shipping Act, 1958.
  • Security Created in any aircraft which has been defined in Section 2 of the Aircraft Act 1934.
  • Any conditional sale, hire-purchase or lease or any other contract in which there has been no creation of security Interest.
  • Any rights of an unpaid seller as per the Sale of Goods Act, 1930 under its Section 47.
  • Under Section 60(1) of the Civil Procedure Code, 1908, any property not subject to attachment or sale.
  • A security interest cannot exceed Rs. 1,00,000.00 or any other financial asset that is owed repayment
  • Land that is secured by a security interest
  • In case the amount due amounts to < 20 % of the principal amount and interest thereon.

Civil Court not to have Jurisdiction

DRT and AT have jurisdiction over civil cases but do not have jurisdiction over civil courts as far as SARFAESI as well as under Recovery of Debts Due to Bank and Financial Institutions Act, 1993 have a say on it.

So, these were the main provisions or points which you are required to focus on when you prepare for the SARFAESI Act for the Central registry, penalties & miscellaneous provisions as per the Legal & Regulatory Aspects of Banking 2022 Syllabus for the upcoming JAIIB Exam 2022.

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