Question: Consider the following statement:
- SARFAESI Act allows banks and other financial institution to auction residential or commercial properties (of Defaulter) to recover loans.
- The Supreme Court of India pronounced its judgement that cooperative banks shall be placed under SARFAESI Act.
Choose the correct one:
(a) Only(1)
(b) Only(2)
(c) Both (1) and (2)
(d) None of the above
Answer:(c)
Related facts:
Context:
- On May 05, 2020, The Supreme Court of India pronounced its judgement that cooperative banks shall be placed under SARFAESI Act.
- The Supreme Court brought cooperative banks under a stringent 2002 law that empowers lenders to seize and sell defaulters’ assets, in a boost for these institutions that play a vital role in financial inclusion across India.
Major Highlights
- According to the judgement, cooperative banks come under the category of banks as defined under Section 2(1)(c) of the Sarfaesi Act, and the recovery procedures mentioned under that law apply to cooperative banks as well.
- The bench, also upheld the legislative power of the Parliament to bring cooperative banks under the ambit of Sarfaesi Act.
- The bench also effectively upheld a 28 January 2003 notification issued under the Banking Regulation Act, 1949, that brought cooperative banks within the class of “banks” under the Act.
- Sarfaesi Act allows secured creditors to take possession of the assets of a borrower who fails to pay dues within 60 days of demanding repayment.
- The judgement also stated that cooperative banks were bound by the provisions of the Banking Regulation Act, 1949, and all the other legislation applicable to banks under the RBI Act.
Sarfaesi Act, 2002:
- The Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (also known as the SARFAESI Act) is an Indian law.
- It allows banks and other financial institution to auction residential or commercial properties (of Defaulter) to recover loans.