13.
Enforcement of security interest.-
(1) Notwithstanding anything contained in section
69 or section 69A of the Transfer of Property
Act, 1882 (4 of 1882), any security interest
created in favour of any secured creditor may
be enforced, without the intervention of the
court or tribunal, by such creditor in accordance
with the provisions of this Act.
(2) Where any borrower, who
is under a liability to a secured creditor under
a security agreement, makes any default in repayment
of secured debt or any instalment thereof, and
his account in respect of such debt is classified
by the secured creditor as non-performing asset,
then, the secured creditor may require the borrower
by notice in writing to discharge in full his
liabilities to the secured creditor within sixty
days from the date of notice failing which the
secured creditor shall be entitled to exercise
all or any of the rights under sub-section (4).
(3) The notice referred to
in sub-section (2) shall give details of the
amount payable by the borrower and the secured
assets intended to be enforced by the secured
creditor in the event of non-payment of secured
debts by the borrower.
(4) In case the borrower fails
to discharge his liability in full within the
period specified in sub-section (2), the secured
creditor may take recourse to one or more of
the following measures to recover his secured
debt, namely:-
(a) take possession of the
secured assets of the borrower including the
right to transfer by way of lease, assignment
or sale for realising the secured asset;
(b) take over the management
of the secured assets of the borrower including
the right to transfer by way of lease, assignment
or sale and realise the secured asset;
(c) appoint any person (hereafter
referred to as the manager), to manage the secured
assets the possession of which has been taken
over by the secured creditor;
(d) require at any time by
notice in writing, any person who has acquired
any of the secured assets from the borrower
and from whom any money is due or may become
due to the borrower, to pay the secured creditor,
so much of the money as is sufficient to pay
the secured debt.
(5) Any payment made by any
person referred to in clause (d) of sub-section
(4) to the secured creditor shall give such
person a valid discharge as if he has made payment
to the borrower.
(6) Any transfer of secured
asset after taking possession thereof or take
over of management under sub-section (4), by
the secured creditor or by the manager on behalf
of the secured creditor shall vest in the transferee
all rights in, or in relation to, the secured
asset transferred as if the transfer had been
made by the owner of such secured asset.
(7) Where any action has been
taken against a borrower under the provisions
of sub-section (4), all costs, charges and expenses
which, in the opinion of the secured creditor,
have been properly incurred by him or any expenses
incidental thereto, shall be recoverable from
the borrower and the money which is received
by the secured creditor shall, in the absence
of any contract to the contrary, be held by
him in trust, to be applied, firstly, in payment
of such costs, charges and expenses and secondly,
in discharge of the dues of the secured creditor
and the residue of the money so received shall
be paid to the person entitled thereto in accordance
with his rights and interests.
(8) If the dues of the secured
creditor together with all costs, charges and
expenses incurred by him are tendered to the
secured creditor at any time before the date
fixed for sale or transfer, the secured asset
shall not be sold or transferred by the secured
creditor, and no further step shall be taken
by him for transfer or sale of that secured
asset.
(9) In the case of financing
of a financial asset by more than one secured
creditors or joint financing of a financial
asset by secured creditors, no secured creditor
shall be entitled to exercise any or all of
the rights conferred on him under or pursuant
to sub-section (4) unless exercise of such right
is agreed upon by the secured creditors representing
not less than three-fourth in value of the amount
outstanding as on a record date and such action
shall be binding on all the secured creditors:
Provided that in the case
of a company in liquidation, the amount realised
from the sale of secured assets shall be distributed
in accordance with the provisions of section
529A of the Companies Act, 1956 (1 of 1956):
Provided further that in the
case of a company being wound up on or after
the commencement of this Act, the secured creditor
of such company, who opts to realise his security
instead of relinquishing his security and proving
his debt under proviso to sub-section (1) of
section 529 of the Companies Act, 1956 (1 of
1956), may retain the sale proceeds of his secured
assets after depositing the workmen$s dues with
the liquidator in accordance with the provisions
of section 529A of that Act:
Provided also that the liquidator
referred to in the second proviso shall intimate
the secured creditors the workmen$s dues in
accordance with the provisions of section 529A
of the Companies Act, 1956 (1 of 1956) and in
case such workmen$s dues cannot be ascertained,
the liquidator shall intimate the estimated
amount of workmen$s dues under that section
to the secured creditor and in such case the
secured creditor may retain the sale proceeds
of the secured assets after depositing the amount
of such estimated dues with the liquidator:
Provided also that in case
the secured creditor deposits the estimated
amount of workmen$s dues, such creditor shall
be liable to pay the balance of the workmen$s
dues or entitled to receive the excess amount,
if any, deposited by the secured creditor with
the liquidator:
Provided also that the secured
creditor shall furnish an undertaking to the
liquidator to pay the balance of the workmen$s
dues, if any.
Explanation.-For the purposes
of this sub-section,-
(a) record date means the
date agreed upon by the secured creditors representing
not less than three-fourth in value of the amount
outstanding on such date;
(b) amount outstanding shall
include principal, interest and any other dues
payable by the borrower to the secured creditor
in respect of secured asset as per the books
of account of the secured creditor.
(10) Where dues of the secured
creditor are not fully satisfied with the sale
proceeds of the secured assets, the secured
creditor may file an application in the form
and manner as may be prescribed to the Debts
Recovery Tribunal having jurisdiction or a competent
court, as the case may be, for recovery of the
balance amount from the borrower.
(11) Without prejudice to
the rights conferred on the secured creditor
under or by this section the secured creditor
shall be entitled to proceed against the guarantors
or sell the pledged assets without first taking
any of the measures specified in clauses (a)
to (d) of sub-section (4) in relation to the
secured assets under this Act.
(12) The rights of a secured
creditor under this Act may be exercised by
one or more of his officers authorised in this
behalf in such manner as may be prescribed.
(13) No borrower shall, after
receipt of notice referred to in sub-section
(2), transfer by way of sale, lease or otherwise
(other than in the ordinary course of his business)
any of his secured assets referred to in the
notice, without prior written consent of the
secured creditor.
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