Section 3 (Registration of asset reconstruction companies) under Chapter II (Regulation of securitisation and reconstruction of financial assets of banks and financial institutions) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 —
“(1) No asset reconstruction company shall commence or carry on the business of securitisation or asset reconstruction without—
(a) obtaining a certificate of registration granted under this section; and
(b) having net owned fund of not less than two crore rupees or such other higher amount as the Reserve Bank, may, by notification, specify;
Provided that the Reserve Bank may, by notification, specify different amounts of owned fund for different class or classes of asset reconstruction companies:
Provided further that a asset reconstruction company, existing on the commencement of this Act, shall make an application for registration to the Reserve Bank before the expiry of six months from such commencement and notwithstanding anything contained in this sub-section may continue to carry on the business of securitisation or asset reconstruction until a certificate of registration is granted to it or, as the case may be, rejection of application for registration is communicated to it.
(2) Every asset reconstruction company shall make an application for registration to the Reserve Bank in such form and manner as it may specify.
(3) The Reserve Bank may, for the purpose of considering the application for registration of a asset reconstruction company to commence or carry on the business of securitisation or asset reconstruction, as the case may be, require to be satisfied, by an inspection of records or books of such asset reconstruction company, or otherwise, that the following conditions are fulfilled, namely:—
(a) that the asset reconstruction company has not incurred losses in any of the three preceding financial years;
(b) that such asset reconstruction company has made adequate arrangements for realisation of the financial assets acquired for the purpose of securitisation or asset reconstruction and shall be able to pay periodical returns and redeem on respective due dates on the investments made in the company by the qualified buyers or other persons;
(c) that the directors of asset reconstruction company have adequate professional experience in matters related to finance, securitisation and reconstruction;
(e) that any of its directors has not been convicted of any offence involving moral turpitude;
(f) that a sponsor of an asset reconstruction company is a fit and proper person in accordance with the criteria as may be specified in the guidelines issued by the Reserve Bank for such persons;
(g) that asset reconstruction company has complied with or is in a position to comply with prudential norms specified by the Reserve Bank;
(h) that asset reconstruction company has complied with one or more conditions specified in the guidelines issued by the Reserve Bank for the said purpose.
(4) The Reserve Bank may, after being satisfied that the conditions specified in sub-section (3) are fulfilled, grant a certificate of registration to the asset reconstruction company to commence or carry on business of securitisation or asset reconstruction, subject to such conditions, which it may consider, fit to impose.
(5) The Reserve Bank may reject the application made under sub-section (2) if it is satisfied that the conditions specified in sub-section (3) are not fulfilled:
Provided that before rejecting the application, the applicant shall be given a reasonable opportunity of being heard.
(6) Every asset reconstruction company shall obtain prior approval of the Reserve Bank for any substantial change in its management including appointment of any director on the board of directors of the asset reconstruction company or managing director or chief executive officer thereof or change of location of its registered office or change in its name:
Provided that the decision of the Reserve Bank, whether the change in management of a asset reconstruction company is a substantial change in its management or not, shall be final.
Explanation.—For the purposes of this section, the expression “substantial change in management” means the change in the management by way of transfer of shares or change affecting the sponsorship in in the company by way of transfer of shares or amalgamation or transfer of the business of the company.”
Extra Notes for Readers
(1) Section 3 of SARFAESI Act, 2002 was modified by the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016 (Act 44 of 2016) (w.e.f. 1-Sep-2016).
(2) Section 3 of SARFAESI Act, 2002 was modified by the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2004 (Act 30 of 2004) (w.e.f. 11-Nov-2004).