Banking Related Laws

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Presentation Transcript Presentation Transcript


Slide 2 : The Law related to Banks SARFAESI Act 2002 Banking Ombudsman Scheme 2006 DRT Act 1993 Bankers Book of evidence Act 1891 Legal Services Authorities Act 1987 Consumer Protection Act 1987 Law of Limitation Tax related laws

SARFAESI ACT 2002 : SARFAESI ACT 2002 Applicable to Whole Country including J & K Effective w.e.f. 21 June 2002 Constitutional valid after Supreme Court decision Act also applicable to other financial companies like housing finance etc. Applies to cases in which security interests are created Securitization Company Asset Reconstruction Company

Slide 4 : DRT & ADRT: Setup by Govt of India as per provision of Recovery of Debt due to Bank and Financial Institution Act 1993 SEBI: As per SEBI act 1992 CERSAI: Central Registry set up by Govt of India Default : Non payment of the dues by the borrower NPA: Default or irregularity for more than 90 days Hypothecation: Charge on Moveable assets as per Securitization act (First Time definition) Property: IP, MP, Any debt, Receivables, Intangible assets QIB: Qualifying Institutional Buyer

Slide 5 : Security Agreement : Agreement for creation of security interest in favour of Secured Creditor Secured Asset: On which security interest is created Secured Creditor: A Bank or financial institution whose favour security interest is created Secured Debt: A Debt which secured by any SI Security Interest: A right created in favour of Secured Creditor Security Receipt: A receipt or another security issued by SC or ARC to QIB. Sponsor: An entity not less than 10% holding

Slide 6 : Registration of Securitisation company is must with RBI Owned fund minimum Rs. 2 Crore and Capital Min 15% of the financial assets required or Rs. 100 Cr. Whichever is less The Co can formulate separate schemes for aquasition of financial assets Can Create separate trust for each scheme Can act as trustees Risk of non realisation will not impact entire company

Slide 7 : Cancellation of registration can be done by RBI if Co ceases business or fails to comply RBI direction with or without consent.

Slide 8 : Acquisition of Rights of interest in financial assets is in two parts 1. Acquisition of financial assets and undivided interest therein 2. Issue of security receipts in favour of investor for the purpose of raising money

Slide 9 : Documents involve in securitization transaction Offer Document: Full detail of financial assets, loan, trustees etc. Debenture: For payment of consideration, as per RBI guidelines intt on Debenture can not be less than 1.5% above Bank rate An Agreement: With originator Security Receipt: In favour of investor

Slide 10 : Notice to Obligor in optional including ROC if borrower is company. If notice is given than ROC also to be informed In case notice is given and obligor make the payment to concerned securitization company, such payment will be treated as valid discharge If notice is not given, payment received by Bank or financial institution shall be handed over to securitization company

Slide 11 : Certain other points for securitization Only QIB can buy these security Each financial assets should have separate scheme Scheme wise and assets wise account should be maintained In case of non realization and repayment, 75% of investor can pass a resolution which is binding to concerned securitization company The fund raised or assets acquired shall be held in trust for investor Registration is not required as per registration act 1908 except in case of transfer of security receipt

Slide 12 : Other functions of securitization or reconstruction company Can act as an agent for any Bank or financial institution for recovery Can act as Manager for secured assets for which possession is taken Can act as receiver if appointed by court Or any other business with prior approval of RBI Any dispute is required to be settled by conciliation or arbitration as provided in the arbitration Act 1996 RBI can change any policy to above company.

Slide 13 : Enforcement of Security Interest As per SARFAESI act, secured creditor can enforce the security without intervention of court and has an overriding effect on provisions related to Transfer of Property act 1882 Under section 13(2) of the act, a 60 days notice is to be served to the borrower to pay the amount with interest The notice should be in complete detail of loan, interest, NPA etc.

Slide 14 : The Borrower can make any representation or raised any objection, Section 13(3A) added to the act If borrower does not pay, secured creditor can take the possession, takeover the management, appoint any person as manager to manage the security Secured creditor can than sell the asset after giving 30 Days notice to the borrower.

Slide 15 : Before selling of the property, certain other precaution like, Inventory, Valuation, Insurance, Publication of possession notice in two newspaper, Reserve price etc has to be taken care. Sale proceeds will first adjusted towards costs, charges and expenses etc. and than towards due of secured creditor. Surplus if any will be paid to the borrower

Slide 16 : If borrower pays the dues before sale of assets, secured creditor can not take further action like sale etc If borrower is company under winding up process, than the dues payable to the workmen will get priority under section 529 and 529 A of companies act 19956 (Now 2013) this is only exception in the act Under SARFAESI act, the right of secured creditor may be exercise by authorized officer of Scale IV and above of PSU Bank

Slide 17 : After receiving notice under section 13(2) of the act, borrower can not transfer the secured asset. The authorized officer is authorized to issue sale certificate to purchaser and it should be stamped as per relevant state law For taking possession, help of Chief Metropolitan Magistrate or district magistrate can be taken by sending request in writing

Slide 18 : In case takeover of the management, it must follow the procedure as per act and also ensure companies act 1956 (Now 2013) in case of company No compensation is payable to directors for loss of the office in case of takeover of management, however any recovery from borrower can be recovered

Slide 19 : Borrower can file an appeal to DRT along with fee within 45 days from the date of action initiated under SARFAESI DRT has to dispose of the application in accordance to DRT act 1993 as soon as possible but within 60 days or record the reason for delay. Any person can file the appeal against DRT to DRAT along with fee and within 30 days from DRT order. As per amendment, now person has to deposit 50 % of amount passed by DRT unless DRAT waive this amount or reduce it

Slide 20 : Central Registry Govt of India has set up Central Registrar for recording of transaction related to Securitization and reconstruction of financial assets and creation of security interest under SARFAESI act This registration is in addition to registration required by different act i.e. Registration Act 1908, Companies Act 1956 now 2013), Merchant Shipping act 1958, Patent Act 1970, Designs Act 2000 and Motor Vehicle Act 1988

Slide 21 : The Central Registry has the process of Creation of security interest, Modification of Security interest and satisfaction of security interest. The entry in Central registry is require payment of fee and it has to be recorded within 30 days from creation or modification of security interest. Delay for more than 30 days can be condoned by another 30 days on payment of additional fee not more than ten times of the prescribed fee

Slide 22 : The software of Central Registry has already been developed by TCS and presently is in force. The central registry is also open for inspection by any person by payment of fees Banks and financial institution can also take search from Central Registry for their use by payment of Fees

Slide 23 : Offences and Penalties Section 23 of the Act provides filling of particulars for creation of charge, section 24 for modification of charge and section 25 for satisfaction of charge, non compliance of this section is punishable with fine of Rs 5000/- per day for default Section 12 of SARFAESI act also provide that non compliance of RBI direction is punishable with fine up to Rs. 5 Lakh or additional up to Rs 10000/- per day

Slide 24 : Section 30 of the act provides that cognizance of the offence under SARFAESI shall be taken by the Metropolitan Magistrate of First Class only, no court below rank than this can take cognizance of such offence

Slide 25 : Miscellaneous Provisions The act SARFAESI is not applicable to the following type of loans or security as per section 31 of the act 1. A lien under Indian Contract Act 1872 or Sale of Goods act 1930 2. A pledge of movable asset as per section 172 of Indian Contract Act 1872 On Vessel as per section 3(55) of merchant shipping act 1958

Slide 26 : On Aircraft as per section 2 of aircraft act 1934 On Conditional sale , hire purchase or lease without security interest Unpaid rights under section 47 of the sale of Goods act 1930 On property not liable to attach Any loan up to Rs. 1.00 Lahk Any agriculture Land If dues is less than 20 % of the principal amount

Slide 27 : The act also provide the protection to authorized officer Civil court do not have any jurisdiction to entertain any suit or proceeding, however High court and supreme court are exempted as per article 226 and 227 of constitution Law of limitation is applicable to SARFAESI, i.e. action has to be initiated within 3 year from cause The act is also having overriding effect on other law.

Slide 28 : The Banking Ombudsman Scheme 2006 The scheme was introduced to resolve complaints relating to banking services The scheme is applicable to whole of India The ombudsman is appointed by RBI in the rank of GM or CGM for a period of 3 year RBI shall specify the territorial limits to the ombudsment

Slide 29 : Definition of different terms Award: Award as passed by Ombudsmen Appellate Authority: Dy Governor of RBI Auth. Representative: Authorized person on behalf on complainant Ombudsmen: A person appointed by RBI Bank: Banking Company Compliant: Representation in writing Settlement: Agreement by parties by conciliation or mediation

Slide 30 : Complaint can be filed on any type of deficiency in service, i.e. cheque pmt or delay, non accepting of notes and coins, remittance, DD, Guarantee claim, transactions, export related, NRI account, A/C opening and closing, Charges in account, Pension, Taxes, or any other matter. Loan related complaint can also be filed on Interest and charges, delay in sanction, rejection without reason or violation of any other RBI direction

Slide 31 : A Complaint can be filed by complainant or through authorized representative in writing dully signed with full detail of the case to ombudsman to whom branch or office of the bank is located in case of credit card, it should be lodge to the ombudsman within whose jurisdiction billing address on complainant is located

Slide 32 : It should be ensure that complainant has written to the bank before ombudsman and either not received any reply or not satisfy with the reply of bank. Complaint can be file within one year from cause Ombudsman can call any information as required related to the matter Ombudsman should attempt for a settlement

Slide 33 : If settlement attempt fails, ombudsman can pass an award He can not give any direction in award for amount exceeding Rs. 10 Lakh or loss to to complainant which ever is lower. In loss to complainant, He can consider the other expenses including harassment and metal anguish The bank has to accept the award within one month form date of receipt or file an appeal

Slide 34 : Ombudsman can also reject the complaint if filed frivolous, vexatious, Mala fide, without sufficient cause etc. Both the parties can file an appeal to Dy Governor of RBI which is fully empower to dismiss the appeal or modify the award or even pass any other order Banks has to display the salient features of the schemes for the common knowledge of the public

Slide 35 : Recovery of Debts due to Banks and Financial institution Act (DRT Act) 1993 The Act was passed and came into operation w.e.f . 24.06.1993, the act is also constitute the special Debt Recovery Tribunals

Slide 36 : The validity of this act was challenged in Delhi High Court and the court decided the act was unconstitutional but Supreme court decided that act was constitutional The Act is applicable to whole country except J & K and applicable for debt due to Bank or any financial institution when debt is above Rs. 10.00 Lakh, however Govt of India may reduce this amount to Rs. 1.00 Lakh

Slide 37 : The DRT is made up of only one person called presiding officer The PO should have qualified to be appointed as a District Judge The term of PO is for Five year or until he attain age of 62 Year Apart from PO, the DRT is also have one or more Recovery Officer and other staff as needed

Slide 38 : DRAT is headed by Chairperson who should be qualified to be a judge of High Court, has been a member of legal service or has held office as presiding officer of DRT for at least three year The appointment is for five year or until he attains the age of 65 Years, whichever is earlier PO or CP can resign by giving 3 month notice

Slide 39 : From date of establishment the tribunal no court have any jurisdiction, power or authority to deal within any way recovery cases above Rs. 10 Lakh, however this is not applicable to High Court and supreme court. However order passed by civil court after DRT act but before establishment of DRT will remain valid

Slide 40 : The procedure of DRT is same as of any other court as to file application along with fees payable, any other Bank or financial institution may join the applicant before passing of final order After scrutiny, statement, hearing, affidavit and other paper work DRT may issue interim order DRT may also appoint recovery officer and issue recovery certificate

Slide 41 : Any party can appeal to DRAT, however if order was made with consent of the parties, appeal can not be filed Appeal can be filed within 45 days from order and after depositing 50% of amount shown in the order passed by DRT There is no provision of further appeal, however writ jurisdiction of high court under article 226 and special leave petition before the supreme court is not barred Limitation act is applicable for filling to DRT

Slide 42 : Any correction in recovery certificate issued by PO must be submit within 60 days from date of issuance Po may give some time for depositing of amount even after issuance of Recovery certificate during this time RO may not initiate the action or if appeal is filed with DRAT and order is modified by DRAT than also it should act accordingly

Slide 43 : Certain provisions are linked with the Income tax act 1961 hence recovery under this act is at par with income tax arrears An appeal can be filed to DRT against the order passed by RO within 30 days and DRT may confirmed the order or set aside Cases pending with civil courts are to be transferred to DRT after establishment of DRT even if decree has been issued in favour of Bank the execution or issuance of recovery certificate will be dealt by DRT

Slide 44 : The PO, chairperson of DRAT and other officers are deemed to be public servant and are having protection of action taken in good faith DRT act is having overriding effect when there is inconsistency with any other law or act like companies act etc. Doctrine of election

Slide 45 : The banker’s books evidence act, 1891 This act was enacted to amend the law of evidence with respect to bankers book The act is extends to whole country except state of J & K Bankers book includes Ledgers, Day book, Cash book, Accounts Book etc

Slide 46 : If record are maintained in electronic form than print out of data along with certificate from principal accountant or Manager is required Also a certificate by a person in charge of computer system regarding various safeguards adopted in the system In addition to above another certificate from computer in charge that system is operated properly

Slide 47 : No officer of the bank shall be called as witness to prove the matter, transaction and accounts recorded in the certified copies However court may order otherwise for special cause Court may also order on application to inspect the books for any of the purposes of the proceeding

Slide 48 : The legal services authorities act 1987, Lok Adalat The act was applicable to whole country except state of J&K This act for compromise and settlement of dispute between parties The monetary ceiling of amount which can be settled under this mechanism is Rs. 20.00 Lakh

Slide 49 : The award of Lok Adalat shall be deemed to be a decree of civil court or any other court Every award shall be binding on all parties to the dispute No appeal shall lie to any court against the award In case of settlement, court fee shall be refunded

Slide 50 : The consumer Protection Act 1986 The act was enacted for better protection of the interests of the consumers and to provide speedy and simple redressal to consumer disputes The Act is applicable to whole country except in the state of J & K The act apply to all goods and services The act is not overriding on any other law and provide additional means.

Slide 51 : Consumer Protection Councils Central Consumer Council is headed by Minister in Charge of consumer affair of Govt Of India and other official as required The council shall meet as and when necessary but at least once in a year The council shall protect different rights of consumers and to create awareness on above issues

Slide 52 : State consumer council shall be in every state and headed by Minister in Charge of the consumer affair in the state Govt and other official and non official members Other official and non official members by Central Govt official not more than ten The council shall meet as and when necessary but at least twice in a year

Slide 53 : District Consumer Protection Council is for every district and shall be headed by District Collector and other official and non official members as decided by state Govt This should also meet as and when necessary but at least twice in a year

Slide 54 : Consumer Dispute Redressal Agencies For this purpose various Agencies established by state and central Govt District Forum: established by State Govt at each district and can more than one for any district State Commission: Established by State Govt for each state National Commission: Established By Central Govt.

Slide 55 : District Forum shall be presided by a person who shall be qualified to be a district judge Two other members, one shall be women with Minimum age of 35 Year, with bachelor degree and with experience of ten year in economics, law, commerce, accountancy, industry etc The appointment shall be for five year or up to the age of 65 year whichever is earlier

Slide 56 : The appointment for district forum has to be made by State Govt by selection committee of following person President of State Commission (in absent, Chief Justice of High Court may nominate any sitting Judge) shall be chairman of committee and secretary, law department along with secretary in charge of consumer affair department shall be members

Slide 57 : District Forum will entertain complaint within local jurisdiction i.e. on the basis of residence, work, business, office or branch or the cause of action entire or in part arises Subject to other provision of the act, district forum can entertain complaint where value of goods or services and the compensation does not exceed Rs. 20.00 Lakh Any person can file the complaint related deficiency in goods or services

Slide 58 : The District Forum will have to sent copy of complaint to opposite party within 21 days from admission of complaint and the opposite party is required to submit their reply within 30 days or extended within 45 days from date of notice The forum has to follow the similar procedure as applicable to civil court and at deemed to be judicial proceeding as per section 193 and 228 of IPC

Slide 59 : If Forum is satisfied after hearing all parties, it can pass any order for payment, replacement and compensation etc. The forum should have President and at least one member at every proceeding Any party can file an appeal against the District forum to State commission within 30 days from date of order, if order is for any payment that appeal can be filed only after 50% of amount or Rs. 25000/- whichever is less

Slide 60 : State commission shall have president, who is or has been judge of high court Not less than two members with qualification same as applicable to district forum, however not more than 50% members shall be from judicial background Selection committee will also have the same composition as applicable to district forum Every members shall have a term of five year or up to the age of 67 year whichever is earlier

Slide 61 : The state commission shall entertain complaint where value exceed Rs. 20.00 Lakh but does not exceed Rs. 1.00 Crore and appeal against order of District Forum and within jurisdiction or with permission of Commission The state commission can also transfer any proceeding at any stage from one district forum to another on the application or its own Normally appeal should be dispose off within 90 days from its admission or commission has to give reason for delay

Slide 62 : Any party aggrieved by the order passed by the State commission may prefer to file an appeal to the national commission within 30 days from order National commission may condone the delay, however if the order of state commission involves payment of any amount than appeal can be filed only after depositing 50% of amount ordered or Rs. 35000/- whichever is less

Slide 63 : National Commission shall have president who is or has been judge of Supreme court Commission should have not less than four members, one shall be women with qualification same as applicable to District Forum or State commission, however not more than 50% members shall be from judicial background Every member shall have a term of five year or up to the age of 70 year

Slide 64 : The selection committee for National Commission shall have chairman who is Judge of Supreme court as nominated by CJI and Secretary in the department of legal affair, Govt of India along with the secretary of Department of Consumer affair of Govt of India The national commission should have the decision by unanimous or by majority

Slide 65 : The National Commission shall entertain the complaint where claims exceed Rs. 1.00 Crore or appeal against the order of State commission The commission can also transfer the cases at any stage from one district forum of any district to another district of same state or even another state or from one State commission to another State Commission on application or its own

Slide 66 : An appeal can be filed against the order of National Commission to Supreme Court within 30 days from the order as per section 21 of the act Supreme court may condone the delay, however if order involves payment of any amount than the appeal can be filed only after depositing 50% of amount of order or Rs. 50000/- whichever is less Every order of District Forum, State Commission or National Commission is final if no appeal is preferred

Slide 67 : The complaint before any agencies has to be file within two year from the date of cause, however delay may condone by such agencies if satisfy The orders from agencies are enforcement nature and non compliance can leads to attachment of property and even certificate can be issued to District Collector for recovery as land revenue Agencies can dismiss any complaint if it is frivolous or vexatious nature and also impose fine not exceeding Rs. 10000/- to the complainant

Slide 68 : Non Compliance of order by District Forum, State Commission or National Commission is punishable offence with imprisonment for the term from 1 month to three year and fine of Rs. 2000 to Rs. 10000/- or both Trail of offence under this act is deemed as and conferred with powers of First Class Judicial magistrate No personal suit or legal proceeding can lie against the members of any District Forum, State Commission or National Commission

Slide 69 : The Law of Limitation The Limitation Act 1963 has significant application to Banks and financial institutions The action under various acts are to be initiated and permissible if initiated within limitation period If limitation period expires on a day when it is court is closed, it should be initiated on the day when court reopen

Slide 70 : Fresh Limitation will start if an acknowledgement of liability has been made in writing signed by the party or Where payment of a debt or interest is made before expiration of prescribed period by the person liable to pay the debt Normal limitation of a debt is Three year from the date of loan documents or debt of any nature or Promissory note or Bill of Exchange etc

Slide 71 : For performance of specific Contract and Mortgagee for force closure are having limitation period of Twelve year from the respective date The enforcement of payment of money secured by mortgage, possession of IP, the limitation period is Thirty Year The limitation is also Thirty year in case of any suit for which no period of limitation is provided elsewhere in schedule

Slide 72 : Tax Laws Income Tax Act 1961 Fringe Benefit tax BCTT Service Tax & Cenvat Credit

Slide 73 : Income Tax Act is having various definition and those applicable to Bankers i.e. Assessee and Assessment year and financial year Residential and non residential status Different heads of income i.e. Salary, Property, Gain from Business, Capital gain and Any other source Quoting of PAN or form 60/61, payment of TDR above Rs. 20000/- and CTR

Slide 74 : Payment of Taxes to made in advance by self assessment as under By June 15, 15% By September 15, 30% By December 15, 60% By March 15, 100% of advance tax The various heads where TDS is applicable as we are making such payments are as under

Slide 75 : Salaries-Section 192 Interest on Securities-Section 193 Pmt of Intt, other than Sec- Section 194A Pmt to contractor- Section 194C Pmt of Brok & Comm- section 194H Pmt of Rent- Section 194I Pmt of Prf & Tech Fee- Section 194J Pmt to NRI- Section 195

Slide 76 : Non compliance will attract penalty, Interest and other provisions including recovery of tax from the person responsible for deduction of tax per Act Fringe Benefit Tax was introduced by Finance act 2005 and applicable with prev FY (AY 2006-07) The tax is applicable to the benefits provided by the employer to the employees which was shown as expenses

Slide 77 : Banking cash transaction tax was levied on cash withdrawal in single day on various type of account @ 0.1% This tax however was discontinued w.e.f. 2009 Service tax was introduced by Finance act 1994, Banking and financial services were included to pay service tax w.e.f. 16.07.2001 A person can also avail Cenvat Credit on input services provided by the employer Tax rate and services and exemption declared by Govt of India in annual Budget………

Slide 78 : Thank You

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