Answer: Banks and Financial Institutions are entitled to assign a loan account to asset reconstruction company without issuing any notice to the borrower.

Answer: The assignment of a loan account by banks and financial institutions to asset reconstruction company is their internal affair and a borrower is not entitled to raise any objection to such assignment.

Answer: A borrower cannot challenge in Court or Tribunal the assignment of a loan account by banks and financial institution to asset reconstruction company. Even if a borrower files a case in Court or Tribunal against such assignment, the chance of success is almost nil, unless there are exceptional facts and circumstances. 

In the case of Veena Textiles Versus Authorised Officer, IFCI, reported in (2015)1 Banking Cases page 73, the property was situated in Tamilnadu, but the Assignment Deed was registered in Kolkata. In this case, Madras High Court held that the Assignment Deed was void. 

Answer: The reason is that it is almost impossible for a borrower to prove that he is prejudicially affected by assignment of a loan account by banks and financial institutions to asset reconstruction company. The effect of such assignment is that the asset reconstruction company steps into the shoes of bank and financial institutions and the borrower has to repay the loan to asset reconstruction company instead of banks and financial institutions. All the terms and conditions of the loan affecting the borrower remain the same.

In the case of ICICI Bank limited –versus- APS Star Industries Ltd. reported in (2010)10 Supreme Court Cases page 1( This was a case of assignment by one bank to another bank), Supreme Court held as follows :

“an outstanding in the account of a borrower (customer) is a debt due and payable by the borrower(s) to the ban Secondly, the bank is the owner of such debt. Such debt is an asset in the hands of the bank as a secured creditor or mortgagee or hypothecatee. The bank can always transfer its asset. Such transfer in no manner affects right or interest of the borrower(s) (customer).”

Answer : Asset Re-construction Company may acquire the debts of any Bank or Financial Institution.

According to Section 5(1) of Sarfaesi Act, 2002. Financial assets means debts and other receivables, whether secured or unsecured. See Section 2(1)(l) of Sarfaesi Act,2002 

 After any Asset Reconstruction Company acquires Financial Asset of any Bank or Financial Institution, who will be treated as the lender. ? What will be the rights of asset reconstruction company after it is treated as a lender? 

Answer : After Asset Reconstruction Company acquires Financial Asset of any Bank or Financial Institution, the Asset Reconstruction Company will be treated as the lender and not the original Bank or Financial Institution. After Asset Reconstruction Company is treated as the lender, all the rights of such Bank or Financial Institution shall vest in the Asset Reconstruction Company in respect to the Financial Asset, that is, the loan account. Section 5(2) of Sarfaesi Act, 2002

Answer: It is not necessary for the asset reconstruction company to enter into fresh loan and other agreements with the borrower or guarantors.

Answer : The assets reconstruction company may take necessary measures for the rescheduling the payments of debts payable by the borrower. Section 9(1) of Sarfaesi Act, 2002

Answer : The assets reconstruction company may take necessary measures for the enforcement of security interest created by the borrower in accordance with the provisions of Sarfaesi Act,2002. Section 9(1) of Sarfaesi Act, 2002

Answer : The assets reconstruction company may take necessary measures for the settlement of the dues payable by the borrower. Section 9(1) of Sarfaesi Act, 2002