MCQs on THE SARFESI ACT, 2002 Part -2

Q.1:- In case the secured creditor expects resistance, who can he request to take possession of the assets or documents:

• Assistant Civil Judge or Additional Civil Judge within whose jurisdiction the asset is located
• Principal Junior Civil Judge within whose jurisdiction the asset is located
• Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction the asset is located
• Chief Judicial Magistrate within whose jurisdiction the asset is located

Q.2:- "Securitisation" means acquisition of financial assets by any asset reconstruction company from any originator, whether by raising of funds by such asset reconstruction company from qualified buyers by issue of security receipts representing undivided interest in such.....................

• Current assets
• Financial assets
• Non Performing assets
• None of the above

Q.3:- An asset reconstruction company existing on the commencement of this Act, shall make an application for registration to the RBI before the expiry of from such commencement

• 6 months
• 3 months
• 30 days
• 120 days

Q.4:- In the case of a borrower residing in the State of Jammu and Kashmir , the application under section 17 shall be made to the…………………In that state having jurisdiction over the borrower which shall pass an order on such application

• Central Registrar
• Any Of these
• Court of District Judge
• High Court

Q.5:- The requirement of classification of secured debt as non-performing asset shall not apply to a borrower who has raised funds through issue of ___________

• Bonus Shares
• Debt securities
• Equity shares
• Bonds

Q.6:- As per provision of the SARFAESI act, 2002, which of the following measure are not required to be provided by a securitization company or reconstruction company may, for the purposes of asset reconstruction, having regard to the guidelines framed by the Reserve Bank in this behalf?

• Enforcement of security interest in accordance with the provisions of this Act
• Settlement of dues payable by the borrower
• Taking possession of secured assets in accordance with the provisions of this Act
• None of the above

Q.7:- In continuation to the above case, what are the rights of Reliance Ltd against such cancellation

• Appeal to the Central Government
• No rights
• Appeal to the Appellate tribunal
• None of the above

Q.8:- If ARC is aggrieved by the order of cancellation of certificate of registration by the Reserve Bank, then it may prefer an appeal, within a period of ..................... from the date on which such order of cancellation is communicated to it, to the Central Government (Secretary, Ministry of Finance, and Government of India).

• 60
• 120
• 30
• 90

Q.9:- Which of the following is not a ground for cancellation of certificate of registration granted to an asset reconstruction company by Reserve Bank of India:

• When the ARC has incurred loss for a year
• When the ARC ceases to receive or hold any investment from a qualified buyer
• When the ARC fails to comply with any direction issued by RBI
• When the ARC fails to maintain accounts in accordance with the requirements of any law

Q.10:- The asset reconstruction company shall within 30 days give intimation of such payment or satisfaction in full of the security interest to the---------

• State Government
• Central Registrar
• High Court
• Central Government

Q.11:- If a person contravenes or abates contravention of any provision of this Act or rules, he shall be punishable:

• With imprisonment for a term which may extend to three years or with fine or both
• With imprisonment for a term which may extend to one year or with fine of minimum Rs. 10,000 or both
• With imprisonment for a term which may extend to one year or with fine or both
• With imprisonment for a term which may extend to two years or with fine or both

Q.12:- Who shall be responsible for the control and management of the Central Register:

• Any department authorized by the Central Government
• Reserve Bank of India
• Central Government
• Central Registrar

Q.13:- Who shall be responsible for the control and management of the Central Register:

• Any department authorized by the Central Government
• Reserve Bank of India
• Central Government
• Central Registrar

Q.14:- Taking over the management of business of a borrower by a secured creditor falls under:

• Section 6(1)
• Section 15
• Section 13(4)(b)
• Section 9(a)

Q.15:- What is the time limit for filing an appeal by the asset reconstruction company?

• 60 days
• 45 days
• 15 days
• 30 days

Q.16:- What is the effect when the secured creditor has taken over the management of the borrower

• No Director shall be nominated or appointed by shareholders of borrower company
• No resolution passed in the shareholders meeting shall be given effect without the approval of secured creditor.
• No winding up of the borrower’s company shall lie in any court except with the consent of secured creditor
• All of the above

Q.17:- Any penalty imposed under section 30A shall be payable within a period of --

• 15 days
• 60 days
• 30 days
• 45 days

Q.18:- What happens when the Debt Recovery Tribunal does not dispose of the case under Section 17 within the prescribed time limit:

• Any party to the application may make application to Debt Recovery Appellate Tribunal and the Appellate Tribunal may make an order for expeditious disposal
• Only the creditor may make an application to Debt Recovery Appellate Tribunal and the Appellate Tribunal may make an order for expeditious disposal
• The Appellate Tribunal make take such cases on its own motion and may make an order for expeditious disposal
• Such cases stand transferred to the Appellate Tribunal

Q.19:- Bajaj Finance Ltd has raised a loan of Rs 10 lakhs and has defaulted in payment of Rs 5000 on the due date. Written notice has been given to Bajaj Finance Ltd demanding the payment of his liability in full within 60 days. Is the account of Bajaj Finance Ltd classified as NPA ?

• No Debts are classified as NPA only if they exceed 10,000
• No debts are classified as NPA only if they exceed 1,00,000
• Yes even a debt of Rs 1 outstanding is classified as NPA
• None of the above

Q.20:- Oberoi Hotels Private Ltd. is an asset reconstruction company. This company has failed to comply with any direction issued by the RBI under the provisions of this Act. What action will RBI take now?

• Cancellation of certificate
• No Action
• Suspension of certificate
• None of the above

Q.21:- Any person aggrieved, by any order made by the Debts Recovery Tribunal under section 17, may prefer an appeal along with such fee, as may be prescribed to the Appellate Tribunal with in days from the date of receipt of the order of Debts Recovery Tribunal

• 90
• 60
• 30
• 45

Q.22:- An ARC registered with RBI to carry on the business of asset reconstruction are deemed to be which can invite any number of qualified institutional buyers to subscribe its debentures, bonds etc.

• Bank
• Public Financial Institution
• Non-Banking Financial Corporation
• Merchant Banker

Q.23:- Under the provision of SARFAESI Act 2002, where a transaction of securitization is registered

• Registrar of Central Registry
• Registrar of Firms
• Registrar of Assurances
• Registrar of Companies

Q.24:- Subject to the provisions of the Insolvency and Bankruptcy Code, 2016, 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, secured creditor can enforce the security interest only if secured creditors representing not less than percent in value of the amount outstanding as on a record date and such action shall be binding on all the secured creditors.

• 40
• 30
• 60
• 26

Q.25:- What is the time limit within which the secured creditor can initiate an action for enforcement of security:

• If the liability is not discharged within 45 days of receipt of notice from the secured creditor
• If the liability is not discharged within 30 days of receipt of notice from the secured creditor
• If the liability is not discharged within 60 days of receipt of notice from the secured creditor
• If the liability is not discharged within 90 days of receipt of notice from the secured creditor

Q.26:- What is the time limit within which Chief Metropolitan Magistrate or District Magistrate shall pass an order after receipt of the affidavit from the authorized officer of the secured creditor:

• Within 15 days of receipt of application and within such further period not exceeding in aggregate 30 days
• Within 60 days of receipt of application and within such further period not exceeding 120 days
• Within 45 days of receipt of application and within such further period not exceeding 90 days
• Within 30 days of receipt of application and within such further period not exceeding in aggregate 60 days

Q.27:- Which of the following is not the Pre-conditions for enforcement of security interest

• There is no mandatory requirement for borrower liability to a secured creditor to be under a security agreement
• Notice in writing is issued to the borrower to discharge its liabilities in full within 60days from the date of notice
• There should be a default in repayment of secured debt
• The account in respect of such debt is classified as NPA

Q.28:- What is the consequence where it is found that statement on oath made by the person is false in material particulars?

• Personally liable to the Reserve Bank
• Imprisonment
• Fine
• None of the above

Q.29:- Which all measures an ARC can take for the purpose of asset reconstruction?

• Sale or lease of a part or whole of business of borrower
• Waiver of dues payable by borrower
• Proper Management of Business of borrower
• All of the above

Q.30:- In the event of non-realization of financial assets, the qualified buyers of an asset reconstruction companies, holding security receipts of not less than ______ shall be entitled to call a meeting of all the qualified institutional buyers and every resolution passed in such meeting shall be binding on company.

• Seventy percent of the total value of the security receipts issued by such company,
• Seventy-five percent of the total value of the security receipts issued by such company,
• Sixty-five percent of the total value of the security receipts issued by such company,
• fifty percent of the total value of the security receipts issued by such company

Q.31:- An acquisition of financial assets by any asset reconstruction company from any originator, whether by raising of funds by such asset reconstruction company from qualified buyers by issue of security receipts representing undivided interest in such financial assets or otherwise is:

• Amalgamation
• Reconstruction
• Asset Acquisition
• Securitization

Q.32:- The scheme for the purpose of offering security receipts or raising funds may be in the nature of a __________ to be managed by the asset reconstruction company:

• Trust
• Deposit
• Exchange or barter
• Investment

Q.33:- The Reserve Bank may, for the purpose of considering to grant its approval for the application for registration of an ARC 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 ARC, or otherwise, that the following conditions are fulfilled,namely

• that the directors of ARC have adequate professional experience in matters related to finance, securitisation and reconstruction;
• that any of its directors has not been convicted of any offence involving moral turpitude;
• that the ARC has not incurred losses in any of the three preceding financial years;
• All of the above

Q.34:- As per provision of the SARFAESI act, 2002, which of the following measure are required to be provided by a securitization company or reconstruction company may, for the Purpose of asset reconstruction, having regard to the guidelines framed by the Reserve Bank in this behalf?

• The proper management of the business of the borrower, by change in, or take over of, the management of the business or the borrower
• The sale or lease of a part or whole of the business of the borrower
• Rescheduling of payment of debts payable by the borrower
• All of the above

Q.35:- Any person aggrieved by any of the measures given in section 13(4) taken by the secured creditor or his authorized officer, may make an application along with such fee, as may be prescribed to the Debts Recovery Tribunal having jurisdiction in the matter within ..................... days from the date on which such measure had been taken.

• 90
• 30
• 45
• 60

Q.36:- Starwood Hotels & Resorts India Private Ltd has defaulted in payment of its debt; ARC has taken action to realize its assets through auction and has incurred expenses related to realization of assets. Can ARC recover the expenses incurred fromborrower on realization of such assets?

• ARC can recover full expense and cost incurred
• ARC can recover 50% of the expenses and cost incurred
• ARC and Borrower can mutually decide
• No ARC has to bear the cost and expenses

Q.37:- The Asset Reconstruction company after acquiring the financial assets shall replace ………… in terms of obligations, terms and conditions

• Special Purpose Vehicle
• Guarantor
• Secured Creditor
• Bank or financial Institution

Q.38:- Section 24, provisions relating to modification of security interest applies whenever

• The terms or conditions of any security interest registered under chapter IV are modified
• The extent or operation of any security interest registered under chapter IV is modified
• None of the above
• Both of the above

Q.39:- A receipt or other security, issued by an asset reconstruction company to any qualified buyer pursuant to a scheme, evidencing purchase or acquisition by the holder thereof, of an undivided right, title or interest in the financial asset involved in securitization;

• Subscription Letter
• Security receipt
• Acquisition Receipt
• Acknowledgement Letter

Q.40:- What if penalty is not paid within the specified period

• Postponement of registration
• Cancellation of registration
• Interest is to be paid with penalty
• None of the above

Q.41:- Sponsor means any person holding not less than _______________ of an asset reconstruction company;

• Thirty percent of the paid-up equity capital
• Twenty percent of the paid-up equity capital
• Five percent of the paid-up equity capital
• Ten percent of the paid-up equity capital

Q.42:- The asset reconstruction company or the secured creditor shall give intimation to the Central Registrar of the payment or satisfaction in full, of any security Within ______ days from the date of such payment or satisfaction:

• 30
• 15
• 90
• 7

Q.43:- Which of the following is not a condition that is considered by the RBI in case of application for registration or carrying on business by an Asset Reconstruction Company (ARC):

• that the directors of ARC have adequate professional experience in matters related to finance, securitisation and re-construction
• That a sponsor of an ARC is a fit and proper person in accordance with the criteria issued by RBI
• that the ARC has not incurred losses in any of the three preceding financial years
• that the directors of ARC have not entered into related party transactions

Q.44:- What is the maximum period allowed to a securitization company for recovery of reconstructed financial asset?

• 6 years
• 5 years
• 4 years
• 3 years

Q.45:- A copy of every notification u/s 31 A proposed to be issued shall be laid in draft before ,while it is in session, for a total period of 30 days

• High Court
• ARC
• Each House Of Parliament
• State government

Q.46:- Before granting a certificate of registration, the RBI shall itself satisfy that…………….

• Such company has not incurred losses in any of 3 preceding financial years
• that such company has complied with or is in a position to comply with prudential norms specified by the RBI
• That no director of such company has been convicted of any offence involving moral turpitude
• All of the Above

Q.47:- In what cases are the provisions of the Act not applicable?

• Any security interest for securing repayment ofany financial asset not exceeding Rs. 1 Lakh
• Any rights of unpaid seller u/s 47 of the Sale of Goods Act,1930
• Any security interest createdin agricultural land
• All of the above

Q.48:- Which of the following does not require a public notice in newspaper

• Demand Notice to the borrower
• Sale of Movable property by the secured creditor
• Both (a) and (b).
• Sale of immovable Property by the secured creditor

Q.49:- "Financial assistance" means:

• means any loan or advance granted
• any debentures or bonds subscribed or any guarantees given
• letters of credit established or any other credit facility extended
• Any of the above

Q.50:- A person in default aggrieved by an order of Adjudicating authority imposing penalty may within a period of 30 days from the date on which such order is passed prefer an appeal to the-------------

• Appellate Authority
• Central Government
• High court
• Tribunal