MCQs on THE SARFESI ACT, 2002 Part -3

Q.1:- An Asset Reconstruction Company may, provide for following measure/s, for the purposes of asset reconstruction

• the proper management of the business of the borrower, by change in, or takeover of, the management of the business of the borrower
• the sale or lease of a part or whole of the business of the borrower
• None of the above
• (a)or(b)

Q.2:- As per provision of the SARFAESI act, 2002, an appeal against the order of DRT shall be made in the DRAT within:

• 30 days
• 45 days
• 60 days
• 90 days

Q.3:- What is the Penalty for non-compliance of directions of Reserve Bank of India:

• Stands Omitted
• A fine extending to Rs 5 lakh
• A fine extending to Rs 1 lakh
• A fine extending to Rs 10 lakh

Q.4:- The RBI may cancel the certificate of registration of any asset reconstruction company, without giving any opportunity being heard, if it is of opinion that the delay in cancelling the certificate of registration shall be prejudicial to the public interest or the interest of the investors of such company.

• High court
• Central Government
• State Government
• Appellate Tribunal

Q.5:- RBI has power to determine policy and issue directions to the ARC in particular or it should be uniform for all the ARC’s

• RBI can issue in public interest to the ARC’s and also to the ARC in particular directions and determine policies
• RBI can issue directions only to particular ARC
• RBI has power to issues such directions only generally, uniformly for the all the ARC’s
• None of the above

Q.6:- Section 16 of the said Act disentitles any director, manager or person in charge of the borrower from-

• Accepting any compensation for premature termination of his contract with the borrower.
• Waiving off any compensation for premature termination of his contract with the borrower.
• Receiving any compensation for premature termination of his contract with the borrower.
• Paying any compensation for premature termination of his contract with the borrower.

Q.7:- If any financial assets, of a borrower acquired by an asset reconstruction company, comprise of secured debts of more than one bank or financial institution for recovery of which such banks or financial institutions has filed applications before two or more Debts Recovery Tribunals, the asset reconstruction company may file an application to ___________ having jurisdiction over any of such Tribunals

• High Court
• Central Government
• Supreme Court
• Appellate Tribunal

Q.8:- As per provision of the SARFAESI act, 2002, Securitization or reconstruction companies are required to take mandatory registration with:

• Central government
• RBI
• Ministry of corporate affairs
• All of the above

Q.9:- In 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 the upon by the secured creditors representing not less than_____in value of the amount outstanding as on a record date and such action shall be binding on allthe secured creditors:

• Two-third
• 0ne Three- fourth
• Three -forth
• None all the above

Q.10:- As per provision of the SARFAESI act, 2002, In case if the borrower resides in the slate of Jammu and Kashmir, the application for recovery shall be filed with:

• High court
• District court in that area
• Supreme court
• DRT in that area

Q.11:- As per provision of the SARFAESI act, 2002, Disputes shall be settled through:

• DRT
• Civil court
• Conciliation or arbitration
• All of the above

Q.12:- In case of Mardia Chemicals cases in the relation of SARFAESI Act 2002, which part was declared as invalid by Supreme Court:

• Pre-condition of deposit of 75% of the amount by the borrower if the bank sells the immovable property and borrower wants to appeal the DRT
• Pre-condition of deposit of 75% of the amount by the borrower before going to the DRT
• The condition of deposit of 75% of amount by the borrower after DRT decision
• Pre-condition of deposit of 75% of the amount by the borrower before going to the DRT

Q.13:- As per the judgement passed in Mardia Chemicals v. UOI, is SARFAESI Act Unconstitutional on grounds that it is heavily in favour of lenders.

• No
• Yes
• The act is regarded as unconstitutional
• The act has been amended in view of the case

Q.14:- The DRT may extend the said period of 60 days, that the total period of pendency of the application shall not exceed ----------

• 60 days
• 4 months
• 1 month
• 90 days

Q.15:- As per provision of the SARFAESI act, 2002, company aggrieved by the order of cancellation of registration shall file an appeal within:

• 60 days
• 45 days
• 90 days
• 30 days

Q.16:- What is the time limit within which appeal against penalties can be made:

• 90 days from the date on which such order was passed
• 120 days from the date on which such order was passed
• 30 days from the date on which such order was passed
• 60 days from the date on which such order was passed

Q.17:- As per Security Interest (enforcement) Rules,2002, on sale of immovable property by the secured creditor, the purchaser shall pay a deposit of the amount of sale price immediately and balance within days of such sale.

• 25%, 15 days
• 35%, 20 days
• 50%, , 30 days
• 15% , 15 days

Q.18:- An asset reconstruction co. shall not commence the business of securitization unless

• It has obtained a certificate of registration
• It has obtained a certificate of registration
• A and B
• A or B

Q.19:- Which court shall try any offence punishable under this Act:

• No Court inferior to that of Metropolitan Magistrate or a Judicial Magistrate of Second Class
• No Court inferior to that of Metropolitan Magistrate or a Judicial Magistrate of First Class
• No Court inferior to that of Principal Junior Civil Judge or a Judicial Magistrate of First Class
• No Court inferior to that of High Court

Q.20:- Which of the following is not a security interest?

• Any security interest for securing repayment of any financial asset exceeding Rs. 1 Lac
• Any security Interest created in agriculture land
• Any case in which the amount due is more than 20% but less than 30% of principal amount and interest thereon
• Any unconditional sale

Q.21:- To whom shall the Central Government delegate its powers and functions in relation to establishment, operations and regulations of the Central Registry?

• Reserve Bank of India
• Ministry of Communications and Information Technology
• Debt Recovery Tribunal
• Ministry of Information and Broadcasting

Q.22:- Any registration of transactions of creation, modification or satisfaction of security interest by a secured creditor or other creditor or filing of attachment orders shall be deemed to constitute a.............from the date and time of filing of particulars of such transaction with Central Registry.

• Ordinary Notice
• Private Notice
• Special Notice
• Public Notice

Q.23:- 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 installment 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..................... 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) of Section 13.

• 90
• 30
• 60
• 120

Q.24:- The SARFAESI act, 2002, applies to which of the following?

• The loan amount is Rs. 10 lakh
• When the loan is uncured
• When the remaining debt is less 20% of the original principal
• All of the above

Q.25:- What is the time period for the validity of notice of caveat:

• 60 days from the date of lodgment
• 30 days from the date of lodgment
• 120 days from the date of lodgment
• 90 days from the date of lodgment

Q.26:- If there are more than one borrower, how should the demand notice be served

• Demand notice must be served only on those borrowers whose borrowing is more than 40% of the debt
• Demand notice must be served on all borrowers
• Demand notice must be served on the person whose name appears first in the list
• Demand notice must be served on any one of the borrowers

Q.27:- Sponsor means---

• Any person holding any amount of the paid up equity capital of an asset reconstruction company
• Any person holding more than 20% of the paid up equity capital of an asset reconstruction company
• Any person holding not less than 10% of the paid up equity capital of an asset reconstruction company
• Any person holding not less than 20% of the paid up equity capital of an asset reconstruction company

Q.28:- No appeal shall be entertained unless the borrower has deposited with the Appellate Tribunal 50% of the amount of debt due from him, as claimed by the -------

• secured creditors or determined by the Debts Recovery Tribunal , whichever is more
• secured creditors or determined by the Debts Recovery Tribunal
• High Court
• Secured creditors or determined by the Debts Recovery Tribunal, whichever is less.

Q.29:- The definition of Bank has been amended to include

• Multi-state Co-operative banks
• Nationalized
• Private banks
• None of the above

Q.30:- Every company functioning as Securitization Company or reconstruction company shall have net owned funds of or % of financial assets, whichever is higher.

• 100 Crores or 15% of financial assets
• 2 Crores or 15% of financial assets
• 100 Crores or 25% of financial assets
• 50 Crores or 10 % of financial assets

Q.31:- The communication of the reasons to the borrower by the secured creditor for not having accepted his representation or objection or the likely action of the secured creditor shall not entitle the borrower to make an application to the--.

• State Government
• Central Government
• Court of District Judge
• ARC

Q.32:- Before which for a can an asset reconstruction company file an application for enforcement of its security interest:

• High Court
• Debt Recovery Tribunal
• District Court
• National Company Law Tribunal

Q.33:- No secured creditor shall be entitled to exercise the rights of enforcement of securities unless the security interest created in its favour by the borrower has been registered with the Central Registry. Statement is

• Incorrect
• Correct
• None of the above
• May be or may not be

Q.34:- Which of the following is not an essential ingredient to initiate action for enforcement of security under this act:

• The security interest must be at least Rs. 20,000
• There must be a default in repayment of secured debt or installment thereof
• The account must be classified as Non-Performing Asset
• There must be a security agreement in which borrower is under liability of the secured creditor

Q.35:- As per SARFAESI Act 2002, definition of financial institution includes:

• The international Finance Corporation established under the International Finance Corporation (Status, Immunities and Privileges Act, 1958
• Any institution specified by the Central Government under sub-clause (ii) of clause (h) section 2 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 ,
• A public financial institution within the meaning of section 4A of the Companies Act
• All of the above

Q.36:- What is the eligibility of an authorized officer appointed by a secured creditor:

• He should not be below Deputy General Manager of a public sector bank or equivalent
• He should not be below Senior Manager of a public sector bank or equivalent
• He should not be below Chief Manager of a public sector bank or equivalent
• He should not be below Assistant Manager of a public sector bank or equivalent

Q.37:- What is the purpose of Central Registry?

• Storehouse of information relating to securitized assets
• Registration of information relating to secured creditors and related borrowers
• Registration of transaction of securitization and reconstruction of financial assets and creation of security interest
• Collection of information related to securitization cases

Q.38:- A record called Central Register shall be kept at the head office of the Central Registry for entering the particulars of the transactions relating to –

• Securitization of the financial assets
• Reconstruction of the financial assets
• Creation of security interest
• All of the above

Q.39:- Which of the following statement with respect to secured creditor taking over the management of the business of the borrower being a company is false:

• No meeting of the shareholders can be held unless approved by the secured creditor
• No resolution passed at any meeting of the shareholders shall be given effect unless approved by the secured creditor
• It shall not be unlawful for the shareholders of such company or any other person to nominate or appoint any person to be a director of the company
• No proceeding for the winding up of such company or appointment of receiver thereof shall lie in any court, except with the consent of the secured creditor

Q.40:- If the registration certificate of the ARC is cancelled, in how many days can it make an application to the Central Government (Ministry of finance)?

• 180 day
• 30 days
• 60 days
• 90 days

Q.41:- Any amount which is received by the secured creditor shall be applied , firstly, in payment of such costs and secondly , in discharge of the dues of the -----------, and if any amount remains after such payments, such amount shall be paid to the borrower

• liquidator
• Unsecured creditor
• Vendor
• Secured creditor

Q.42:- Where the sale of an immovable property, for which a reserve price has been specified, has been postponed for want of a bid of an such reserve price, it shall be lawful for any officer of the secured creditors to bid for the immovable property on behalf of the secured creditor at any subsequent place

• Amount not less than and equal to
• Amount equal to
• Amount not less than
• Amount not more than

Q.43:- What would be the location of the head office of Central Registry?

• Delhi
• Mumbai
• Chennai
• At such place as the Central Government may specify

Q.44:- Does Civil Court have the jurisdiction to grant an injunction in respect of any matter which the Debts recovery Tribunal or the Appellate Tribunal is empowered to determine

• No
• Yes
• Both are Yes
• Both Are Not

Q.45:- SARFAESI Act 2002 does not concern which of the following aspects:

• Authority to enforce without the intervention of the court
• Securitization of Financial Assets
• Reconstruction of Assets
• Setting up of Central Registry

Q.46:- if after sale of secured asset, the dues of the secured creditor are not paid fully, what option does the secured creditor have:

• he can file a suit in a civil court
• he can file a suit in a DRT
• A and B
• He has to write off the same

Q.47:- When the securitization company fails to realize the securitized assets, the qualified institutional buyers holding _____ % of total value of the security receipts can force the securitization company for a particular decision:

• 60%
• 75%
• 50%
• 40%

Q.48:- Any asset reconstruction company registered under section 3 may-

• Act as a receiver, if appointed by any Court or Tribunal.
• Act as an agent for any bank or financial institution for the purpose of recovering their dues.
• A & B
• Not act as an agent/receiver for any bank or financial institution for the purpose of recovering their dues.

Q.49:- To whom are Securitisation company required to report satisfaction of security interest.-

• Central Registrar
• Reserve Bank
• Secured Creditors
• None of the above

Q.50:- Who is the owner of a financial asset which is acquired by a asset reconstruction company?

• Original Owner
• Obligor
• Originator
• None of the above