MCQs on THE SARFESI ACT, 2002 Part -4

Q.1:- Reserve Bank of India may check the condition that the asset reconstruction company has not incurred any loss in the _______ preceding financial years.

• 3
• 2
• 1
• 8

Q.2:- The SARFAESI act, 2002, as amended by enforcement act 2016, which of the following measures can be provided by the assets reconstruction company?

• Enforcement of securities interest in accordance with act
• Rescheduling of the debt payable by the borrower
• Settlement of dues payable by the borrower
• All of the above

Q.3:- As per provision of the SARFAESI act, 2002, how it assets reconstruction company can acquire financial asset?

• By issuing a debenture or bond or any other security in the nature of debenture
• By entering into an agreement
• None of the above
• Both (a) and (b)

Q.4:- What is the time limit within which any person aggrieved by any measure taken by secured creditors file an application to the Debt Recovery Tribunal:

• Within 60 days from the date on which such measure had been taken
• Within 15 days from the date on which such measure had been taken
• Within 45 days from the date on which such measure had been taken
• Within 30 days from the date on which such measure had been taken

Q.5:- In case of a borrower residing in Jammu & Kashmir, which of the following shall be the Appellate Tribunal:

• Court of the Chief Metropolitan Judge having jurisdiction over the secured creditor
• High Court of the State
• Court of District Judge in that State having jurisdiction over the borrower
• Court of District Judge in the State having jurisdiction over the secured creditor

Q.6:- An Injunction granted by the civil court to stop the secured creditor from selling or leasing the secured assets is valid?

• No
• Yes
• Both are No
• Both are Yes

Q.7:- As per provision of the SARFAESI act, 2002, the penalty imposed upon u/s30Aof the SARFAESI act, shall he payable within:

• 30 days of notice demanding payment served upon the person in default
• 60 days of notice demanding payment being served upon the person in fault
• 45 days of passing of order
• 30 days of passing of the other

Q.8:- The debts of Sap labs private Ltd are not fully satisfied even after enforcement of security interest of all secured assets, the secured creditor can file an appeal to which of the following authorities ?

• Debt Recovery Appellate Tribunal
• High court
• Debt Recovery Tribunal
• Any of the above

Q.9:- ARCIL Ltd. is an asset reconstruction company. This company ceased to carry on the business of securitization under the provisions of this Act. What action will RBI take now?

• No action By RBI
• Continue working of that ARC Company
• Cancellation of certificate
• Suspension of certificate

Q.10:- Every asset reconstruction company shall obtain prior approval of RBI for change of location of its registered office

• False
• True
• Partly False
• Partly True

Q.11:- As per provision of the SARFAESI act, 2002,if the assets reconstruction company fails to comply the direction of the reserve bank of India, the RBI imposes penalty on the ARC, to the extent of…….:

• Rs, 1 crore
• Twice the amount involved, in the failure
• Lower amount of a and b
• Higher amount of a and b

Q.12:- An application under Section 5A of the SARFAESI Act for transfer of applications pending before two or more Debt Recovery Tribunals may be filed by an Asset Reconstruction Company before:

• High Court
• Debt Recovery Appellate Tribunal
• Special Court
• National Company Law Appellate Tribunal

Q.13:- Caveat application means that you are requesting any Court that if in case a person files a case in which you have interest, then no order should be passed by the court, without giving a ......................

• Memorandum of Objections
• Summons
• Notice
• None of the above

Q.14:- Section 3(1)(b) of SARFAESI Act provides that the net owned fund of an asset reconstruction company should:

• Not be less than three crore rupees or such higher amount as the Reserve Bank may notify
• Not be less than two crore rupees or such higher amount as the Reserve Bank may notify
• Not be less than four crore rupees or such higher amount as the Reserve Bank may notify
• Not be less than one crore rupees or such higher amount as the Reserve Bank may notify

Q.15:- Who is sponsor in an assets reconstruction company?

• A person holding >10% of the capital
• Promoter
• A person having substantial interest
• All of the above

Q.16:- Who can assist a secured creditor in taking possession of the secured asset?

• District Magistrate
• Chief Metropolitan Magistrate
• either (a) or (b)
• Judicial Magistrate First Class

Q.17:- Which of the following Statement is incorrect with regard to Security Agreement?

• The creation of pledge by deposit of title deeds with the secured creditor
• The creation of mortgage by deposit of title deeds with the secured creditor
• An agreement, instrument under which security interest is created in favour of the secured creditor
• Any other document or arrangement under which security interest is created in favour of the secured creditor

Q.18:- Under the provision of SARAESI Act 2002 a charge on moveable property in favour of secured without delivery of possession to the creditor is called:

• Mortgage
• Lien
• Hypothecation
• Pledge

Q.19:- The management of business of a borrower is taken over by a secured creditor , the secure creditor may appoint as many person as is thinks fit to be the---

• Administrators ,in case the borrower is a company; Directors, of the business of the borrower ,in any other case
• Directors ,in case the borrower is a company; Administrator of the business of the borrower ,in any other case
• Central Registrar ,in case the borrower is a company; Administrator of the business of the borrower ,in any other case
• None of the above

Q.20:- Under section 14,compulsory filing of ------------ by the secured creditor through their authorized officer with the District magistrate to take possession of the secured assets

• Affidavit
• Certificate
• Report
• None of the above

Q.21:- In the process of securitization the non-liquid financial assets (NPA) are converted into marketable securities in the form of:

• Shares
• Security receipts
• Pass through certificates
• debentures

Q.22:- What time period is to be given to the borrower as a notice before sale of the secured asset:

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

Q.23:- Secured creditor means any bank or financial institution or any consortium or group of banks or financial institutions and includes-

• Debenture trustee appointed by any bank or financial institution
• An Asset Reconstruction company
• Debenture trustee registered with the Board appointed by any company for secured debt securities
• All of the above

Q.24:- 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:

• 60
• 30
• 90
• 45

Q.25:- The Reserve Bank may cancel a certificate of registration granted to an ARC, if suchcompany:

• ceases to receive or hold any investment from a qualified buyer
• ceases to carry on the business of securitisation or asset reconstruction
• (a) and(b)
• (a)or(b)

Q.26:- As per the provision of section 15 of the SARFAESI act, 2002, how can the ARC, take over the management of the borrower company?

• By appointing directors in the management of the company
• By converting the debt into equity
• None of the above
• Both (a) and (b)

Q.27:- As per the section 17 of the SARFAESI act, 2002 the party aggrieved by the action of the secured creditor can apply against such measure to recover secured debt to DRT within:

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

Q.28:- Any person aggrieved by any of the measures taken by the secured creditor may appeal to

• The District Tribunal
• The Debts Recovery Tribunal
• The Special Tribunal
• None of the above

Q.29:- As per provision of the SARFAESI act, 2002, the rate of stamp duty on agreement for acquiring financial assets will be:

• Nil
• 1%
• 10%
• 0.01%

Q.30:- As per provision of the SARFAESI act, 2002, in case if the application is pending with the two or more DRTs can the same be transferred to one DRT:

• No
• Only by making application to DRAT
• Yes
• None of the above

Q.31:- What are the penal provisions if the ARC fails to comply with the directions issued by RBI?

• 5000 per day during which the default continues
• 1,00,000
• 10,000 per day during which the default continues
• 5,00,000

Q.32:- Within how many days of the measures taken can an aggrieved party make an appeal-

• Within thirty days from the date on which measures had been taken.
• Within forty-five days from the date on which measures had been taken.
• Within sixty days from the date on which measures had been taken.
• Within forty days from the date on which measures had been taken.

Q.33:- Where any asset reconstruction company or any person fails to comply with any direction issued by the Reserve Bank under The Securitization And Reconstruction of Financial assets and Enforcement of Security Interest Act, 2002 the adjudicating authority may, by an order, impose on such company or person in default, a penalty not exceeding one crore rupees or ..................... the amount involved in such failure where such amount is quantifiable, whichever is more.

• Twice
• Equal
• Thrice
• None of the above

Q.34:- Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 is an Act to ______securitization and reconstruction of financial assets and enforcement of security interest

• Set up
• Wind up
• Regulate
• All of the above

Q.35:- No asset reconstruction company shall commence or carry on the business of securitization or asset reconstruction without-

• Such other amount not exceeding fifteen per cent. of total financial assets acquired or to be acquired by the securitization company or reconstruction company
• Having the owned fund of not less than two crore rupees
• A & B Both
• Only B

Q.36:- High ltd. is an asset reconstruction company, of which certificate of registration was cancelled. Which…………authority can cancel the registration?

• Supreme Court
• RBI
• High court
• Any of the above

Q.37:- Whether any Stamp duty is levied on the transfer of security interest from the Banks/Financial Institution to Asset Reconstruction Company?

• Stamp duty is exempted
• Depends from state to state
• Levied if the amount of transfer exceeds 100 Crore
• Rs. 100 on every Rs 1,00,000 of security interest

Q.38:- Type of registrations which is required by ARC

• Only Registration under RBI
• Registration under Companies Act and RBI
• Can start the business of ARC just by registering with SEBI and issuing securities.
• Only to be formed as Company under Companies Act

Q.39:- On the basis of period for which the asset remained non-performing assets are classified into 3 categories

• Standard, sub- standard and default assets
• Standard, doubtful and irrecoverable Assets
• Sub-standard, doubtful and loss assets
• Standard, doubtful and loss assets

Q.40:- Asset Reconstruction Company means a company registered with Reserve Bank under section 3 for the purposes of carrying on the business of:

• Securitization
• Asset reconstruction
• None of the above
• (a) or (b) or both

Q.41:- SARFAESI Act 2002 does not concern which of the following aspects?

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

Q.42:- Which of the following is not a Public Financial Institution:

• State Financial Corporations
• Life Insurance Corporation of India (LIC)
• Axis Bank Limited
• National Bank for Agriculture & Rural Development (NABARD)

Q.43:- Who shall be responsible for furnishing information on modification and satisfaction of security interest:

• Borrower or secured creditor
• Asset Reconstruction Company or secured creditor
• Only the asset reconstruction company
• Only secured creditor

Q.44:- Before which of the following can an asset reconstruction company file an application for enforcement of its security interest:

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

Q.45:- The particulars of securitization entered in the Central Register shall be open during business hours for inspection by on payment of prescribed fees

• Concerned Bank
• Director
• Central Registrar
• Any Person

Q.46:- What is Principle of Subrogation

• When ARC enforces its interest on the assets
• When ARC acquires financial assets of any bank or financial institution it is deemed as Lender
• When ARC takes over the management of the borrower, it is deemed owner of the company.
• None of the above

Q.47:- What norm has to be followed by a securitisation company regarding owned funds and the acquired financial assets i.e. owned funds as % age of acquired assets

• 15%
• 10%
• 12.5%
• 20%

Q.48:- Where any ARC or any person fails to comply with any direction issued by the RBI under this Act, penalty is imposed---

• Not less than Rs. 1 crore or twice the amount involved in such failure, whichever is more
• Not exceeding Rs. 1 crore or twice the amount involved in such failure, whichever is
• Not exceeding Rs. 1 crore or twice the amount involved in such failure, whichever is more
• Not exceeding Rs. 50 lakh or twice the amount involved in such failure, whichever is more

Q.49:- It must be noted that an ARC, which is holding investments of qualified buyers and whose application for grant of certificate of registration has been rejected or certificate of registration has been cancelled shall, not withstanding such rejection or cancellation be deemed to be an ARC un tilitre pays ..................... investments held by it (together with interest, if any) within such period as specified by the Reserve Bank.

• at least 50% of
• entire
• at least 25% of
• at least 75% of

Q.50:- As per provision of the SARFAESI act, 2002, to initiate an appeal to DRAT a deposit of……… amount of debt by the borrower is required to be deposited:

• 50%
• Nil
• 75%
• 25%