MCQs on THE SARFESI ACT, 2002 Part -5

Q.1:- As per the provision of SARFAESI act, 2002, the any borrower residing in the State of Jammu and Kashmir and aggrieved by any order made by the Court of District Judge under Section 17A may prefer an appeal, to:

• Supreme court
• DRAT
• The High Court having jurisdiction over such Court
• DRT

Q.2:- 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.

• Chief Metropolitan Magistrate of Jammu and Kashmir
• Supreme Court
• Court of District Judge
• High Court of Jammu & Kashmir

Q.3:- Can an asset reconstruction company act as a manager

• No
• With the Permission from Central Government
• Yes
• With the Permission from Reserve bank

Q.4:- In which of the following cases, the constitutional validity of the SARFAESI Act 2002 was questioned before Supreme Court:

• Mardia Chemicals vs ICICI Bank
• Mardia Chemicals vs Union of India dc.
• Manchester Chemicals vs Union of India
• Manchester Chemicals vs ICICI bank

Q.5:- As per the provision of section 15 of the SARFAESI act, 2002 If the secured creditor takes over the management of the company, then, do the shareholders have the right to appoint their director in the company:

• NO
• The DRT's approval should be taken
• Yes
• Yes, but approval should be taken

Q.6:- _________is a person that is liable to the originator under the provisions of the SARFAESI Act.

• Drawer
• Obligor
• Obligee
• Drawee

Q.7:- The Reserve Bank may cancel a certificate of registration granted to an asset reconstruction companies, if such company-

• Ceases to carry on the business of securitization or asset reconstruction; or
• Ceases to receive or hold any investment from a qualified institutional buyer; or
• Has failed to comply with any conditions subject to which certificate of registration has been granted to it;
• All of the above

Q.8:- When a secured creditor takes over the management of business of a borrower, he may appoint:

• The liquidator who shall take over the liquidation proceedings
• As many persons as it thinks fit to be the registered valuers of the business of that Borrower
• As many persons as it thinks fit to be the directors/administrators of the business of that borrower, as the case may be
• The auditors of the business of that borrower

Q.9:- What happens to the director in case of loss of his office or pre mature termination under this act by the secured creditor:

• He shall be entitled to compensation as per the amount prescribed by the Court
• He shall not be entitled to any compensation at all in any case
• He shall be entitled to compensation as per the contract of management between him and the borrower
• He shall not be entitled to any compensation except with the previous permission of the secured creditor

Q.10:- The particulars of securitization or reconstruction or security interest entered in the Central Register of such transactions kept under section 22 shall be open during the business hours for inspection by any person…………………of such fee as may be prescribed.

• 75% payment
• Without payment
• on full payment
• None of the above

Q.11:- If the borrower fails to discharge his liability in full within the above specified period, the secured creditor may take recourse to one or more of the following measures to recover his secured debt:

• take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realizing the secured asset
• appoint any person (hereafter referred to as the manager), to manage the secured assets the possession of which has been taken over by the secured creditor
• take over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realizing the secured asset
• Any of the above

Q.12:- When does an asset become non performing:

• When the instalments and/or interest is not paid for a period exceeding 60 days
• When the instalments and/or interest is not paid for a period exceeding 120 days
• When the instalments and/or interest is not paid for a period exceeding 180 days
• When the instalments and/or interest is not paid for a period exceeding 90 days

Q.13:- What is the stamp duty to be paid in respect of any document executed by any bank or financial institution for issuing a debenture or bond:

• It shall be exempted from stamp duty
• One rupee for every Rs. 1000 or part thereof
• It depends from State to State
• One rupee for every Rs. 100 or part thereof

Q.14:- Under the provision of SARFAESI Act 2002, where a transaction of securitization is registered

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

Q.15:- The SARFAESI Act, applies to

• Any case in which the amount due is less than 20%of the principal amount and interest thereon
• Any security interest for securing repayment of any financial asset exceeding Rs 1,00,
• Creation of any security in any aircraft as per the Aircraft Act 1934
• A lien on goods, money or security given under Indian Contract Act 1872 or Saleof Goods Act 1930

Q.16:- Does SARFAESI, 2002 apply in the following situations?

• Creation of any security in any aircraft as defined in clause (1) of section 2 of the Aircraft Act,1934
• A pledge of movables within the meaning of section 172 of the Indian ContractAct,1872
• Does not apply
• Apply

Q.17:- Under the provision of SARFAESI Act 2002, what is meant by enforcement of security interest:

• Sale of charged assets by the secured creditor through DRT
• Sale of assets of the borrowing party by the bank
• Getting bank's charge registered with Central Registry
• Sale of charged assets by the secured creditor without court intervention

Q.18:- Notwithstanding anything contained in any other law for the time being in force, after the registration of security interest, the debts due to any secured creditor shall be paid ______________

• In priority over all other debts and all revenues, taxes, cesses and other rates payable to the Central Government
• In priority over all other debts and all revenues, taxes, cesses and other rates payable to the State Government.
• In priority over all other debts and all revenues, taxes, cesses and other rates payable to the local authority.
• All of the above

Q.19:- Such a company can commence or carry on the business of securitisation or asset reconstruction only after obtaining a certificate of registration granted under this section and having the net owned fund of not less than ..................... or such other higher amount as the Reserve Bank, may, by notification, specify

• 30 crores
• 100 crores
• 1 Crore
• 30 lakhs

Q.20:- As per provision of the SARFAESI act, the certificate of registration stands cancelled, if:

• Ceases to carry on business
• Ceases to receive or hold arty investment from a qualified buyer
• Fails to comply with the condition
• All of the above

Q.21:- In case a borrower resides in Jammu & Kashmir, with whom shall an application be filed:

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

Q.22:- At the time of take over the bad loans from 3 banks it is found that these banks have filed suits in different DRTs. Securitization company wants to get these cases in one DRT, which can be permitted by:

• Supreme Court
• DRAT
• High Court
• Central Govt.

Q.23:- Reliance ltd is a securitization and reconstruction company as per provisions of SARFAESI, 2002. The certificate of registration was cancelled. State the authority which can cancel

• District Judge
• High Court
• RBI
• Central Registry

Q.24:- In which case, the constitutional validity of the SARFAESI Act, 2002 was declared by Supreme Court?

• Mardia Chemicals v/s Union of India The SARFAESI Act, 2002 255
• Amar Singh v/s Union of India
• Devi Ispat Limited v/s State Bank of India
• Standards Chartered Bank v/s Dharminder Bhihi

Q.25:- Who shall settle disputes relating to securitization or reconstruction or non-payment of any amount due including interest?

• Conciliation or arbitration under the Arbitration and Conciliation Act, 1996
• The Reserve Bank of India under the Banking Regulation Act 1949
• None of the above
• All of the above

Q.26:- 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 A

Q.27:- Which of the following is not a secured creditor:

• Any bank or financial institution or any consortium or group of banks or financial institutions holding any right, title or interest upon any tangible asset or intangible asset
• Any person who has pledged movables within the meaning of Section 172 of the Indian Contract Act, 1872
• Debenture trustee appointed by any bank or financial institution
• Asset reconstruction company whether acting as such or managing a trust set up by such asset reconstruction company for the securitisation or reconstruction, as the case may be

Q.28:- Which of the following does not fall under financial asset:

• Prepaid expenses undertaken with respect to a movable or immovable property
• A mortgage, charge, hypothecation or pledge of movable property
• Any right or interest in the security, whether full or part underlying such debt or receivables
• Any financial assistance

Q.29:- Managing director or any other director or a manager or any person in charge of management of the business of the borrower to any compensation for the loss of office or for the premature termination under The Securitization And Reconstruction of Financial assets and Enforcement of Security Interest Act, 2002:

• shall not be entitled
• shall be entitled
• None of the above
• maybe or may not be

Q.30:- Central Registry of Securitization Asset Reconstruction and Security Interest of India is a --------------with Government of India having a shareholding of 51% by the Central Government and select public sector banks and the national housing bank also being shareholders of the company

• Charitable trust under section 8 of the Companies Act,2013
• Public Company
• Ministry of Information and Broadcasting
• Government of India Company licensed under section 8 of the Companies Act, 2013

Q.31:- Which of the following statements relating to Chief Metropolitan Magistrate or the District Magistrate assisting the secured creditor in taking possession of the secured asset is false:

• Any act done in pursuance of this shall not be called in question in any court or before any authority
• The requirement of filing affidavit shall apply in all cases, whether any proceeding is pending before them or not, on the date of commencement of the Act
• They may take any steps and use any force as may be necessary in their opinion for securing compliance
• They may authorise any subordinate officer to take possession of such assets and documents

Q.32:- An Asset Reconstruction company Works as

• Gent, manager & obligator
• Principal, manager & receiver
• Agent, manager & receiver
• Manager, receiver & administrator

Q.33:- When does an asset become non-performing?

• When the installments and/or interest is not paid for a period exceeding 90 days
• When the installments and/or interest is not paid for a period exceeding 180 days
• When the installments and/or interest is not paid for a period exceeding 60 days
• When the installments and/or interest is not paid for a period exceeding 120 days

Q.34:- One of the following ground is not the criteria for cancellation of Registration Certificate of ARC

• Has failed to comply with the conditions specified by RBI
• has incurred loss in the preceding financial year
• Fails to maintain the accounts in accordance with the requirement of the Act
• Ceases to carry on the business of securitization or asset reconstruction Company

Q.35:- An asset is sold by the secured creditor, what would be the order for the appropriation of proceeds:

• first towards costs and dues to the secured on prorate basis
• secondly, if there is surplus towards other person entitled to the asset
• first towards costs, charge incidental towards the preservation of securities
• first towards the dues of the secured creditor

Q.36:- An asset reconstruction company aggrieved by the order of cancellation of certificate of registration may prefer an appeal__________

• Within a period of forty five days from the date on which such order of cancellation is communicated to it, to the Central Government.
• Within a period of thirty days from the date on which such order of cancellation is communicated to it, to the Central Government.
• Within a period of Sixty days from the date on which such order of cancellation is communicated to it, to the Central Government.
• Within a period of ninety days from the date on which such order of cancellation is communicated to it, to the Central Government.