Legal Question in Banking Law in India

25.01.2016

Dear Sir / Madam,

Each and every asset (movable and immovable) is included within the purview of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) An aircraft is a movable asset within the meaning of this Act and is included within the purview of recovery of debts as per this Act.

Regards,

Dear Sir

Section 31 (c) reads as under : - The provisions of this Act shall not apply to -- (c) creation of any security in any aircraft as defined in clause (1) of section 2 of the Aircraft Act, 1934 (24 of 1934);

Thus, Section 31 (c) completely bars the application of SARFAESI Act, over the Security Interest or Charge created over the Air Craft. This means, that the Banks / Financial Institutions cannot enforce the security interest under the SARFAESI Act over the AIRCRAFT.

So you are correct in saying that where the debt is secured against the Aircrafts the provisions of SARFAESI are not applicable.

However, this would not mean that bank or Financial Institutions cannot pursue other remedies available to them under any other law for enforcement of Security Interest.

The Bank / FI can recovery the money as under : -

(1) Bank or FI can file a O.A before the Debt Recovery Tribunal for enforcement of Security Interest by praying for attachment and auction of mortgage movable property and disburse the sale proceeds to the Bank / FI.

Or ;

(2) If the debtor is a Company then Bank / FI can also file proceedings for winding up of the company, and pray for appointment of liquidator to take over all the assets of the Company including aircraft. The liquidator has equal power to sale the movable property and disburse the sale proceeds to the secured creditors. Initial process of winding up is very fast. But auction and disbursement through this channel is very time consuming.

Feel free to contact should you have any questions.

Regards

Vivek N Mapara

www.vnmlaws.com