1. The SARFAESI Act, 2002 is NOT applicable to loans where the outstanding balance is less than:
?10 Lakh
?1 Lakh
20% of the principal and interest
Both A and C
Explanation:
Section 31 of the SARFAESI Act excludes loans where the amount due is less than ?1 Lakh OR where the remaining debt is less than 20% of the original principal and interest.
2. Lok Adalats are effective for recovering dues in NPA accounts up to a ceiling of:
?1 Crore
?50 Lakh
?20 Lakh
?10 Lakh
Explanation:
Lok Adalats provide a low-cost, faster resolution mechanism for smaller loans. The monetary ceiling for cases to be referred to Lok Adalat is ?20 Lakh.
3. According to RBI guidelines, Debt Recovery Agents (DRAs) must complete a training course and obtain certification from:
Police Department.
SEBI.
IIBF (Indian Institute of Banking & Finance).
The Bank employing them.
Explanation:
To ensure ethical behavior and knowledge of regulations, RBI mandates that all recovery agents must undergo 100 hours of training and pass the DRA examination conducted by IIBF.
4. Under Section 13(4) of the SARFAESI Act, 2002, which of the following actions can a secured creditor take without court intervention?
Sell the borrower's agricultural land.
Arrest the borrower.
Attach the borrower's salary.
Take possession of the secured assets.
Explanation:
Section 13(4) empowers the bank to take possession of the secured assets, take over management, or appoint a person to manage the assets if the borrower fails to pay within 60 days of the demand notice.
5. An appeal against the order of the Recovery Officer in a DRT lies with:
High Court
Presiding Officer of the DRT
Debt Recovery Appellate Tribunal (DRAT)
District Court
Explanation:
Under Section 30 of the RDDBFI Act, an appeal against the order of the Recovery Officer lies with the Presiding Officer of the DRT itself, not directly to the DRAT.
6. An award passed by the Lok Adalat is:
Valid only for 6 months.
Final and binding on all parties, and no appeal lies to any court against it.
Recommendatory in nature.
Appealable in the High Court.
Explanation:
Under the Legal Services Authorities Act, the award of a Lok Adalat is deemed to be a decree of a civil court and is final. Since it is based on compromise/agreement, no appeal is allowed.
7. Does the SARFAESI Act apply to Agricultural Land?
Yes, if the land is used for commercial farming.
Yes, always.
Yes, if the loan is above ?10 Lakh.
No, Section 31(i) specifically exempts agricultural land.
Explanation:
To protect farmers, the SARFAESI Act explicitly excludes "any security interest created in agricultural land" from its purview. Banks must use civil courts or DRT for recovery in such cases.
8. Asset Reconstruction Companies (ARCs) acquire NPAs from banks by issuing:
Debentures
Security Receipts (SRs)
Equity Shares
Commercial Paper
Explanation:
ARCs pay banks a portion in cash (e.g., 15%) and the balance in the form of Security Receipts (SRs), which represent an undivided right/interest in the acquired asset.
9. Under the Security Interest (Enforcement) Rules, 2002, before selling an immovable secured asset, the Authorized Officer must serve a notice of _____ to the borrower.
60 Days
15 Days
90 Days
30 Days
Explanation:
The Sale Notice of 30 days is mandatory. If the sale fails and a subsequent sale is conducted, the notice period is reduced to 15 days.
10. Registration of security interest (mortgage/hypothecation) with CERSAI must be done within ___ days of creation of the charge.
60 Days
30 Days
45 Days
15 Days
Explanation:
Banks must file details of security interest with the Central Registry (CERSAI) within 30 days to ensure public record and priority of charge.
11. Which Debt Recovery Tribunal (DRT) has the jurisdiction to entertain an application for recovery of debt?
Only where the Bank's Head Office is located.
Either A or B.
Only where the cause of action arises.
Only where the Defendant resides or carries on business.
Explanation:
Under the RDDBFI Act, a bank can file an application in the DRT within whose jurisdiction the defendant resides/works OR where the cause of action arises wholly or in part.
12. Civil Courts have jurisdiction to entertain matters related to SARFAESI Act enforcement actions:
No, Civil Court jurisdiction is barred under Section 34 of the SARFAESI Act.
Yes, if the amount is small.
Yes, always.
Yes, if the borrower requests.
Explanation:
To prevent delays, the Act specifically bars Civil Courts from issuing injunctions on matters that the DRT/DRAT is empowered to determine.
13. If a settlement is reached in a Lok Adalat, the court fee paid by the plaintiff (bank) is:
Shared by both parties.
Transferred to the judge.
Refunded to the bank.
Forfeited.
Explanation:
To encourage compromise, the Legal Services Authorities Act provides that if a case is settled in Lok Adalat, the court fee originally paid is refunded to the plaintiff.
14. When an ARC acquires a financial asset from a bank, it must pay a minimum of ____ of the acquisition price in cash upfront.
Explanation:
As per RBI guidelines, ARCs must pay at least 15% of the agreed price in cash, and the remaining 85% can be in Security Receipts (SRs).
15. To file an appeal in the Debt Recovery Appellate Tribunal (DRAT) against a DRT order, the borrower must pre-deposit what percentage of the debt due?
25% of the amount of debt due.
75% of the amount of debt due.
10% of the amount of debt due.
50% of the amount of debt due (reducible to 25% by DRAT).
Explanation:
Section 21 of the RDDBFI Act mandates a pre-deposit of 50% of the amount of debt due as determined by the DRT. The Chairperson of DRAT has the discretion to reduce this amount, but not below 25%. This ensures that appeals are not used merely to delay recovery.
16. Under Section 13(8) of the SARFAESI Act, the borrower has the right to redeem the secured asset by paying the entire dues:
Anytime within 1 year of possession.
Even after the sale is confirmed.
Only within 30 days of the demand notice.
At any time before the sale is concluded (publication of auction notice).
Explanation:
Amendments to the Act state that the right of redemption is available to the borrower only till the date of publication of the auction notice or public notice for sale/transfer.
17. An award made by a Lok Adalat is deemed to be a decree of:
A Civil Court
The Supreme Court
The High Court
A Criminal Court
Explanation:
Every award of the Lok Adalat shall be deemed to be a decree of a Civil Court. It is final and binding, and executed directly as a decree.
18. Registration of security interest (like mortgage) with CERSAI is mandatory within ___ days of creation.
Explanation:
Under the SARFAESI Act, details of securitisation, asset reconstruction, or creation of security interest must be filed with the Central Registry (CERSAI) within 30 days.
19. Section 34 of the SARFAESI Act bars the jurisdiction of:
Civil Courts.
Debt Recovery Tribunal (DRT).
High Courts.
Supreme Court.
Explanation:
Section 34 ensures that Civil Courts cannot entertain any suit or proceeding in respect of any matter which a DRT or DRAT is empowered to determine, preventing delays in recovery.