The Apex Court in a recent pronouncement has been pleased to uphold the right of transfer of loan without seeking consent of the borrower as also the discussed effect of Amalgamation of a company on a loan account.
Banking – Assign/ Transfer of loan - Right to transfer /assign assets to any person without seeking consent of the borrower - There is a force in the contention that the debt with underlying securities is the asset of IBFSL and that IBFSL had right to transfer/assign its assets to any person without seeking consent of the borrower - Such transfer/assignment is recognized .
SARFAESI - Appellant was an assignee of a debt through the amalgamation of original lender with the appellant which was effected invoking the statutory provisions of the Companies Act. Loan was given by I which was not a financial institution covered by the SARFAESI Act when the loan was given. This entity got merged with the appellant and which is a SARFAESI company.
Loan was given by I which was not a financial institution covered by the SARFAESI Act when the loan was given. This entity has got merged with the appellant and which is a SARFAESI company. On sanction of the scheme of amalgamation, all loans, recoveries, security, interest, financial documents, etc. in favour of I got transferred to and stood vested in the appellant including the loans given by I to respondent borrowers, debts recoverable by I from respondent borrowers in favour of I, security documents executed by respondent borrowers in favour of I, etc. On the sanctioning of the scheme, the respondent borrowers became the borrower of the appellant as if the financial assistance was granted by the appellant to the respondent borrowers.
It has been held that Respondent would be treated as ‘borrower’ within the meaning of Section 2(1)(f) of the SARFAESI Act; the arrangement would be classified as ‘security arrangement’ under Section 2(1) (zb); the agreements created ‘security interest’ under Section 2(1) (zf); and the appellant became ‘secured creditor’ within the meaning of Section 2(1)(zd) of SARFAESI Act – SARFAESI.