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Section 10: Other functions of asset reconstruction company

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 • Official Statutory Text & Practice Guide

Statutory Regulation
Legal Standard
Competent Court / Tribunal
Act 2002
Section 9 All 42 Sections of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 Section 11

Legal Commentary & Landmark Judgments: Section 10

Section 10 of the SARFAESI Act, 2002 enumerates the ancillary statutory functions permissible for Asset Reconstruction Companies, including acting as recovery agent, court-appointed receiver, or manager of secured assets, subject to strict RBI regulation.

  • Permissible Ancillary Functions: Acting as an agent for any bank or financial institution for recovery of dues, acting as a receiver if appointed by court or DRT, or acting as manager under Section 13(4)(c).
  • Statutory Prohibition on Unrelated Business: Under Section 10(2), an ARC is strictly prohibited from commencing or carrying on any business other than securitisation or asset reconstruction without prior written approval of the RBI.
  • Fiduciary Standard of Administration: When acting as a receiver or manager, the ARC discharges fiduciary duties subject to the supervisory oversight of the appointing tribunal or civil court.
Key Landmark Precedents:
  • Authorized Officer, Indian Overseas Bank v. Ashok Saw Mill (2009) 8 SCC 366: The Supreme Court held that all actions taken by secured creditors and their agents under Section 13(4) or ancillary provisions remain subject to the comprehensive judicial review of the DRT under Section 17.
  • Standard Chartered Bank v. Dharminder Bhohi (2013) 15 SCC 341: The Supreme Court held that the DRT is a statutory creature whose powers are circumscribed by the statute; ARCs acting as recovery agents or receivers under Section 10 are strictly bound by statutory mandates and RBI prudential directions.
Courtroom Practice & Strategic Litigation Guidance:

Where an ARC attempts to conduct collateral commercial operations or assume management outside core securitisation, demand production of specific RBI approval under Section 10(2); challenge any unauthorized extra-statutory operations before the DRT.

Section 9 All 42 Sections of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 Section 11