(1) In this Act, unless the context otherwise requires,—
(a) "Appellate Tribunal" means a Debts Recovery Appellate Tribunal established under sub-section (1) of section 8 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993);
(b) "asset reconstruction" means acquisition by any asset reconstruction company of any right or interest of any bank or financial institution in any financial assistance for the purpose of realisation of such financial assistance;
(ba) "asset reconstruction company" means a company registered with Reserve Bank under section 3 for the purposes of carrying on the business of asset reconstruction or securitisation, or both;
(c) "bank" means—
(i) a banking company; or
(ii) a corresponding new bank; or
(iii) the State Bank of India; or
(iv) a subsidiary bank; or
(iva) a multi-State co-operative bank; or
(v) such other bank which the Central Government may, by notification, specify for the purposes of this Act;
(d) "Board" means the Reserve Bank of India;
(f) "borrower" means any person who has been granted financial assistance by any bank or financial institution or who has given any guarantee or created any mortgage or pledge as security for the financial assistance granted by any bank or financial institution and includes a person who becomes borrower of an asset reconstruction company consequent upon acquisition by it of any rights or interest of any bank or financial institution in relation to such financial assistance;
(ha) "debt" shall have the meaning assigned to it in clause (g) of section 2 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) and includes— (i) unpaid portion of the purchase price of any tangible asset; (ii) any right, title or interest on any intangible asset; (iii) any financial assistance;
(i) "Debts Recovery Tribunal" means the Tribunal established under sub-section (1) of section 3 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993);
(j) "default" means non-payment of any debt or any other amount payable by the borrower to any secured creditor consequent upon which the account of such borrower is classified as a non-performing asset in the books of account of the secured creditor;
(k) "financial assistance" means any loan or advance granted or any debentures or bonds subscribed or guarantees given or letters of credit established or any other credit facility extended by any bank or financial institution;
(l) "financial asset" means debt or receivables and includes— (i) a claim to any debt or receivables or part thereof, whether secured or unsecured; or (ii) any debt or receivables secured by, mortgage of, or charge on, immovable property; or (iii) a mortgage, charge, hypothecation or pledge of movable property; or (iv) any right or interest in the security;
(m) "financial institution" means— (i) a public financial institution within the meaning of section 4A of the Companies Act; (ii) any institution specified by the Central Government; (iii) the International Finance Corporation; (iv) any other institution or non-banking financial company as defined in clause (f) of section 45-I of the Reserve Bank of India Act, 1934;
(n) "hypothecation" means a charge in or upon any movable property, existing or future, created by a borrower in favour of a secured creditor without delivery of possession of the movable property to such creditor, as a security for financial assistance and includes floating charge and crystallised charge;
(o) "non-performing asset" means an asset or account of a borrower which has been classified by a bank or financial institution as sub-standard, doubtful or loss asset—
(a) in case such bank or financial institution is administered or regulated by any authority or body established, constituted or appointed by any law for the time being in force, in accordance with the directions or guidelines relating to assets classifications issued by such authority or body;
(b) in any other case, in accordance with the directions or guidelines relating to assets classifications issued by the Reserve Bank;
(r) "originator" means the owner of a financial asset which is acquired by an asset reconstruction company or securitisation company;
(t) "property" means— (i) immovable property; (ii) movable property; (iii) any debt or any right to receive payment of money, whether secured or unsecured; (iv) receivables, whether existing or future; (v) intangible assets, being know-how, patent, copyright, trademark, licence, franchise or any other business or commercial right of similar nature;
(u) "qualified buyer" means a financial institution, insurance company, bank, state financial corporation, state industrial development corporation, trustee or any asset reconstruction company or foreign institutional investor;
(zc) "secured asset" means the property on which security interest is created;
(zd) "secured creditor" means any bank or financial institution or any consortium or group of banks or financial institutions and includes— (i) debenture trustee appointed by any bank or financial institution; or (ii) asset reconstruction company; or (iii) any other creditor in whose favour security interest is created;
(ze) "secured debt" means a debt which is secured by any security interest;
(zf) "security interest" means right, title or interest of any kind, other than those specified in section 31, upon property created in favour of any secured creditor and includes any mortgage, charge, hypothecation, assignment or any other right, title or interest of any kind upon property created in favour of any secured creditor;
(z) "securitisation" means acquisition of financial assets by any asset reconstruction company from any originator, whether by raising of funds by such asset reconstruction company from qualified buyers by issue of security receipts representing undivided interest in such financial assets or otherwise;
(zg) "security receipt" means a receipt or other security, issued by an asset reconstruction company to any qualified buyer pursuant to a scheme, evidencing the purchase or acquisition by such buyer of an undivided right, title or interest in the financial asset involved in securitisation.
Legal Commentary & Landmark Judgments: Section 2
Section 2 provides the statutory definitions of secured creditor, financial asset, non-performing asset (NPA), and security interest that govern the invocation of SARFAESI powers.
Section 2(1)(zf) defines 'security interest' broadly as any right, title, or interest created in property (mortgage, charge, hypothecation, assignment) securing payment, but excluding pledges and statutory liens under Section 31.
Section 2 establishes the statutory foundation for non-adjudicatory debt enforcement. Proper classification as an NPA under Section 2(1)(o) is the jurisdictional prerequisite without which all subsequent coercive enforcement actions under Section 13 are null and void.