Key Changes under Security Interest (Enforcement) (Amendment) Rules 2002

Ministry of Finance (Department of Financial Services) has vide Gazette Notification No 775 has notified amendments to the Security Interest (Enforcement) Rules 2002. The Amended Rules are available here. The key changes made by the Amendment are discussed below:

2016 Amendment of Security Interest (Enforcement) Rules 2002
Rule	Existing Provision	Post Amendment
Rule 3 Sub-Rule 1: (Demand Notice)	The service of demand notice as referred to in sub-section (2) of section 13 of the Act shall be made by delivering or transmitting at the place where the borrower or his agent, empowered to accept the notice or documents on behalf of the borrower, actually and voluntarily resides or carries on business or personally works for gain, by registered post with acknowledgement due, addressed to the borrower or his agent empowered to accept the service or by Speed Post or by courier or by any other means of transmission of documents like fax message or electronic mail service.	(Hand Delivery of the Demand Notice has been included as a new mode of delivery of the Demand Notice.)
New Sub-Rule 5 inserted in Rule 3 (Demand Notice)	(NEWLY INSERTED)	“(5) The demand notice may invite attention of the borrower to provisions of sub-section (8) of section 13 of the Act, in respect of time available to the borrower, to redeem the secured assets.”  (The demand notice must inform the Borrower as to the time available to him for redeeming the mortgaged assest/s as per Section 13(8) of the Principal Act.)
Rule 3A Clause b (Reply to representation to the borrower)	If on examining the representation made or objection raised by the borrower, the secured creditor is satisfied that there is a need to make any changes or modifications in the demand notice, he shall modify the notice accordingly and serve a revised notice or pass such other suitable orders as deemed necessary, within seven days from the date of receipt of the representation or objection.	For the words “seven days”, the words “fifteen days”, shall be substituted. (As per the Amendment 7 days window available for the Secured Creditor to modify the Demand Notice according to the objections of the Borrower, has been increased to 15 days)
Rule 3A Clause c (Reply to representation to the borrower)	If on examining the representation made or objection raised, the Authorized Officer comes to the conclusion that such representation or objection is not acceptable or tenable, he shall communicate within one week of receipt of such representation or objection, the reasons for non-acceptance of the representation or objection, to the borrower.	For the words “one week”, the words “fifteen days”, shall be substituted. (As per the Amendment 7 days window available for the Secured Creditor to reply to the objections of the Borrower, has been increased to 15 days)
Rule 4 (Procedure after issue of notice) After Sub-Rule 2 new Sub-Rules 2A and 2B will be inserted.	(NEWLY INSERTED)	“(2A) The borrower shall be intimated by a notice, enclosing the panchnama drawn in Appendix I and the inventory made in Appendix II. (2B) All notices under these rules may also be served upon the borrower through electronic mode of service, in addition to the modes specified under rule 3.”
Rule 6 (Sale of movable secured assets) Sub-Rule 1 Clause C	Sale of Movable secured assets is done by holding public auction.	Sale of Movable secured assets is done by holding public auction including through e-auction mode. (Thus the amendment has made a clarification that e – auction is a mode of Public Auction envisaged under the Act.)
Rule 6 (Sale of movable secured assets) Sub-Rule 2 after the proviso following proviso shall be inserted	(NEWLY INSERTED)	Provided further that if sale of movable property by any one of the methods specified under sub-rule (1) fails and the sale is required  to be conducted  again,  the authorised  officer  shall serve,  affix and publish notice of sale of not less than fifteen days to the borrower for any subsequent sale.”
Rule 6 (Sale of movable secured assets) Sub-Rule 3	Sale by any methods other than public auction or public tender, shall be on such terms as may be settled between the parties in writing.	For the words “between the parties in writing”, the words “between the secured creditors and the proposed purchaser”, shall be substituted.
Rule 8 (Sale of immovable secured assets) After Sub-Rule 2 new Sub-Rule shall be inserted i.e. Sub-Rule 2A	(NEWLY INSERTED)	“(2A) All notices under these rules may also be served upon the borrower through electronic mode of service, in addition to the modes prescribed under sub-rule (1) and sub-rule (2) of rule 8.”
Rule 8 (Sale of immovable secured assets) Sub-Rule 5 Clause c	Sale of Immovable secured assets is done by holding public auction.	Sale of Immovable secured assets is done by holding public auction including through e-auction mode.
Rule 8 (Sale of immovable secured assets) Sub-Rule 8	Sale by any methods other than public auction or public tender, shall be on such terms as may be settled between the parties in writing.	For the words “between the parties in writing”, the words “between the secured creditor and the proposed purchaser in writing”, shall be substituted.