Yes Bank invokes SARFAESI Act, takes possession of Reliance Group Headquarter and another property in Mumbai

Fresh troubles for Anil Ambani erupted recently, as the private sector lender Yes Bank took possession of the Reliance Centre, the headquarters of Anil Dhirubhai Ambani Group (ADAG) in Mumbai, for non-payment of pending dues amounting to INR 2,892 Crore. The office building is spread over a 21,432.28 square metre plot in Santacruz. 

Apart from this, the bank also took possession of a property of the group situated at Veer Nariman Road in Mumbai. The possession of the properties took place under the provisions of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act.

Demand Notice

The private lender said it had issued a demand notice on May 6, 2020, to Reliance Infrastructure Ltd. under the provisions of SARFAESI Act to repay the dues within 60 days, which the latter failed to comply with and accordingly, the possession of the properties was taken over by Yes Bank. 

The possession of the properties took place on July 22 under the SARFAESI Act.

Enforcement Directorate

In March 2020, Anil Ambani had told Enforcement Directorate (ED) officials that his group, i.e. ADAG’s entire exposure to the private lender, Yes Bank, is fully secured and is in compliance with the applicable law and financial regulations. He also said that the group neither has any direct or indirect exposure to Rana Kapoor, his wife, or his daughters, nor is it exposed to any entities controlled by them.

Headquarters of ADAG

The Anil Ambani group had acquired the headquarters of ADAG in Santacruz —situated on a 21,432-square metre plot, which was a legacy of Reliance’s acquisition of BSES two decades ago. BSES was rechristened Reliance Energy and subsequently repositioned as Reliance Infrastructure, which currently owns the property.

The private sector lender has been working to speed up recoveries of bad loans through various measures, including invocation of pledged shares. Yes Bank has substantial loans due from the Anil Ambani group, to which it had an exposure of close to Rs 12,000 crore.

SARFAESI Act, 2002

• SARFAESI Act is an Indian law that allows banks and other financial institutions to auction residential or commercial properties (of Defaulter) to recover loans, without recourse to the courts.
• It provides a time-bound recovery of debts by the banks.
• This law allowed the creation of asset reconstruction companies (ARC) and allowed banks to sell their non-performing assets to ARCs. Banks are allowed to take possession of the collateral property and sell it without the intervention of a court.
• The law, however, does not apply to the unsecured loans, loans below ₹100,000 or where remaining debt is below 25% of the original principal and the interest is due.