Angad had taken a business loan of ₹ 70 lakhs from DNF Bank Ltd., secured by his commercial property. His business faced a tough time due to stiff competition and global recession and hence he could not repay his instalm

Section 6 of SARFAESI Act, 2002 states that: the bank or financial institution may, if it considers appropriate, give a notice of acquisition of financial assets by any asset reconstruction company, to the concerned obligor and any other concerned person and to the concerned registering authority including Registrar of Companies in whose jurisdiction the mortgage, charge, hypothecation, assignment or other interest created on the financial assets had been registered. Where a notice of acquisition of financial asset under sub-section (1) is given by a bank or financial institution, the obligor, on receipt of such notice, shall make payment to the concerned asset reconstruction company, as the case may be, and payment made to such company in discharge of any of the obligations in relation to the financial asset specified in the notice shall be a full discharge to the obligor making the payment from all liability in respect of such payment. Where no notice of acquisition of financial asset under sub-section (1) is given by any bank or financial institution, any money or other properties subsequently received by the bank or financial institution, shall constitute monies or properties held in trust for the benefit of and on behalf of the asset reconstruction company, as the case may be, and such bank or financial institution shall hold such payment or property which shall forthwith be made over or delivered to asset reconstruction company, as the case may be, or its agent duly authorised in this behalf. Advice to DNF Bank: In this scenario, DNF Bank Ltd. did not issue any notice to Mr. Angad about the assignment of the debt to Faith Assets Ltd. (ARC). According to Section 6(3) of the SARFAESI Act, 2002, if no notice of acquisition of financial asset is given by the bank, any money or other properties subsequently received by the bank from the obligor (Angad) shall be held in trust for the benefit of and on behalf of the Asset Reconstruction Company (ARC). Therefore, DNF Bank can accept the ₹ 15 lakhs from Angad. However, the bank must accept this money in the capacity of a trustee for Faith Assets Ltd. (ARC). DNF Bank is obligated to forthwith make over or deliver this payment to Faith Assets Ltd. (ARC) or its duly authorised agent.