Fair Practice Code

PREAMBLE

International Asset Reconstruction Company Private Limited (“IARC”) is an Asset Reconstruction Company (“ARC”) and registered as such with the Reserve Bank of India (“RBI”).

IARC is committed to functioning in conformity with the provisions of the Companies Act, 2013, Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (the “SARFAESI Act”) read with the Security Interest Enforcement Rules (“the Rules”), the guidelines and directions issued by Reserve Bank of India to Asset Reconstruction Companies from time to time (the “RBI ARC Guidelines”), and with all laws and regulations as applicable and as may be amended/modified/updated/replaced from time to time.

Furthermore, the RBI Notification DOR.SIG.FIN.REC 1/26.03.001/2022-23 of October 14, 2022 (as updated from time to time) (the “RBI ARC Master Circular 2022”) requires ARCs to formulate Fair Practices Code, to be approved by its Board of Directors, in order to achieve the highest standards of transparency and fairness in dealing with all stakeholders and the same to be placed in public domain.

In line with the RBI ARC Master Circular 2022, IARC has accordingly framed the following IARC Fair Practices Code (“FP Code”) to be effective immediately upon approval by its Board of Directors (“Board”), and to supersede and replace existing code relating to Fair Practices. This FP Code shall remain in effect until superseded or amended, or rendered inapplicable by amendments to laws, rules, and regulations applicable to the relevant matters to an ARC.

Notwithstanding anything contained herein, in case of a conflict between the provisions of this code and extant laws, rules and regulations, the extant laws, rules and regulations (including RBI ARC Master Circular 2022 on Fair Practices Code) shall prevail.

A. OBJECTIVE

The purpose of this FP Code is to serve as a guide to achieve highest standards of transparency and fairness in dealing with all stakeholders, including shareholders, security receipt holders as well as the borrowers in line with the guidance issued by RBI through its circular on Fair Practices to be adopted by Asset Reconstruction companies.

B. FAIR PRACTICES RELATING TO:

1. ACQUISITION OF FINANCIAL ASSET

Acquisition of financial assets by IARC shall be in conformity with the IARC Financial Asset Acquisition Policy & Resolution Policies approved by the Board and with the prescribed regulatory guidelines effective on the given date. Any deviation from the said policy shall require approval of the Board.

While acquiring any financial asset, IARC shall follow transparent and non-discriminatory practices (such as participation in auctions, submission of bids that are eligible for Swiss Challenge Method as per the extant rules, regulations, or guidelines, etc.), at the same time ensuring that IARC maintains arms-length distance in the process.

2. REALIZATION OF FINANCIAL ASSETS

Realization of financial assets acquired by IARC shall be in conformity with the IARC Financial Asset Acquisition Policy & Resolution Policies approved by the Board and with the prescribed regulatory guidelines effective on the given date. Any deviation from the said policies shall require approval of the Board.

In case of realization through enforcement of Security Interest under the SARFAESI Act, in order to enhance the transparency of the process, IARC shall:
a) in respect of auction of secured assets, publicly solicit invitation for participation, to enable participation of as many prospective buyers as possible; in respect of sale of secured asset by any other mode permitted under the Act and the Rules, adhere to the relevant provisions in letter and spirit.
b) decide the terms and conditions of sale strictly in terms of the provisions of the SARFAESI Act and Rules and also adhere to any additional condition that might have been agreed to in the transaction documents entered into with investors in Security Receipts.
c) ensure that the spirit of Section 29A of Insolvency and Bankruptcy Code, 2016 is followed in dealing with prospective buyers.

IARC shall ensure that the employees and agents are trained to deal with customers in an appropriate manner. IARC shall ensure that its employees or recovery agents do not resort to intimidation or harassment of any kind, either verbal or physical, against any person in their debt collection efforts, including acts intended to humiliate publicly or intrude upon the privacy of the debtors' family members, referees and friends, sending inappropriate messages either on mobile or through social media, making threatening and/ or anonymous calls, persistently calling the borrower and/ or calling the borrower before 8:00 a.m. and after 7:00 p.m. for recovery of overdue loans, making false and misleading representations, etc.

3. RELEASE OF SECURITIES

Upon full repayment of dues or on full realisation of the outstanding loan amounts, IARC shall release all securities subject to any legitimate right or lien for any other claim it has against the Borrower. On exercising such right of set off, the borrower shall be given notice about the same with full particulars about the remaining claims and the conditions under which IARC is entitled to retain the securities till the relevant claim is settled/paid.

4. GRIEVANCE REDRESSAL

IARC has constituted a Grievance Redressal machinery as detailed below, within the organisation. IARC shall mention the name and contact number of designated grievance redressal officer on its website and the website address is mentioned in its communication with the borrower(s).

Grievance Redressal Machinery:
The Chief Operating Officer (COO) shall be the Grievance Redressal Officer (“GRO”) of the company. Any grievance or dispute arising out of any decision by a functionary of IARC below the rank of President or any action of an outsourced agency or recovery agent appointed by IARC, may be brought to the notice of COO by the concerned borrower. On receipt of such complaint / notice, COO shall examine genuineness of the matter and take such action as may be required and furnish an appropriate response to the complainant.
Any grievance or dispute arising out of any decision by the COO, may be brought to the notice of MD & CEO by the concerned borrower. On receipt of such complaint/notice, Management Committee comprising of MD & CEO, DY. CEO, COO and if so, decided from time to time, a President level or SVP level functionary shall examine the matter and take such action as may be required and furnish an appropriate response to the complainant.
If a complaint/dispute is not redressed within one month, the borrower may appeal to the General Manager, Department of Non-Banking Supervision of the Regional Office of Reserve Bank of India, under whose jurisdiction the registered office of IARC falls (currently New Delhi Regional Office of RBI).
The name and contact details of the Grievance Redressal Officer and the address of the relevant Regional Office of RBI will be displayed at the offices of IARC.
A record of complaints received from borrower and the follow up action taken will be maintained and a summary will be placed before the Management Committee at half- yearly intervals at the end of June and December every year. The Compliance Officer of the company will be the coordinating officer for this purpose.

5. CONFIDENTIALITY

IARC, subsequent to its acquisition of financial assets, with adequate confidentiality terms with its investors shall keep the information acquired in the course of its business, strictly confidential and shall not disclose the same to anyone including other companies in the group, except when:
(i) required by law;
(ii) there is duty towards public to reveal information; or
(iii) there is borrower’s permission.

C. FAIR PRACTICES POLICIES

As mandated under the RBI ARC Master Circular 2022on Fair Practices, IARC has also put in place Board approved Fair Practices Policies covering the following areas:
1. Management Fees, expenses, and incentives
2. Outsourcing and
3. Code of Conduct for Recovery Agents.

1. MANAGEMENT FEES, EXPENSES, AND INCENTIVES – IARC shall ensure that fees including management fees, processing fees, asset reconstruction fees etc. as well as incentives and expenses charged either to the Trust, seller of the financial asset or the security receipt (“SR”) holders are reasonable, proportionate to the financial transactions and as per the terms of contract entered into between the parties in conformity with the prescribed regulatory guidelines effective on the given date. It shall be further ensured that such fees and incentives charged towards the asset reconstruction or securitization activity come only from the recovery effected from the underlying financial assets.

Management/Trusteeship fees will not exceed 10 (ten) percent per annum of total original SR value (not just IARC share). Processing fees will not exceed 10 (ten) percent per annum of total original SR value. All types of incentives, yield Income and upside on aggregate basis will not exceed 500% of total original SR value (not just IARC share). Any deviation from the said approved cap shall require approval of the Board.

There is a Policy on Management Fees, Expenses and Incentives which forms part of the IARC Fair Practices Policies.

2. OUTSOURCING – IARC shall ensure that the outsourcing arrangements entered into, neither diminishes its ability to fulfil its obligations to customers and the RBI, nor impede effective supervision by RBI. If the outsourced agency is owned or controlled by a Director of IARC, the same will be made part of the disclosures specified by RBI.

There is an Outsourcing Policy which forms part of the IARC Fair Practices Policies.

3. RECOVERY AGENTS – IARC has also adopted “Code of Conduct for Recovery Agents” and shall be responsible for all actions of its Recovery Agents which are taken pursuant to instructions issued by IARC from time to time. Further, IARC will also obtain an undertaking from the Recovery Agents appointed by it, to abide by the Code of Conduct and require all its Recovery Agents, as a part of such undertaking, to (among others):
a. observe strict customer confidentiality;
b. handle their responsibilities with care and sensitivity, particularly in respect of aspects such as hours of calling, privacy of customer information, etc.
c. not induce adoption of uncivilized, unlawful, and questionable behaviour or recovery process; and
d. not resort to intimidation or harassment of any kind, either verbal or physical, against any person in their debt collection efforts, including acts intended to humiliate publicly or intrude upon the privacy of the debtors' family members, referees and friends, sending inappropriate messages either on mobile or through social media, making threatening and/ or anonymous calls, persistently calling the borrower and/ or calling the borrower before 8:00 a.m. and after 7:00 p.m. for recovery of overdue loans, making false and misleading representations, etc.

There is a Code of Conduct for Recovery Agents which forms part of the IARC Fair Practices Policies.

D. COMPLIANCE

The Fair Practise Code shall be placed on IARC’s website.

E. REVIEW

The Fair Practices Code and Fair Practices Policies shall be placed for review by the Board every two years, or as needed.