CA holding COP can work as Recovery agents

The banking sector has opened opportunity for CA firms to act as Recovery Agent/Enforcement Agent for making recovery underSARFAESI Act. The agents so appointed are required to do following acts under an contract for and on behalf of the Banks:

Scope of work:

1. Search and survey of the borrower's movable and immovable assets.

2. Prepare inventory thereof and get valuation thereof from approved valuers of bank.

3. Take steps for seizing the assets or taking possession of the secured assets

3. Take step to safe upkeep and Protect the asset by putting securityGuards; shall be responsible in case of any pilferage or loss of asset in his possession ;and

4. Arrange to sell the asset and recover the amount to be adjusted to Loan account of NPA Borrower.

5. The Recovery agent should undergo 100 hours training and qualify exam to become a Recovery Agent.

The Recovery agent has to take the services of Legal Professionals, Valuers and Security Personnel for the purpose of discharging the abovesaid duties.

Fees to be paid:

If recovery is made through Recovery agent, the Bank will make payment of fees to Recovery Agents as 10 to 15% or so, of amount of recovery made by them.

Following are the issues related to the abovesaid opportunities:

1. As per Clause 11 of the First Schedule of CA Avt, the CA having Full Time COP can not become Recovery Agent but they can work as Recovery consultant in the Banking sector. There is no mention of difference between the Recovery Agent and Recovery Consultant ?

I personally feel that without touching other areas of scope of work, the basic difference in Recovery Agent and Recovery Consultant is about the right to receive remunerarion. The Recovery Agent is entitled to get the remuneration after successful recovery in NPA Accounts. Recovery Agent shall have no right to claim any amount of remuneration if no recovery is made although he has put his energy and efforts. Whereas the Recovery consultant is merely acting as professional consultant and have the right to receive the remuneration without any result of recovery.

Please give expert comments :

1. whether working as Recovery agent with duties mentioned above with remuneration based of amount of recovery only, can be deemed as Recovery Consultant and is permissible under CLAUSE 11 of the First Schedule ?.

2. Secondly the amount of fees paid as %age of recovery made. The said method of charging fees by CA is prohibited by Clause 10. There is clarification by Council also in the year 2005 vide Announcement serial No. 91 :- 'that the Recovery Consultants can not charge fees as %age of recovery made'

I would request to learned members of the Group to comment and clarify the issue in the larger interest of the profession. if the said area is permissible by ICAI then our professional brothers should also explore the opportunities.

Our Council Members who are regular contributor to this Group, Mr. Ravi Holani and Mr. Madhukar Hiregange should also throw some light on these issues.

CA R. A. Sharma, FCA, DISA(ICAI)