Cap. 16 Art. 2095HLiability of the creditor transferee.

(1) When the creditor has taken possession of the property so transferred, subject to the terms of the transfer agreement, he shall not be permitted to make use of the property unless expressly permitted to do so by the agreement between the parties and shall be liable to the transferor for the loss or deterioration of the property arising from his negligence.

(2) Where the property transferred by way of security is fungible in nature:

(a) the parties may agree that the creditor to whom the property has been transferred may enter into transactions involving its sale and may also use it as security for the performance of his obligations;

(b) the obligation to return the property shall be to return equivalent property but may be extended to return equivalent value.

(3) The provisions on fiduciary obligations in this Code shall apply to the creditor who shall be considered as having acquired title and possession as a fiduciary for the sole purposes of -

(a) retaining the title and, if so agreed, possession of property as security for the performance of the secured obligations,

(b) of applying such property or its value in settlement of the secured obligations in case of default; and

(c) of returning the property, or its equivalent in case of fungible property, on performance of the secured obligations or of returning any excess in value to the transferor in case of enforcement, and notwithstanding the obligation to avoid conflicts of interest he shall be entitled to act in his own interests for the above purposes.

(4) Notwithstanding the fact that the creditor is the absolute owner of property transferred by way of security, any exercise of ownership rights other than as may be provided for in the agreement between the parties or as herein provided shall be a breach of fiduciary duties for which the creditor shall be liable toward the debtor in accordance with this Code.

(5) When enforcement is through set-off by the creditor, upon notice of enforcement given in accordance with article 2095G(2), the creditor shall become the absolute owner of the property and shall be released of all fiduciary duties arising from the transfer agreement and these provisions. The value of the obligation of the creditor to return the property transferred by way of security which is set-off against the rights of the creditor to payment of the obligation due to him shall be established by agreement with the transferor or established in the manner agreed between the parties and in the absence of such agreement, at the market value if there is one, or where there is no market value, at a price established by an independent person competent to value such property.

(6) Upon a notice of enforcement through sale of the property in accordance with article 2095F(2), the creditor shall have the power to sell the property -

(a) in the manner agreed with the transferor or, in the absence of agreement, in the manner the creditor considers most appropriate and commercially reasonable;

(b) for a price established by agreement with the transferor or established in the manner agreed between the parties and in the absence of such agreement, at the market value if there is one, or where there is no market value, at a price established by an independent person competent to value such property; and

(c) when the property is to be sold through a judicial sale by auction, at a price and in accordance with applicable provisions of law, and the creditor shall be the sole person entitled to receive the proceeds of sale.

7) Upon the events in the preceding sub-articles taking place, the creditor shall allocate to and set-off against the obligation secured -

(a) in the case referred to in sub-article (5), the value of the obligation to return the property set-off against the secured obligations;

(b) in the case referred to in sub-article (6), the proceeds of sale received by the creditor shall be set-off against the secured obligations, and any excess shall be immediately paid over to the transferor.

(8) If it is necessary to properly realise the commercially reasonable value, the creditor shall be entitled to sell or set-off as aforesaid all the property transferred by way of security even if it exceeds the value of the secured obligations. Otherwise, the creditor shall only sell or set-off as much as is required to cover the secured obligations, interest and charges and return the excess property to the transferor.

(9) Except where special laws permit otherwise, it shall not be lawful for the debtor to agree on the value of property transferred by way of security for the purposes of enforcement before the receipt by him of a notice of sale or set-off provided for in article 2095G(2); provided it shall be lawful to agree on a value to be established by reference to a market or on valuation mechanisms to be followed in case of disagreement between the parties.

(10) The Court may, on the demand of the debtor a posteriori, verify the commercial reasonableness of the realisation of the property or the valuation used in terms of the preceding provisions. Upon such review the Court may, if it finds that the realisation was not carried out in accordance with the agreement between the parties or, absent terms of agreement, in a commercially reasonable manner or at a fair value, condemn the creditor to pay damages to the transferor and, or the debtor for the losses suffered by his actions.