Query reg - guarantor's property & dm order...!

Hi Siva,

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Dear Mr. Jeevan,

Here goes my Query, in detail:

A Borrower borrows an amount of Rs.10 Lacs from a Bank by mortgaging a property of his Guarantor in the yr. 2007. The Borrower repays the loan amount correctly till 2011; then after, he became Defaulter and the account becomes NPA. Later, the Borrower updates his account and paid Rs.10 Lacs till 2012 and requested the then Manager of that Bank for the OTS (One-Time Settlement) and rescheduling of the Loan. That Manager promised him to get the approval for the same from his higher-ups. 

The innocent borrower trusted his speech and waited for his consent. The Borrower has sent many reminders via RPADs, e-mails and Phone Calls to the Bank's Chief Manager. But, he didn't heed or responded to any do that and simply says that he (the Bank Manager) would get back to him (Borrower), shortly. Simply, the Manager dragged this matter and later, he got transferred to some other place. This ‘delay of action’ and ‘breach of Promise’ of the Manager makes the innocent Borrower to wait for a long period and proportionally, it piled up the interest amount of the loan a/c, as well. So, who will be liable for this? Without knowing this, the Borrower called up the Manager's no. but the other guy picked up and told that he is appointed as the new Chief Manager…!

Then, the borrower narrated the whole story again and said that he's ready for OTS. The new Manager says that he'll listen to him and will do the needful. Also, the Borrower sent couple of e-mails as reminder and followed him on the phone as well. But to the surprise, the new Manager has initiated the process of Physical possession and served the notice to the Borrower and the Guarantor u/s 13(4) of SARFAESI Act. The shocked Borrower asked the Manager... why he has done so? For that, the Manager replied that he had already served the Notice of Symbolic Possession u/s 13(2) of SARFAESI and called upon the Borrower / Guarantor to close the loan a/c within 60 days. Since they failed to regularize he said that he has initiated the physical possession of the Guarantor's property.

But, the Symbolic Possession notice has not been served to the Borrower / Guarantor since the Banker has mentioned an incorrect / wrong address. However, the Borrower has paid around Rs. 13 Lacs (Rupees Thirteen Lakhs) up-to-date. So far, the Borrower had paid the Principal amount of Rs. 10 Lacs as well as the Interest amount Rs. 3 Lacs. But, the Banker says that they are not satisfying with this amount and threatening the Borrower to pay the entire amount immediately to avoid the Auction / Sale of the said mortgage property.  

Above all, now, they locked up the Guarantor's property and taken physical possession when the Guarantor had gone out of station and forcibly vacating the tenants. The Guarantor is a very honest, retired Govt. Officer. Now, the Banker creates defamation to the Guarantor with their rude approach. The Guarantor asked the Bank Manager that how the Bank initiated the physical possession for a minimum amount due and too without the Order of Court / District Magistrate (DM) / CMM? Moreover, the Baker has appointed a private security to the possession property. Is this kind of possession legal or illegal; because, sometimes, the Banker initiates the possession falsely?

Can the Guarantor and/or the Borrower approach the DRT or CIVIL court or Lok Adalat or Consumer Court or any other appropriate legal forum to challenge the Banker against his possession actions since they are very genuine and honest and intend to pay-off the outstanding dues but the Banker creates defamation to them unwarrantedly?

Need some clarifications on the following queries. So, pls help out them by giving your valuable comments:

(1) I believe that the Banks and Financial Institutions are required to file their claims in DRT / DRATs in respect of alleged Debts above Rs.10 Lacs. And even if, the Debt is less than Rs. 10 Lacs, are they able to approach the DRT? Are DRTs accepting their pleas?  

(2) Suppose, if their pleas were rejected, what will they do to recover the dues from the Borrowers / Guarantors? And, what they would do with SARFAESI ACT (for debt lesser than Rs.10 Lacs)?!

(3) Similarly, are the Banks & FIs (Secured Creditors) able to initiate the Physical Possession of the Guarantor's Property  u/s 13(4) of SARFAESI ACT, 2002,  against an outstanding loan amount of the Borrower is very meager, say Rs. 3 Lacs only, and whereas the worth / current market value of the mortgaged property is about Rs. 1 CRORE?!

(4) Can the Borrower or the Guarantor approach the “DRT” and file an appeal (Securitization Application) against the Bank or Recovery Officer u/s 17 of SARFAESI Act (even if the Debt is less than 10 Lacs) ? Is there any time-frame to file the suit? What will be the Fee for SA for amount less than Rs.10 Lacs?

(5) Else, the Borrower or Guarantor can approach the “CIVIL Court” rather than DRT since the Debt is less than 10 Lacs?

(6) I came to know that once the account becomes NPA, then the interest will not be applied and/or levied. But, the Bank has levied some PENAL / ACCRUED INTEREST of Rs. 3 Lacs (apart from outstanding loan amount of 3 Lacs) plus some legal charges for the NPA ACCOUNT, which is exaggerated and exorbitant, and harass the Borrower / Guarantor to repay the dues(Rupees Six Lacs Only) in full, immediately. Is there any way out to waive-off the exorbitant ACCRUED INTEREST, at least?

 (7) Irrespective of the debt, Whether DM / CMM order is mandatory to take Physical Possession of the mortgaged property?!

Summary: Borrower borrows Rs.10 Lacs as Mortgaged Loan from the Bank and repaid Rs.13 Lacs (Principal plus Interest) till date to the Secured Creditor. The Outstanding Loan Amt. is less than Rs.3 Lacs but the Accrued Interest of the NPA a/c is 3 Lacs. So, the total dues mentioned as Rs.6 Lacs by the Banker and initiated physical possession of the mortgaged property of the Guarantor under SARFAESI Act.

Furthermore, a year ago, the Banker has sent to the Symbolic Possession u/s 13(2) to the Borrower / Guarantor and the parties gave representation u/s 13(3A) to the Bank by raising some mistakes done by the Lender. Further, the Banker has sent Physical possession notice u/s 13(4) and at that time, the Parties paid a fair amount (almost the principal amount of the loan) and make the notices “NULL & VOID”. Later, they asked for the OTS & tenure extension. The then Manager of the Bank agreed to do so but there is no proper response for about a year and, the parties were in faith of getting OTS. But, without serving notices properly to the parties, the Banker has now taken Physical Possession, saying that they had sent notices afresh and the parties didn’t act upon to that.

But this time, the Symbolic Possession notice u/s 13(2) has not been served to the Borrower / Guarantor properly since the Banker has mentioned an “incorrect / wrong correspondence addresses”. Also, they are saying that they had sent to the mortgaged property address where only the tenants are living in that mortgaged property but the Borrower / Guarantor lives in some other address and they already given that living address as correspondence address but the Banker didn’t sent the Notice to the correspondence address which makes the Borrower / Guarantor non-receipt of the Symbolic Possession Notice. So, the Borrower / Guarantor unable to give objection to that notice u/s 13(3A). This shows that the Banker didn’t give time to the Borrower & Guarantor to give their representation, and tactfully, cunningly invoked the Physical Possession u/s 13(4) in the intension of selling the property and published in the News Papers. Now, the Banker locked up the Guarantor's property when the Guarantor had gone out of station and also forcibly vacating the tenants? If asked the tenants about the notice, they are saying that they were not aware of those notices and the postman didn’t tell anything about the notices. I believe it is not the tenant’s or postman’s job to notify the party as they may not aware the subject but it is the Banker’s duty to serve proper notices. My view is that both the recent notices were NULL & VOID. Isn’t it? But, how come the Banker has taken the PHYSICAL POSSESSION? Thus, the Banker creates defamation to the Guarantor with their rude approach. Can the Parties sue the Banker and give police complaint against Banker for trespassing the Mortgaged Property? Whether the Parties to approach the DRT or CIVIL Court in this matter? Can the Borrower break the lock which was put illegally by the Banker and enter into the property? Will there be any legal implications? Or, can they take photo / video of the locked property and handover the same to Policemen and take action against the Banker for their illegal act?

However, now the Party (Borrower) started paying the dues to the Bank and updates the account. Recently, he paid around Rs. 2 Lacs (Rupees Two Lacs) towards his Loan A/C in the span of one week time and asked the Bank to restore the possession. But, the Banker did not oblige to restore the physical possession or to revoke the legal actions and not soft to the Borrower. HERE, MY QUESTION IS WHETHER THE SERVED DEMAND NOTICES 13(4) / RULE (8), ETC., BECOMES “NULL & VOID” SINCE THE BORROWER STARTED PAYING THE OUTSTANDING AMOUNT AND UPDATES THE ACCOUNT? IF SO, HAS THE BANKER TO START THE SARFAESI ACT AFRESH BY SENDING THE DEMAND NOTICE U/S 13(2) AGAIN AND GIVES 60 DAYS MORE AS IN THE SAID ACT? OR, THEY CAN PROCEED WITH THE EARLIER NOTICES? IF THE BANKER IS NOT SENDING THE NOTICE U/S 13(2) AFRESH, CAN THE BORROWER SUE THE BANKER AND COMPEL THEM TO RESEND THE NOTICE U/S 13(2)? IN THIS CASE, WHETHER THE BORROWER HAS TO APPROACH DRT OR CIVIL COURT?

What is your suggestion and how to deal with this matter, further?!What will be the remedy for this matter? Pls advise. Also, kindly answer for the above said Queries. Thanks a lot…!