Undue / illegal recall notice under section 13(2) of sarfaes

Make a written representation to bank with Subject  : Representation to Bank to withdraw proceedings under SARFAESI - amount outstanding below 20 percent of Interest and Principal - action of SARFAESI not conforming requirements of Section 31(j).  Explain why the bank cannot take action under SARFAESI in the body of letter and request, for this reason kindly stop proceedings under SARFAESI as it is illegal. The bank has to reply to the representation within 7 days under Section 13(3A), Yes or no to you.  They don't reply normally because of lack of knowledge about SARFAESI.  If they do not do it becomes a procedural irregularity in the eyes of law and when bank contests your SA in DRT, they will surely lose the case for not replying to your representation.  So writing to bank is better from your point of view. 

Or to the contrary, if you are wrong and bank is right then also you can demand the bank to submit evidence to prove that the amount outstanding is more than 20%.  That will give you time to delay so that you can gather funds. 

Your question is this humiliation is right, but it should be raised in appropriate forum.  Bank does not require any license to take action under SARFAESI, but if it employs Enforcement agents to take possession of property they require to present their credentials (IIBF certificate is mandatory for them to carry everywhere as per RBI regulations) to you whenever they visit your place. 

You see a free country means everybody has a right to do whatever he wants.  If you want you can slap the fellow standing next to you in a city bus without any reason.  For that he has to complain in PS and plead his case in front of a judge.  Similarly bank is free to do whatever it wants.  After it completes taking action you can move the appropriate forum to get your grievance reddressed if you feel its action is illegal by explaining to the appropriate forum why it is illegal.  But you cannot claim an action which is legal had caused agony to you.  Which means if bank initiates action under Section 13(4) and forcibly takes possession of secured/mortgaged asset in front of people, you cannot file a defamation suit against bank calling my reputation is tarnished because of the act of bank.  However, if the action of bank itself is illegal in the first place like the bank is educated by you through a representation that it has been initiating proceedings under SARFAESI without following requirements of Section 31(j) then it is illegal action then simply a reveral by DRT of the SARFAESI proceedings is not adequate justice. 

IN such cases, if the borrower suffered any loss arising out of the illegal action of bank taking possession of secured asset that has to be recovered from bank.  Or as you said, it may also involve mental loss like humiliation for which the remedy lies in Consumer Forum.  Bank is a service organization and by taking illegal action, it has committed lapse in its service to its customer and hence liable under Consumer Protection Act.  There also you can try your luck. 

All the best.

 I found vary interesting blog website of Mr.V.D.Rao V.D.RAO, Advocate, Madras High Court. Every one related or suffered by   SARFAESI Act & the Law must visit it once.

Vary interesting very detail with examples & examples of court cases with his views expressed & personal comment.

DRT & SARFAESI Act & the Law

This blog provides academic information on to the needy on Banking Law in India and especially various interesting and complicated issues under SARFAESI Act, 2002.

https://drtsarfaesi.blogspot.in/

Regards

Raj

My answer in details has been sent as reply to the PM of  Mr. Raj Mulay.

Mr. Raj Mulay

As can be seen from the various points discussed by my learned friends, I understand that what is served to you is squarely a demand notice u/s 13(2) of the Act by whatsoever name/heading it is given.

Sec.31(j) has no application to the facts of your case. Sec.31(j) reads thus:

"Any case in which the amount due is less than twenty per cent of the principal amount and interest thereon".

  There are two illustrations to understand the language contained in the above sub-Section 31(j).

1 .Action is not permissible if 81% of amount is paid prior to the date of the demand notice and only 19% of the amount is left over. In such cases action cannot be taken even if the account still remains as NPA.

2.Action is permissible if 81% of amount is paid subsequent to the date of the demand notice:

It has been clarified by A.P.High Court & Madras High Court  that, any payment made by the borrower to a secured creditor after issuance of the notice under Sec.13(2) of the SARFAESI Act would not affect or invalidate pursuit of the remedies available to a secured creditor under sub sec.(4) Sec.13 of the Act, even where on giving credit to such subsequent payments made,  the amount due would fall below 20% of the principal amount and interest thereon [Azam Food Products Pvt. Ltd. Vs DRAT Chennai & Ors. [2011(1)D.R.T.C. 204 (A.P.)]; Chembeti Brahmaia Choudhary Vs. State Bank of Hyderabad :2010 (4) ALD 408 AP (DB)].

You cannot approach civil court or criminal court in the matter sice the statutory jurisdiction over the dispues covered by this subject matter is conferred to DRT only. Filing of writ is barred when alternative remedy is available (See judgment of Supreme Court in Satyavati Tondon's cse). But there are certain cases where filing of writ is not barred in the light of the clarification given by A.P.High Court & Jharkand High Court.

 A.P.High Court  in Sarvan Dall Mill (P) Ltd. vs. Central Bank of India : 2010 (1) ALT 321 (D.B.) held that, judicial review under Art.226 is the only remedy available in certain circumstances such as wrong classification of accounts contrary to RBI Guidelines for which no remedy is  available and the borrower has to face unsavory action until his right to invoke Sec.17 arises.

In Stan Commodities Pvt. Ltd. vs. Punjab and Sind Bank : AIR 2009 Jharkand 14 the bank failed to communicate reply u/sec. 13(3A) to the objections raised particularly on classification of accounts wherein it was seriously contended that the classification of borrower’s account was contrary to RBI Guidelines. Sec.13 (3A) was inserted in the Act by amendment dated 11.11.2004 after the land mark judgment of Supreme Court in Mardia Chemicals case and action was being taken by the bank defeating the said provision of the Act. In such cases borrower can invoke writ jurisdiction as jurisdiction Recovery Tribunal is not available.

In your case, according to you, the bank has not communicated  any reply to your representation / objection submitted by you against the demand notice. If the bank serves you any notice for taking symbolic possession or takes physical possession from it will be in  gross violation of  provisions of the Act inserted by Parliament after landmark judgment of Supreme Court in Mardia Chemicals case. Therefore you have to approach High Court of your State through a competent Lawyer well versed in SARFAESI Act.

You can file an application before DRT u/s 17 of SARFAESI ACT,2002 praying for setting aside the SARFAESI Proceeding by citing the following deccision. 

Kolkata High Court (Appellete Side)

Madhu Sudan Ghosh & Anr vs The Bank Of Baroda & Ors on 30 July, 2010

Thanks Mr. C.P.S. Ramachary & Mr. K.K.Ganguly for yours valuable guidance.

Sorry for delayed reply, I was quite busy in my work & engaged in verbal communicating with bank officers.

And this is for reference.

Their story of (meaning) 31(J) is that if we Pay 81% if outstanding then only the SARFAESI Act.is not applicable? Meaning if we pay 81% of outstanding which is equal to 1120102/- and 81% of it become 907283/- and balance will remain 212819/- ?

Their approach to all the issue is confusing? This is what they saying.

“If you want will give you reply all in writing for your question” (today is 39th day and there is no reply).

It looks like they don’t know about Section 13(3A)? Or they are hiding something? (All they all are working in financial capital of India?)

“We can’t stop SARFAESI preceding and take symbolic Possession by pasting Notice u/s13 (4) on doors of securities assets”?

“We want to answer to our senior officers.” All kind of rubbish answers?

Dear Mr.Raj,

Can you please answer the following points to enable me to guide you in a better manner.

1. Date of Loan Agreement
2. Loan Amount Disbursed
3. Date of receipt 13(2) Notice
4. Amount claimed in the 13(2) Notice - with split ups
5. Names of the borrowers, co-borrowers, guarantor
6. Date of your objections(Name of the person who sent the objections
7. The category of your wife to this loan (Borrower/guarantor)
8. If she is a guarantor, whether her property has been given as secutity?
9. Nature of the property.

Dear Mr.Raj,

Pls go by the advice given by Mr.Ramachary. I failed to notice his reply earlier.

 Tahnks Mr, Uday,

my answer for following points

1. Date of Loan Agreement

05/10/2006

2. Loan Amount Disbursed

CC Limit Rs. 3,00,000/- on Date 05/10/2006                                                                                           

CC Limit Enhance to 5,00,000/- in May /2007

3. Date of receipt 13(2) Notice

Notice 13(2) dated 19/03/2012 Received on 22/03/2012

4. Amount claimed in the 13(2) Notice - with split ups

CC Limit Due Rs. 2,07,109.58/-

T/L Due RS. 9,12993.00/-

5. Names of the borrowers, co-borrowers, guarantor

Total Three Partners including Me, And My wife as a guarantor

6. Date of your objections(Name of the person who sent the objections

26/03/2012 By me And Second Partner and guarantor (we have APL pending in Mumbai Hc. u/s 9 of Arbitration act)

7. The category of your wife to this loan (Borrower/guarantor)

My Wife is guarantor

8. If she is a guarantor, whether her property has been given as secutity?

1 office (Audio Studio) of Partnership Company

2 Residential Flat of Third Partner

3  Residential Flat of guarantor

Nature of the property. As above.

Regards

Raj

Mr. C.P.S. Ramachary

You sad “Sec.31(j) has no application to the facts of your case.” In yours advice,

please looks at it once.

Case One

On the Base of Allotment Letter Dated 04/10/2006

Case Two

The amount Paid Till the Date 29/02/2012

Sec.31(j) reads thus:

"Any case in which the amount due is less than twenty per cent of the principal amount and interest thereon".

Now My question regarding  above sub section is  about amount principal

1)       The amount principal is consider which one?

2)     principal  amount  which is sanction ? Or

3)       principal  amount     which Repaid Before the Date Notice u/s.13(2) is served ?

4)       And interest Thereon?

 I have given Both Cassese. (their  is issue of additional T/L Sanction & not consider in above Casses )

Have they given you bank statements of both accounts since the date of release of limits to till date?  Ask them to provide bank statements from beginning (tell them I will pay charges whatever you want for that, because they will object to give such a lengthy statement of account) and also to provite what is Principal component and what is interest component in the above accounts.  It will be of great use for you.  Secondly, as you have not received any reply from bank you have a strong case against bank you will definitely get a favorable order from DRT.  However, you can only file the Securitization Application u/s.17 of SARFAESI only when the bank initiates any action under Sec.13 (4), ie., taking actual physical possession or symbolic possession of mortgaged property. 

You have to file SA in DRT within 45 days from the date of receipt of Possession notice from bank.

Getting a favorable order means, the DRT will direct the bank to start the proceedings afresh from beginning, that means again start by issuing Demand notice.  So this time, you be sure what is 20 percent of amount outstanding by making proper enquiries with bank.  Bring it to less than 20% and stay cool.

DRT will also restore that possession of property taken by them to you.  They are bound to give you a reply within 7 days from the receipt of representation from you under Section 13 (3A).  As they have not done so, that is enough ground for DRT to restore possession of property back to you and direct the bank to re-start the SARFAESI proceedings by issuing a fresh Demand Notice.

To All Dear expert

There is twisting The Bank Official Now Asking for Fresh Proposal?.                                                                                                               Now only 12 Days Left for limit  of 60 days  to  Over?                                                                                                                                                                                                                             Even after giving Fresh Proposal they will not going  to accept the proposal but delay the procedure ? Then what is the use? Their demand is specious? What will be the reason? Should we give Fresh Proposal?.

Raj

Don't give fresh proposal, but inform through Regd.post ack due that that they were duty bound to give reply to your first representation within 7 days of receipt of the first proposal under SARFAESI 13 (3A) but they have not replied to that representation hence their proceedings have no legal validity henceforth in the eyes of law and may be stopped.

You did not mention whether they issued you any letter asking for fresh proposal or not. Without clear & complete reporting it becomes difficult to understand. However, please note that if fresh negotiations in writing starts, it ends the SRAFEASI Proceedings  in vouge because they can not battle in the DRT & also negotiate for settlement at the same time.

My experience is Banks negotiate & settle for much less amount after waiving off interests, penalty etc. There should be a proof that the Bank wants to negotiate though they do not give in writing till the borrowers proposal is accepted by their management.

Immediately give your proposal in writing politely  mentioning their invitation to negotiate. Go for a much less amount than what is due. They will settle for inbewteen amount. You can also ask them at what amount they will agree. The concerned person may expect some amount personally.

However, you have an opportunity to settle the loan by paying a much less amount than what is due to you.

Try it tactfully.