Can bank accept payment after declaring loan account as npa?
K.K.Ganguly
(Querist) 06 September 2012
This query is : Resolved
1. Can any Bank accept payment from a Borrower after its loan account has been declared as NPA and Demand Notices u/s 13(2) & 13(4) of SARFAESI ACT, 2002 have been issued?
2. If the Bank has accepted such payment after issuing such notices, can the borrower pray before DRT for setting aside the SARFAESI Proceedings simply basing on the above ground?
3. What plea the bank should take now to defend itself?
4. Any decision in this regard?
Thanks in advance.
ajay sethi
(Expert) 06 September 2012
M/s. Sri Srinivasa Rice and Floor Mill Vs. State Bank of India (2007 (4) ALT 317: 2007 (4) ALD 649: 2007 AIR(AP) 252) was pleased to observe as follows:
“There is, as considered earlier in the judgment, no statutory format, express or by necessary implication, that requires the respondent bank to follow a particular or formal procedure or requires a formal declaration as a condition precedent to classification of debt as NPA. From the scheme of the Act in general and the provisions of Sec.13 (2) in particular the conclusion is compelling that the legislature has consecrated the power, authority and discretion (to classify a debt as a NPA) to the secured creditor within the generic guidelines to be ascertained from the definition of a non performing asset [Sec.2(o)].
A wide margin of discretion is available to the respondent bank as the secured creditor, within the legislative presents of the Act, to assess and classify a debt but within the legislative framework. This Court is not constituted an appellate authority over the bank’s exercise of discretion in this area. The respondent bank, as legislatively recognized is an institution having the requisite expertise to form a commercial judgment on known principles of banking practices and procedures fertilized by R.B.I directions and guidelines to assess and classify a debt as NPA.
once account is declared NPA bank wont regularise the account and accept payment .
if bank does so you can challenge assesment of account as NPA beofre DRT
R.K Nanda 
(Expert) 06 September 2012
1. No.
2.Yes.
3.Ask bank.
4.Search google.
Guest
(Expert) 06 September 2012
Dear Mr. Ganguly,
An asset becomes non-performing when it ceases to generate income for the bank. In fact, the intention of making as asset an NPA is to reflect a bank's actual financial health in its balance sheet in any particular year of accounting. But, it does not mean that the bank is debarred to accept payment of its own dues to recover its debt, if it treats an asset as NPA. So --
(1) I do not find any such debarring provision for the banks to accept the payments pertaining to the NPA assets to get part of its loans cleared to reduce the amount of NPAs.
(2) The borrower of course can pray before DRT for setting aside the SARFAESI Proceedings, but there seems no likelihood of acceptance of his plea as the recovery has to be made within a specified period, not as per the previously set EMIs, etc.
(3) The Sarfaesi Act, itslf contains clear provisions for the recovery plan. There seems no escape for the borrower, if the case is filed under the Act.
(4) You may have to make your own efforts, as it is time taking job to search some specific case law that could match the stated circumstances.
