Sarfaesi act sec 31

C MURALI MOHAN (Querist) 13 October 2011 This query is : Resolved
Provisions of this Act not to apply in certain cases :
(j) any case in which the amount due is less than twenty per cent of the principal amount and interest thereon.

In the above provision under exemption to invoke SARFAESI Act , I need a clarification the meaning of " amount due is less than twenty per cent of the principal amount and interest thereon". What does it mean? Is this means the irregular / Overdue amount should be greater than 20% of the Principal+Interest or it convey any other meaning. Please clarify

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prabhakar singh (Expert) 14 October 2011
To understand the phrase brought for our consideration i shall propose you to understand it through an illustration as follows.

Suppose the principal advanced was Rs.100,000/= and interest calculated up to date counts forty thousand then total would be Rs.1,40,000/=.

Now suppose the debtor has already paid Rs.1,25,000/=to the bank before the date bank is considering to invoke its right under SARFAESI ACT,CAN IT ??OR CANT NOT ??WOULD BE DETERMINED BY THIS SECTION.

now suppose the bank has appropriated the said payment towards interest as a whole and the balance towards the principal.SO on the date bank desires to invoke the Act,the principal due is only Rs.15,000/= which is less than 20%of the principal togather with interest thereon.HENCE BANK CAN NOT INVOKE.

RAJU O.F., (Expert) 14 October 2011
Assume loan amount 10 years back was 100 crore. Present balance only 19.5 crore, after repayments towards principal and interests. Hence even if the account is NPA, SARFAESI cannot be invoked till the dues cross 20 crores by accrual of further interest.