Notice under Section 13(4) of SARFAESI Act, 2002

A BRIEF OVERVIEW OF SARFAESI ACT

I wish to add that the Supreme Court in its Judgement in the matter of  Mardiya Chemicals upheld the constitution validity of the SARFAESI Act, but struck down Sub-section 2(2) which provided for a deposit of 75% of the claimed amount before the appeal is admitted by DRT.  In this case, if the account is NPA, Bank after giving just 60 days notice in writing, can take the possession of the assets in the nature of security for the loans/advances.  If the borrower makes an object, the bank is bound to give the reply in 7 days.  Any borrower aggrieved by the action of the secured creditor can file a petition to the concerned DRT within 45 days.  DRTs would have to dispose - ff cases within 4 months of any application being filed before it by borrowes whose assets are taken possession by the banks. The Bank has to give sale notice of 30 days to the borrower. As per the SC judgement in Transcore Vs Union of India banks can proceed simultaneously in DRT and SARFAESI.

DRT is meant for Banks

Banks are deemed caveator in every case that is filed against them by borrower or 3rd party before DRT (WITHOUT ANY PROVISION)

even PO saheb is a bank manager in some renowned bank and sitting on the said post on deputation (AGAINST THE  PROVISIONS) then how could an order pass against a bank. 

everything at DRT is fishy

bulls have eyes but they are busy in grazing 

condemn

Banks are dealing with Public Money and so they must ensure that all the wilful defaulters are dealt with this tool in SARFAESI. 

 respected sir

your good self is very true that SARFAESI is a tool. because law can never be so biased.

banks started playing with this tool and they have no concern with the law.

moreover, the banks give the public money to businessman for sweet fruit of interest on a very high rate. bank give loans and advances only to earn more profit from the business  of others.

but  what rate of interest bank pays to general public whose money they are using.....???

public at large takes loan for business to earn income and not to forfeit the bank's money. and if the business goes in loss then how can only the businessman held liable to pay from the last drop of his blood.

regards

vijyant

When a property is brought under auction by a bank under SARFAESI ACT and there is no bidder. under the circumstances whether the bank can reduce the reserve price and if so whether the reduction in reserve price should be informed to the borrower

Banks are in no way concerned with the Business Loss of a firm as only the latter manages the affairs of business with the financial assistance of the former.  Hence, he has the legal and moral obligation to repay the debt borrowed.  For your kind information, Bankers are in Low Wage land.  I have put up more than two decades of service in the officer cadre and you will be surprised to know that even after recent wage revision I am yet to touch the 50K mark even though we contribute towards productivity and the wages are earned from our profit unlike Government sector.  My contemporary in the State /Central/PSU sector earns Rs.80K per month without contributing anything to profit or productivity.  That is the harsh reality.
 

Dear Law Experts,

I’m writing the following on behalf of my cousin.

One of my cousins availed a Mortgage loan of Rs. 10 Lakhs on Oct’2007 from one of the nationalized bank in Chennai and the Loan tenure is about 5 years. The Interest is w.r.to the current PLR and of daily diminishing from the outstanding. Initially for a period of 23 months (almost 2 yrs.), my cousin happily paid the Principal as well as the interest without any delay.  But unfortunately, Due to global recession, he lost his job and also been hospitalized for some months because of illness. So at this situation, he couldn’t able to re-pay the EMIs for about 4 months collectively, however, he made some adjustments in his loan account in the subsequent months and mobilized accordingly. Suppose, if he couldn’t able to pay the EMI by the month of January, he must dropped both Jan & Feb month’s EMIs by the next subsequent month i.e., by February. Likewise, he tried to regularize his loan.

On November 2009, the Bank Manager has effected the Standing Instruction from his Saving Account where he has already with the same branch but without his mandate / consent. While my cousin questioned about this matter with the Bank Manager, the manager said that he only effected the SI under Sec-171 Act and also, said that he never need his mandate / consent to effect SI to recover the loan EMI. Is that been possible to do so? Please clarify me.

But as per RBI guidelines, we understand that ‘’Banks have a right to exercise lien under section 171 of the Indian Contract Act against the dues from constituents/customers. However, the banks CAN NOT exercise lien over the personal account of a customer on the ground that money was due to the bank in another account where he acts in a different capacity, if there is no agreement to that effect’’. If it is so, how the manager has effected the SI? Moreover, he admitted that he can take action under Sec-138. How it’s possible to enact such act in this case?

Till last January’2010, the past due is for 4 months (i.e., Rs. 22,500 per month). So, my cousin has to pay around Rs. 90, 000. But he has paid only Rs. 40,000, where he has only that much of amount at that time. Also, he communicated to manager that the rest will be paid soon. But the Manager has declared his loan A/C as NPA and sent the preliminary Notice to pay the outstanding due amount of Rs. 1, 35,000 within 10 days of time. Since my cousin has paid around Rs. 5.25 Lakhs till January’2010 (Principal cum Interest), he doubted that there’re some discrepancies in the amount mentioned. So, he asked the manager to send the 'Detailed Amortization Schedule / Statement' of his Loan A/C and asked the manager to re-classify his account as ‘Standard Account’ and asked for Re-Scheduling of re-payment plan after explaining his crisis. 

But, on the other hand, the manager said that my cousin has to pay 8 months EMI with some penal charges and also, he sent the Notice u/s 13(2) of SARFASI ACT immediately by next following week itself by giving 60 days of timeframe to settle the amount of Rs. 7.8 Lakhs (Principal cum Interest for the period served of 2 years / till date). The bank didn’t give any time to serve the notice period of 10 days as declared in the earlier preliminary notice. Later, my cousin has given a counter by sending ‘Representation/Objection under Sub-Sec-13(A) of Sec-13 of SARFAESI ACT’ based on the aforesaid grounds.  Although, there is another 3 years (apprx.) of tenure for full disbursement, we're forced to pay the full settlement now. However, we’re planning to settle the amount in FULL now and get the property back; but, we need some buffer time to arrange the said amount.

If there’s NO reply from banker side for our representation, shall we go appeal at DRT? If so, what are all the procedures? To appeal at DRT, is it mandatory to send Representation/Objection letter to the concerned Banker? And are we needed to wait till the notice period of 60 days to complete for appealing at DRT / DRAT? If they go for possession, is that symbolic possession or critical possession that they must enact and how long it will take for them to achieve the auction / sale? If we appealed at DRT / DRAT, can we get some benefits like interest free installments when disbursing of loan amount? Also, can we get some additional time to settle our loan amount? Furthermore, can we request the manager or DRT officials to Re-schedule his Mortgage Loan and grant him some 'Re-payment Holiday / Moratorium' until he get placed in a job (as he’s getting some job offers now). 

Also, let us know when an account has declared as NPA? As per RBI Guidelines, we understand that the account of any concern/individual can be declared NPA by the banks when NO amount (Interest/Principle) is deposited by the borrower in its account for the last 90 days (Earlier it was 180 days). Is that the 90 days period is of continuous or intermediate terms because he failed to make his EMI only for collective of 4 months, intermediately? 

Hope you can understand our above said queries and get us clarified, which helps my cousin to exit from his problems. Also, please correct us, if we were wrong anywhere.

Appreciate your immediate respond!

Thanks a lot for your valuable time!!

You can not approach DRT on anticipation of notice, however you can approach DRT after the reciept of the notice. In the interim period you can approach the Bank for settlement.

This is in response to the query raised by Mr.Subramani "When a property is brought under auction by a bank under SARFAESI ACT and there is no bidder. under the circumstances whether the bank can reduce the reserve price and if so whether the reduction in reserve price should be informed to the borrower'.Mu answer is yes. When there is no bidder for the price fixed, the bank can reduce the reserve price and it should be informed to the borrower. Sub-section 2 of section 9 of the Security Interest (Enforcement) Rules, 2002 has clearly dealt with this aspect which reads as follows.

"If the authorised officer fails to obtain a price higher than the reserve price, he may, with the consent of the borrower and the secured creditor effect the sale at such price"

YOU MAY FILE A WRIT PETITION TO THE HIGH COURT ON CERTAIN LAW POINTS AND ILLEGALITIES OF BANK SUCH AS CUMULATIVE RATE OF INTEREST AND BREACH OF  PROVISIONS OF SAID ACT.

AT LEAST  IT WILL COST YOU LESS AND IN GENUINE CASE HIGH COURT CAN INTERFERE..

IN CASE OF ANY ADVERSE RESULTS THEN YOU MAY APPROACH ANOTHER REMEDY WHERE HEAVY STAMP IS REQUIRED.

THANKS.

dear members

i hav taken a loan from one of the nationalized bank arountd of Rs15 lacs......due some problems in my businees my account become NPA...after that bank gave me a  notice in section 13(2) of Serfaesi act...      within two monts time  i make my objection n repersentation to the bank but bank did not reply on that..n without giving me a reply bank fixed a possession notice on my factory under section 13(4) without serving the notice to me. After  checking  my account i found that the pending dues is less than 20% of the principle amount.....bank is now in process of selling of my property .... what ramadies are avialabile for me in my view  this act is not apply on me and ilegal .....kindly reply ..i m very thankfull to all of u

Anil,

Pls approach the DRT (which comes under your Jurisdiction) within 45 days from the Possession Notice.

Hi all

 when notice is issued file ur objections and reply

 bank is bound to consider the objections filed and pass appropriate orders on this

if the bank fails to pass any order and proceed further is a good ground to challenge the proceedings .

for all my dear borrowers

always check on quarterly or monthly basis that the bank is imposing/charging correct rate of interest on your loan, cash credit, current, overdraft account etc. and always file your writen objection before the bank if u find that the bank is charging exhagerated rate of interest or using unprovisional means in calculating the interest or charging heavy interest arbitrarily and always stop paying further instalments and take appropriate action against the bank under the provisions of law before let the bank to proceed against you under SARFAESI Act.

Thanks and Regards

possession notice

mere pasting of possession notice by the bank upon the property mortgage by the guarantor but not duly served upon the borrower and not published in any news paper cannot be said to be valid notice under section 13(4) of the SARFAESI Act and is liable to be quashed by the Hon'ble DRT.

discussions invited

thanks and regards

vijyant nigam