SARFAESI

to take recourse under section 13(4) it is mendatory to send the notices.

the notice is required to be sent to the Borrowers for the intimation of date n time of posession etc.

For issuing Possesion Notice u/s 13(4), is there a timeframe i.e. how many days before the actual date of possession the Notice must be served? Does the act provides for it or the Principals of Natural Justice would apply here?

at the first place if the notice under section 13(2) was sent in the yr 2007 the bank should have send the posession notice u/s 13(4) soon after the said 60 days in the notice are over.

secondly if the borrower have made any payment after that, and if the debt is not time barred than the bank will again have to send the notice u/s 13(2) n soon after 60 days notice for posession is required to be sent. notice u/s 13(4) is mandatory to issue n time limit may be given depending upon the actual situation but at list a weeks time may be given to the borrower.

if i am wrong pls let me also know the correct position

Thanx

Notice u/s 13 (2) was sent in June - 2007. There have been some payments in the account after the Notice. Now the Bank wants to enforce Sec - 13(4). What are the options before the Borrower? What are statutory requirements to be complied with by the Bank before Possession?

first of all confirm that the borrower have not created any other charge on the property.(possible that he might have done )

then the bank needs to send the notice u/s 13(2) again, than soon after the 60 days of the said notice the bank shall send notice for taking posession u/s 13(4) and on the specified date the bank can get the posession.

Dear Friends,

Let me share my views on the subject.

1) The act no where says that a possession notice has to be served on the borrower and the guarantor before the possession of the property.

2) The act stipulates that possession notice shall be published/served on the borrower within 7 days from the date of possession.

3) There is no time limit to proceed under section 13(4) i.e. possession after sending 13(2) Notice.

4) To be on the safer side, pls confirm whether the account became a performing account after issuing the demand notice under section 13(2) of the SARFAESI Act.

5) If the account is still a non-performing asset, you can go ahead with possessing the secured property.

6) Some High Courts insist that symbolic possession has to be taken first and then the secured creditor shall apply before the CJM or CMM or DM for Physical Possession under section 14 of the Act.

7) Whereas the Act does not say like that.

I hope this has thrown some light on the aspects. If there is any contradicting views pls react

Dear Mr.Uday,

1. What happens if the possession notice is not published in Newspaper even after expiry of more than six months?

2. The Limitation period of Notice u/s 13(2) is 3 Years. Please Comment.

Regards,

Manoj Harit

Dear Mr.Manoj,

1) It is not correct to say that the limitation period of section 13(2) is three years. There is no limitation period to this.

2) If the possession notice was not published within 7 days from the date of possession. the possession will be set aside on technical grounds and if the sale had taken place, even the sale will be set aside.

Other friends can share their views are debate.

Dear Mr.Uday,

Thanx for your opinion. I agree with you about point no - 2. But about Limitation period of Notice u/s - 13(2) I still am of the opinion that it is 3 years. I'll try & give a Citation in this regard.

I agree with your point. Can you please provide me the citation?

dear uday n manoj...

as far as i know there is no limitation clause for 13(2)

Dear Gayathri, I too was under the impression that there is no limitation for section 13(2). On going through the views of Mr.Manoj, I did a research and found the following points from the book "Law and Practice of Securitisation" Authoured by Dr.R.G.Chaturvedi. For your infomation I'm providing the relevant points obtained from that book. Hope this will calrify every one.

Page No.475 Sec 36-2 Plea of limitation

Section 3(1) of the Limitation Act, 1963 has provided that- “Subject to the provisions contained in section 4 and 24 of (inclusive), every suit instituted, appeal preferred and application made after the prescribed period shall be dismissed although limitation has not been set up as a defence”. It may be reiterated that an action under section 13(4) being unilateral action without intervention of court, there is hardly an occasion for the borrower to take a plea of limitation at the stage of initiation of any action under said section 13(4), yet in case the borrower finds that the claim in respect of the financial assets is not made within the period of limitation, that is within three years, it is open to the borrower to at once approach the Debts Recovery Tribunal by way of an application under section 17 of the Act to assail the action of the secured creditor as barred by the limitation, and the Tribunal can, in exercise of its inherent powers under section 19(250 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, make an order staying the action of the secured creditor, or make such other order as it deems fit, to secure the ends of justice, till disposal of the borrower’s application.

Sec.36-3 Commencement of period of limitation.

The clue to commencement of the period of limitation for an action under section 13(4), is traceable to provisions of sub-section (2) of section 13, stating that- “Where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any instalment thereof, and his account in respect of such debt is  classified by the secured creditor as non-performing asset, then, the secured creditor may require the borrower by notice in writing in discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to entitled to exercise all or any of the rights under sub-section (4)”.

Thus, the secured creditor has, first of all, to designate the account of the borrower as non-performing asset, and, thereafter to issue a notice demanding full payment within sixty days from date of such notice. The period of three years shall, then, commence, accordingly, from the expiry of a period of sixty days from date of receipt of such notice by the borrower, and, as usual, the date of receipt of notice by the borrower shall be excluded, in view of the use of word ‘from’ in sub-section (2) of section 13.