Sarfersi act 13 3 clarification
8 months ago
We are a successful bidder of a property in Hyderabad
We recently came across a major objection in a case
Where borrower asked
to not to convert his account to npa and regularise and requested for 1 crore loan it seems bank didn't respond to it and after couple of years of sa case that seems the major objection in the drt court do you think as the successful bidder for the property we have any chance to get the property
A.Dear Client,
Section 13(3A) primarily lays down that any security interest created in favour of a secured creditor is enforceable without the intervention of any court or tribunal. As per sub-section (2) a creditor is required to issue a notice in writing to the borrower to discharge his liability within sixty days of the notice when such borrower has defaulted in repayment of secured debt or any installment thereof, and his account in respect of such debt is classified by the secured creditor as non-performing asset(NPA). If the borrower fails to discharge his liability despite the service of notice, the creditor is free to recover the debt through the modes prescribed in sub-section (4) such as – taking over possession of the secured assets of the borrower, taking over management of the business of the borrower etc. Sub-section (3A) of Section 13 of SARFAESI Act was introduced by way of an amendment in the year 2004 whereby (3A) the borrower is given an opportunity to make representation or raise an objection with respect to the notice issued under subsection (2). A further duty is imposed on the creditor to consider such representation/objection and if the creditor concludes that such representation or objection is meritless, he shall communicate within fifteen days of receipt of such representation or objection the reasons for non-acceptance of the representation or objection to the borrower. The Delhi High Court discussed the facts and ratio of the judgment of the Supreme Court in ITC Limited v. Blue Coast Hotels Ltd. & Ors.: 2018 SCC OnLine SC 237, which was the basis of the entire case of the petitioner. It was held by the Court that undoubtedly, the provisions of Section 13(3A) of the SARFAESI Act are mandatory and it is necessary for the lender to consider the representation/objection made by the borrower in response to the notice issued under Section 13(2) of the SARFAESI Act. The Delhi High Court observed that the intention of the Legislature in introducing sub-section (3A) is to ensure that objection/representation of a borrower against any action for enforcement of security interest is considered before a creditor proceeds to take possession of the secured assets in terms of Section 13(4) of the SARFAESI Act. The Court opined that bearing the aforesaid object in mind, it became at once clear that it is mandatory for the creditor to consider the objection and representation furnished by the borrower before resorting to any action under Section 13(4) of the SARFAESI Act. However, the Court was of the view that there is no reason to hold that if the lender fails to do so within a period of fifteen days, it loses its right to enforce the security interest under provisions of Section 13 of the Act. Keeping the aforesaid views of both Delhi High Court and Apex Court into consideration, being a successful bidder of the property, your chance for getting that property appears to be not viable or feasible at the moment. For further clarification, you may seek a counter-opinion on the subject.
Section 13(3A) primarily lays down that any security interest created in favour of a secured creditor is enforceable without the intervention of any court or tribunal. As per sub-section (2) a creditor is required to issue a notice in writing to the borrower to discharge his liability within sixty days of the notice when such borrower has defaulted in repayment of secured debt or any installment thereof, and his account in respect of such debt is classified by the secured creditor as non-performing asset(NPA). If the borrower fails to discharge his liability despite the service of notice, the creditor is free to recover the debt through the modes prescribed in sub-section (4) such as – taking over possession of the secured assets of the borrower, taking over management of the business of the borrower etc. Sub-section (3A) of Section 13 of SARFAESI Act was introduced by way of an amendment in the year 2004 whereby (3A) the borrower is given an opportunity to make representation or raise an objection with respect to the notice issued under subsection (2). A further duty is imposed on the creditor to consider such representation/objection and if the creditor concludes that such representation or objection is meritless, he shall communicate within fifteen days of receipt of such representation or objection the reasons for non-acceptance of the representation or objection to the borrower. The Delhi High Court discussed the facts and ratio of the judgment of the Supreme Court in ITC Limited v. Blue Coast Hotels Ltd. & Ors.: 2018 SCC OnLine SC 237, which was the basis of the entire case of the petitioner. It was held by the Court that undoubtedly, the provisions of Section 13(3A) of the SARFAESI Act are mandatory and it is necessary for the lender to consider the representation/objection made by the borrower in response to the notice issued under Section 13(2) of the SARFAESI Act. The Delhi High Court observed that the intention of the Legislature in introducing sub-section (3A) is to ensure that objection/representation of a borrower against any action for enforcement of security interest is considered before a creditor proceeds to take possession of the secured assets in terms of Section 13(4) of the SARFAESI Act. The Court opined that bearing the aforesaid object in mind, it became at once clear that it is mandatory for the creditor to consider the objection and representation furnished by the borrower before resorting to any action under Section 13(4) of the SARFAESI Act. However, the Court was of the view that there is no reason to hold that if the lender fails to do so within a period of fifteen days, it loses its right to enforce the security interest under provisions of Section 13 of the Act. Keeping the aforesaid views of both Delhi High Court and Apex Court into consideration, being a successful bidder of the property, your chance for getting that property appears to be not viable or feasible at the moment. For further clarification, you may seek a counter-opinion on the subject.
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A.Dear client,
As the successful bidder, it is crucial to thoroughly investigate the nature and implications of this objection. The borrower's request and the bank's response, or lack thereof, might have legal ramifications on the property's ownership and title. It is recommended to seek professional legal advice from a lawyer experienced in property and debt recovery matters to understand the potential impact on your position as the successful bidder.
The DRT court's decision on this objection could influence the property's status and transfer of ownership. If the borrower's request is upheld and the loan is regularized, it might affect the property's saleability and transfer to you as the successful bidder. Conversely, if the objection is dismissed, it may strengthen your claim to the property.
To safeguard your interests and make an informed decision, collaborate closely with your legal counsel to review the case's progress and any court orders related to the borrower's request. Your lawyer can guide you through the legal complexities and potential risks associated with acquiring the property under these circumstances.
As the successful bidder, it is crucial to thoroughly investigate the nature and implications of this objection. The borrower's request and the bank's response, or lack thereof, might have legal ramifications on the property's ownership and title. It is recommended to seek professional legal advice from a lawyer experienced in property and debt recovery matters to understand the potential impact on your position as the successful bidder.
The DRT court's decision on this objection could influence the property's status and transfer of ownership. If the borrower's request is upheld and the loan is regularized, it might affect the property's saleability and transfer to you as the successful bidder. Conversely, if the objection is dismissed, it may strengthen your claim to the property.
To safeguard your interests and make an informed decision, collaborate closely with your legal counsel to review the case's progress and any court orders related to the borrower's request. Your lawyer can guide you through the legal complexities and potential risks associated with acquiring the property under these circumstances.
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