SARFAESI ACT
6 months ago
Sir
A loan account was declared NPA in 2019 and notices under section 13(2) and 13(4) were given and permission from DM was also taken but physical possession was not taken as partial payment was done at that time. Can now the financial institution proceed for physical possession without giving any notice to the borrower ????
A.Dear
If a loan account was declared as a Non-Performing Asset (NPA) and the financial institution followed the necessary legal procedures under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, including issuing notices under section 13(2) and 13(4) and obtaining permission from the District Magistrate (DM), the institution may have the right to proceed with the physical possession of the property if the borrower defaults on the partial payment arrangement.
If a loan account was declared as a Non-Performing Asset (NPA) and the financial institution followed the necessary legal procedures under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, including issuing notices under section 13(2) and 13(4) and obtaining permission from the District Magistrate (DM), the institution may have the right to proceed with the physical possession of the property if the borrower defaults on the partial payment arrangement.
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A.Dear Sir,
Normally, District Magistrate give permission to take physical possession within certain period if not taken such order to be extended. You must approach the concerned expert lawyer and see that stay may be taken on such loopholes.
Normally, District Magistrate give permission to take physical possession within certain period if not taken such order to be extended. You must approach the concerned expert lawyer and see that stay may be taken on such loopholes.
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A.Dear Client,
Once the EMI against a loan is not repaid for consecutive 3 times by the borrower for any reason whatsoever, it is treated as NPA and starts the routine process of action prescribed under relevant laws for recovery of debt lying outstanding against the Borrower and the Guarantor. A suit for recovery of an outstanding loan from the borrower is filed by the Bank before a Debt Recovery Tribunal under the SARFAESI Act, 2002. Section 13(3A) of said Act 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, 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 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. 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. So, in the given situation, once a notice under Sec13(4) is issued to the Borrower who is well aware of the next course of action and permission of DM is obtained for taking over physical possession of secured assets, Lender/Bank need not to issue further notice u/s.13(4) of the Act to the Borrower. However, still you can approach the Bank for suitable negotiation before the property is listed for auction sale.
Once the EMI against a loan is not repaid for consecutive 3 times by the borrower for any reason whatsoever, it is treated as NPA and starts the routine process of action prescribed under relevant laws for recovery of debt lying outstanding against the Borrower and the Guarantor. A suit for recovery of an outstanding loan from the borrower is filed by the Bank before a Debt Recovery Tribunal under the SARFAESI Act, 2002. Section 13(3A) of said Act 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, 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 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. 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. So, in the given situation, once a notice under Sec13(4) is issued to the Borrower who is well aware of the next course of action and permission of DM is obtained for taking over physical possession of secured assets, Lender/Bank need not to issue further notice u/s.13(4) of the Act to the Borrower. However, still you can approach the Bank for suitable negotiation before the property is listed for auction sale.
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