SARFASE Act
Querist :
Anonymous
(Querist) 19 July 2010
This query is : Resolved
I have a export credit outstanding of Rs 2.5 Crore. My interest payments as of date are prefect so was the bill submission and realisation. Due to the recession in the EU and adverse exchange rates as well as uncontrolled rise in price of raw materials I have been incurring loss and now stand with zero Working capital. The matter was verbally brought to my bank's notice. I m trying other means to bring in funds and be back on rails. I m also trying to dispose some assets mortgaged to the Bank which will see me out of trouble. But I will need time in any case. What legal recourse do I have to avoid or delay the SARFASE enforcement so that I can bring in funds and move on?
Can I request the Bank to apply some rehabilitation measures instead of SARFASE?
Devajyoti Barman
(Expert) 19 July 2010
Yes, you first make a representation towards restructuring the re payment schedule in the trying times. After the amendment of the SARFASE Act , the bank is bound to ponder over such representation and whether or not it accepts such proposal , you will gst the much needed breathing space.
Even if the bank take recourse to such Act there are lot of measures you could take to buy time.
s.subramanian
(Expert) 19 July 2010
you approach the bank first explaining your difficulties and seek rescheduling.If they accept and do it,well. Otherwise,if they choose to proceed under sarfaesi,do not worry at all. your will have the chance of giving your explanation to Sec.13(2) notice.After that you can approach the Debt Recovery Tribunal and seek redressal. All these can merely delay the repayment. But it will give you quite a lot of time to overcome your temporary difficulties. Or else seek the permission of the bank to relieve some of the properties from mortgage so that you can sell them and discharge the loan dues for which the bank may agree. once you approach the courts there are lot of avenues to prolong the matter. do not worry.
J. P. Shah
(Expert) 20 July 2010
If branch or regional office of bank does not listen, refer the matter to CMD of the bank. Put every thing in black and white with supporting documents. Try to have appointment with CMD/Executive Director/GM [credit]HO and have meeting minutised also or subsequently write and email as to what has transpired in the meeting. I think you are SME and hence you deserve sympathetic and helpful approach by bank as per directives of Ministry of Finance and RBI. You can also approach RBI to intervene.
You must prove on paper that circumstances are beyond your control due to adverse business conditions and that you are not a willful defaulter. Give all options to bank to help you out of difficult situation. Please also mention that if factory is closed, large number of employees and their families would be adversely affected. Bank can be convinced and if needed forced to reschedule/rephase repayment as per RBI very lenient directives, which are binding on banks. With new national litigation policy effective from 01-07-10, public sector banks will not be too legalistic. Please search www.rbi.org.in and also consult a good CA to represent you at bank. Bank is bound to consider all your genuine problems including additional working capital requirements.
Please move fast before bank takes one-sided decision to invoke SARFESAI etc. Just explaining orally will not solve the issue. Banks take decisions on what is in file and records. Mark copies of letters to RO/ZO and HO of the bank.
J. P. Shah
(Expert) 20 July 2010
You have a separate ministry of micro,small and medium enterprises. Its website is http://msme.gov.in/. Please study THE MICRO, SMALL AND MEDIUM ENTERPRISES DEVELOPMENT ACT, 2006 at http://msme.gov.in/MSME_Development_Gazette.htm
You can try arbitration in worst come worst situation. Following links will also be of use to you:
www.bankdrt.com
www.bankdrt.net
www.drtsolutions.com
Industry associations, if active in your area, will also be in a position to help you out with bank.
Querist :
Anonymous
(Querist) 20 July 2010
Hello
Thanks for your advises.
The position is that the Bank has not officially recorded that my WC is nil. ie the inventory position is precarious. They say if they put it on record that will be problem creation for me. So though they know that my WC is nil they are insisting that I keep giving Export bills. The position is since WC is nil I cannot, and they know that.. And they want me to sell the mortgages or bring in money immediately. In the meeting with the circle office I requested a time frame of 6 months to dispose assets and regularise. In the mean time also requested for an adhoc assistance. But so far since nothing is formally recorded they have refused any assistance until I clear the OD PCs.In this situation I also fear losing my international export business.They sort of threaten that unless I provide export bills they can go for recovery and once that process is begun they cannot stop that.
