Notice u/s 13(2) sarfaesi act

Advocate/ nadeemqureshi1@gmail.com

Dear Friends

can the bank/Financial institution sent the notice under section 13(2) SARFAESI ACT after filling the Original Application for recovery of money in Debt Recovery tribunal or not?

Is it mandatory to mention in above notice the date of NPA Declaration or Not?

thanks in advance for your valuable time

 
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Lawyer

Yes, parallel proceeding is permitted under the SARFAESI Act. There is no bar. It is well settled by the "Transcore" Judgement.

 
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POWER OF DEFENSE IS IMMENSE

Practically such situation does not arise since after notice the lender has powers to attach property and sale it. It is only for few expert debtors with proper legal advice to thwart such action and force the lender to bring legal order for attachement and sale.

 
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managing director

the party comes to know NPA declaration only through 13(2). is it correct? or there should be a separate written declaration of account being declared NPA.

 
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Advocate

Even after filing OA in DRT banks and FIs initiate SARFAESI proceedings by issue of Demand Notice

u/Sec.13(2) especially after the disposal of Transcore case by Hon'ble Supreme Court.  There is no specific ruole to mention the date of NPA, in the Demand Notice.  But the mortgagor/ borrower can challenge against the classification of account as NPA, if such classification was wrong.

 
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managing director

If Bank resort to action u/s 13(2( and subsequently under 13(4) where the defaulted amount is less than 20% or RS.1 LAKH, whether bank is right.  If not, what is the forum where this wrong declaration of NPA and taking action under 13(2) and 13(4)  can be challenged.

 
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Lawyer

Can you please clarify the meaning of defaulted amount. Does it mean the defaulted EMIs or the entire outstanding?

 
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managing director

The NPA is declared on account of irregularity in payment.   As per RBI guidelines, if irregular dues are paid, the account should no longer be treated as NPA and should be converte into standard account.   I am talking about irregular amount of dues due to which the account become NPA.  The account in question is PC, Term Loan, OD in current account, interest.

 
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The "defaulted Amount" as on any date includes instalments of term loan(s) and interest debited in the account(s)  which remains unpaid.

 
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Advocate

If the default is for more than 90 days the banker can classify that account  ( full loan dues) as NPA. If that due amount is more than Rs.1 lakh or more than 20% of principal+interest, bank can also take proceedings under SARFAESI Act.

 
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