Illegal classification as npa

This is not a right time for filing Writ Petition.You will be given ample opportunities to defend your case.The first such opportunity will be available on the issue of notice U/S 13(2) of SARFAESI ACT.If the account has been classified as NPA time is not far off when you will be served with notice U/S 13(2) of the Act.

Raise the issue of restructuring of loan in reply to notice U/S 13(2).However as you have accepted the terms of restructuring in writing your case is a weak case.

You have at present the following opportunities

1.Challenging the classification as NPA of the account in reply to notice u/s 13 (2).

2.Challenging action under section 13(4) in Debt Recovery Tribunal.

The sincere most advice is that you should avoid getting in to this litigation and enter in to negotiated settlement with the bank.Litigation can only delay the recovery but cannot stop it.In litigation you will be loosing on the following grounds.

1.Cost of your litigation.

2.You will be burdened with the cost of litigation of the bank.

3.Cost of publication of Notice/ Tender in the News Papers.

4.Cost of Recovery/Recovery agents fee etc.

5.Devaluation of property in litigation sale.The sale under Sarfaesi act is generally at throw away prices.

6This may not be the end of it ,many other mice. charges /costs/penal charges may be added to it.

Good advice by Mr. Cheema.

Dear S. Ajit Singh Cheema ji, 

Many thanks for your sincere advise. We had been trying to settle the matter with the Bank in a very cordial way and have even offered for resturcturing the entire loan. I give here under a few further facts of the case:

The Bankers reduced the C/C (hyp) Limit from Rs. 25 Lacs to Rs. 24 Lacs frfom 01.03.2012, without informing us in writing, as wer had agreed to gradual reduction of the Limit by Rs. 10,000.00 every month from Nov. 2011, when our sales had gone down below Rs. 45 Lacs, in first 7 Months, but we had also informed that by the end of the Fiscal year 2011-12, we shall be able to reach our Target of Rs. 1.00 Cr.

The account wasdeclared irregular due to the reduction of Limit as well as debit of interest. 

In the month of March 2012, we did deposit a sum of Rs. 75,500.00 but the bankers never cooperated and returned many of our cheques un paid, damaging our reputation and tarnishing our image in the business circles.

We still cooperated and deposited a furth sum of Rs. 50.000.00 in the end of April 2012, to bring the balance down from the earlier limit of Rs. 25.00 Lacs.

The bankers were given proff of our VAT returns, showing a sales of Rs. 95.30 Lacs upto 31.03.2012, nd requested that the limit be restored to the original level, but they did not yield and kept saying that as per computer our account is running irregular since 01.03.2012 and would be classified as NPA on 30th May 2012.

Even on 29th May 2012, we deposited further sum of Rs. 32,000.00 but the Bank was insisting that we should deposit a minimum of Rs. 1.32 Lacs to bring the Limit below Rs. 24.00 Lacs, now they have written to us that account had beome NPA.

The RBI Guidelines are clear on the subject that where in any account the interest is being serviced it can not be classified as NPA, herein the Bank is using its own interpetaion and trying to harass us. 

Please sugguest some strong remedy and also the Authority, we can approach to get our account back on track. We had been working with the same bank for th last 40 yrs. 

Best regards...Vinod 

There is no doubt about it that your account has turned NPA with effect from 31.05.2012,as it remained out of order / over drawn from 01.03.2012 to 31.05.2012.

The matter of reduction in limit was in your knowledge / Notice and under consideration of the Bank. You have not mentioned any thing about agreed terms of restructuring of the account. The returning of cheques   unpaid , shows you have been informed about the reduction of limit.

The Bank must have reduced the limit after appraisal of your proposal and placing the necessary sanction letter on record.

There may be some small irregularities on the part of the Bank , but those are not material .One thing is for sure that there is some Ego problem with some staff member /Manager.

Once again my  sincere advice is instead of facing SARFAESI  ACTION, Arrange rupees one lac or so and pay it to the Bank and bring the account at least once below sanctioned limit of RS24 lac and apply for enhancement of limit immediately by giving your fresh sales  figures / projected sales figures. Please note its temporary phase and it will pass. Best wishes.

Yes, you can file W.P. for wrongly declaring your loan account as NPA.

Mr. Cheema has given good advice kindly pay attention to that instead of going to lotigation side

No writ petition business it is cosly and no results possible, Ld advocate Cheema has given detailed analysis.

You have simple options -

1) wait for notice u/s- 13(2) and raise maximum LEGAL OBJECTIONS WITHIN next sixty days which the lender has to reply in next seven days.

YOU MUST TAKE LEGAL OBJECTIONS WHICH WILL BE IN PLENTY.

2) Oppose possession notice which can be done even in local courts .

3) Even there are provisions still the lender must get local court orders for possession which will be given only after hearing. So it will give sufficient time.

After the Bank starts SARFAESI proceedings, you can not go to any  Court other than the DRT as per section 34 of SARFAESI ACT,2002. You will be able to go to DRT only after being agrieved being issued possession notice u/s 13(4) of the Act, not before that.

Please note that the Sarfaesi action cannot be and should not be challenged in the local court,it shall be mere wastage of time and money, particularly under the circumstances mentioned by the applicant.

Please be informed that The Chief Metropolitan Magistrate or The District Magistrate under  section 14 of the Sarfaesi Act is not required to give notice either to the borrower or to the third party. There is no adjudication before CMM / DM .

Thanks Cheema ji once again.... I am trying that the borrower and the lender come on terms for restructuring asap. will keep you informed, you help is the most valuable.

Dear S. Ajit Singh Cheema ji,

My banker classify my account as NPA in cc/od account i.e declare NPA on 90 days. As per RBI guidelines cc/od continuous overdraft for 90 days. That means 90 day should not count in counting or should be count. Please clarify my account overdraft on 18apr and declared NPA on 16 July. (13days april+31days may+30days june and 15days july) 89 days and if we count 16 july than 90 days. What should i do, what is the remedy.

Awaiting for your reply