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Rohit Gupta (partner)     26 August 2014

Banking problem

i had availed cash credit and letter of credit from a nationalized bank i had hypothecated my stocks sale bills and debtors and had mortgaged my land and building which was duly valued by the bank.In the sanction letter given to me at the time os disbursement of loan there was no mention of machinery being hypothecated but after an alteration with the manager he has added a line "plant and machinery are charged to the bank" by hand whereas rest of the sanction letter is typed .there is no list of machinery with the bank but there is a hypothecation deed which says that all plant and machinery is charged to the bank.how do i prove that the plant and machinery was never hypothecated to the bank?Is the list of machinery necessary for making charge upon the same?can bank without notice seal my premises under the ban of hypothecation agreement? pl help



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 6 Replies

malipeddi jaggarao (retired banker)     26 August 2014

When you obtain a Cash Credit facility from the Bank, the principal security is hypothecation of stocks.  But the Bank's documents are so structured all your assets including plant and machinery are covered as security for such loan.  Mere absence of recital in the sanction letter is of no use.  

As regards selling your plant and machinery without notice, it is not possible for the Bank.  First of all, Bank should recall the entire advance giving specific time and if you could not repay the amount, then only bank can go take any step for realisation of debt by selling the hypothecated goods or immovable property.  

What exactly is your problem at present.  Whether your account is classified as NPA or standard asset.  Except for the immovable property which is mortgaged to the Bank, Bank can not sell away the hypothecated goods without legal recourse.  Do not bother with imaginary problems that may come in future.  Instead keep your account properly, showing the required turnover through Bank account.

Rohit Gupta (partner)     26 August 2014

I had availed cc limit in march 2013 all was fine I was given ad hoc limit of lc in April 2013 in July the ad hoc limit was due for renewal but the manager wanted money for renewal as I refused he came to unit he threw everybody out deputed their security guards and put locks on.the main gate the reason was I had sent my machinery for repair it had been verbally told to him after 3 days he declared my account NPA after he filed case in civil court

Rohit Gupta (partner)     26 August 2014

I had availed cc limit in march 2013 all was fine I was given ad hoc limit of lc in April 2013 in July the ad hoc limit was due for renewal but the manager wanted money for renewal as I refused he came to unit he threw everybody out deputed their security guards and put locks on.the main gate the reason was I had sent my machinery for repair it had been verbally told to him after 3 days he declared my account NPA after he filed case in civil court

Rohit Gupta (partner)     26 August 2014

I had availed cc limit in march 2013 all was fine I was given ad hoc limit of lc in April 2013 in July the ad hoc limit was due for renewal but the manager wanted money for renewal as I refused he came to unit he threw everybody out deputed their security guards and put locks on.the main gate the reason was I had sent my machinery for repair it had been verbally told to him after 3 days he declared my account NPA after he filed case in civil court

P.THANGAVEL (ADVOCATE & LEGAL CONSULTANT)     26 August 2014

Dear Sir,

Having executed deed of hypothecation in favour of bank and now denying that there was no intention may not be accepted in  court now.However,descripttion of machinery is must in the deed of hypothecation with out  which bank may not be in a position to enforce the same.

Banks have power only to take possession of security by peacefull manner that too by resorting to the procedure recognised by law ie by sending notice etc and use of strong arm tactics is against the law in terms SC judgement in ICICI Bank Vs Prakash Kaur.

Further classification of Account/s to NPA is based on the conduct of the Account/s and not on the basis of availability of security. Moreover if the liability is more than 10.las. ,recovery suit will lie only in DRTs and not in civil courts.

malipeddi jaggarao (retired banker)     27 August 2014

First of all I could not accept that an adhoc limit of Rs. 1 lakh was given to you within a month of sanction.  No Manager can give like that easily.  When it was due in July, whether the same Manager was there or a new one came in?

As regards your issue, if the machinery is sent for repairs, why could you not convince the Manager showing the evidence?  The act of the Manager is high-handed and illegal.  He does not have any power to put locks all of the sudden that in when there is no pledge and only hypothecation.  In case of hypothecation intervention of court is a must.  You should not have allowed him to act like that.  You should have taken immediate steps for redressal by complaining to the police or to the higher authorities of the Bank.   How can he classify your account as NPA merely because certain machinery for which the bank did not finance is missing machinery.  Were you maintaining sufficient stocks to comensurate with the drawing limit and sanctioned limits of cash credit?  Whether the turnover was being routed through the account?  

I am afraid you are hiding the facts.  Come with full facts so that you can get a proper advice.  If the same Manager who has sanctioned you cash credit limit in March 2013 and adhoc limit iwithin one month in April 2013 acted differently in a period of 3 months i.e., in July 2013, there must be strong reason.  He might not have been paid the agreed bribe.  Is it so?

Anyway, you go to the Regional Manager/Zonal Manager/Divisional Manager of the Bank with all relevant papers and explain that the action of the Bank is illegal and immediately Bank should withdraw the case and allow you to operate the account, otherwise you will file a Writ petition against the Bank in the concerned High Court as the action of Bank tantamount to infringement of your fundamental right. 

Where do you reside?  With which Bank & Branch you have account?

If you need further help contact me on my mobile 9490753458 if you wish so.


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