Harish Bhatia (Director) 23 November 2010

invocation of sarfaesi act

After how many days from NPA classification can sarfaesi act be invoked??

It is a case of Rs 26000 overdue in machinery Term Loan of an SSI and it is not a willful defaulter. Borrower claims that export payment receipts of Rs. 2.20 Lakhs were not credited by bank to any of his accounts before NPA and that's the reason for default in paying regular EMI. Even after 3 years, bank unable to explain where this credit of Rs. 2.20 Lakhs disappeared.

Bank never gave any letter to borower as to when and why the account is classified as NPA. Nor does Sarfaesi 13(2) notice give details of any overdues. Is this a serious defense for the borrower at DRT.

After Sarfaesi the borrower kept on paying all his overdues and requested the bank to upgrade account to standard. Bank refused and kept adjusting the payments to principal amount and kept the interest outstanding. Was the bank legally correct??

Currently, the entire principal amount is paid-up. The uncharged interest is disputed because the bank keeps on charging very high rate, compounded monthly + penal interest. The borrower is disputing this. The bank still harasses him under sarfaesi act to sell his home property for the dues in interest account. In this case what is defence of the borrower??

Reply Follow

6 Replies

Y. ARAVIND (ADVOCATE) 23 November 2010

For such greievence approach nearest Banking Ombudsman

1 Like

Harish Bhatia (Director) 24 November 2010

Banking Ombudsman closed our complaint even after 1 year of detailed hearings on grounds that the matter needs elaborate investigation and therefore out of BO purview. Other RBI depts are refusing to inetervene.

The tragedy now is, we being an SSI and never a defaulter before and after NPA, have been forced to shut down our manufacturing unit rendering our over 50 employees and ourselves as street beggars because of harassment by bank officials. All this, because the system at RBI or any other forum denies us quick justice.

In order to hide the deficiencies in service and oust the jurisdiction of Banking Ombudsman, the bank has filed recovery suit at DRT inspite of no dues position. By illegally givng inflated principal and Interest figures and invoking Sarfaesi act immediately after NPA, they projected a mountain from a mole hill and thereby successfully deterred Banking Ombudsman, RBI, BCSBI etc from intervening.

Our justice delivery system is pathetic and totally against the interests of small borrowers.

SACHIN AGARWAL (ADVOCATE) 03 December 2010

You have stated that only 26,000/= is the balance outstanding. If so, the Bank cannot take any action under SERFESI ACT because it is less then Rs. 1,00,000/=.

Besides this, if the outstanding amount is less then 20% of the total loan amount, the provisions of SERFISI Act are not applicable in terms of Section 31 ofthe act.

It is not mandatory for the Bank to grant any time to initiate the proceedings under SERFECI Act after NPA.

In case of any problem of not giving credit of the amount deposited, the matter can be taken up with DRT or Banking Ombudsman and also the Complaint can be filed before Consumer Forum.

1 Like

SACHIN AGARWAL (ADVOCATE) 03 December 2010

Further, the Bank can charge the interest in terms of the agreement and not otherwise.

nishad (Asst.Manager Legal) 06 January 2011

U may contest the matter in the Hon'ble DRT.BO would not admit the case as the matter is not summary in nature.You may also explore the possibility of Writ petition to put a stay on the Secrutization untill the matter is decided by the DRT.There are also chance that writ may not be entertained by the HC citing alternative remedy.However,u may give a shot

1 Like