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anand das (service)     27 April 2011

SARFAESI Act Vs Debt Racovery ..

What is difference between SARFAESI act and Debt recovery procedures folled in DRTs?



 15 Replies

N.K.Assumi (Advocate)     27 April 2011

It is not SARFAESI Vs DRT but SARFAESI via DRT. The two are complimentary to each other and not exclusive of each other.

RAJU O.F., (Advocate)     29 April 2011

SARFAESI Act if the most draconian proceedure gifted to the bank officials, for selling the secured properties for the benefit of often  the bank officials.  DRT Act is the provision for filing suits for the banks if the dues are more than Rs.10 lakhs.  In fact, as per Sec.19(1) the banks have to withdraw pending Original Application (suit) filed by the bank, so as to proceed under the SARFAESI Act. Unfortunately, the Apex Court allowed simultaneous proceedings under both the acts against the borrowers, in the landmark judgment in "Transcore" case.  As per the original scheme of the SARFAESI Act, the secured assets had to be registered in the Central Registry, so as to enable banks & FIs, to invoke SARFAESI proceedings.  But now the Central Govt. is silent on this part and the Central Registry is not established till now.  Hence the bank officials enjoy maximum, with the sale of valuable properties for meagre amounts. Concerted efforts must be taken to stop this.

1 Like

(Guest)

Thanks  RAJU O.F.,   for giving this advise.

Can you post  the landmark judgment in "Transcore" case?


(Guest)

ok, i found the judgments which can be access here:

https://www.lawyersclubindia.com/forum/SARFAESI-Act-Imp-Judgment-36077.asp

Vigneswaran (Lawyer)     14 June 2011

DRT is an Executive machinery of the Sarfaesi act

1 Like

RAJU O.F., (Advocate)     15 June 2011

I wish to correct Mr.Vigneswaran. DRT is not an executive machinery of the SARFAESI Act.  RDDBFI Act ( shortly DRT Act) and SARFAESI Act are two separate proceedures available to banks & FIs.  Banks can execute and proceed for recovery without help of any court. DRT is the legal forum for the aggrieved parties to approach to stop such procedures by banks.

Vigneswaran (Lawyer)     16 June 2011

I do agree both are different, but whatever the procedural violations or other anomolies to the provisions of the sarfaesi act would be redressed by DRT only.

Sumit Bhatnagar (service employee)     20 June 2011

Dear Sir,

I have a single residential property in a prime location of gurgaon, I took 13 lacs loan from nationalise bank @ 8.5% floating reducing balance terms.

During the recessions I lost my job as my company winded up, I could not get job for more than a year, I tried to do some business, I opened my current account too with the same bank/branch.

I was continuing my EMI but some time I deposits 2 EMI;s together in the next month as & when I use to get payments in business. Which Bank has taken as my default, I requested bank in a writing to increase my tenure as the interest rate was also increased 3 times during the recession period so it was a 2 sided problem for me.

But bank has not considered, I keep depositing money somehow & maximum I could, bank has also taken all the funds in the current account without my permission to home loan A//c resulting my business japeordized.

Now in spite of my payments more than my agreed EMI till last month, bank has taken a symbolic possession from Dist. Megistrate. 

I took 13 Lac in 2004, I paid around 9.5 Lac till now, still my outstanding principle is 11.97L bank has put all the penalties, Legal & paper ad charges on my account, Whatever I have been paying they are adjusting against their bills.

I just have single property in a joint name of my mother & myself, My mother also passed away in december.

I have been going to the bank personaly every month with money to deposit, but it seems bank is more interested to take property & ignoring all my payments to them & increasing my due's day by day.

everytime they take my signatures on revival notices & other legal documents without a date.

What do I do, Please help.

Thanks & regards,

Sumit

RAJU O.F., (Advocate)     23 June 2011

As the bank has taken symbolic/physical possession through Dist. Magistrate, your only remedy is to file Securitisation Appeal u/S.17 of SARFAESI act before DRT of your jurisdiction through an advocate who is conversant with DRT and SARFAESI proceedings, immediately.

Suresh Naik (xxx)     12 September 2011

Hi, If Bank will not get the loan amount of the house after selling it, Can the remaining amount need to be pay the barrower? If original Barrower will not pay the amount then will these effects to the GUARANTOR? Will Guarantor having any effects in the SARFAESI Proceedings if the loan amount is more than property price? If yes, please tell what the problems GUARANTOR needs to Face are. Please clarify the doubts.

RAJU O.F., (Advocate)     17 September 2011

If the full amount of dues was not recovered by the sale of secured properties, bank can either file Original Application (suit) before DRT, or before civil court if the balance due amount is less than Rs.10 lakhs, against all the borrowers, including the guarantors. 

Anjuru Chandra Sekhar (Advocate )     18 September 2011

Dear Sumit,

You have taken loan in 2004 and the amount was Rs.13 lacs.  Now outstanding shown by statement is 11.97 lacs which is nearly Rs.12 lacs.  That means you have paid only Rs.1.00 lac.  Rest of Rs.8.5 lacs is adjusted towards interest, charges etc. 

You need to take the following from bank:

1. Statement of account from the date of account opening till date

2. Loan agreement copy showing interest rate

3. Particulars about changes in floating interest rate

4. Documents evidencing EMI amount and Tenure of loan (36 months, 48 or 60 months etc)

Calculate on your own in Excel sheet (or if you need my help you can contact me at 9290548743 I am located at Hyderabad so I don't know how far I can be of help to you) how much it works out to if you calculate on your own.  My assumption is generally bank employees because of inability to operate the system and make interest rate entries correctly in the system ensure that the system does not calculate the balance properly.  If there is any difference, on that basis you can file Securitization Application in DRT under Section 17 of the SARFAESI Act, 2002 within 45 days from the date of symbolic possession or from the date of actual physical possession.

Generally tribunals hear the SAs from borrowers if there is any deviation in the procedure followed by banker in following the rules relating to SARFAESI Act, otherwise, it is not of any use for borrowers.  I think in your case they have charged excess interest. 

Banks should remember that when they charge floating interest rate which increases the interest portion in the EMI, then accordingly they should also set the new EMI amount so that principal amount is also paid by borrower and intimate the borrower accordingly.  Otherwise, it so happens that only interest portion is only paid and principal remains as it is. If the floating interest rate reduces, it is advantage to borrower because the principal portion is paid more than necessary, but if it increases then the interest portion eats away the principal portion that is how principal remains as it is.  This argument you can use in your SA and hear what court says about it. 

Thanks and regards,

Chenna Keshava

Anjuru Chandra Sekhar (Advocate )     18 September 2011

Dear Suresh,

The borrower has to pay the remaining amount if Bank files suit for recovery of shortfall under Section 11 of Security Interest Enforcement Rules, 2002.  The question with respect to guarantor has to be answered in two portions.  If the guarantor is a person owning mortgaged property, then the bank has a right to proceed against his property under Securitization Act.  If the guarantor is not the owner of mortgaged property, then the bank can proceed as if some judgment debtor is proceeded against under Civil law either in DRT (if the liability is more than 10 lacs) or in Civil court if the liability is less than 10 lacs.  The guarantor's liability is co-extensive with that of borrower, it is not necessary for bank to extinguish its rights against borrower first and then fall back up on the guarantor.  It can enforce its rights in whatever order it wants.  If it is in a better position to enforce its rights against guarantor first, then it has every right to proceed against guarantor first without even proceeding against borrower.

Chennakeshava

Suresh Naik (xxx)     19 September 2011

Hi Chandra, Thanks for Your reply, if borrower denies paying the amount, because he is Private employee and not having any properties on his name. And Guarantor is Central government Employee and having property. Will bank take any action on Guarantor?

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