cpc

sarfaesi act


THE SCENARIO IS AS UNDER:
Company "A" was enjoying working capital limit (Export PCL) with a bank.
Due to recession world over, the PCL became overdue and hence bank classified account as NPA on 31.12.2008.
Above limit was guaranteed by Individual "B".
 
Individual "B" was also enjoying Term Loan from the same bank. The account was being serviced regularly. The loan was a mortgage loan on a "Land & Building" mortgaged by way of Equitable Mortgage. The said "Land & Building" was also CONTINUING SECURITY to the working capital limits given to Company "A".
 
The Bank recalled the Loan from the Company "A" on 31.01.2009 and issued notice under SARFAESI on 04.09.2009 to Company "A". However to our suprise without recalling the loan of Individual "B" they have issued notice under SARFASEI on the same date i.e. 04.09.2009.
 
Company "A" is a registered company under the Companies Act and registered in Delhi. Individual "B" is a resident of Haryana and the "Land & Building" is situated in the State of Haryana.
 
Under the Haryana Stamp Act, Stamp Duty @ 0.2455% needs to be paid on the extent of charge of the Equitable Mortgage, HOWEVER NO STAMP DUTY HAS BEEN PAID AT THE TIME OF LOAN DOCUMENTATION. THE EQUITABLE MORTGAGE IS NOT REGISTERED WITH ANY REVENUE DEPTT.
 
MY QUESTION:
1. Can the EM document be taken as evidence since the document has not paid the required stamp duty?
2. Can the bank, on the basis of EM document (which has neither been registered nor the applicable stamp duty paid) issue notice to Individual "B" (Guarantor to NPA accout) whose account was regular.
 
 
 
 
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Lawyer

Dear Sandeep

please clarify whether the notice sent by bank to individual 'B' was in the capacity of a guarantor of financial facility granted to Company 'A'.

secondly, please clarify which mortgage was not registered (1.) Gurantee to financial facility to Company 'A' or (2.) Financial facility to Individual 'B'.

It is further clarified that the Banks generally create equitable Mortgage by deposit of title deed and not registered mortgage in order to avoid the stamp duty and the same is valid and binding. they note the same in register of deposit of title deeds and register the charge on the property with the registrar of companies.

 

 


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Advocate

1- I agree with Mr Negi

2- The Mortgages ( for several Laons on same proerty) have to eb ebforced at a time  - as per the Sec  78     of Transfer of preorty Act . A Security on the same mortgaged proerty can not be adjourned /postphoned on account of Regularity or godd serving of one Account

3- Here in this  case Two Accounts -one is  declared NPA and naother is Not NPA

4- Mortgage is for both Loan accoutns ( NPA & non - NPA )

5- While enforcing Security in NPA Accoutn ( which is later Extention of Mortgage  ) the Bank can not leave the First Charge- original Mortgage   for B Loan account  Security on the same property - the First Charge/Mortgage  and Second  extentded Mortgage have to be enforced at onece - not withstandign the fac t the B Accoutn is in good Servicign / not NPA . It is legal   obligation to enforce and claIm all the rights on the same  mortgage security at once - !

 


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Advocate

The Section 67 A - may be read in the place of Section 78 of Transfer of property  Act -- in my above posting !

Section 67- A    - Transfer of Proerty Act            ;-Mortgagee  bound to brign one suit / Claim on Severla Mortgages ;-


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Reply   
 

 The notice to Individual "B" was sent in capacity of guarantor.

Furthermore, there is an ECGC cover available for the loan amount of the Company "A". Isnt the bank supposed to first claim from the ECGC and then from the guarantor?

 

The property was charged both to Comapny "A" and Individual "B" by way of Equitable Mortgage. BUT HOWEVER as per the Stamp Duty Act in Haryana there is Stamp Duty payable even on EQUITABLE MORTGAGE @ 0.2455%. This required stamp duty was not paid at the time of loan disbursal.

 

 

 

 
Reply   
 
Lawyer

In that case the Bank is well within its jurisdiction under SARFAESI Act to issue the SARFAESI Notice to Individual 'B'. Further the liability of the Guarantor is co-extensive with that of the borrower and the defence that first you should have proceeded against the borrower and then the gurantor is no defence. the co-existence of liability of the borrower and guarantor had been uphled by the courts in numerous cases.

 

 

further as stated above Banks create equitable mortgage by deposit of title deed and seldom create registered mortgage. this is in order to save the stamp duty u r talking about. the mortgage by deposit of title deeds is valid and binding.

further the ECGC is an additional remedy available to the Bank and not in derogatory to the action under SARFAESI. it is like an insurance cover and doesn't cover the whole default amount. whenever the same is realized it would be adjusted towards the total outstanding and the remaining shall be taken from the borrower and the guarantor.

 


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Advocate

 Dear Negi

I Think that Credit Guaratee insurence claim , is with after compliance of all the formaliites and after showing some legla steps to recover the due amount  by the Banks !  

 
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Lawyer

well Mr. Rao am not that aware of ECGC.. however the crux still remains the same that its not compulsary for the Bank to exhaust all other remedies and thereafter proceed with the invocation of Guarantee. The bank can invoke the guarantee along with the action against the borrower or anytime.

 
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Dear Shri Rao/ Negi,

It is not at all required to exhaust all the recovery measures before filing claim with ECGC.

Opinion given by Mr. Negi that Bank can claim 75% from ECGC and balance from the debtor is not at all correct. As claim, if any, settled by ECGC to Bank for indemnification of loss suffered by Bank shall always be subject to the condition that bank shall continue to recover its dues and share the amount, if any, recovered with ECGC in the same ratio the loss was borne.

 
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Chief Manager(Law)

Interesting facts arise are as follows:

Here B is a guarantor to A. B has also availed Loan. Property X belonging to B is secured by way of EQM to the Bank for loan availed by B first and then extended to cover loan availed by A.

Loan availed by A is NPA. Loan availed by B is standard account.

SARFAESI Notice is issued for loan outstanding [aggregate] of A&B - is it justified?

 
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