Harish Bhatia (Director) 28 July 2011

Sarfaesi immediately on npa

Bank invoked sarfaesi on us within 10 days of NPA classification. We kept on clearing all dues of principal and interest repeatedly after NPA and Sarfaesi and continously requested the bank to upgrade accounts to standard and withdraw sarfaesi action. Bank refused. This way our SSI unit became sick. Bank is persisting on reovery under sarfaesi act.

RBI guidlines state that borrowers accounts should be upgraded to standard on clearence of arrears of Principal and interest. If Sarfesi is invoked immediately on NPA does it not be an illegal act because it violates this RBI guideline auitomatically??

Further, RBI guidlines mandate the banks to attempt debt restructure / Nursing for rehabilitation of SSI. If Sarfaesi act is invoked immediately, this guidlines are also violated automatically.

Further the preface of Srafesi act states that Narasihmn committe recomended this act for quick recovery of banks Long Term dues to improve bank's financial health. By virtue of this spirit of enactment of this act - if the bank invokes Srafesi act immidiately on NPA, especially on small borrowers - is the action illegal??

Please comment.

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5 Replies

RAJVEER RAI (CS EXECUTIVE) 29 July 2011

Hello dear you can refer sub-section 2 of section 13 of the Act as it requires 60 days prior notice before taking any action by the secured creditor.

RAJVEER RAI (CS EXECUTIVE) 29 July 2011

further you can approach Debt Recovery Tribunal under section 17 of the Act please hire a eligible professional to approach tribunal.

SANTOSHSINGH. (ADVOCATE sardarsena@gmail.com) 29 July 2011

You can contest , no forcible possession possible.

SACHIN AGARWAL (ADVOCATE) 31 July 2011

If you feel that you have a strong case, you can move under section 17 of SARFAECI Act before DRT.

RAJU O.F., (Advocate) 01 August 2011

Within 60 days from the date of Demand Notice under Sec.13(2) of the SARFAESI Act/ immediately submit your objections/representations to the bank challenging their actions as provided under Sec.13(3-A) of the Act. You can approach DRT only after issue of Possession Notice u/S 13(4) of the Act. Act tactfully so that the account is re-classified as 'standard asset', out of NPA, as you have regularised the a/c.