cpc

time barred loan

EX BANKER

Sir,

bank has taken possession of my house under Securitisation Act.Mortgage was done in Novemeber 2001  against housing loan and bank has already published auction notice in the local news papers.

I had also availed a clean overdraft facility of Rs.3.50 lakhs in 2007 against the execution of a Demand Promissory Note (No collaterals,No guaranttes /sureties).This DPN is now time barred under limitation Act

The value of my house is around Rs.20.00 lakhs and housing loan is Rs.5.50 lakhs.It is learnt that many people have come forward to buy the house under auction by the bank

Bank has a general lien But,.Whether Bank can appropriate the sale proceeds of my house towards my clean overdraft account where the security documents are time barred after adjusting my housing loan account.Bank has not yet asked me to sign any Acknowledgement of debt,Debit balance confirmation or fresh DP Note and also not issued any demand notice

Kindly clarify

 
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Advocate

Normally banks do not sanction any clean overdraft limits without any collateral security... Let me know the details of you OD account and the purpose for which you had taken... What was the date of   your last credit into the Overdraft account ?

 
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EX BANKER

It  is a  staff clean overdraft at the rate of Bank's BPLR.Last credit in the account is somewhere in June 2008.I am dismissed from the services of the bank in 2009 on false and fabricated charges and allegations.My WP is pending in high court.My PF is not yet settled.

 
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Advocate

According to my knowledge the scheme of sanctioning clean OD to staff will have provision for recovery also... Please let me know those guidelines... Your case being Dismissal, bank reserve the right to recover all the loans from your terminal benefits...I cannot comment on the action of the bank since the matter is pending before HC.

 
Reply   
 

Dear Mr. Gokuldas,

In mercantile system the Bank has a general lien over all forms of securities coming to possession of bank in the ordinary course of banking business. Money is best form of property and security.The Bank has the liberty to adjust the surplus sale proceeds in possession of the bank towards dues in the second loan.

Please see Sec.171 of Indian Contract Act which reads thus:

"Bankers, factor, wharfingers, attorneys of a High Court and policy brokers may, in the absence of a contract to the contrary, retain as a security for a general balance of account, any goods bailed to them; but no other person have a right retain, as a security for which balance, goods, bailed to them, unless is an express contract to that effect."

There is no agreement against bank restraining it to exercise BANKER'S LEIN.

The point of limitation arises only when the bank wants to go to court of law for recovery of the debt. But such necessity may not artise as surplus sale proceeds are in possession of the bank or comes to bank.


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In my view, the bank's action of recovering a time barred debt can be challenged by you in an appropriate court. However, bank may adjust the clean overdraft out of your terminal dues

 
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In my view, the bank's action of recovering a time barred debt can be challenged by you in an appropriate court. However, bank may adjust the clean overdraft out of your terminal dues``

 
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Advocate

Though there may be some procedural lapses on part of the bank, however it must be seen that the right of the bank to recover the loan is not time barred, and hence it will have the right to resort to appropriate alternatives available to it. SInce the security is time- barred/  invalid now, the bank can even ask you to issue a fresh security in their favour. It must be kept in mind that law of limitation only curtails the remedy before court of law, and does not stop the bank from obtaining any other relief which may be available to him or her. In this regard kindly refer to Secton 171, Contract Act.

 
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Advocate

You stated the property is put to auction by the bank. If it is under SARFAESI Act, immediately prefer an Appeal under Sec.17 of the SARFAESI Act in jurisdiction DRT, through an expert lawyer to stop the sale and also to sort out the issue amicably later.

 
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