Writ to challenge NPA classification prior to sarfaesi 13(2)

If bank had classified the loan a/c as NPA, when the a/c was defaulted for more than 90 days,  based on the rate of interest and the schedule of instalments already by you, then bank is justified for such classification and hence preferring of Writ and proceeding in HC for that gound would be waste or your luck.

Dear Mr.Rahul

Restructuring of a loan account is not automatic. It is subject to acceptance of the terms and conditions by borrower who lent his signature on restructured documents. Having accepted the terms of restructuring of loan account and executed the loan documents it is not open to the borrower to challenge the same on the grounds of excessive charging of interest. In this regard please refer to the following two judgments of Supreme Court

^{Indian Bank Vs. Blue Jaggers Estate Ltd. & Ors. : 2010 (4) CTC 856 the Supreme Court held that, the borrower having signed the loan documents with open eyes and agreed to abide by the terms of the loan cannot contend later on that the rate of interest imposed by bank is unconscionable, ex propriety and contrary to law. Doctrine of unconscionable contract can not be invoked to frustrate the action initiated under SARFAESI Act. In Syndicate Bank Vs. R. Veeranna & Ors. (2003) 2SCC 15 the Supreme Court held that, if loan agreement makes a specific provision for enforcement of rate of interest without notice to the borrower it is held that bank need not put borrower on notice before charging higher rate of interest on the basis of the agreement, principles of natural justice cannot be read into express terms of contract.}

^{To challenge classification of the account by the bank as NPA by way of writ petition on this ground of excessive charging of interest may not be tenable. RBI has powers to issue guidelines in the form of circulars and the circulars have statutory flavour as held by supreme court in Sardar Associates vs Punjab & Sind Bank as well as Ravindra vs. Central Bank of India. NPA concept was introduced in advances portfolio with effect from 31.03.1993 based on Narasimham Committee’s Report 1992. No one challenged so far the vires of RBI in issuing such guidelines on asset classification and it be a belated challenge for shake of the loan account. As a matter of fact there is no cause of action to take any steps either in High Court or DRT in the present case.}

Dear Mr.Rahul,

I've responded to the Private Message.

Dear Mr. Rahul

don’t wait. I don’t think that the borrower will remain any option after receiving notes u/s 13 (2) of  SARFAESI Act. Once it is issued you cannot go to any court? And further you have to wait for further 60 days and notes and or action u/s 13 (4) of  SARFAESI Act. In between Banks do all wrong things how borrowers will know? As it is the general opinion of all borrowers that DRT & DART are bias to Banks? And some extent it is true, just look at my case I received Notes u/s 13(2)  even after my account is fit for 31(J) of SARFAESI Act. And so SARFAESI Act is not applicable? It seems I don’t have any alter remade Left? One month is goon and one more month have to go, we have to wait further to issue Notes and or action under u/s 13(4), then approach to DRT , then further to DART, and then to HC  why?

Mr. JSDN is partially write but I will modify his pet statement bellow                             

“Why should someone wait for notice , create as many objections as possible and obstruct physical possession for which you can go to any courts and bypassing SARFAESI Act and so on DRT and DART.”

SARFAESI Act is one-way Road and all borrowers are prohibited? It seems that it is barred all rights including Natural justices / human rights.

                   I don’t know is there is any NPA Act. But as per my knowledge which I got on this website and similar website, RBI is governing body & In Case Challenging Legality one can approach to RBI Banking Ombudsman

“Can the borrower claim that the restructuring was done at excessive interest rates & unrealistic repayment schedules (though the borrower had accepted both in writing in sanction letters) and hence the NPA? How strong would this ground be?”

No way. The Banks will do restructuring on present interest rates and not older interest rates as per old account. I think restructuring will be done with new allotment letter & fresh agreements and once restructuring is done no Question of SARFAESI Act until the account become NPA . But the account will lose all kind of reference including legal aspect too. Then how one can challenge old account of NPA?

       I think one will have all option remain in hand before one can accepted restructuring both in writing on sanction letters.

Hi Rahul,

I happen to be in a similar situation as what you have mentioned in your post. I was just wondering if you could find out ways to pin the bank for its  wrong classification of your account. Would be glad if you could share.

Tks in advance