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Guidance On SARFAESI ACT - NPA Accounts

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17 views2 pages

Guidance On SARFAESI ACT - NPA Accounts

Uploaded by

palakrajput463
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Application of SARFAESI Act & Security Interest Enforcement Rules 2002 in

the process of recovery of the loans in case f default/non-payment/non-


performing assets

Applicability

1. The provisions of this Act are applicable only for NPA loans with outstanding
above ₹1. 00 lac.
Non-Applicability
1. NPA [Non-Performing Asset] Loan accounts where the amount
due/outstanding is less than 20% of the principal and interest are not
eligible to be dealt with under this Act.
2. The Act does not apply to agriculture land – any security interest created
over agricultural land cannot be proceeded with.
Notice u/s. 13[2] of the Act/Demand Notice
Demand Notice is issued by the Bank, addressed to the Borrower as well as the
guarantor/s to discharge in full his/her liabilities to the bank within sixty days from the
date of Notice failing which the Bank shall be entitled to exercise all or any of the rights
under Section 13(4) of the said Act.

This demand notice must specify the outstanding amount payable by the borrower.
Outstanding amount means outstanding amount in the bank’s book and un-debited
portion of the interest accrued but not reflected in the Bank’s book are added in demand
notice. In case of NPA accounts interest amount is not recognised as income from the
date of classification of account as NPA. Therefore, there is a possibility that this un-
debited portion of the interest accrued might not be included in demand notice

Representation/objections by the borrower u/s.13[3a]:


1. The Borrower is entitled to make his/her representation and raise her/her
objections to the Demand Notice upon the receipt of the Demand Notice u/s.
13[2] .
2. The Bank is entitled to reply indicating the reasons for acceptance and/or non-
acceptance of the representation/objection raised by the Borrower within 15
days upon the receipts of such representation/objection raised by the Borrower.
Procedure/guidelines after receiving representation/objection from the
borrower ( specified as per Rules under SARFAESI ACT 2002)

1. If on examining the representation made or objection raised by the Borrower,


the Secured Creditor is satisfied that there is a need to make any changes or
modifications in the Demand Notice, he shall modify the Notice accordingly and
serve a revised Notice or pass such other suitable orders as deemed necessary,
within seven days from the date of receipt of the representation or objection.

2. If on examining the representation made or objection raised, the Authorized


Officer concludes that such representation or objection is not acceptable or
tenable, he shall communicate within one week of receipt of such representation
or objection, the reasons for non-acceptance of the representation or objection,
to the Borrower.

Upon non-acceptance of the representation/objection of the borrower, the bank


entitled to take following steps for recovering the said outstanding loan amount
under Section 13(4) of the Act:

Section 13(4):
In case the Borrower fails to discharge his/her liability in full within the period specified
in the Demand Notice i.e. sixty days, the Secured Creditor may take recourse to one or
more of the following measures to recover his/her Secured Debt: –

a. Take Possession of the Secured Assets of the Borrower including the right to
transfer by way of lease, assignment or Sale for realising the Secured Asset.
b. Take over the management of the business of the Borrower including the right
to transfer by way of lease, assignment or Sale for realising the Secured Asset:
provided that the right to transfer by way of lease, assignment or Sale shall be
exercised only where the Substantial part of the business of the Borrower is held
as security for the Debt: provided further that where the management of whole
of the business or part of the business is severable, the Secured Creditor shall
take over the management of such business of the Borrower which is relatable to
the security for the Debt.
c. Appoint any person (hereafter referred to as the manager), to manage the Secured
Assets the Possession of which has been taken over by the Secured Creditor.
d. Require at any time by Notice in writing, any person who has acquired any of
the Secured Assets from the Borrower and from whom any money is due or may
become due to the Borrower, to pay the Secured Creditor, so much of the money
as is sufficient to pay the Secured Debt.

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