When a loan account becomes an NPA the issues can escalate rapidly from missed EMIs to a demand notice, possession proceedings or auction notice. Borrowers then want to know what action the bank has initiated, if the required statutory procedure was followed and what remedy is available at that stage.
An NPA dispute DRT lawyer can review the loan documents, account statement, NPA classification and recovery notices before recommending the appropriate forum. If the loan is a term loan RBI material specifies that the account should be treated as an NPA where interest or principal is overdue for more than 90 days; other asset classifications use different tests.
NPAs aren't automatically assigned to the Debt Recovery Tribunal. A Section 13(2) demand notice under SARFAESI, a Section 13(4) action, a Section 17 application and subsequent DRAT appeal each play a different role and have their own timeline.
BK Singh Advocate usually starts by outlining that chronology to clients. NPAs: Borrowers and guarantors can have all the notices, payment history and documents related to the secured-asset reviewed as a group instead of analysing each bank notice separately.
An NPA dispute can arise over a home, commercial property, piece of machinery or other asset that was put up as security. Enforcement can also trigger serious cash-flow stress for a business. Guarantors can find themselves exposed even though someone else took out the original loan.
Typically under Section 13(2) of SARFAESI Act, a secured creditor can ask borrower to discharge the secured liability within a period of 60 days. He can initiate measures under Section 13(4) thereafter. Once the secured creditor takes a measure under Section 13(4), an aggrieved person can approach the jurisdictional DRT under Section 17 typically within a period of 45 days from the date of such measure.
This is why borrowers need to know exactly what document they received. A recall letter, Section 13(2) notice, possession notice, Section 14 proceeding and auction notice do not trigger the same legal rights. BK Singh Advocate can tell you what stage your matter is in based on the papers, not the phone calls or verbal assurances.
The nub of the matter is seldom the tag βNPAβ itself. A lawyer must look beyond that classification to analyse what transpired thereafter and whether the lender has taken enforcement actions in compliance with law.
For instance, borrowers can challenge the date of NPA, outstanding dues, interest rates, set off of payments made, details of secured-assets, service of notices or procedure undertaken prior to taking possession and selling the assets. Guarantors can also challenge issues specific to their guarantee or security agreement.
The DRT is not a forum to address all banking disputes. As per Section 17, it only looks into whether actions referred to in Section 13(4) for enforcement of security interest, were in accordance with the SARFAESI Act and rules made thereunder. Hence a preliminary review would weed out generic banking complaints from an actionable legal dispute at the recovery stage.
No two cases are identical, but there are several issues that come up again and again that need closer scrutiny.
Amount claimed: the borrower may claim that previous repayments, restructures of terms or amounts settled are not accurately accounted for by the lender.
Service of notice: sometimes a borrower will only find out about the recovery process once a significant amount of time has elapsed. He may not have received any prior notice of the lenderβs intention to recover the property at an advanced stage.
Description of property/security documents: where multiple properties, co-owners, guarantors or mortgages are involved, descriptions and supporting documents can become key.
Disputes at auction stage can raise separate issues regarding possession, valuation, sale notices and compliance with statutes.
Any of the above issues do not necessarily make the bankβ actions illegal. The document trail and the specific enforcement action are key.
Ideally Legal review should be undertaken at stage when possession/auction is not imminent.
Possession advice should be undertaken by a borrower after receipt of a Legal notice of recall, Section 13(2) demand notice, Notice of possession, Section 14 communication, Notice of auction or summons from DRT.
Review of a Section 13(2) notice is best undertaken while the 60 day demand period is running. After institution of a Section 13(4) action the borrower has a 45 day Section 17 period to review.
Guarantors should take advice in any matter where recovery is sought against them. Section 13 does not in any way derogate from the creditor's right to proceed against guarantors as per the provisions of the Act.
BK Singh Advocate can review the timeline, jurisdiction and documents prior to borrower deciding the course of action of responding to notice, approaching the tribunal to challenge the action, filing an appeal or entering into a settlement.
Start by determining the context out of the list below debt recovery account objections, Section 13(2a) notice, possession, Section 17 application, DRT recovery application, auction or appeal. Add work product as needed for tribunal cases including preparing chronology, checking numbers, organizing documents and drafting pleadings. Continue to separately track out of court settlement talks from statutory deadlines unless modified by a competent order or binding agreement.
BK Singh Advocate explains difference between the borrowers business goal and what relief is available from the tribunal. Debt Recovery Tribunal is not a synonym for Negotiate a Settlement Request, Oppose Possession, DRT Answer or DRAT Appeal.
Individuals in Delhi may also visit the verified DRT Lawyer in Delhi service page for reviewing documents and appearing for clients in loan recovery and SARFAESI cases.
Yes, lawyers can look into the NPA classification and recovery measure connected with it. Section 17 remedy however requires an aggrieving action referred to in Section 13(4), not simply because an account has been termed NPA.
Not normally under Section 17 simply because the demand notice was issued. The law further clarifies that communication rejecting an application under Section 13(3A) does not of itself give the Section 17 remedy at that point.
Normally 45 days from the date on which the impugned Section 13(4) measure was taken to apply to the jurisdictional DRT. Note the date carefully on the recovery document.
Yes, if the statutory requirements are satisfied. So if DRT upon finding the objected enforcement measure unfair and merits calling for restoration of possession or management under Section 17, can declare such measure null and void.
Account being declared NPA is not in itself the entire possession process. In SARFAESI enforcement the secured creditor has to comply with applicable statutory process and Section 14 lays out procedure for assistance from a Magistrate to take possession.
Settlement may still be a commercial option depending on the lenders policy, the account history and stage of recovery, but is not an automatic right. Borrowers should not expect negotiations to override statutory action unless that concession has been expressly recorded.
Cross check the demand against sanction terms, account statements, payment acknowledgements and correspondence. While an error could be significant, its legal significance would depend on the facts and the proceeding. BK Singh Advocate can determine if the issue impacts the remedy sought.
Not automatically. Filing and interim stay are two separate matters. A borrower should only rely on terms of order that is passed by DRT. Request for interim protection is decided on facts and documents placed before Tribunal.
Section 17 refers to βany personβ aggrieved by a qualifying action under Section 13(4), which includes the borrower. Whether a guarantor is eligible for particular relief would depend on the guarantee, security and enforcement action taken against that person.
Yes, under Section 18 there is an appeal to DRAT from an order passed under Section 17, normally within 30 days of receipt. Remember borrower-appellants are required to also make good the statutory pre deposit condition to have the appeal heard.
An NPA lawsuit is a procedure. NPA classification, Section 13(2), borrowerβs objection, Section 13(4) measure, wrongful possession, Section 17 remedy and a potential Section 18 appeal all have different functions.
The important question is: Where is account recovery at today? A borrower who has received a demand notice is in a different position than someone who is about to lose their business to physical possession or an auction.
Contact Legals365 for a document review carrying the loan agreement, account statements, and complete set of notice/s. BK Singh Advocate can evaluate what DRT or SARFAESI course is available, without guaranteeing a prediction when the facts and the appropriate forum matter.
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Frequently Asked Questions
1. Can a DRT lawyer defend against NPA declared by bank?
2. Can I go to DRT right after I get Section 13(2) notice?
3. How many days do I get after a Section 13(4) action?
4. Can DRT order return of possession of secured asset?
5. Can a bank forcefully take possession after declaring account NPA?
6. If account is NPA, can we settle the account?
7. What if bank has shown incorrect outstanding amount?
8. Does an application to DRT stop bank auction?
9. Can a guarantor claim remedy under Section 17?
10. Can order of DRT be appealed?
Final Thoughts
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