SARFESIA
SARFESIA
NARENDER SINGH
SCOPE OF APPILCATION
APPLIES TO ALL NPA LOANS & ADV UNDER HYPOTHECATION, ASSIGNMENT OR MORTGAGE EXCEPTING SANCTIONED LOANS NOT EXCEEDING 1 LAC
SECURITY INTEREST IN AGRICULTURAL LAND AMT DUE IS < 20 % OF PRINCIPAL & INTEREST LIEN & PLEDGE OF MOVABLE GOOD INTEREST IN AIRCRAFT OR VESSEL CONDITIONAL SALE, HIRE PURCHASE & LEASE
IS ACT ALTERNATIVE TOOL OR REMEDY ? AGAINST WHOME IT CAN BE INVOKED ? CAN NOTICES UNDER ACT BE STAYED ? POSITION OF AUTHORISED OFFICER IN THE ACT
1.
2. 3. 4.
NO . IT IS ADDITIONAL TOOL AGAINST SECURED ASSETS ONLY NO CIVIL COURT HAS JURISDICTION SEC 34 QUASI JUDICIAL, TOTAL IMMUNITY PROVIDED ACTS IN GOOD FAITH & FOLLOW PROCEDURE PROVIDED IN THE ACT
IMPORTANT SECTION- 13
(1) (2) (3) Empowers enforcement without court intervention on expiry of 60 days Empowers demanding full amount within 60 days from date of notice failing which creditor shall exercise rights available in 13(4) of Act. Requires that notice should provide details of amt payable by borrower & secured assets intended to be enforced. Service of notice is a must. Any objection raised be analyzed and replied within 7 days of receipt. Confers powers to take (a) possession & sell (b) takeover management (c) appoint manager (d) demand money due to borrower by any person who has acquired any of secured assets. Provides that payment made by any person in accordance with 4(d) shall give him a valid discharge. Transfer of assets by secured creditor shall vest in the transferee all rights in relation to secured asset as if transfer has bn made by owner. Expenses properly incurred for action is recoverable from borrower.
(4)
SECTION 13 contd.
(8) (9) (10) (11) Provides if entire dues including expenses & charges are tendered any time before date fixed for sale or transfer, no further step shall be taken for transfer or sale. In consortium loans before action under 13(4) consent of creditors representing 75% in value is must. In case of shortfall on sale proceeds, an application has to be filed with civil court/DRT for recovery of balance dues. Bank shall be entitled to proceed against guarantor or sell pledged assets without first taking any of the measures mentioned in clauses (a) to (d) of sub-section(4) Rights may be exercised by one or more officers authorized in this behalf. Confer powers to nominate Autho. Officers. Restrains the borrower from Sale/Lease/Transfer after receipt of notice without written consent of Bank. Violation will attract punishable action under section 29.
(12)
(13)
SECTION -14
Casts a duty on CMM/DM to assist Bank in taking possession
(1) Banks may for the purpose of taking possession or control of any secured asset, request in writing to CMM/DM and the CMM/DM shall, on such request being made (a) take possession of such assets and documents relating thereto; and (b) forward such assets and documents to Bank. (2) For the purpose of securing compliance with the provision of (1) above CMM/DM may take or cause to be taken such steps and use, or cause to be used, such force, as may, in his opinion, be necessary. (3) No act of CMM/DM done in pursuance of this section shall be called in question in any Court or before any authority.
OTHER SECTIONS
15 16 17 18 19 Methods of taking over management. No compensation to directors for loss of office. Any person ( including borrower) aggrieved by the action under 13(4)[only] may appeal to DRT within 45 days from the date on which such measure has been taken. Appeal appellate tribunal against DRT order. Borrowers right to receive compensation in certain cases-if action being not in accordance of Act. AO has to act fairly with reasonableness at every stage, as possessing more drastic powers calls for exercise of higher degree of good faith and fairplay. Central Registry formation. 21 to 28 sections pertains to it.
20
SECTIONS
29 30 32 If any person contravenes/abets or attempts to contravene provision of this act, or any rules made thereunder, he shall be punishable with imprisonment for a term which may extend to one year, or fine or both. No Court inferior to that of a Metropolitan Magistrate of the First class shall try any offence punishable under this Act. No suit, prosecution or other legal proceedings shall lie against Bank or any of its officers exercising any of the rights of the secured creditor or borrower for anything done or omitted to be done in good faith under the Act. Offences by companies. Director, manager, secretary will be personally responsible. No Civil Court shall have jurisdiction to entertain any suit or proceeding to determine and no injection shall be granted by any court or other authority in respect of action taken or to be taken in pursuance of any power conferred by or under this Act.
33 34
SECTIONS
35 Bank can take action under 13(4) within limitation period . 36 Provisions of this Act to override other lawsTPA 37 This Act is in addition to and not in derogation of the Companies Act, Securities contract Act, SEBI Act, DRT Act or any other law for time being in force.
S I RULES
3A If borrower raises objection to notice, AO should examine same& if feels objections are tenable, he should modify the notice accordingly If on examination AO comes to conclusion that representation or objections are not acceptable or tenable, he shall communicate within one week of receipt of such representation, the reasons for nonacceptance of the representation or objection, to the borrower. However such reply does not confer right to borrower to go to DRT.
ENFORCEMTN RULE 4 When amt demanded is not paid within 60 days AO shall proceed to realize any one or more measures under 13(4) & take possession
2
3
4 5
MOVABLE ASSETS Take possession in presence of two witnesses after a Panchnama drawn & signed by the witnesses. AO shall make inventory & deliver one copy to borrower. AO shall ensure care of assets as an owner of ordinary prudence, insurance etc. Debts , shares & others AO shall obtain valuation
2 3
IMMOVABLE ASSETS Take possession by delivering p notice to borrower & affixing it on outer door or conspicuous place of property. P Notice shall be published in two news paper within 7 days. Physical possessed properties requires care, protection & insurance till it is disposed. AO shall obtain valuation, get reserve price fixed.
Sale of assets
AO may sell assets by giving 30 days notice for sale through
Obtaining quotations from parties; or Inviting tenders from public; or Holding public auction ; or By private treaty If sale is through (b) or (c) Public notice in two leading news papers, setting out terms of sale, is a must. If sale is through (a) or (d) shall be on such terms as may be settled between parties in writing. In case of immovable assets, notice of sale shall be affixed on a conspicuous part of the property. AO may put on the web site of the Bank on Internet.
No sale of IMMOVABLE property take place before expiry of 30 days from notice publication or notice of sales is served. Sale shall be confirmed in favor of person who has offered highest price & shall be subject to confirmation by Bank. If AO fails to obtain price
higher than RP, he may, with the consent of borrower and Bank effect the sale at such price.
Purchaser shall immediately pay 25% of the amount of sale to AO Balance amount shall be paid on or before the fifteenth day of confirmation of sale or such extended period as may be agreed upon in writing between the parties. Default of payment within above mention period will render the deposit forfeited & property shall be resold. On confirmation of sale by Bank and compliance of terms of payment AO shall issue a Certificate of Sale.
Practical hints-BMs-contd.
Put up the sale notice on notice board not only to inform maximum persons but also to pass on a message to other NPA accounts. Arrange a wide publicity of the auction near the property through pamphlets, Banners and painting on the walls of the property Any other local method to ensure maximum bidders for the same on auction date. Ensure the property is clean & well maintained before the scheduled inspection by prospective purchasers so as to fetch good value. Arrange for photographer or video shooting, police help, some press reporter for auction date & help smooth auction process. Keep AO updated about the payment made by the purchaser as per the schedule. Ensure confirmation of sale, timely receiving total payment & issuance of Sale Certificate.
AUTHORISE OFFICER
POWERS & RESPONSIBILITY
AO must ensure the property proposed for possession is listed in the notice of 13(2) Demand notice has been properly served 60 days period is over Must accompanied by two independent witness, photographer and police, in case of need. Designation should be used as AUTHORISED OFFICER After possession valuation must be done by approved valuer only.
AO contd
Notice of having taken the possession is published in two leading newspapers within 7 days. In big accounts where the borrower is intending to frustrate the action through some appeal a caveat should be taken before action under 13(4) Reserve price should be got fixed 30 days sale notice should be served to borrower and published in two news papers setting terms of sale Property should be sold to highest bidder and if any chance to increase the offer should be given to all bidders. 25% of sale amount should be got deposited immediately after sale and rest amount in 15 days of confirmation of sale or as per agreed terms reduced in writing. After receiving full amount sale certificate is issued to bidder himself.
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