What to Do If You Receive I SARFAESI Notice from the Bank
Receiving a SARFAESI notice can be alarming, but it is important to act promptly and strategically to protect your rights and address the issue. The SARFAESI (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest) Act, 2002, empowers banks to recover non-performing assets (NPAs) without court intervention. Here’s a detailed guide on what to do if you receive such a notice.
Step 1: Understand the Notice
Demand Notice under Section 13(2):
- The bank issues this notice demanding repayment of the outstanding amount within 60 days.
- The notice outlines the total dues, details of the loan account, and the bank’s intention to take action if dues are not cleared.
Key Points to Check in the Notice:
- Verify the loan account details.
- Cross-check the claimed outstanding amount.
- Look for any procedural errors or discrepancies.
Step 2: Respond to the Notice
You have the right to raise objections or submit a representation to the bank within 60 days of receiving the notice.
Drafting a Representation:
- Clearly state your objections to the notice.
- Highlight any procedural lapses by the bank (e.g., incorrect calculations, lack of prior communication).
- Attach supporting documents, such as proof of partial payments or disputes about the amount.
Bank’s Duty to Respond:
- The bank must reply to your representation within 15 days. If the bank does not respond or proceeds with the action, you can challenge their actions legally.
Step 3: Explore Settlement Options
Negotiation:
- Discuss the possibility of restructuring the loan, such as extending the repayment period, reducing interest rates, or converting the loan to manageable terms.
One-Time Settlement (OTS):
- Propose a lump-sum payment or a reduced amount to settle the loan. This can help avoid further recovery actions.
Seek Legal or Financial Counsel:
- Consult a lawyer or financial advisor to understand the best settlement options and protect your interests.
Step 4: Legal Actions if the Bank Proceeds
If the bank rejects your representation and proceeds with recovery actions under Section 13(4), you can seek legal remedies.
File an Application with the DRT:
- Under Section 17 of the SARFAESI Act, you can approach the Debt Recovery Tribunal (DRT) to challenge the bank’s actions.
- The application must be filed within 45 days of the bank’s notice under Section 13(4).
Grounds for Challenging the Bank’s Actions:
- Procedural lapses (e.g., failure to consider your representation).
- Excessive or unlawful demands by the bank.
- Improper valuation or auction of the secured asset.
Seek Interim Relief:
- Request a stay on the bank’s actions to prevent the auction or possession of your property while the case is pending.
Appeal to DRAT:
- If aggrieved by the DRT’s order, you can appeal to the Debt Recovery Appellate Tribunal (DRAT) within 30 days.
Step 5: Protecting Your Assets
Negotiating Before Auction:
- Even after possession of the property, you can negotiate with the bank to halt the auction by paying the dues or reaching a settlement.
Challenging the Auction Process:
- If the auction is not conducted as per law (e.g., undervaluation or non-compliance with notice requirements), you can challenge it before the DRT.
Reclaiming Your Property:
- If the property is auctioned, you can approach the DRT or higher authorities to challenge the sale if procedural violations are evident.
Step 6: Preventing Further Issues
Regular Communication with the Bank:
- Maintain clear communication with the bank to avoid misunderstandings or escalations.
Financial Planning:
- Seek advice on managing your finances better to prevent future defaults.
Legal Assistance:
- Always involve a lawyer familiar with SARFAESI proceedings to guide you through the process and protect your interests.
FAQs
1. Can I stop the bank from taking possession of my property?
Yes, you can file an application with the DRT under Section 17 of the SARFAESI Act to challenge the bank’s actions and seek a stay order.
2. What happens if I don’t respond to the notice?
If you fail to respond or repay the dues within 60 days, the bank can proceed to take possession of your secured assets, auction them, and recover the dues.
3. Can I negotiate with the bank after receiving the notice?
Yes, you can negotiate with the bank for loan restructuring, settlement, or partial payments to avoid further action.
4. What if the bank undervalues my property during the auction?
You can challenge the valuation and auction process before the DRT, citing procedural violations and unfair practices.
5. Can the bank take action without going to court?
Yes, under the SARFAESI Act, banks can take possession of secured assets and recover dues without court intervention, provided they follow the prescribed legal procedures.
Conclusion
Receiving a SARFAESI notice is a serious matter, but it is not the end of the road. By understanding your rights and legal options, responding promptly, and seeking professional advice, you can address the issue effectively and safeguard your interests. Always act within the stipulated timelines and maintain clear documentation to strengthen your case.
Disclaimer: This information is intended for general guidance only and does not constitute legal advice. Please consult with a qualified lawyer for personalized advice specific to your situation.
Advocate J.S. Rohilla (Civil & Criminal Lawyer in Indore)
Contact: 88271 22304