If your property has been taken into physical possession by a bank due to a loan default, you can seek to get it back through legal provisions provided under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The Debt Recovery Tribunal (DRT) is the primary forum where you can challenge the bank’s actions and seek relief. Below is a detailed guide on how to proceed:
1. Understanding Physical Possession by the Bank
- Physical Possession: When a bank takes physical possession of your property, it means that they have not only asserted their control over the property through a notice (symbolic possession) but have also physically taken over the property, often by changing locks or evicting occupants.
- Legal Authority: This action is authorized under Section 13(4) of the SARFAESI Act if you fail to repay the loan within 60 days of receiving the demand notice.
2. Legal Remedies Under the SARFAESI Act
- Right to Appeal: Under Section 17 of the SARFAESI Act, you have the right to appeal to the Debt Recovery Tribunal (DRT) if you believe that the bank’s action of taking physical possession of your property was illegal or unjust.
3. Filing an Application with the Debt Recovery Tribunal (DRT)
- Timeline: You must file the application within 45 days from the date of the bank’s possession notice. If you miss this deadline, it can weaken your case, although the DRT may consider delays if there is a valid reason.
- Application Format: The application should be in the format prescribed by the DRT, and it must include the following:
- A detailed account of the events leading to the possession.
- Evidence showing that the bank did not comply with the SARFAESI Act’s provisions.
- Specific reliefs you are seeking, such as the return of the property and the setting aside of the possession order.
4. Grounds for Challenging the Bank’s Action
You can challenge the bank’s action on the following grounds:
- Non-compliance with SARFAESI Act: If the bank did not follow the procedures laid out in the SARFAESI Act, such as not issuing a proper demand notice or not giving you the opportunity to repay the loan within 60 days, this can be a strong ground for challenging the possession.
- Disproportionate Action: If the bank’s action is disproportionate to the amount due, or if you had already made substantial payments, this can also be a ground for challenge.
- Improper Valuation: If the bank undervalued the property in its possession notice or auction process, this could be a reason to challenge the possession.
- Violation of Principles of Natural Justice: If you were not given a fair hearing or if the bank acted in bad faith, these can be grounds for seeking relief.
5. Hearing Before the DRT
- DRT Proceedings: After you file the application, the DRT will issue notices to the bank and other relevant parties. Both sides will present their arguments, and the DRT will examine whether the bank’s actions were legally justified.
- Interim Relief: You can seek interim relief from the DRT, such as a stay on the auction of the property or the restoration of possession to you, pending the final decision.
6. Possible Outcomes
- Restoration of Possession: If the DRT finds that the bank acted improperly or violated legal procedures, it can order the bank to return the physical possession of the property to you.
- Setting Aside the Possession Order: The DRT can set aside the possession order if it finds that the bank did not follow the due process under the SARFAESI Act.
- Compensation: In some cases, if the DRT finds that the bank’s actions caused you undue hardship, it may award compensation for damages.
7. Appeal to the Debt Recovery Appellate Tribunal (DRAT)
- If Unsatisfied: If you or the bank is not satisfied with the DRT’s decision, you can appeal to the Debt Recovery Appellate Tribunal (DRAT) within 30 days of the DRT’s order. The DRAT will review the case and make a final decision.
8. Execution of the DRT’s Order
- Compliance: Once the DRT issues its order, the bank is legally bound to comply with it. If the bank fails to comply, you can file a contempt petition in the DRT, and the tribunal can take action against the bank.
9. Preventive Measures
- Regular Monitoring: To avoid such situations, it is crucial to regularly monitor your loan account and communicate with the bank if you foresee difficulties in making payments.
- Loan Restructuring: If you are facing financial difficulties, consider requesting loan restructuring from the bank before the situation escalates to possession.
FAQs
Here are some FAQs related to getting your property back after physical possession has been taken by a bank:
1. What is physical possession of a property by a bank?
Physical possession refers to the bank taking actual control of the property, often by changing locks or evicting occupants. This usually occurs after a borrower defaults on a loan and the bank initiates recovery proceedings under the SARFAESI Act.
2. Can I get my property back after the bank takes physical possession?
Yes, you can seek to get your property back by filing an application with the Debt Recovery Tribunal (DRT) under Section 17 of the SARFAESI Act, challenging the bank’s action.
3. What is the Debt Recovery Tribunal (DRT)?
The Debt Recovery Tribunal (DRT) is a quasi-judicial body in India that adjudicates disputes between banks and borrowers related to the recovery of debts. It has the authority to hear cases related to the enforcement of security interest under the SARFAESI Act.
4. How long do I have to file an application with the DRT?
You must file your application within 45 days from the date the bank took physical possession of your property. Delays in filing can weaken your case, although the DRT may consider delays if you have a valid reason.
5. On what grounds can I challenge the bank’s possession of my property?
You can challenge the bank’s possession on several grounds, including:
- Non-compliance with SARFAESI Act: If the bank did not follow the proper legal procedures.
- Disproportionate action: If the bank’s action was excessive compared to the amount due.
- Improper valuation: If the property was undervalued in the bank’s notice or auction process.
- Violation of natural justice: If you were not given a fair hearing.
6. What relief can I seek from the DRT?
You can seek several forms of relief, including:
- Restoration of possession: The return of your property.
- Interim relief: A stay on the auction or sale of the property.
- Compensation: For any damages suffered due to the bank’s actions.
7. What happens if the DRT rules in my favor?
If the DRT rules in your favor, it can order the bank to return the physical possession of your property to you, set aside the possession order, or award compensation for damages.
8. Can I appeal the DRT’s decision?
Yes, if you are not satisfied with the DRT’s decision, you can appeal to the Debt Recovery Appellate Tribunal (DRAT) within 30 days of the DRT’s order.
9. What should I do if the bank doesn’t comply with the DRT’s order?
If the bank does not comply with the DRT’s order, you can file a contempt petition in the DRT, and the tribunal can take action against the bank.
10. How can I avoid my property being taken by the bank?
To avoid such situations, monitor your loan account regularly, communicate with the bank if you foresee payment difficulties, and consider requesting loan restructuring if necessary.
11. What is symbolic possession, and how is it different from physical possession?
Symbolic possession refers to the bank asserting its control over the property by issuing a public notice but not physically taking over the property. Physical possession involves the bank taking actual control of the property, which is a more advanced stage in the recovery process.
12. Can I negotiate with the bank after they have taken physical possession of my property?
Yes, it’s possible to negotiate with the bank even after physical possession. However, legal action through the DRT may be necessary if an agreement cannot be reached.
13. What is a sale notice, and when is it issued?
A sale notice is issued by the bank before auctioning the property. It contains details like the property description, reserve price, and auction date. It must be published at least 30 days before the auction.
14. What happens to the surplus money if the auctioned property sells for more than the outstanding loan amount?
If the property is auctioned for more than the outstanding loan amount, the surplus money is returned to you, the borrower.
15. Can I stop the auction of my property?
Yes, you can stop the auction by obtaining an interim stay from the DRT or by repaying the outstanding loan amount before the auction takes place.
These FAQs should help clarify the process and your rights when dealing with a situation where a bank has taken physical possession of your property due to loan default.
Conclusion
Getting your property back after physical possession has been taken by a bank requires prompt and well-prepared legal action through the Debt Recovery Tribunal. The SARFAESI Act provides you with the right to challenge the bank’s actions, and if you can prove that the bank did not follow proper procedures, the DRT can order the return of your property. Acting quickly and seeking legal advice is crucial to protecting your rights and reclaiming your property. A bank can legally auction your property if you default on your loan, but this process must follow specific procedures outlined in the SARFAESI Act. The Act provides safeguards for borrowers, including the right to receive notice, the opportunity to repay the loan before the auction, and the ability to challenge the bank’s actions through the DRT. The entire process is designed to balance the interests of both the lender and the borrower, ensuring that the recovery of bad debts is conducted in a fair and transparent manner. If you are facing potential property auction due to loan default, it is crucial to understand your rights and options to protect your interests.
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