It is not very easy to defraud the Banks and Financial
Institutions by the defaulting Borrowers since various statutory protections
are provided to the lending Banks and Financial Institutions. The activities of
borrowing and lending are inseparable activities and there is a change from
savings based economy to credit based economy not only in individual's budget
but also in the budget of a Country.
Recovery of debts has become a very difficult task for the
Banks and Financial Institutions and their bad debts or Non-Performing Assets
are on the rise. The process of realisation or recovery of Non-Performing
Assets (NPA) through the normal process is time consuming. To hasten or speed
up the recovery process and keeping in view the alarming increase in NPAs, the
Government of India has enacted the Recovery of Debts Due to Banks and
Financial Institutions Act, 1993 popularly known as DRT Act. The DRT Act had
some deficiencies in as much as it did not provide for assignment of debts to
securitization companies and the secured assets could not be liquidated in
time.
As far as the General Public are concerned, Chapter III,
Enforcement of Security Interest contained in Sections 13 to 19 are very
important. The following are the requirement for initiating action for
enforcement of security interest under SRFAESI Act:
[1] The account of the Borrower should have been classified
as Non-Performing Asset strictly in accordance with the guidelines of the
Reserve Bank of India and such other Authority;
[2] Assets should not be those which have been accepted under
sec.31 of the SRFAESI Act and security interest can be enforced only in respect
of assets which are specifically charged;
[3] The action should be initiated well within the limitation
period. If the limitation is due to expire shortly, and then it will be proper
to institute a suit in a Civil Court or DRT as per pecuniary limit applicable
for such suits.
[4] Action can be initiated only where the N.P.A.is Rs. l
lakh and above.
Section 13 of the Act empowers the secured Creditor to
enforce the security interest in case the Borrower defaults in repayment of
secured debts and whose accounts categorised as Non-Performing Asset without
the intervention of the Court or Tribunal. The secured Creditor is required to
give notice under sec.13 (2) of the Act to the Borrower to discharge all his
liabilities in full within 60 days from the date of notice. The notice should
be comprehensive furnishing full details of the amount due and secured assets
intended to be enforced. Upon receipt of the notice under sec.13 (2) of the
Act, no Borrower shall transfer by way of sale, lease or otherwise any of his
secured assets referred in the notice without prior written consent of the
secured Creditor. The notice may be served by delivering, or transmitting at a
place where Borrower or his Agent is empowered to accept the notice or
documents on behalf of the Borrower.
19. Right of borrower to receive compensation and costs in
certain cases: If the Debt Recovery Tribunal or the Court of District Judge, on
an application made under sec.17 or sec.17A or the Appellate Tribunal or the
High Court on an appeal preferred under sec.18 or sec.18A, holds that the
possession of secured assets by the secured creditor is not in accordance with
the provisions of the Act and rules and directs the secured creditor to return
such secured assets to the concerned borrowers, such borrower shall be entitled
to the payment of such compensation and costs as may be determined by such
Tribunal or Court of District Judge or Appellate Tribunal or High Court
referred to in sec.18B.
The secured creditor or his authorized officer may take
recourse to one or more of the measures provided in sec.13(4) of the Act to
recover his secured debt who has the following options: He may take possession
of the secured assets of the borrower including the rights to transfer by way
of lease, assignment or sale. He may take over the management of the secured
assets of the Borrower, including the right of transfer of lease, assignment,
sale. He may appoint any person as the Manager to manage the secured assets,
the possession of which has been taken over.
Under sec.17 of the Act the person aggrieved by the actions
of the secured creditor as provided in sec.13(4) may make an application to the
Debt Recovery Tribunal having jurisdiction within 45 days from the date on
which action has been taken. Similarly, any person aggrieved by the order made
by DRT under section 17 may prefer an appeal to the Appellate Tribunal within
30 days from the date of the order. The party preferring appeal shall deposit
50% of the amount of debt, with a discretion given to the Appellate Tribunal to
reduce the amount to not less than 25% of the debt.
The following transactions are excluded from the provisions of
the SRFAESI Act:
a] A lien on any goods, money or security given by or under
the Indian Contract Act, Sale of Goods Act or any other Law for the time being
in force;
b] Pledge of movables within the meaning of sec.172 of the
Indian Contract Act;
c] Any conditional sale, hire purchase or lease or any other
contract in which no security interest has been created;
d] Any property not liable to attachment;
e] Any security interest created in agricultural land;
f] Any security interest for securing repayment of any
financial asset not exceeding Rupees one lakh;
g] Any case in which the amount due is less than twenty
percent of the principal amount and interest thereon.
The provisions of the Limitation Act 1963 are applicable to
the Act. Therefore, taking possession of the property or appointing a Manager
or taking over the management of the securities is to be carried out within the
period stipulated in the Limitation Act, 1963.
For More..........:
No comments:
Post a Comment