Learn how borrowers can protect property from bank auction under SARFAESI, understand DRT remedies, settlement options, notices and key legal risks.
It can happen anytime you get a bank auction notice. It can become a family issue if your loan is not getting paid. It could be any reason why you took the loan. Whether you bought a house which you saved for years or took a mortgage on your office to sustain your business or pledged some property against your loan. But once there is non payment of emi and your recovery starts against your collateral. The biggest question comes to mind is how to save your property from bank auction?
There is no provision where a borrower can always stop the bank auction. But a secured creditor also can't bypass the method to recover its dues. How will you know if you can stop the auction or not? It depends on various factors like what kind of loan was given, documents signed by borrower, nature of your account, notices received from lender, possession taken or not, stage of auction, amount due and your approach towards the case.
According to Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 (SARFAESI) a secured creditor is allowed to take steps to recover its qualifying security interest without going to civil court for a decree. There are few caveats to it but you can enforce section 13(2) of the act to send a notice to borrower to pay his dues within 60 days and under section 13(4) he can take certain steps if dues are not paid.
The difference between these steps is important.
You may receive a demand notice or your property may be under possession or you may even receive an auction notice. Don't wait till the last moment to save yourself from auction when sale is scheduled to happen soon.
BK Singh is an Advocate who deals with all kinds of cases related to secured loan recovery. If you have received a notice under SARFAESI act or are facing issues regarding possession of your property or want to settle your dues with the bank please contact us. We can help you know your options and what you can do to prevent your property from being sold off in an auction.
Loan Settlement Agency also offers help to borrowers for loan settlements and other recovery related queries.
It can be any form of secured lending. Home loan can be on the property you buy. Loan against property can be on your self occupied flat or house, commercial property, industrial property or any other type of security.
Often times families have a financial crisis and are also living under threat of possession. It could be that your business may suffer if your property which was used as security is lost to you. You could be a guarantor who did not know that your signature from years ago could cause such an effect.
In Delhi NCR there are many borrowers who live in Delhi, Noida, Greater Noida, Ghaziabad, Gurugram and Faridabad who fall into this predicament. Borrowers in cities like Mumbai, Pune, Bengaluru, Hyderabad, Chennai, Kolkata, Ahmedabad, Jaipur and Lucknow etc also tend to take help when the matter of recovery is already going ahead.
One of the problems Advocate BK Singh notices with clients in this scenario is that they have only some of the paper work. They may have some mails from the bank, but can't find what they had told them previously. Statements of account may not be verified and family members may or may not know if possession notice has been served or an auction was published.
All this adds to your confusion when you are in this state of mind.
Auction by bank can take many forms. From the point of view of recovery of money by the bank using provisions of law to contractual obligations of the parties and securing property for the bank and even approaching DRT.
Remember that we are discussing how to avoid a bank auction not how to evade debt. Legal advice in these circumstances should be to identify what actions can be taken under law to stay your recovery process.
Saving your property from being sold off in bank auction doesn't mean that the loan will not exist or the recovery process will come to halt forever.
It could be about stopping an illegal auction from happening at the moment, it could be to get a SARFAESI action looked into. Fixing errors, clearing off pending discrepancy of amount. To conclude a settlement that was agreed to or to buy time from the lender by legally coming to a resolution.
There is a difference between these situations.
When someone receives a notice they are in one stage. When someone's property has been attached by the bank they are at another level. And if your auction is notified you have even less time to act.
Most of the times advocate BK Singh will look at when did the loan happen. When did default take place. Any records of the loan being turned into npa. Notice under section 13(2). What you said to the bank and their reply. Steps of attachment, documents regarding value of property. Auction notice and any settlement talks that took place.
"I want to keep my property" this is all fine but we need more information to advise you on the matter.
What kind of loan did you take. If its a personal loan then it will be difficult to analyze using Sarfaesi. As there might not be any property linked to your personal loan. You can't just say I took a personal loan therefore its a secured loan.
It is possible for the Section 13(2) notice to lead towards enforcement on the secured asset but you need to understand that once you receive it your property will not be sold.
As explained earlier if the requirements are fulfilled under section 13(2) you can be asked by the secured party to pay the dues within a period of 60 days. Once this time limit has passed the measures stated under section 13(4) can be taken.
This stage is what borrowers should take seriously when it comes to taking action. You have been told about the liability that your lender believes you owe. You should go through your account to see if anything seems incorrect.
There could be many things you might question. The liability, credits of money paid, the asset that has been secured, loan account being talked about, documents being referred to etc. There could be many other points you would want to contest on the facts and law in your case.
A representation should not be treated as a boilerplate document.
You can contact Advocate BK Singh to see if there is any need to point out any wrong facts or ask questions about the account, documents, your financial condition or a settlement. We at Loan Settlement Agency will also inform you the difference between the 13(2) stage and when you could face possession or settle your loan.
Just be careful that you do not think that once you have sent a representation no further action will be taken.
If the Act's conditions are satisfied and the borrower fails to extinguish the liability within the prescribed period, Section 13(4) permits the secured creditor to take one or more of the following measures.
These measures include Possession of the secured assets, which extends to the right to sell the secured asset for the purpose of realising the debt. In case of immovable secured assets, the Security Interest (Enforcement) Rules, 2002 provide for procedural requirements with respect to possession and sale.
At this stage, the borrower ceases to have a mere collection-call dispute.
Possession proceedings can impact direct control over valuable assets. Auction proceedings may bring in third party bidders and create additional legal and commercial issues. Advocate BK Singh analyzes whether the bankâs action has reached at a stage where a remedy under Section 17 of SARFAESI Act can come into play. Maintainability, limitation, grounds and relief would depend on the measure adopted and facts.
One should not file indiscriminate proceedings under fear of auction. Choice of forum is important. A bank grievance, settlement request and DRT application have different functions. You canât substitute one for the other automatically.
Section 17 of the SARFAESI Act provides that an aggrieved person shall have a statutory remedy before the Debts Recovery Tribunal in respect of any action taken under Section 13(4), as per the procedure prescribed under the Act.
Whether or not the DRT will entertain an application for interim relief is a question for the Tribunal to decide. No advocate or settlement firm can guarantee that an auction will certainly be stayed.
A borrower will usually require persuasive legal grounds backed up by evidence.
There could be issues relating to compliance with the statutory process, the specific security interest being enforced, the amount due, possession proceedings, sale related process or any other issues specific to the case. It is not possible to determine the merits of such issues based on the auction notice itself.
BK Singh will be able to review the recovery documents and advise you on whether a remedy via DRT seems applicable at the stage of facts developed.
Time is of the essence.
A preparedness to file an application days before the scheduled auction date would be a far cry from having a matter evaluated within days of the relevant statutory action being taken. Delay could impact the relief you are able to seek and your ability to put all relevant documents before the proper authority.
Settlement could potentially settle or impact recovery if the lender accepts the deal and terms are met. However, a borrower cannot believe that asking for settlement off will suspend an auction.
OTS is largely dictated by lender discretion, policy, commercial consideration, borrower situation, ability to pay and terms finally offered.
The lender may accept or reject or counter a proposal.
Hence verbal discussions must be taken carefully. A telephonic confirmation like âyour settlement is under processâ does not necessarily mean the same as an official approval in writing with the amount approved, schedule of payment & impact on ongoing recovery action.
Loan settlement agency makes the same distinction in their post on bank auction notice and bank auction notice and settlement: Requesting for settlement does not stop SARFAESI proceedings.
Advocate BK Singh can assist a borrower evaluate settlement correspondence along with the history of recovery actions so that financial settlement is not mistaken with legal or statutory relief.
Settlement can still be worthwhile. It just needs to be recognized what it is; a deal which needs lender approval and not an automatic legal stay.
Fear causes delay more often than you might think. Some borrowers wonât even open emails from their bank. Every communication from the lender stresses them out. Others rely solely on phone conversations with branch employees. Some think that just because theyâve started negotiating, the bank canât take any action against them.
Fear can also cause people to seek fragmented adviceâŚ
âIgnore the notice,â says one adviser. âYou have guaranteed stay,â says another. âTransfer the mortgaged property to your son,â suggests someone else.
Speaking of transferring mortgaged propertyâŚ
This type of advice can be very risky. Once a Section 13(2) notice is issued, Section 13(13) prohibits any transfer by sale, lease, or otherwise of the secured assets to which the notice refers after receipt of the notice and until the completion of the sale, lease, or transfer, except in the ordinary course of business or with the prior written consent of the secured creditor.
document based analysis,â says Advocate BK Singh. âDonât experiment with rights over property at the last minute.â For borrowers who are actually experiencing financial distress, that should also extend to realistic expectations about funds. You canât depend on litigation to permanently substitute for your ability to repay. Sooner or later, even where a borrower has sought procedural stay, the debt and cash picture matter.
A properly prepared review will usually demand more information than just the latest auction advertisement. Ideally the file will demonstrate the progression of the account through borrow -> default -> enforcement.
Typical useful documents are:
Advocate BK Singh will sometimes require documents for co-borrowers / guarantors. This is because neither the liability nor exposure to secured-property is always clear by reviewing only the primary borrower's paperwork.
Another concern is identification of the property.
Flat no, plot nos, municipal record, boundary walls or title should be checked wherever possible if the dispute relates to the identity or extent of the secured asset.
LAP borrowers can read the corresponding same-topic thread under loan against property default and recovery issues.
Lawful recovery does not allow recovery agents to threaten or humiliate a borrower with impunity.
The RBI directions say âreasonable stepsâ shall be taken by regulated entities to ensure that they and their agentsâ⌠do not practice intimidation or harassment in the debt recovery process. This includes verbal or physical abuse, intimidation at the workplace or elsewhere; telecasting or publishing the details of borrowers and offending staff; hostile or anonymous calls; inappropriate letters or visits and certain other intrusive behavior against borrowers, their family members, referees and friends. The RBIâs 20 22 direction also includes excessive calling and calls outside of 8: 00 a. m. to 7:00 p.m. in this context.
None of these standards eliminate a legitimate debt.
They regulate how the recovery process should be handled.
If harassment takes place during the course of SARFAESI recovery, the borrower should not muddy the separate legal issue of whether enforcement against the secured property will still enjoy by filing a complaint about the misconduct.
Advocate BK Singh can help you sort out these issues. Documentation of abusive recovery calls may support a complaint, but stopping an auction may require you to challenge the SARFAESI process itself.
Not always. While part-payment could establish willingness, aid a settlement discussion or lessen liability, borrowers should not think that random part-payment invalidates a pending auction sale.
This depends on the lender's documented statement, stage of recovery process involved and any documented agreement made.
For instance, if a borrower has defaulted on a large amount and makes a token payment after negotiating with a bank official, he still runs the risk of recovery action if the bank has not explicitly stated what that payment truncates from the auction process.
Many a times this misunderstanding lands the borrower into trouble.
BK Singh, an advocate, suggests borrowers cross-check the receipt of payments along with the written communication from the lender. If the payment has been made under an OTS, then terms of sanction are more relevant.
Donât consider oral assurances as gospel.
Property auction under SARFAESI is not a lending bank uploading an ad online and selling the property the following morning. There is an Act and the Security Interest (Enforcement) Rules, 2002 which governs enforcement of immovable secured assets.
There could be queries about compliance in relation to possession, description of asset, valuation, reserve price, sale notice, publication, timing or any procedural requirement.
However, this does not mean that every small technical hitch would invalidate a sale.
Courts and tribunals have looked at the legality consequences in light of the provision concerned, facts, prejudice alleged and stage of proceedings.
BK Singh can help you figure out if a concern you have is legally significant or just technical.
Make sure borrowers keep full copies of notices as well. A WhatsApp screenshot thatâs been cropped or a picture of a page may not have dates, annexures or even the property description which may turn out to be relevant when reviewing legally.
Professional review becomes particularly important once the lender's communications move more than routine EMI notices.
Triggers can be receipt of a Section 13(2) demand notice, possession notice, auction notice or indeed any letter which specifies a date on which sale is intended to take place.
Advice can also assist where the borrower contests the outstanding amount claimed, thinks material payments have not been credited, is disputing the secured asset as identified by the bank, is embroiled in proceedings as a guarantor or has an sanctioned settlement which appears unfair to have recovery proceedings continued.
Yet another trigger is urgency.
If auction is scheduled for next week, it is not a regular loan-settlement enquiry.
Adv. BK Singh can examine the legal and documents position and help you understand what issues relate to settlement, what relates to SARFAESI process and what (if anything) needs to be adjudicated by the appropriate tribunal.
No sensible advisor will guarantee that no property can be lost.
The right question to ask is whether there is a legally viable or commercially viable path forward on the facts.
Loan Settlement , Loan default advisory , settlement negotiation, SARFAESI Notice Issue, recovery calls and related paperwork can be sorted with Loan Settlement Agency always keeping the borrower as priority.
Usually, the first step is understanding where we are standing.
The position of a borrower who has only received a demand notice is different than that of a borrower who is facing possession or a date fixed auction. Similarly, if the borrower has received a written OTS approval then the facts are different than when a borrower has simply applied for a concession.
Advocate BK Singh can go through the timeline, notices issued, loan documents, settlement correspondence and any financial information that is available to assess the legal and commercial options.
If a settlement is possible, the documentation around how much the borrower will pay, where does the money come from, prior payment history and how the lender received your offer may play into the commercial conversation.
If SARFAESI action has already been initiated, Advocate BK Singh can help you understand if it may be prudent to have a standalone legal review for DRT proceedings.
The goal is not to give you false hope. The goal is to ensure the borrower knows exactly where they stand.
Careful note should be taken of the exact stage of recovery. All SARFAESI notices should be reviewed. The loan documents and mortgage deed should be preserved. One should understand if settlement or statutory remedy is available/applicable. All these records can be reviewed by Advocate BK Singh who can advise on the position that may be available based on the facts.
Section 13(2) notice itself is a demand stage notice and generally allows 60 days to repay the liability. Only after compliance with statutory requirements, if the liability still remains unpaid the secured creditor can move towards action authorized under Section 13(4).
No. A representation/objection being filed does not automatically act as an injunction or stay against every recovery action taken thereafter. Bank has to address such representation as per the governing framework. However the borrowerâs remedies at a later stage would depend upon the stage of recovery and facts.
Section 17 only allows for disputes relating to actions taken under Section 13(4). Whether a DRT application is maintainable at a particular stage and whether interim relief can be granted needs to be seen on the actual action taken, stage at which it was taken and facts. This can be examined by Advocate BK Singh before concluding on the appropriate forum.
Possibly yes, if the lender agrees to a settlement and the borrower abides by its terms. However, making an OTS request does not automatically stay an auction by itself. A settlement is subject to lender agreeing to it and the terms in writing governing the settlement.
Separate consideration should be taken of settlement discussions and a written settlement being approved by the lender. If an OTS was genuinely approved, the OTS sanction letter, conditions of payment and all subsequent correspondence should be reviewed. This can be reviewed by Advocate BK Singh who can determine whether the continued recovery action amounts to a legal breach or contractual breach.
A guarantor is only liable to the extent of the guarantee, other security documents provided by him and governing law. If the guarantor has provided a valid security interest against property, that property is also at risk of recovery. The actual guarantee, security document would need to be reviewed before determining this question.
Agents cannot harass, intimidate or take advantage of the fact that a loan is overdue. RBI has issued directions to banks not to allow recovery agents to indulge in threatening, humiliating and unacceptable recovery methods. Harassment is one issue and the legality of auctioning of property is another issue.
Auction notice is a very advanced notice and such matters should be treated at once. However, the legal options available would depend on what actions have already taken place and if the sale was already conducted. chronology of events before concluding that every auction-notice matter can be saved. Advocate BK Singh can review
Yes. Advocate BK Singh can help borrowers review such documents, examine SARFAESI related issues, loan recovery matters, review settlement documentation and determine what legal options are available. Relief would still depend on the facts, relevant statutory procedure and decision made by the lender or appropriate forum.
âSimple trick to stop bank auction?â is not the best way to phrase that question.
Protection of property against bank auction depends upon knowing where the bank is actually at (what stage they are at), if they have complied with statutory requirements; how much the borrower actually owes; what documents they have and whether a genuine settlement or legal remedy exists that can be enforced or not.
Section 13(2), Section 13(4) application, possession proceedings, sale procedure, DRT remedies and settlement talks all serve different purposes. Combining them all together as something that the bank sent you called a âbank noticeâ can be an expensive mistake.
Similarly borrowers should ignore anyone guaranteeing a stay of auction. Tribunal relief is judicial and dependent on facts. Settlement is entirely lender discretionary. Neither can be promised.
Loan Settlement Agency counsels borrowers under pressure from loan default and recovery throughout Delhi NCR and India. Borrowers can have their loan documents, notices and recovery timeline and settlement potential reviewed by Advocate BK Singh so that they know where they stand before an auction issue goes too far.
Time is always money and in an auction matter, time lost can become equivalent to losing your paper too.
Speak directly with Advocate BK Singh at LEGAL365.
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