Defending SARFAESI Proceedings
The SARFAESI Act empowers banks and financial institutions to enforce security interests without court intervention. The typical sequence is:
Section 13(2) Notice: The bank issues a 60-day notice to the borrower and guarantor demanding repayment of the entire outstanding amount. This is the first opportunity to respond and raise objections.
Section 13(3A) — Reply to Objections: If the borrower raises objections, the bank must respond within 15 days. If the bank fails to respond or the response is inadequate, this can be challenged.
Section 13(4) — Possession: If the borrower does not repay within 60 days, the bank can take possession of the secured asset and sell it. The bank can also take over the management of the borrower's business.
Section 14 — Assistance from DM: If the bank faces resistance in taking possession, it can apply to the District Magistrate or Chief Metropolitan Magistrate for assistance.
Section 17 — SARFAESI Appeal to DRT: Any person aggrieved by the bank's action under Section 13(4) can file an appeal before the DRT within 45 days. The appeal must be accompanied by a deposit of 25% (or 50% in certain cases) of the amount claimed.
Advocate Shaw represents borrowers at every stage — from replying to Section 13(2) notices to filing appeals under Section 17 before the DRT and pursuing writ petitions before the Calcutta High Court where the bank's action is arbitrary or mala fide.
Proceedings Before the DRT Kolkata
The DRT (Debts Recovery Tribunal) Kolkata has jurisdiction over banks whose recovery amount exceeds Rs. 20 lakhs. Key aspects of DRT proceedings:
Original Application (OA): The bank files an OA for recovery of its dues. The borrower must file a written statement.
Interim Relief: The bank may seek interim attachment of the borrower's assets or a restraint on alienation.
Trial: Both sides lead evidence. The DRT is not strictly bound by the CPC but follows principles of natural justice.
Recovery Certificate: If the DRT finds in favour of the bank, it issues a recovery certificate, which the Recovery Officer executes.
Appeal to DRAT: An appeal against the DRT order lies to the Debts Recovery Appellate Tribunal (DRAT), Kolkata, within 45 days. The appeal must be accompanied by a deposit of 50% of the debt amount (which can be reduced to 25% at the DRAT's discretion).
Advocate Shaw represents borrowers before both the DRT Kolkata and the DRAT Kolkata, ensuring that their rights are protected against aggressive bank recovery actions.
One-Time Settlement (OTS) Negotiations
Many banking disputes are resolved through OTS — a negotiated settlement where the bank agrees to accept a compromised amount in full and final settlement of the dues. Advocate Shaw assists borrowers in:
Assessing Viability: Determining whether OTS is appropriate given the borrower's financial position, the value of the security, and the strength of the bank's case.
Formulating an OTS Proposal: Drafting a realistic and persuasive OTS proposal with a viable repayment plan.
Negotiating with Banks: Engaging with the bank's officials to negotiate the OTS amount and terms.
Documenting the OTS: Ensuring that the OTS agreement is properly documented, includes a release of all claims, and is binding on the bank.
Post-OTS Compliance: Ensuring that the bank updates CIBIL records, releases securities, and files closure memos in pending proceedings.
Banking Ombudsman Complaints
The Banking Ombudsman, appointed by the RBI, provides a free and speedy grievance redressal mechanism for banking customers. Complaints can be filed for:
Deficiency in Service: Non-payment or delay in payment of cheques, drafts, or bills; failure to provide banking services promised; non-adherence to RBI guidelines.
Unauthorized Transactions: Debiting of accounts without authorization, particularly in cases of online fraud or ATM skimming.
Harsh Recovery Practices: Harassment by recovery agents, use of muscle power, or violation of RBI's fair practices code.
Excessive Charges: Levying charges without notice or in excess of RBI guidelines.
Refusal to Close Accounts: Unreasonable refusal to close deposit accounts.
Advocate Shaw files complaints before the Banking Ombudsman, Kolkata, and pursues them to resolution.