| Securitisation and Reconstruction of Financial
Assets and Enforcement of Security Interest Act (SARFAESI):
In case where the
borrower refuses to give peaceful possession of the hypothecated vehicle,
Bank can issue a notice under section 13 of SARFAESI Act and take forceful
possession by following the procedure as stipulated in SARFAESl Act provided
the amount to be recovered is more than Rs.1 lac and more than 20% of the
principal amount granted and interest thereon.However, notices under the SARFAESIAct should not be issued for agricultural advances.
Action under the provisions of SARFAESI Act can be taken' under the current
documents also.
In the times to come expeditious recovery of vehicle
loans would become extremely critical. Utilizing the services of third parties
for recovery is considered a practical option and therefore instructions are
being reiterated. However, it is to be noted that this method would not in any
way dilute the laid down responsibilities of officials with regard to follow-up
of accounts. The recovery agents would only support the efforts of the branch
officials for expediting recoveries in account. It should be ensured that the
Recovery Agents follow legally permissible means and their recovery efforts
should not result in adverse publicity to the Bank.
The guidelines/instructions enumerated above are
applicable to all vehicles including cars, SUV, MUV, commercial vehicles and
tractors and vehicles financed under SME Scheme. Wherever it is found that
there is ambiguity in the State laws regarding impounding of any class of
vehicles, the matter should be immediately referred to Zonal Office after
obtaining the legal opinion including the views of the Banks Law Officer.
Annexure –A
A) Repossession of vehicles hypothecated to
the Bank
GIST OF OPINION GIVEN BY LAW DEPT.STATE BANK OF INDIA MUMBAI
(1)The Bank can always proceed to take possession of the
hypothecatedvehicles/movables without
intervention of the Courts by following the required procedure. It is to be
kept in mind that a notice is required to be given to the borrower and/or the
guarantor as the case may be, calling for payment of the dues of the bank
failing which the Bank would be taking possession of the property hypothecated
to the Bank and sell it in realizing the dues of the Bank. The period for repayment
should be stated in the notice failing which the Bank would take measures for
possessions/sale etc. The second precaution to be taken is that the Bank should
see that the vehicle is kept in proper custody and arrangements are made for
immediate sale thereon. There are cases where the banks have kept the vehicle
for years resulting in the vehicle becoming useless and the borrower filling a
suit against the Bank for damages. The third precaution should be that proper
inventory should be made at the time of the seizure in the presence of the
witnesses. It is advisable that there should be transparency while affecting
the sale etc.to avoid any allegation from the borrowers that the Bank has sold
the vehicle for a paltry sum etc.
(2)It is also equally necessary that generally a public
sector banks should not resort to unfair means for taking possession either
through ourselves or through agents engaged for the purpose.
(3) It is also possible to initiate action under SARFAESI
Act by issuing 60 days notice under Section 13(2) thereon and in that case, the
procedure required under the said Act and Rules should be followed.
(B) SEIZURE
OF TRACTORS
GIST OF OPINION GIVEN BY LAW DEPT.STATE BANK OF INDIA MUMBAI
1) It
is advisable to give notice before taking possession. The Notice should only
refer to default in payment or any of the events of default as specified in
loan documents and call for repayment failing which bank would exercise any or
all of the rights specified under the loan documents including possession of the
vehicles. The date and place of taking possession need not be mentioned in the
Notice.
2) It
is also made clear that the Bank should get a confirmation that there is no
embargo for taking such possession and selling the tractors hypothecated to the
Bank under any state Laws applicable to the concerned Branch/Region/Zonal
office.
3)
It
is to be noted that the courts in India have been consistently holding that if
there is a clause in the relevant loan documents providing for taking
possession and selling hypothecated movable goods etc., there is no legal bar
for resorting to such methods.
Annexure
'B'
Letter from the Branch to the borrower/guarantor about
enlisting
the services of the Recovery Agent
for repossession of vehicle
Date:
To,
Shri/Smt./Ms.__________________(borrower/ guarantor)
__________________
__________________
Dear Sir/Madam,
SUB: VEHICLE LOAN
ACCOUNT NO.____________ OF
SHRI
_____________
Please refer to the notice dated _______________addressed by the Bank
to you requesting you to regularize your above account.
2.You have failed to repay the Bank's dues as advised to you in
the said notice. Accordingly, Bank has now decided to repossess (impound) the
vehicle for the purchase of which you had availed the said loan.
3. In this connection, Bank has engaged
the services of M/s____________________as Bank’s Recovery Agency to
assist the Bank in taking all necessary steps for repossession/sale of the
vehicle. You are requested to cooperate with the authorized representatives of
the Agency.
Yours
faithfully,
(Authorized Officer)
State Bank of Saruashtra
_______________
___________ |
