+919892855900 202 Dhun Building, Janmabhumi Marg, Fort, Mumbai-400001 info@npaconsultant.in
Your Guide in Crisis

Dr. Visswas ( Ex. Banker)
B.Com, LL.B., M.A. (Eco.),
ACS, A.I.I.A. (USA), Ph.D. (U.K)

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SARFAESI ACT, 2002

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (also known as the SARFAESI ACT) is an Indian law .It allows banks and other financial institution to auction residential or commercial properties to recover loans.


Under this act secured creditors (banks or financial institutions) have many rights for enforcement of security interest under section 13 of SARFAESI Act, 2002. If borrower of financial assistance makes any default in repayment of loan or any installment and his account is classified as Non performing Asset by secured creditor, then secured creditor may require before expiry of period of limitation by written notice to the borrower for repayment of due in full within 60 days by clearly stating amount due and intention for enforcement. Where he does not discharge dues in full within 60 days, THEN Secured creditor may take possession of the mortgaged assets under section 13(4) of SARFAESI ACT WITHOUT INTERVENTION OF ANY COURT OR TRIBUNAL but with a prior notice to the borrower.


The secured creditors will then file an application under section 14 of the SARFAESI ACT, in the Metropolitan Magistrate Court or The District Magistrate Court as per the jurisdiction of the mortgaged assets inorder to obtain the order for forceful physical possession of the assets.


Generally the orders under section 14 of the SARFAESI ACT are passed in a period of 3 months in favor of the secured creditors.


The borrower may approach competent court to obtain stay against such orders even against the notice issued under section 13(4) of the said Act.


We can provide valuable guidance against every action taken by the secured creditors.


DRT / DRAT (Debt Recovery Tribunal)

The Debts Recovery Tribunals (DRTs) and Debts Recovery Appellate Tribunal (DRATs) were established under the Recovery of Debts Due to Banks and Financial Institutions Act (RDDBFI Act), 1993 with the specific objective of providing expeditious adjudication and recovery of debts due to Banks and Financial Institution. The DRTs are empowered to adjudicate claims of banks and FIs involving rupees ten lakhs and above.


Where a bank or Financial Institution has to recover any debt from any person, it makes an application called Original Application (OA) to the Tribunal against such person. After adjudication, the DRT issues order and Recovery Certificate, certifying the amount payable by the borrower to the bank or Financial Institution. This Recovery Certificate is thereafter executed by Recovery Officers attached to the DRTs as per the procedure for recovery of tax under Second Schedule of Income Tax Act, 1961.


Major difference between DRT Act and SARFAESI Act


No. DRT Act SARFAESI Act
1 It provides for recovery of debts of Banks & FIs through quasi-judicial tribunals called Debt Recovery Tribunals It empowers Banks and FIs to recover secured debts directly without intervention of judicial process
2 Banks and FIs and recover any debt through DRTs Only secured debts, ie., those debts which are secured by way of underlying security in the nature of mortgage, charge, hypothecation, assignment, etc
3 Banks and FIs and recovers any debts of more than Rupees ten lakhs through DRTs Banks and FIs can take action under the Act to recover secured debts of more than one lakh rupees
4 Appeal against the order of DRT to be filed in Debt Recovery Appellate Tribunal The action of Banks and FIs under the SARFAESI Act can be challenged before the DRT


THE MAHARASHTRA CO-OPERATIVE SOCIETIES ACT 1960

Maharashtra Co-operative Societies Act, 1960 provides order and laws for development of co-operative societies in the state of Maharashtra. This Act was passed as a law by the Maharashtra legislative assembly in 1960 enacted in the eleventh year of the Indian republic. It extends to the whole state of Maharashtra giving detailed laws for registration to membership and liability of members and incorporation of duties and privileges of the co-operative societies across the state. This micro enterprises are leading in promoting women entrepreneurship, keep the market available for them, development of their business, encourage decent employment, promote self help organization etc. These types of co-operatives are usually deals in producer, consumer, worker co-operatives.


Section 91-A of the MCS Act 1960 was inserted in 1974 and Co-operative Courts were established in certain territories to deal with the number of cases, then pending in this area. Section 91 of the MCS Act 1960 confers exclusive jurisdiction on Co-operative Courts to decide the disputes between parties referred to in section. It prescribes the jurisdiction of ordinary civil courts to decide such disputes between the parties referred to in the said section.


Section 101 of the MCS Act 1960 contemplates a recovery of the amount due to the society in a summary manner with regards to certain societies. The different procedures that are followed under these two sections often conflict with one another. Societies and Co-operative banks are interested in recovering amounts, due from the members, by adding sureties as parties u/s 101 of the MCS Act 1960. The reason for this is that a certificate can be obtained from the Registrar as per the provisions of the MCS Act 1960 without a full-fledged trial. Thus, the procedure for the recovery of money due to a society or bank is comparatively easy & speedily disposed off. Unfortunately, often Co-operative Societies and banks, in order to defraud their creditors and to expedite their claims from borrowers, file proceedings under Section 101 before the Registrar. The reason is that this section gives relief quickly and without any full-fledged inquiry. However, this practice is prejudicious to the members of the society.


THE MULTI-STATE CO-OPERATIVE SOCIETIES ACT, 2002An Act to consolidate and amend the law relating to co-operative societies, with objects not confined to one State and serving the interests of members in more than one State, to facilitate the voluntary formation and democratic functioning of co-operatives as people's institutions based on self-help and mutual aid and to enable them to promote their economic and social betterment and to provide functional autonomy ,was being felt necessary by the various cooperative societies, and federation of various cooperative societies as well as by the Government. The Multi-State Co-operative Society Banks are eligible for recovery under THE RECOVERY OF DEBTS DUE TO BANKS AND FINANCIAL INSTITUTIONS ACT, 1993.

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