District magistrates are supposed to assist banks (secured creditors) in taking over possession of loan defaulters' properties, which can be eventually auctioned to recover the loan amount.
The Gujarat High Court has said that district magistrates should not delay the process of taking over possession of 'secured assets' of a loan defaulter once the lending bank approaches them for the same. The order would help banks that are reeling under increasing burden of non-performing assets (NPA).
Notably, district magistrates are supposed to assist banks (secured creditors) in taking over possession of loan defaulters' properties, which can be eventually auctioned to recover the loan amount.
The direction came from a single judge bench of the high court in response to a plea filed by Bank of Baroda against the Valsad collector, who, on his own, had provided three months additional time to a defaulting company to repay the loan.
The court, while setting aside the collector's order, clarified that the whole objective of Section 14 of the Securitisation And Reconstruction Of Financial Assets And Enforcement Of Security Interest (SARFAESI) Act, is to ensure that the creditor is able to take possession of the secured assets at the earliest. The bench said once an order under Section 14 of the SARFAESI Act is passed, the same shall be implemented at the earliest.
As per the case details, a textile company in GIDC Umbergaon had taken a loan of around Rs 7.4 crore from Bank of Baroda. It defaulted in payments and was declared an NPA on October 17, 2017. The bank issued a demand notice against the company on January 3, 2018, under the SARFAESI Act, providing two months time to clear the default amount, failing which, they said they would go ahead with possession of its secured assets to recover the same.
Since no payment was made by the company, the bank approached the collector on March 27, 2018, for taking over possession of the two plots owned by the company in GIDC Umbergaon for subsequent auction and recovery of the default amount. However, the collector decided the matter on August 10 providing three months additional time to the borrower to clear its dues before taking over possession of the secured assets.
The bank challenged the same and through its counsel Virendra Gohil prayed that the district magistrate be given clear direction not to delay the processing of securitisation applications submitted by banks.
Bank of Baroda also contended that such delays often result in unwarranted litigations resulting in wastage of precious judicial time and delay in recovery of public money. It also submitted that Section 14 of the SARFAESI Act is clear and without any ambiguity.
THE DEFAULTER
A textile company in GIDC Umbergaon had taken a loan of around Rs 7.4 crore from Bank of Baroda. It defaulted in payments and was declared an NPA on October 17, 2017.
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