Legal Question in Banking Law in India

I want to know about 31(j) " Any case in which the amount due is less than twenty percent of the principal amount and interest thereon ". What exactly "amount due" mean? Is it the over due amount (i.e, EMI's to be paid) or it mean the outstanding amount?If any one took a housing loan of Rs.27Lakhs and couldn't pay monthly installments for around 6 months. If they requested the bank for allowing them to temporarily stop their repayments, as they are renovating their house. In that case , the bank after few months suddenly issued demand notice on the basis of SARFAESI act on August 2010. And at that time the client had his/her overdue amount of around Rs.2,70,000 & outstanding was around Rs.24lakhs. If the 31( j ) section is about overdue amount. Here the overdue(i.e, monthly unpaid EMI's) is around 10% of the outstanding & very much less than 20% mentioned in 31(j). Also , before issuing demand notice, a month before that client had paid some EMI's to the bank. And after receiving notice the client paid the mentioned amount & also some additional amount as EMI for that month, requested the bank to withdraw the Demand notice. But, they didn't done that. And again sent some unofficial acknowledgement letter & suddenly mentioning an additional amount of Rs.2,80,000 as interest & some not mentioned EMI's of moratorium period. Even then also he paid around Rs.1,60,000 frequently. The last payment was made on 06-12-2010 (i.e, this month). Now, the over due is around Rs.1,20,000( of which 80,000 is being said as some interests for Demand notice,etc..). Even the A.G.M is harassing the client & warning to issue position notice. In this case are the measures taken to issue demand notice issued was correct? Even after frequent transactions & repayments by the client, do the bank have right to issue position notice? Is that demand notice issued is valid? And why that A.G.M is delaying in withdrawal of the demand notice, as the client is no more a NPA and paying the amount gradually & frequently? What action can that client take to get out of this harassing situation?


Asked on 12/12/10, 12:57 am

1 Answer from Attorneys
J. Radhakrishnan independent Practice

Once default in payment of EMI taken place, the Bank could take advantage of the accelaration clause in the loan agreement which might be that in the event of default in payment of interest and or instalment on due date, the entire loan amount can be demanded. If such is the case, the Bank would take umbrage under that clause and the amount due is the entire loan with interest and not the defaulted instalment or instalments alone. Try to reason out with the Bank and if it does not relent, only alternative is to challenge the further action of possession notice as and when issued, under Sec.17 of the SARFAESI Act before the DRT and obtain stay of further proceedings.

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Answered on 12/12/10, 2:48 am


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