I took a loan against property from a well known NBFC by mortgaging my flat. Loan amount is less than 20Lakhs. I was paying EMI regularly but after lockdown my business failed and so I am unable to pay EMIs. I talked to the NBFC about one time settlement which I can give after selling my plant machinery and taking loan from relatives and friends. They said yes settlement can be done but they are putting strange conditions for it. First they said - pay this month's EMI and you will get settlement letter in 15 days. I complied with it. Then they started saying - pay 2 more EMIs then only you will get settlement letter. I did that too. But now they're saying - give 50 thousand as token money then you will definitely get settlement offer. It doesn't seem like they have any intention of doing settlement and releasing my flat. So here are some of my questions. 1.] Which is the correct process of loan account becoming NPA? --- (a) Miss 3 consecutive EMIs (no payment for consecutive 90 days). --- (b) Miss any 3 EMIs - doesn't have to be consecutive. I have already missed 2 EMIs in June and August of 2021. The NBFC is threatening that if I miss just one more EMI then account will become NPA and they will seize my flat next day. 2.] Will the NBFC legally have to wait until the account becomes NPA to take possession of property, or can they do it any time? --- The loan agreement reads - "Take possession of property in the 'Event of Default'". It doesn't say wait until account becomes NPA anywhere. 3.] What is the process by which the NBFC can take possession of mortgaged property? Will they have to go to court or to any other authority to take orders, or can they just come walking and lock the flat and go away? 4.] I am out of station for some time and I have informed the NBFC about it, but still they keep sending recovery agents to my flat to harass and threaten my family members who are neither a party in the loan nor in the ownership documents of the property. Are my family members obligated to entertain the recovery agents? If not, then what action can we take against them. Thank you very much for your valuable guidance. I look forward to taking an in-depth consultation on this matter.
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1) family members are not obligated to entertain recovery agents
2) if they are threatening your family members file police complaint against them for criminal intimidation
3) if NBFC has to take possession of property they will have to follow due process of law .they can’t just come and lock your flat
4) they cannot take possession of flat at any time
1. A NPA is a loan or advance for which the principal or interest payment remained overdue for a period of 90 days or above.
2. The NBFC cannot take action for possession without making this account as NPA.
3. They first have to issue a notice under section 13(2) of SARFAESI Act, wait for 60 days for reply from the borrower and then take action for symbolic as well as physical possession as per section 13(4) of the Act, of course they have to get permission from CJM court for taking physical possession.
4. You take their name and either give a criminal complaint against them for the offenses of threatening and criminal intimidation or issue a legal notice to the NBFC warning them of the legal consequences if they adopt such illegal activities against you.
The loan amount is 14Lakhs which is less than the 20Lakhs minimum loan amount required for SARFAESI Act to be applicable. Doesn't that make the NBFC ineligible to proceed according to SARFAESI Act to take possession of property? Please enlighten.
Yes 3 months.
Yes they need to send you notice and then approach court for seeking recovery.
Send them a legal notice and file complaint for harassment against them
In such a case NBFC would file case in civil court to take possession of property
1. NPA is defined in s.2(o) of sarfaesi act. the nbfc being regulated by RBI would have to follow the RBI guidelines for classifying a loan account of a borrower as NPA. The query does not disclose which NBFC so it cannot be said whether such nbfc is regulated by any law or comes under the umbrella of RBI
2. When there is a default, the bank will issue a notice to pay the outstanding. if the outstanding is not paid within the notice period, the bank will proceed to take steps for taking possession of the mortgaged flat
3. i dont think SARFAESI is inapplicable. i have not come across any provision in sarfaesi which says that if the loan is less than 20 lacs then sarfaesi does not apply. if that be so, the bank will give a possession notice to the borrower and take symbolic possession of the property. the bank will also issue notice in local newspapers about the factum of it having taken the symbolic possession. the bank will then have to apply to the magistrate court for taking the physical possession of the property from the borrower
4. if the recovery agents are troubling your family members then file a police complaint for criminal intimidation
The finance Ministry has reduced the minimum loan size eligible for debt recovery by NBFCs under the SARFAESI law to Rs. 20 lakhs from the existing level of Rs. 50 lakhs in the year 2015.
Therefore the NBFC may not be able to invoke the provisions of sarfaesi act for recovery of outstanding loan and interest thereon.
Dear Client,
As per the facts which have been provided, you need to consult an advocate and share with him in details the facts of the case and the required documents to get a better idea about the current situation.
Thank You.
