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CS Professional · Insolvency and Bankruptcy - Law and Practice · Debt Recovery and Securitization

Mehta Agro Pvt Ltd received a reply from its lender, Bharat Bank, rejecting its objection to a notice of default and giving reasons for not accepting the objection. The bank has not yet taken any measure under section 13(4). Mehta Agro wants to approach the DRT immediately against the rejection. What is the position?

Mehta Agro cannot approach the DRT merely because the bank communicated reasons for rejecting its objection, or its likely action. The Explanation to section 17(1) says such communication does not give a right to apply. The right arises only once a section 13(4) measure has actually been taken.

  1. AIt can apply to the DRT, since the rejection of its objection is a measure under section 17
  2. BIt can apply to the DRT only if the bank also indicates the likely action it will take
  3. CIt cannot apply to the DRT merely on the communication of reasons for not accepting its objection or the likely action of the bankCorrect
  4. DIt can apply to the DRT only after paying the entire outstanding debt

Explanation

The Explanation to section 17(1) states that communication of reasons for not accepting the borrower's representation, or of the likely action of the secured creditor at that stage, does not entitle the person to apply to the DRT. The right arises only against a section 13(4) measure actually taken. The second option is wrong because communicating likely action also does not confer the right.

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