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CS Professional · Corporate Restructuring, Valuation and Insolvency · Debt Recovery and SARFAESI

Sundaram Textiles Ltd defaulted on a term loan from Coastal Bank, and the bank has classified the account as a non-performing asset. The bank issues a written notice under Section 13(2) of the SARFAESI Act. Within what period must the borrower discharge its liabilities in full before the bank may exercise the rights under Section 13(4)?

The borrower has sixty days from the date of the notice to pay in full. Section 13(2) gives this period, and only after it lapses without payment can the secured creditor take possession or use the other Section 13(4) measures.

  1. AThirty days from the date of notice
  2. BSixty days from the date of noticeCorrect
  3. CNinety days from the date of notice
  4. DFifteen days from the date of notice

Explanation

Section 13(2) allows the secured creditor to require the borrower to discharge liabilities in full within sixty days from the date of notice. Only if the borrower fails to do so can the creditor use the Section 13(4) measures. Fifteen days is the period for communicating reasons for rejecting a representation, not the repayment period.

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