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

Sundaram Textiles Ltd defaulted on a term loan from Western Bank, and the bank classified the account as a non-performing asset. The bank wants to enforce its security without approaching any court or tribunal. What must it do first under Section 13 of the SARFAESI Act?

The bank must first issue a written notice to the borrower requiring full discharge of liabilities within sixty days. Only if the borrower fails to pay in that period may the bank take the section 13(4) measures, and no tribunal order is needed for this.

  1. AIssue a written notice requiring the borrower to discharge the liabilities in full within sixty daysCorrect
  2. BObtain an order of the Debts Recovery Tribunal permitting possession
  3. CIssue a written notice allowing thirty days for repayment
  4. DPublish a public auction notice for the secured assets immediately

Explanation

Section 13(1) allows enforcement without the intervention of a court or tribunal. Under section 13(2), after NPA classification the creditor must give written notice requiring full discharge within sixty days. Only after that period can it use the section 13(4) measures. Thirty days is wrong because the Act states sixty.

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