Corporate Law : It is very clear that the Banks should follow RBI guidelines on Asset-Classification before classifying any loan account as ‘Non...
Finance : In the recent past, there is much talk among the business people, media and also society about India’s growth story, consequence...
Corporate Law : With great pain from the bottom of my heart, I have been writing this article. I have got great respect for legal profession, lega...
Corporate Law : There is every need for the Government to enable/assist the Banks in reducing their NPAs (Non-performing Assets) and it is beyond ...
Fema / RBI : It is known that while some loan transactions with the Bank like Housing Loan, Educational Loan etc. are very simple, some commerc...
It is very clear that the Banks should follow RBI guidelines on Asset-Classification before classifying any loan account as ‘Non-performing Asset (NPA)’. There were judgments saying that it is mandatory for the Banks to follow RBI guidelines while classifying an account as ‘Non-Performing Asset (NPA)’ and any deviation in this regard can vitiate the proceedings […]
In the recent past, there is much talk among the business people, media and also society about India’s growth story, consequences of slow-growth rate, ways to improve the growth and taking the growth rates again to more than 8%. Growth can certainly create employment opportunities needed and a country like INDIA with a demographic dividend […]
With great pain from the bottom of my heart, I have been writing this article. I have got great respect for legal profession, legal professionals and Indian Court System. I have had the privilege of reading some of the land-mark cases like ‘breach of legislative privilege case’ where late Shri H.M.Seervai has argued infavour of […]
There is every need for the Government to enable/assist the Banks in reducing their NPAs (Non-performing Assets) and it is beyond doubt that the Banks are now well assisted/equipped through the legal frame-work in recovering their dues.
It is known that while some loan transactions with the Bank like Housing Loan, Educational Loan etc. are very simple, some commercial loan transactions are very complex in nature. The Bank may provide various loan facilities to the Borrower and most of these commercial loans are complex to understand and these loans infact involve many complexities.
It has almost settled and become like a regular practice for the borrowers to question the proceedings initiated by the Banks at the last stage under the provisions of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act)
It has become very easy in most of the cases for the Bank now to recover their dues under ‘The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act)”. Under the Act, the Bank classifies the loan account as ‘NPA’ as per the RBI guidelines, gives a demand notice under section 13 (2) of the Act asking the borrower/s to pay the entire outstanding, deal with the objections if any from the borrower/s under section 13 (3A), will take the symbolic possession of the property under section 13 (4), proceeds with taking the physical possession of the property with the police assistance etc. under section 14 if there is resistance in taking physical possession of the property and then, proceeds with auctioning the property in accordance with the provisions of SARFAESI Act, 2002 and connected rules.
It is known that section 399 of the Companies Act, 1956 entitles minority shareholders, subject to the qualification prescribed, to approach the Company Law Board (CLB) under section 397/398 of the Companies Act, 1956 seeking relief against the ‘oppression and mis-management’ from the majority shareholders in the Company. As majority shareholders effectively controls the Board through their say in General Body Meetings, the protection to the majority is not envisaged though even the majority can approach the Company Law Board under section 397/398 of the Companies Act, 1956 when they become artificial minority under certain circumstances.
It is alleged that the Banks or the officials of the Bank often misuse the provision of ‘The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act, 2002)”. It is also alleged that the Bank officials help some clients/borrowers using all technicalities and their expertise in financial matters. While the Bank officials help few, they tend to be very perfect and sincere in respect of other cases where there is enough security and where the default is negligible and can be corrected.
Section 397/398 of the Companies Act, 1956 provides relief to the minority shareholders against the oppressive actions of the majority and the mis-management in the company. Section 399 of the Companies Act, 1956 deals with the issue as to who can approach the Company Law Board (CLB) seeking relief under section 397/398 and other connected provisions. Section 399 of the Companies Act, 1956 is reproduced below:
