What are the precautions to be taken at the time of issuing demand notice under Section 13 of SARFAESI Act?
Sarfaesi Act is an effective tool in the hand of financial institution for getting a speedy remedy in case of willful defaulters of loans or advances. The first step is however issuing a recall notice for closing the account. Then the time for issuing demand notice will come. Certain things should be ensured by the banks or financial institutions before issuing demand notice. Some of them are mentioned below.
(1) The account should have been classified as NPA and recalled.
(2) The security sought to be enforced should be hypothecated or mortgaged to the secured creditor.
(3) The security interest or rights created should not come under the excluded categories in Section 31 of the Act.
(4) The total liability in the account should be above one lakh rupees.
(5) The demand notice should be issued within the limitation period.
(6) It should be ensured that the correct address of the borrower/mortgagor is ascertained prior to issue of notice.
(7) Correct particulars must be entered in the notice. If any error occurs, a fresh notice has to be issued recalling the earlier one.
(8) Always keep the acknowledgement card of the issued notice for future use.
(9) Always physically verify the particulars of property.
(10) It is advisable to file a Caveat in Civil Court to avoid unnecessary hurdles caused by crooked borrowers.