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ANDHRA PRAGATHI GRAMEENA BANK HEAD OFFICE::KADAPA
Circular No.153/2007-BC-CST 08.08.2007
SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND
ENFORCEMENT OF SECURITY INTEREST (SARFAESI) ACT
All the branches/offices are aware that the major problem faced
by banks and financial institutions in India is that of huge amount
locked in NPA accounts and banks have to go for long litigation
process which takes years to complete. To overcome this situation,
Government of India made Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act 2002 and
it is effective from 21.06.2002. Till date, the above Act made
applicable to the Commercial Banks and RRBs are not brought under
the purview of the Act. Now the Government of India vide
Notification bearing No.F No.1/2/2007.BOI dt.17.05.2007 has
specified the Regional Rural Banks as defined in Clause (f) of
Section.2 of Regional Rural Banks Act 1976 as “Bank” for the
purpose of SARFAESI Act. With the above notification, the
provisions of SARFAESI Act are made applicable to RRBs w.e.f.
17.05.2007. The Act enable the Banks to improve recoveries by
exercising powers to take possession of securities and sell them
without intervention of Courts and to exercise wide range of powers
conferred on them. Detailed guidelines are enclosed herewith in
this regard. 1. Operational guidelines/procedures -- Part-A 2.
Check list of action points in the chronological order -- Part-B 3.
Empanelment and utilization of services of approved Valuers and
enforcement Agencies for enforcement of securities -- Part-C
4.Draft Notice, applications & agreement formats -- Part-D All
the branches/Regional Offices are advised to go through the
guidelines carefully and take advantage of the provisions of Act
for recovery of NPAs. Clarifications required if any on this
circular may be sought from Head Office-Chairman‟s Secretariat.
(M.OBULESU) CHAIRMAN
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Circular No.153/2007-BC-CST dt.08.08.2007 Part (A)
Operational Guidelines/Procedures
The Act deals with four distinct actions in respect of financial
assets held by Banks and Financial Institutions as under:
1) Securitisation of financial assets means acquisition of
financial assets by any Securitisation Company or Reconstruction
Company from any originator whether by raising funds by such
Securitisation Company or Reconstruction Company from qualified
institutional buyers by issue of security receipts representing
undivided interest in such financial assets or otherwise.
2) Reconstruction of Financial Assets means reconstruction of
financial assets by an Asset
Reconstruction Company under the provisions of the Act,
registered under the Companies Act, 1956.
3) Enforcement of security interest without intervention of
Court means, any security interest
created in favour of any secured creditors may be enforced,
without the intervention of Court or Tribunal by such creditor in
accordance with the provision of this Act, by issuing a notice to
Secured Borrower whose loan account has been classified as NPA
giving sixty days time to pay the dues as mentioned in the notice,
failing which Securities described in the notice will be enforced
and dues will be recovered.
4) Setting up of Central Registry means the Registry set up or
caused to be set up by the
Central Government by notification, to be known as Central
Registry with its own seal for the purpose of Registration of
transaction of Securitisation and Reconstruction of Financial
Assets and creation of security interest under this Act. The
Central Registry is yet to be established.
At present the branches have to concentrate on item No 3.
Salient features of the Act are as follows:
1. The Act is deemed to have come into force as on
21.6.2002.
2. The Act is in addition to DRT Act 1993, Companies Act 1956,
The Securities Contract [Regulation] Act 1956 and The Securities
and Exchange Board of India Act 1992.
3. The Act shall have effect notwithstanding anything
inconsistent therewith contained in any
other law for the time being in force.
4. The Act under Section 34 specifically bars Civil Court's
jurisdiction to entertain any matter including granting injunction
in all matters which a DRT / DRAT enjoys under Recovery of Debts
Due to Banks & Financial Institutions Act as also under this
Act.
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Circular No.153/2007-BC-CST dt.08.08.2007
5. Banks can float an Asset Reconstruction Company singly or as
a joint venture with other players or can become a sponsor by
holding not less than 10 percent of the paid up equity capital of a
Reconstruction / Securitisation Company.
6. Section 13 of the Act gives powers to Securitisation and
Asset Reconstruction Company and also to Banks and Financial
Institutions for Enforcement of Security Interest in favour of
secured creditor without the intervention of Courts /
Tribunals.
7. The Act exempts the following from the purview of operation
for the following reasons:
i) A lien on any goods, money or security. Exercise of banker‟s
lien is regulated by Sec 171 of the Contract Act and intervention
of a Court or a Tribunal is uncalled for. ii) A Pledge of movables
is governed by the exercise of right of sale under section 176 of
the Contract Act without intervention of the Court or Tribunal.
iii) The security created in any aircraft. The same is the position
in respect of a vessel as defined under sec 3 (55) of the
Merchant-Shipping Act, 1958. iv) A conditional sale, hire purchase
or lease (lease of movables) is also outside the purview of the
Act, since, in such cases no other security interest is ever
created. v) The rights of an unpaid vendor under Section 47 of the
Sale of Goods Act, 1930, are exercisable by the unpaid vendor
without intervention of the Court or the Tribunal. vi) The security
interest securing repayment of any financial asset not exceeding
Rs.1.00 lakh is outside the purview of the Act. Therefore the
outstanding shadow balance must be more than Rs.1.00 lakh
immediately prior to the date of issue of notice. vii) The security
interest created in an agricultural land is also not covered under
the Act. Branches shall ascertain as to whether particular land is
classified as agriculture or non-agriculture, in the revenue /
municipal records as on the date of issue of notice and take
suitable decision. Hence, irrespective of purpose/classification of
loan, if security taken remains as agriculture property, the Act is
not applicable. viii) The amount due is less than twenty per cent
of the original principal and interest thereon immediately prior to
the date of issue of notice. ix) To invoke the provisions of the
Act, documents or decree as the case may be should be within the
period of limitation prescribed under the Limitation Act, 1963. x)
The Act has not been made applicable to properties not liable for
attachment under Section 60 (1) of the Code of Civil procedure,
1908, since the properties mentioned there under are connected with
right to life of the owner / holder of such properties. However, if
they are offered as security, the Act is applicable.
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Circular No.153/2007-BC-CST dt.08.08.2007
8. A. As per the Act “Borrower” means any person who has been
granted financial assistance by any Bank or Financial Institution
or who has given any guarantee or created any mortgage or pledge as
security and hence the word “Borrower” only is used everywhere in
the Act and the Rules. The Act is meant for securities and the
persons who have created a charge on those securities only. Hence
for the sake of clarity the word “Owner” is used in relation to the
property/security meant for possession and sale under this Act, in
this circular and formats. 8. B. Apart from powers to sell the
assets, Banks / Financial Institutions, Asset Reconstruction
Company can initiate any one or all of the following steps.
i. Take possession of secured assets, including right to
transfer by way of lease, assignment or sale (Sec 13. 4. a).
ii. Take over Management of the business of the borrower (Sec
13. 4. b). iii. Appoint a Manager to manage the secured assets so
taken over (Sec 13. 4. c). iv. Demand by notice in writing from any
person who has acquired any of the secured
assets from owner and from whom any money is due or may become
due to the owner to pay the secured creditor as is sufficient to
satisfy the debts (Sec 13. 4. d).
v. Proceed against owner before an appropriate forum for balance
money if the realisation by sale is not adequate (Sec 13.10)
(within limitation period).
vi. Proceed against the Guarantor/borrower as the case may be,
without prejudice to above (Sec 13.11).
vii. Request the jurisdictional Chief Metropolitan Magistrate /
District Magistrate‟s help for taking possession/custody of any
secured assets (Sec 14).
All payments received after taking above steps will get a valid
discharge.
9. Persons who can exercise the rights of the secured creditors
under the Act Authorised Officer: The Regional Managers who are in
the rank of Scale-IV working at Regional Offices are authorised for
exercising the rights of a secured creditor (including issuing of
notice). The Officers/Managers in Scale I, II and III cannot act as
Authorised officer. 10. Requirements before issue of Notice: a)
Default: As per Sec 2(j) of the Act „Default‟ means non-payment of
any principal debt or interest thereon or any other amount payable
by a borrower to any secured creditor consequent upon which the
account of such borrower is classified as Non-Performing Asset in
the books of account of the secured creditor (it may be noted that
even if interest alone is outstanding, then also the default has
occurred). b) Non Performing Asset: An account is classified as NPA
as per RBI directives and Circulars issued from time to time. Our
loan agreements provide for recalling of full dues in case of
defaults.
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Circular No.153/2007-BC-CST dt.08.08.2007 c) Non Suit Filed NPA
Accounts: The Act made a provision to Banks to issue a notice to a
secured borrower / guarantor / owner of the property (As per Format
– B to both borrower and guarantor for non suit filed accounts)
whose loan account has been classified by the Bank as Non
Performing Asset (as sub standard, doubtful or loss asset) in
accordance with the directions or guidelines relating to asset
classification issued by Reserve Bank of India. It is also a Recall
Notice to all concerned. The borrower / guarantor / owner will be
given 60 days time (from the date of notice) to pay the dues
mentioned in the notice. If they fail, securities described in the
notice will be taken over, enforced and dues will be recovered. It
shall be ensured that all particulars such as total dues (shadow
account balance), interest, full description of the property as per
the mortgage documents with details namely Door Number/Flat
Number/Block Number/ Extent/Name of the Road & Locality with
correct boundaries etc., are furnished correctly in the notice.
Branches shall note that issuing of notice under the Act should be
in respect of loans, which are backed by adequate securities and
having good market. It is also to be ensured that period of
limitation is available to enforce the securities and approach
DRT/Civil Courts for recovering the balance loan amount if any. It
is made clear that by enforcing the provisions of the Act, the
Limitation does not get extended or the time spent for the steps
initiated under this Act will not be excluded for the purpose of
Limitation. d) Suit Filed Accounts: The provisions of Act can be
enforced in suit filed accounts and decreed debt accounts also,
unless they are exempted from the purview of operation of the Act
as mentioned at point No.7. While initiating action in respect of
suit filed/decreed debt accounts, it shall be ensured that no
interim orders are in force against the Bank in the proceedings
before Court/DRT, for e.g.: an order of status quo or any order
which prevents taking actions including under the Securitisation
Act. Wherever such orders are operative, it will be entirely
appropriate to first get such interim orders vacated in order to
proceed under the Securitisation Act. While selecting suit
filed/decreed debt cases for initiating action under the Act,
Branches/Administrative Offices shall keep in mind the above
mentioned conditions and obtain the opinion of Panel/Retainer
Lawyer wherever such orders are in force. It is possible to take
simultaneous steps under Securitisation Act during the pendency of
suit/OA as per the decisions noted below: 2007 (135) Company Cases
1 (Supreme Court) Transcore Vs. UOI. 2006 (2) DRT cases 76 (DRAT
Chennai) S K Viji Vs. IOB. 2006 (1) Kerala Law times 161 Sahir Shah
Vs. BOI. 2005 (1) Kerala Law Times 31 Abdul Azeez Vs. PNB. 2004 (5)
Andhra Law Digest 517 Hotel Raja Hamsa International Vs. IOB.
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Circular No.153/2007-BC-CST dt.08.08.2007 If EP/RC is pending
then, also it is permissible to proceed under Securitisation Act as
per decision reported in 2006 (3) Kerala Law Times 121 Solaris
Systems Pvt. Ltd. Vs. OBC. Only if the Bank wants to withdraw the
OA for proceeding under Securitisation Act, then an application has
to be filed before the DRT concerned. It is not
mandatory/compulsory in all cases. It is not applicable to Civil
Suits filed for recovery before Civil Courts. Wherever DRT cases
are not filed, notices should be issued first and if necessary,
cases may be filed before DRT to save limitation (if borrower
refuses to execute AOD) and both the steps may be continued
simultaneously. However, a narration shall be made in the DRT
application about the upto date steps taken under SARFAESI Act and
that OA is filed before DRT in order to save limitation. In pending
cases, the respective Court/DRT shall be informed of the action
proposed to be taken under the Act by filing a memo as per Format –
F e) Procedure for obtaining permission for Issuing of Notice:
Branches shall send the
proposal in Format – A and seek permission to issue notice from
the respective Regional Office.
In respect of borrowers whose credit limits are sanctioned and
serviced by Head Office, the proposal for issue of notice shall be
submitted through respective Regional Office. Regional Offices
shall examine the applications received from the Branches and
accord permission to issue notices only in cases where ealizable
secured assets are available and documents are well within the
period of limitation. If the limitation period available is short,
suit should be filed first to save limitation and then proceed
under Securitisation Act. The Authorised Officer shall issue notice
in the specified format to the borrower/s, guarantor/s and owners
recalling the dues. Wherever the model draft demand notice is
required to be changed due to any specific reasons, the same shall
be vetted suitably by Panel/Retainer Advocate. In respect of
accounts where there are no complications, notices in such cases
shall be issued to borrowers and guarantors in the Format –B (Non
suit filed accounts) or Format C (Suit filed accounts ) by the
Authorised Officer to avoid delays in getting the notices vetted by
Retainer Advocate. 11. Serving of Notice: The serving of demand
notice shall be made by delivering or transmitting at the place
where the borrower/ guarantor/owner or his agent, empowered to
accept the notice or documents on their behalf, actually and
voluntarily resides or carries on business or personally works for
gain, by registered post with acknowledgement due, addressed to
them or their agent empowered to accept the service or by Speed
Post or by Courier or by any other means of transmission of
documents like fax message or electronic mail service.
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Circular No.153/2007-BC-CST dt.08.08.2007
Where Authorised Officer has reason to believe that they are
avoiding the service of the notice or that for any other reason,
the service can not be made as aforesaid, the service shall be
effected by affixing a copy of the demand notice on the outer door
or some other conspicuous part of the house or building in which
they ordinarily reside or carry on business or personally work for
gain and also by publishing the contents of the demand notice in
two leading newspapers, out of which one in vernacular language
(the translated version in local language only) having sufficient
circulation in that locality. However in such cases, instead of
publishing the entire text of notice in newspapers, an abridged
notice as per Format – D shall be published to save cost. Where the
borrower is a body corporate, the demand notice shall be served on
the registered office or any of the branches of such body corporate
as specified above. The demand notice shall be served on all
borrowers and guarantors. Any other notice under the Act in writing
to be served on the borrower or his agent by authorised officer
shall be served in the same manner as stated above. 12. Borrower’s
Right of Objections: The borrower/s and or guarantor/s have been
given an opportunity to raise objections in writing in response to
the Demand Notice issued by the Bank. The objections raised by them
should be studied and Bank‟s stand in respect of the objections
raised should be communicated to them within 7 days. It should not
be a routine reply without application of mind but it should be a
detailed / elaborate one containing reasons for rejection of the
objections raised by them. The rejection/reply should be after
meaningful consideration and not a ritual rejection. The branches
have to submit point-wise comments to the Authorised Officer to
finalise the draft reply. The replies prepared shall be vetted by
the Retainer Advocate, if necessary and the duly vetted reply be
sent to them under the signature of Authorised Officer of the Bank.
If it is not possible to send full/proper reply within 7 days, an
interim reply may be sent as per Format –D-I (by Certificate of
Posting) to gain time to send detailed reply by any one of the
modes mentioned above. A gist of possible objections and guidance
for preparing suitable reply is furnished hereunder:
REPLY TO DEMAND NOTICE
Sl. No.
Expected objections from Borrower/owner
To explain with reference to the following
1 Denial of loan Loan application and loan documents. Proof of
end utilization, particulars of specific release etc.
2 Denial of execution of documents Loan documents with other
correspondence if any.
3 Denial of creation of charge / mortgage Loan documents,
hypothecation / pledge agree-ments and mortgage papers. If they are
registered with statutory authorities like ROC, Sub Registrar, RTO
etc., that factor also to be referred to.
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Circular No.153/2007-BC-CST dt.08.08.2007
Sl. No.
Expected objections from Borrower/owner
To explain with reference to the following
4 Barred by limitation Refer to latest AOD, Balance Sheet of the
party etc.
5 Rate of interest is not correct, rate of interest is high and
not agreed for the said rate
Sanction letter, loan documents and various circulars.
6 Debits of various expenses to the account disputed
Refer to the availability of enabling clauses in the loan
documents.
7 Claim is not correct To deny.
8 Statement of account not furnished/received
To furnish a copy of account.
9 Bank can‟t take action without filing suit or can‟t take
possession without order of the court etc.
No such bar available under Securitisation Act. In fact Civil
Court has no jurisdiction at all for steps taken under this
Act.
10 Civil Case/DRT cases pending. Hence, Securitisation is not
possible. Simultaneous/parallel action not permitted.
No prohibition / other provisions of SARFAESI Act against
simultaneous action provided it is reported to the court / DRT
concerned. Supreme Court has decided that remedies under DRT Act
& Securitisation Act can be simultaneously resorted to.
11 More time needed. Fresh rephasement/OTS is requested
Consider the same on merits as per extant guidelines. Advise
them to call on the Branch and submit their proposal for
examination.
13. Enforcement of Securities: If there is no response from the
borrower and/ or guarantor, after expiry of 60 days from the date
of issuing of notice, the bank can take action under Sec.13 (4) at
any time and enforce the securities. Though there is no time limit
specified, action must be taken within a reasonable time and within
the period of limitation prescribed under Limitation Act. The loan
documents shall be kept in force by obtaining acknowledgement of
debt from the borrower and guarantors. 14. Sanction of Rephasement
/OTS/Upgradation after issue of notice: In response to the Notice
issued, if the parties approach the Branch with proposal for
rephasement or OTS or upgradation, the same may be considered as
per extant guidelines. In respect of rephased loans, if the account
subsequently becomes NPA due to default in payment there is no need
to send a fresh Demand Notice of 60 days duration. Similarly, if
parties fail to honour the OTS terms of payment, a fresh Demand
Notice of 60 days need not be sent to them.
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Circular No.153/2007-BC-CST dt.08.08.2007 However,
Branches/Administrative Offices should take care at the time of
communicating upgradation / rephasement / OTS to include a
condition in their sanction letter as follows: - “Recovery steps
under SARFAESI Act are kept in abeyance. In case of any default of
payment as per the rephasement schedule / OTS terms and conditions
/ upgradation, the Demand Notice already issued under SARFAESI Act
would automatically stand revived and the Bank would be taking
further steps under the Act without issuing another / fresh 60 days
notice besides cancelling/withdrawing OTS/Rephasement allowed.”
When any default is committed, it would be sufficient to send a
simple letter of intimation to them as per Format–E under
Certificate of Posting. 15. Possession of Movable Property: If the
amount mentioned in the demand notice is not paid within the time
specified therein and even after disposal of their objections, the
Authorised Officer shall initiate steps to realise the amount by
adopting any one or more of the measures available under the
provisions of Act. Officials of the Branch shall personally visit
the mortgaged site / securities and ascertain their exact position,
obtain relevant records from the authorities such as revenue, gram
panchayat, municipality etc, to decide the actions which will be
effective to liquidate the liability of the borrower. The
Authorised Officer shall take note of the following action points
while taking possession of the secured assets.
I. Ensure availability of storage facility / space for safe
keeping of the seized goods/movables. II. The securities / goods to
be seized should command reasonable price and assured
recovery. III. Unless there is a ready market, as far as
possible, the seizure of perishable goods shall be
avoided. IV. In case of movable assets, the exact location /
whereabouts of the securities should be
ascertained. V. Wherever any resistance is anticipated from the
borrower, seek help from the Dist Magistrate
or Chief Metropolitan Magistrate, by filing an application
within whose jurisdiction the assets are located, to take
possession of such assets. (Format -J). It has been decided by
various High Courts etc., that Magistrates need not issue Notices
again to the owner as the Bank has already given 60 days notice
etc. Magistrates have to order assistance immediately. The
following decisions may be relied upon.
1. 2004 IV Banking Cases 529 (Karnataka) - Citi Bank Vs. Sudeep
Singh 2. 2005 (1) ISJ Banking 612 (DRAT, Chennai) - ARCIL Vs. Kumar
Metallurgical Corp. Ltd. 3. 2006 (4) Karnataka Civil & Criminal
Reporter 2216 (DB) - Sunanda Kumari Vs. Standard Chart Bank 4. 2007
(1) Karnataka Law Journal 309 Karnataka High Court - Vijaya Bank
Vs. Shameen Transports
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Circular No.153/2007-BC-CST dt.08.08.2007
VI. Keep informed of the action of the Bank to the local Police.
Take their help wherever stiff resistance from the borrowers is
anticipated.
VII. Where the possession of movable property is to be taken
over, the Authorised Officer shall take the same in the presence of
two witnesses after a Panchnama drawn and signed by the witnesses.
(Format -K)
VIII. After taking possession, the Authorised Officer shall make
an inventory of the movable property (Format- L). Deliver a copy of
such Inventory and Panchnama to the owner or to any person entitled
to receive on behalf of owner of the property/ies.
IX. The Authorised Officer shall keep the property taken
possession either in his own custody or in the custody of any
person authorised or appointed by him, who shall take as much care
of the property in his custody as a owner of ordinary prudence
would, under the similar circumstances, take of such property:
Provided that if such property is subject to speedy or natural
decay, or the expenses of keeping such property in custody is
likely to exceed its value, the Authorised Officer may sell it at
once.
X. The Authorised Officer shall take steps for preservation and
protection of seized secured assets and insure them, till they are
sold or otherwise disposed of.
XI. Wherever the seized securities are vehicles, tractors, rigs
etc, a due intimation of such seizure is to be given to RTO
concerned by Registered Post with acknowledgement due for claiming
exemption from Road tax etc. Copy of the RC / Tax card available
with the branch should also be sent to the RTO and they should be
informed of the address of the premises/godown where the same is
kept
XII. In case any secured asset is
a) a debt not secured by negotiable instrument or
b) a share in a body corporate;
c) Other movable property not in the possession of the borrower
except the property deposited in or in the custody of any court or
any like authority, the Authorised Officer shall obtain possession
or recover the debt by service of notice covering the following
aspects: -
The debtor of the borrower is to be prohibited from making
payment to the borrower and the borrower is also to be prohibited
from recovering the debt. The debtor (of the borrower) is to be
directed to effect payment to the Authorised Officer of the bank.
In the case of Garnishee orders, the bank shall file an application
to the Court to restrain the Garnishee from effecting payment of
the monies due to the borrower and the same is made absolute. If
the secured asset is a share in the body corporate, the authorised
officer has to issue directions to the borrower to transfer the
same to the bank and also issue directions to the body corporate
from not transferring the shares in favour of any person other than
the Bank. Copy of this notice is also to be sent to the Company‟s
Registrar to the issue or share transfer agents.
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Circular No.153/2007-BC-CST dt.08.08.2007 In case of movable
properties which are not in the possession of the borrower, (except
property deposited in the custody of the Court or any other
authority) the borrowers are to be called upon to handover the
possession to the Authorised Officer and Authorised Officer is to
take the custody of the movable property in the same manner as
provided in the Act. Where the movables are secured assets other
than those covered above, possession is to be taken by the
Authorised Officer by taking possession of documents evidencing
title to the movables. 16. Preferring of appeal in DRT by the
Owner/Borrower/Guarantor: Any appeal against the action initiated
by the Bank under the Act would lie with DRT only irrespective of
the amount of claim. The aggrieved Owner may prefer a first appeal
before DRT having jurisdiction in the matter, within 45 days from
date of taking possession/takeover management/issuing sale notice
without depositing any amount. No appeal/writ petition is
maintainable at the stage of Notice as held by the Supreme Court in
Mardia Chemicals case. Though Sec 17(2) of the Act has been struck
down by the Supreme Court, in the same Judgement it has been ruled
that Tribunal in exercise of its ancillary powers should have
jurisdiction to pass any stay/interim orders subject to condition
it may deem fit and proper. Hence, if borrower or guarantor
approaches DRT, Branches should plead for deposit of at least 25%
of the claim amount to show their bonafides and/or direction to
parties for full settlement / submission of One Time Settlement
proposal in deserving cases. The scope of enquiry by DRT has been
expanded. DRT can look into the matter and if necessary may order
restoration of the management of the assets or possession back to
the borrower. A time limit of 60 days is prescribed for DRT to
dispose off the first application of the borrower. In case of delay
by DRT, DRAT may be approached for direction to DRT for speedy
disposal. If DRT or DRAT on an appeal records a finding that the
possession of the secured assets by the creditor is wrongful, the
same shall direct the secured creditor to return the assets of the
borrower besides payment of compensation and costs. An aggrieved
person may prefer an appeal before the DRT having jurisdiction in
the matter. Any person aggrieved by the orders passed by DRT may
file second appeal within 30 days to DRAT. The appeal before the
DRAT is available to the aggrieved secured creditor also.
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Circular No.153/2007-BC-CST dt.08.08.2007 The fee for filing
appeal in DRTs/ and second appeal to DRAT shall be as follows –
(payable by the owner also)
Sl. No. Nature of Application Amount of Fee payable
1 Appeal to DRT under Section-17 (1) by borrower:
(a) Amount of debt is less than Rs.10.00 lakh Rs.500/- for every
Rs.1 lakh or part thereof
(b) Rs.10.00 lakh and above Rs.5000/- plus Rs.250/- for every
Rs.1.00 lakh or part thereof in excess of Rs.10.00 lakh subject to
a maximum of Rs.1.00 lakh
(c) By an aggrieved party other than the borrower and less than
Rs.10.00 lakh
Rs.125/- for every Rs.1.00 lakh or part thereof
(d) Rs.10.00 lakh and above Rs.1250/- plus Rs.125/- for every
Rs.1.00 lakh or part in excess of Rs.10.00 lakh subject to maximum
of Rs.50000/-.
(e) Any other application by any person Rs.200/-
2. Appeal to DRAT against any order of DRT under Section-17
Same fees as provided at Clauses (a) to (e) of Serial No.1.
DRT/District Judge, DRAT can award compensation and cost to the
borrower if the assets are ordered to be returned by the Banks. The
Act has been amended from 11.11.2004 to the effect that if the
owner files a second appeal to DRAT against the order of DRT in his
petition to DRT, then DRAT can direct him to deposit 50% of the
amount demanded in the Notice as a pre-condition. DRAT has
discretion to reduce it to 25%. This amendment has been upheld by a
Division Bench of High Court of Delhi in 2006(2) DRT cases (DB) 550
R V Saxena Vs. Union of India.
17(A). Sale of movable secured Assets: -
Valuation of movable secured assets: After taking possession of
assets and in any case before sale, the Authorised Officer should
obtain valuation report of the movable secured assets from the
valuers approved under the Act by Head Office as stated under Part
C of this Circular and thereafter fix the reserve price of the
assets in consultation with the approved valuer in respect of the
property to be sold to realise the dues. I. The Authorised Officer
may sell the seized movable secured assets in one or more lots
by
adopting any of the following methods to secure maximum sale
price for the assets, to be so sold –
a) Obtaining quotations from parties dealing in the secured
assets or otherwise interested in buying such assets; or
b) Inviting tenders/sealed tenders from the public ; or c)
holding public auction; or d) by private treaty.
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Circular No.153/2007-BC-CST dt.08.08.2007
The Authorised Officer shall serve to the Owner a notice of
thirty days for sale (Format-N). This may be issued immediately
after taking possession if there are no prohibitive orders from
DRT/High Court, but actual sale can be held after 45 days of taking
possession. The owner may be advised in the sale notice itself that
(a) If authorised officer decides to sell the property either by
private treaty or by obtaining quotations, the consent of the owner
would be solicited later (b) If he decides to sell the property by
inviting tenders and public auction, he would publish a public
notice with necessary details in one English and one local
vernacular news paper and no further individual notice would be
given to the owner. If the sale is being effected by inviting
tenders from the public and public auction, the secured creditor
shall cause a public notice as mentioned above ( Format -O ) by
setting out the terms of sale on “As is where is basis”, which may
include; e) details about the borrower/owner and the secured
creditor; f) description of secured assets to be sold with
identification marks or numbers, if any, on them; g) reserve price,
and the time and manner of payment; h) time and place of public
auction or the time after which sale by any other mode shall be
completed; i) depositing earnest money as may be stipulated by
the secured creditor and deposit of balance
within 15 days on confirmation of sale. j) any other thing,
which the Authorised Officer considers it material for a purchaser
to know in
order to judge the nature and value of movable assets. k) For
publication of notices through “Sale by inviting Tenders and by
Public Auction”, the draft
Format -O may be adopted with suitable changes like description
of movable items, any conditions etc., in consultation with
Panel/Retainer Advocate, if necessary.
II. Sale by Obtaining Quotations or by Private Treaty shall be
on such terms as may be settled
between the parties in writing and with consent of owner. The
Act and Rules are silent about absence of Consent of owner for sale
by Quotation or Private Treaty. Hence it is suggested that if the
Owner does not respond or refuses to give his consent, the secured
assets may be sold by “Tenders- Public Auction mode” keeping the
quotation /private treaty amount as Reserve Price
III. If there are no bidders for the reserve price, authorized
officer can sell the property for a lower/lesser price with written
consent of the owner.
(B) Issue of certificate of sale for movable assets: -
(1) Where movable assets are sold, sale price of each lot shall
be paid as per the terms of the public notice or on the terms as
may be settled between the parties, as the case may be, and in the
event of default of payment, the movable secured assets shall be
liable to be offered for sale again.
(2) On payment of sale price, the Authorised Officer shall issue
a certificate of sale in the prescribed form (Format-P) specifying
the movable assets sold, price paid and the name of the purchaser
and thereafter the sale shall become absolute. The certificate of
sale so issued shall be prima facie evidence of title of the
purchaser.
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Circular No.153/2007-BC-CST dt.08.08.2007 18. Possession and
Sale of immovable secured assets: -
A) 1. Where the secured asset is an immovable property, the
Authorised Officer shall take
possession, by delivering a possession notice (Format- M) to the
owner, by affixing the possession notice on the outer door or at
such conspicuous place of the property and also by publishing in
two leading newspapers (one in vernacular language) having
sufficient circulation in that locality.
2. If the property is a vacant site, a board shall be installed
prominently on the property
displaying that Authorised Officer of the Bank under the Act has
taken possession of the site (in Local Vernacular Language) as
follows:
Andhra Pragathi Grameena Bank _____________________Branch
The Authorised Officer of the Bank has taken possession of this
property under SARFAESI Act. General Public are hereby cautioned
not to deal with the property directly with the owners.
Authorised Officer
Wherever it is not feasible/possible to take actual possession,
Bank can take symbolic (constructive) possession by serving,
affixing and publishing the possession notice in newspapers. 3. In
the event of possession of immovable property is actually taken by
the
Authorised Officer, such property shall be kept in his own
custody or in the custody of any person authorised or appointed by
him, who shall take as much care of the property in his custody as
a owner of ordinary prudence would, under the similar
circumstances, take of such property.
4. The authorised officer shall take steps for preservation and
protection of secured
assets and insure them for both symbolic and actual possession
till they are sold or otherwise disposed off.
If the owner approaches DRT, Branches shall act as per para- 16.
5. Before effecting sale of the immovable property, the Authorised
Officer shall obtain
valuation of the property from an approved Valuer under the Act
and fix the reserve price of the property in consultation with him
and may sell the whole or any part of such immovable secured asset
by any of the methods mentioned under Point 17.A ( I ).
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Circular No.153/2007-BC-CST dt.08.08.2007
B. 1. The Authorised Officer shall serve to the owner a notice
of thirty days for sale of the immovable secured assets,
(Format-N). This may be issued immediately after taking possession
if there are no prohibitive orders from DRT/High Court, but actual
sale can be held any day after 30 days of taking possession and
issue of sale notice. For other terms and conditions Para-17.A may
be referred to. The rules under the Act do not prescribe any model
Sale/Auction Notice. Hence the draft format for Sale by inviting
Tenders/ Sale by Public Auction (Format-O ) is furnished for use
appropriately. Rule 6(2) and 8(6) direct that Authorised Officer
shall serve to the borrower (owner) a notice of 30 days for sale of
movable and immovable assets. The rules do not direct to affix or
publish the 30 days sale notice in newspapers. Therefore, there is
no need for affixing or publication of 30 days sale notice
addressed to Owner of the property. However, if the owner of the
property avoids taking delivery of 30 days sale notice, the same
shall be affixed in prominent place of the seized premises and also
published in two leading newspapers, out of which one in local
vernacular language. The rules stipulate publication of Auction
Notice to public only if the sale is conducted through inviting
tenders or public auction setting out the terms of sale in two
leading newspapers, one in vernacular language. If it is a private
sale or by obtaining quotations there is no need for publication.
Public Auction Notice need not be sent by post to the owner
separately.
2. If the Authorised Officer deems it fit sale notice can be put
on the web site of the Bank. 3. Sale by obtaining quotations or by
private treaty shall be on such terms as may be settled
between the parties in writing and with consent of owner (refer
Para 17. A.II ). 4. If the property cannot be sold, steps have to
be taken to reduce the Reserve Price in
consultation with the approved Valuer. Then, a notice may be
sent to the owner as per the Format O-4 before deciding next course
of action.
C. Time of sale, Issue of sale certificate and delivery of
possession etc.-
(1) No sale of immovable property under these rules shall take
place before the expiry of thirty days from the date on which the
public notice of sale is published in newspapers or notice of sale
has been served to the owner of the property. If sale notice
(Format-N) is sent to the owners, sale can be held after 30
days.
(2) The sale shall be confirmed in favour of the purchaser who
has offered the highest sale price in his bid or tender or
quotation or offer to the Authorised Officer and shall be subject
to confirmation by the secured creditor; provided that no sale
under this rule shall be confirmed, if the amount offered by sale
price is less than the reserve price, specified. Provided further
that if the Authorised Officer fails to obtain a price higher than
the reserve price, he may, with the consent of the owner (Format
O.4) and the secured creditor effect the sale at such price. The
authorized officer is the Competent Authority to confirm the
sale.
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Circular No.153/2007-BC-CST dt.08.08.2007
(3) On every sale of immovable property, the purchaser shall
immediately pay a deposit of twenty five percent of the amount of
the sale price including EMD, to the Authorised Officer conducting
the sale and in default of such deposit, the EMD shall be forfeited
and the property shall forthwith be sold again.
(4) The balance amount of purchase price payable shall be paid
by the purchaser to the Authorised Officer on or before the
fifteenth day of confirmation of sale or such extended period as
may be agreed upon in writing between the parties.
(5) In default of payment within the period mentioned, the
deposit shall be forfeited and the property shall be resold and the
defaulting purchaser shall forfeit all claims to the property or to
any part of the sum for which it may be subsequently sold.
(6) On confirmation of sale by the secured creditor and if the
terms of payment have been complied with, the Authorised Officer
exercising the power of sale shall issue a certificate of sale of
the property in favour of the purchaser (Format –Q).
(7) Where the immovable property sold is subject to any
encumbrances, the Authorised
Officer may, if he thinks fit, allow the purchaser to deposit
with him the money required to discharge the encumbrances and any
interest due thereon together with such additional amount that may
be sufficient to meet the contingencies or further cost, expenses
and interest as may be determined by him.
(8) On such deposit of money for discharge of the encumbrances,
the authorised officer or
purchaser may issue notices to the persons interested in or
entitled to the money deposited with him and take steps to make the
payment accordingly.
(9) The Authorised Officer shall deliver the property to the
purchaser free from encumbrances known to the secured creditor on
deposit of money as specified above.
(10) The Certificate of Sale issued shall specifically mention
that whether the purchaser has purchased the immovable secured
asset free from any encumbrances known to the secured creditor or
not.
(11) The Certificate of Sale shall be registered with
appropriate registering authority under Transfer of Property Act on
payment of requisite stamp duty and registration fee by the
purchaser.
(12) Procedure for auction/sale: Though the Act and rules
prescribe sale by public auction
or inviting tenders, it is better to prefer a method of inviting
tenders with liberty to conduct public auction among the bidders to
ensure better price for the property. If Authorised Officer is
satisfied about the quantum of the highest bid, then the sale can
be confirmed in favour of the highest bidder. After opening the
bids, if the authorized officer feels that the bids are not
competitive, then he can call for interse bidding among the
participating bidders to fetch a better price. Before starting the
auction, a letter may be obtained from the intending participants
as per Format – O-1. While conducting the auction/sale, the
proceedings shall be prepared by Authorised Officer as per Format –
O-2. The Act does not provide for any Interim Certificate. There
are instances the bidders have to raise funds to make payment of
balance75% of bid amount. Hence an Interim Certificate as per
Format – O-3, may be issued, which will be helpful for them.
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Circular No.153/2007-BC-CST dt.08.08.2007 (13) Reserve Price: As
per the Act, the Authorised Officer has to get the assets valued by
the
approved valuer for fixing the Reserve Price. At the time of
furnishing the valuation, the valuers empanelled under the Act have
to give the normal valuation for which two mutually willing parties
would agree, guideline value / registration value fixed by the
State Govt. and also distress sale value, which may be 10% to 25%
less than the market value. This distress value will have to be
taken into consideration along with the known encumbrances, by the
Authorised Officer for fixing Reserve Price.
(14) Earnest Money Deposit: The Act does not stipulate any
guidelines. 10% of the Reserve
Price may be fixed and depending upon the facts and
circumstances of each case, the same may be lesser than 10%. It may
be relaxed so that EMD should not be a hurdle for the interested
bidders and should also avoid non-serious bidders.
(15) Time of auction: The Act does not stipulate any guidelines.
As per Rule-9(3) of Security
Interest (Enforcement) Rules 2002, the successful bidder has to
pay 25% of the bid amount inclusive of EMD immediately. If the bid
amount is huge and the auction is conducted in the evening, the
bidders may not be in a position to mobilize funds. Hence, it is
preferable to conduct auction between 10.00 A.M. and 1.00 P.M., so
that the successful bidder can arrange for depositing the balance
either by cash or DD on the same day, as they will have enough
banking hours left out to arrange for funds.
(16) Caveat: The parties may rush to Court/Tribunal/High Court
after the Sale
Notice/Possession Notice is issued for stalling the process. In
general, the Forums grant ex-parte orders like injunction/
stay/statusquo orders. If authorized officer anticipates such moves
from the borrowers to stall the Bank‟s action, caveat petitions in
the respective Courts/Tribunals can be filed immediately after
serving of sale notice to the parties and publication of the
auction notice in the Newspapers. Wherever there is no provision
for filing caveat or DRTs/ Courts do not accept the same, our Panel
Advocates may be requested to look out for such appeal/applications
in the respective courts and as and when they are filed/moved our
Advocates have to appear and oppose.
(17) Personal appearance of Authorised Officer before the
Sub-Registrar for registering the
Sale Certificate is not required as per Section-88 (1) of
Registration Act. A letter/certificate may be sent to the
Sub-Registrar as per Format – O-5.
19. Appointment of Manager:
(1) The Board of Directors may appoint in consultation with the
borrower/owner any person (hereinafter referred to as the Manager)
to manage the secured assets taken over by the secured
creditor.
(2) The Manager appointed by the Board of Directors shall be
deemed to be an agent of the borrower and the borrower/owner shall
be solely responsible for the commission or omission of acts of the
manager unless such commission or omission is due to improper
intervention of the secured creditor or the authorised officer.
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Circular No.153/2007-BC-CST dt.08.08.2007 (3) The Manager shall
have power by notice in writing to recover any money from any
person who has acquired any of the secured assets from the
borrower/owner, which is due or may become due to the
borrower/owner.
(4) The Manager shall give such person who has made payment, a
valid discharge as if he has made payments to the
borrower/owner.
(5) The Manager shall apply all the monies received by him in
accordance with the provisions of the Act i.e., in the absence of
any contract to the contrary to be applied, firstly, in payment of
such costs, charges and expenses, secondly, in discharge of the
dues of the Secured Creditor and the residue of the money so
received shall be paid to the person entitled thereto in accordance
with his rights and interests.
20. Procedure for Recovery of shortfall of secured debt: - If
the balance amount of debt due after crediting the sale proceeds of
the assets sold under the Act is Rs.10.00 lakhs and above, an
application for recovery of balance amount shall be presented to
the Debts Recovery Tribunal in due format. If the balance amount of
debt due is less than Rs.10.00 lakhs, then a regular Civil Suit
shall be filed before the appropriate Civil Court. The provisions
of the Debts Recovery Tribunal (Procedure) Rules, 1993 made under
Recovery of Debts Due to Banks and Financial Institutions Act, 1993
(51 of 1993), shall mutatis mutandis apply to any application filed
under the provisions of the Act for recovery of balance.
Application shall be accompanied with fee as provided in rule 7 of
the Debt Recovery Tribunal (Procedure) rules 1993. 21. Reporting:
The branches shall maintain a Register (as per Format G- Part B)
for recording the cases in which action under the Act has been
initiated. The branches shall furnish consolidated progress (Format
– G- Part A) and individual account wise developments( copy of
register Format – G- Part B) on monthly basis to their respective
Regional Offices who in turn shall furnish consolidated report to
Head Office, Kadapa
22. Miscellaneous guidelines:
1. If the borrower clears the dues of the bank together with the
costs, charges incurred at any
time before the date fixed for sale or transfer, the asset
seized or possession taken over should not be sold in the
auction.
2. There may be instances wherein the borrower may have
alienated / encumbered the property charged / mortgaged (in favour
of the bank) to third parties. In such cases, the bank is entitled
to demand from such third parties to pay the amount (which is due
or may become due at a later date to the borrower) to the bank
directly and give necessary certificate / discharge receipt
thereof. Judgement reported in 2005 (62) SEBI & Corporate Laws
390 (Delhi High Court) O.P. Khanna Vs. UBI may be referred in case
of need.
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Circular No.153/2007-BC-CST dt.08.08.2007
3. In respect of cases where the realizable value of
hypotheca/secured movable assets is nominal, it is advisable to
seize and sell the same under General Law of Contracts as per
Bank‟s Loan cum Hypothecation agreement instead of preferring
action under Securitisation Act.
4. In respect of accounts pending before BIFR, if the secured
creditors representing three
fourth of outstanding dues have taken measures to recover their
dues, then the proceedings before the BIFR shall abate. In this
connection, necessary steps shall be taken in co-ordination with
other secured creditors to come out of the purview of BIFR
proceedings.
AMENDMENTS TO THE COMPANIES ACT: New provisos have been added to
Section 424 A to the effect that any reference pending and any
scheme for revival and rehabilitation pending before the Tribunal
on or before 11.11.2004 shall abate if ¾th of the secured creditors
(in value of amount outstanding) take any measure under
Securitisation Act. Further, no fresh reference can be made by the
borrower if ¾th creditors have already taken steps U/s.13(4) of
SARFAESI Act. Supreme Court has held that Section13(2) Notice is
not a mere show cause notice but an “action” taken under the
provisions of Securitisation Act in Transcore‟s case. Hence, even
by issue of Section-13 (2) notice, the reference pending before
BIFR gets abated. It may be noted that this is in addition to the
amendments already made by SARFAESI Act to SICA in the year
2002.
5. If it is a Consortium Advance, the provisions of this Act can
be enforced by the Secured
Creditors representing 75 % in the value of the amount
outstanding, as on a record date and it is binding on the remaining
Secured Creditors.
6. Where a company is in liquidation, the amount realized from
the sale of secured assets
shall be distributed in accordance with the provisions of
section 529 A of Companies Act. As per Section 529 A of Companies
Act, dues of workmen and dues of the secured creditor shall have
pari-pasu charge over the secured assets. Therefore after realizing
the securities, bank shall deposit workmen dues with the Official
Liquidator / the Company Court as the case may be and appropriate
the balance amount to the loan account.
7. In case of any bonafide act in the matter of enforcing
securities, no suit, prosecution or legal proceedings shall lie
against such persons. The protection is extended in connection with
the exercise of the rights of the borrower against the third
parties or those who stand in legal relation with the borrower.
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Circular No.153/2007-BC-CST dt.08.08.2007 8. The Act will have
precedence over other enactments and creates special rights in
the
secured creditors. Please refer decision in Mardia Chemicals
Case, 2007 (2) Current Tamil Nadu cases 193 (Division Bench –
Madras) Sri Laxmi Products Vs. SBI and 2005 CBJ 638 (Division
Bench-Kerala) Shamim S Vs. City Police Commissioner.
9. The postal acknowledgement cards and the courier delivery
receipts evidencing delivery of
notices issued under Act should be kept with loan documents in
safe custody. If postal acknowledgment cards /courier receipts are
not received within a reasonable time, branches should immediately
write to postal/courier authorities and obtain confirmation of
delivery from them.
10. The Inspecting Officials during branch inspection shall
verify the register containing details
of cases under Securitisation Act and ensure that all related
papers are properly held under safe custody alongwith loan
documents.
11. Though the Act provides for two appeals to DRT and DRAT,
sometimes owners of assets
may approach High Court directly and obtain interim orders. Then
Branches shall request High Court to pass an order directing the
parties to submit OTS proposal, to deposit lumpsum amount to show
their bonafides or to vacate the interim orders. If they fail, High
Court may be requested to dismiss their writ petition confirming
the steps taken by the Bank. Those Writs need not be contested on
technical grounds, as this approach will give more time to the
parties and delay our recovery process.
12. Steps can be taken in respect of a security held in the
custody or occupation of the owner
or tenant. Notices as per Format – M-1 to be sent to the tenants
demanding their voluntary vacation and handing over of peaceful
possession, payment of rent till their vacation etc may be got
approved from the Retainer Advocate, wherever required. The courts
have held that tenants cannot oppose Securitisation Steps vide
Bombay High Court in 2006 (2) DRT cases Page-27 (Division Bench)
Yukta Mookhey Vs. BOI, 2007 (2) Current Tamil Nadu cases 193
(Division Bench – Madras) Sri Laxmi Products Vs. SBI and 2005 CDJ
638 (Division Bench-Kerala) Shamim S Vs. City Police Commissioner
and 2007 (1) Bankers‟ Journal 686 Sanjeev Bansal Vs. Oman
International Bank (Division Bench – Delhi).
A tenant can get the protection only if the tenancy is created
as per Section-65 (A) of the Transfer of Property Act 1882.
SARFAESI Act can override / prevail over all other Rent Control /
Tenancy Acts passed by the respective State Governments. The
protection afforded by any Local / State Acts relates to the
landlord only and it is not applicable to Authorised Officer /
Secured Creditor under SARFAESI Act. If the lessee claims his
possession under an Unregistered or Understamped Lease Deeds, no
protection is available against SARFAESI steps. If a lease deed is
for a period beyond three years, no protection is available against
SARFAESI steps. There should not be any (rent) advance, premium,
clause for renewal etc., in the Registered Lease Deed to claim the
benefit.
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Circular No.153/2007-BC-CST dt.08.08.2007
13. Since the Act/Rules stipulate publication of notices in
vernacular language newspaper, the notices shall be translated in
local language and published but not the English version of
notices.
14. Possession notice as well as sale notice can be published
for more than one account by a
single notification by authorized officer to reduce the cost of
publication and to reduce the burden on the borrower/owner,
provided the branches and the properties fall under the
jurisdiction of the same authorized officer.
15. Photographs of the borrowers/owners of the securities may
also be published in the
respective notices, if it is felt necessary to create an impact
on them.
High Court of Madras in 2006(5) Current Tamilnadu Cases 820 K.J.
Doraiswamy Vs. SBI, Erode Branch and High Court of Madhya Pradesh
in AIR 2007 M.P. 45 – Archana Chauhan Vs. SBI, Jabalpur have held
that this is proper.
16. If any proceedings are pending before local Revenue Recovery
authorities the same shall
be continued. So long as that is pending, steps under SARFAESI
Act can not be taken. 17. This Act is applicable only in respect of
securities offered originally at the time of arranging
the loan or during the currency of the loan and not to the
uncharged properties which are attached before judgement in Civil
Court/DRT.
18. The Regional Offices shall identify all the eligible
accounts on a regular basis and initiate
action under the Act.
19. Civil Courts cannot interfere in Securitisation action/steps
as per Section-34 of the Act. The Civil Courts cannot grant any
injunction also. The following judgements may be referred to.
2006(2) Andhra Law Digest 476 Makineni Madhuri Vs. Bollu
Nagabhushanam. 2006(1) DRT cases 484(DB)(AP) State Bank of India,
Ongole Vs. Chinigeppali Lathangi.
DRT alone is competent under the Act.
20. If the successful bidder fails to pay the amount upto 25%
immediately after the auction or balance 75% within the time
granted by the Authorised Officer, all the amounts paid by him till
then shall be forfeited and credited to the income of the Bank. If
the next/second bidder is ready and willing to pay the highest bid
finalized, the sale may be finalized in his favour without
arranging for a fresh sale/auction again. Otherwise, a fresh sale
has to be conducted as per the procedure.
***
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Circular No.153/2007-BC-CST dt.08.08.2007
PART – B Chronology of action points/ Check List
1) Proper scrutiny and identification of eligible NPA accounts
2) Permission of Competent Authority to issue notice (Format –A) 3)
Issue of Demand Notice (60 days period)– Format- B or C and D 4)
Disposal of reply /objections of the party to the Demand Notice by
preparing suitable reply
by applying mind. Approval of draft reply by law
officer/retainer advocate Format –D-1. 5) Taking possession and
issue of Possession Notice –Format- M (for immovables). In case
of movable secured assets, Panchnama (Format-K) shall be drawn
and signed by witnesses followed by preparing Inventory (Format- L)
of movable assets taken possession.
a) Approach District Magistrate /Chief Metropolitan Magistrate
if resistance from borrower/owner of the property is anticipated
(Format – J).
b) Safe Custody and Insurance of secured assets taken
possession. c) Valuation by the approved Valuer under the Act if
sale of Securities is effected through
public auction /inviting tenders. d) If party approaches DRT
with in 45 days of taking possession, steps shall be taken to
get
the appeal disposed off by DRT. In case of adverse orders of
DRT, move to DRAT. e) If party moves High Court, Branch may request
High Court for vacation of stay or to direct
the party for OTS. f) Issue notice to tenants if any, in Format
M1 6) Issue of 30 days Sale Notice (immediately after taking
possession)- Format- N a) To file caveats. b) Actual Sale after 30
days of issuing sale notice. c) Mode of sale –any one of the 4
modes permitted under the Act Viz., Public auction/Inviting Sealed
Tenders/ Private Treaty /By obtaining quotations from the parties
dealing in secured assets. d) Sale of properties may be effected by
inviting sealed tenders or by public auction (Format - O). If sale
is by private treaty or by obtaining quotations from the parties
dealing in secured assets or otherwise interested in buying such
assets, consent of the borrower/owner of the property shall be
obtained (Format – O-1 to Format – O-5 respectively). e) Issue Sale
Certificates (Formats P & Q)
For proper follow up, this checklist shall be kept in each NPA
account loan file in which action under SARFAESI Act is
initiated.
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Circular No.153/2007-BC-CST dt.08.08.2007
PART – C
Guidelines on empanelment and utilisation of services of
Approved Valuers As per the Security Interest (Enforcement) Rules
2002, Valuers are to be approved by the Board of Directors of the
respective Banks for valuing the assets and fixing Reserve Price
for sale of assets under this Act. Board in its meeting held on
12.07.2007 authorised the Chairman to empanel the Approved Valuers.
The appointed Valuer services shall be availed by the authorised
officers for the purpose of valuation of assets and fixing reserve
price. All the existing valuers mentioned in the above circular
shall be advised to execute an indemnity as per Format I. For
seeking empanellment of additional valuers under the Act on the
panel of Bank, Regional Offices shall obtain an application from
the valuers as per Format – H and forward the same along with
relevant copies of the certificates / documents, recommending to
Head Office. Eligibility criteria for empanelling new valuers: 1)
He shall be preferably an associate/fellow member of Institute of
Valuers. 2) He shall have experience as valuer on the panel of
Banks, Insurance Companies, Income
Tax/ Wealth Tax Department etc. 3) The valuer shall be
specifically empanelled for valuing houses/ buildings or
machinery,
depending upon their qualifications. For e.g. Mechanical
Engineers shall be empanelled for valuing machinery etc. Civil
Engineers for valuing houses / buildings.
4) The applications of Valuers who are on the panel of Income
Tax, Government Departments and other Banks may be submitted for
empanellment, after enquiring their credentials.
After obtaining approval from the Head Office, the Valuer shall
be informed of the same and obtain Indemnity bond (Format - I) duly
executed by them on required stamp paper Schedule of fee payable to
approved valuers for valuation of assets.
On the first Rs.50, 000/- of the property valued At ½% of the
value of the property
On the next Rs.1.00 lakh of the property valued At ¼% of the
value of the property
On the next Rs.50.00 lakhs of the property valued At 1/8 % of
the value of the property
On the balance of the property valued At 1/16% of the value of
the property
The fee payable as above is subject to a minimum of Rs.250/- and
a maximum of Rs.10,000/- for each party / account. Branches shall
refer Cir. No 127-2006-BC-CD, dt. 16-11-2006 for other details. It
is advisable to obtain the valuation of secured assets at the time
of sale from the valuer other than the one who has valued the
assets at the time of lending.
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Circular No.153/2007-BC-CST dt.08.08.2007
PART – D
List of Draft Notices, Applications and Agreement Formats
Sl No
Particulars Format
1 Proposal for seeking permission to issue notice under Act 2002
(Both for Non Suit Filed /Suit Filed Accounts)
Format –A
2 Demand Notice to borrower/s and surety/ies U/s 13 (2) ( Non
Suit Filed Account)
Format –B
3 Demand Notice to borrower/s and surety/ies U/s 13 (2) ( Suit
Filed Account)
Format –C
4 Paper publication of Demand Notice, if returned undelivered
/correct address of the borrower/surety could not be located by
branch (For both Suit filed and non suit filed)
Format –D
5 Interim Reply to the objections of the borrower Format –
D.1
6 Letter to be issued to the borrower/surety/owners of security
committing default after rephasement/ OTS sanctioned in response to
Notice issued under Sec 13(2) of Securitisation Act
Format –E
7 Memo to be filed before DRT/Court Format –F
8 Monthly progress report under Securitisation Act Format –G
9 Application for empanelment of Valuer Format –H
10 Indemnity bond to be executed by the approved valuer Format
–I
11 Application seeking help from Chief Metropolitan Magistrate /
Dist Magistrate
Format –J
12 Panchnama Format –K
13 Inventory Format- L
14 Possession notice (for immovable property) Format –M
15 Letter to the tenant Format – M.1
16 Sale Notice under Rule 8 (5) for and (6) of Security Interest
(Enforcement) Rules 2002 for Immovable property- Rule 6 ( 1) and
(2) for movable property.
Format –N
17 Sale through Inviting Tenders and Public Auction (movable and
immovable property)
Format – O
18 Letter from the bidders Format – O-1
19 Auction proceedings Format – O-2
20 Interim Certificate to successful bidder Format – O-3
21 Letter to owner regarding reduction of Reserve Price Format –
O-4
22 Letter to Sub-Registrar from AO Format – O.5
23 Certificate of sale ( for movable property) Format –P
24 Certificate of sale ( for immovable property) Format –Q
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Circular No.153/2007-BC-CST dt.08.08.2007
Format- A
Andhra Pragathi Grameena Bank
Branch __________________ Region_________________
Ref. No: Date:
PROPOSAL FOR SEEKING PERMISSION TO ISSUE NOTICE UNDER
SECURITISATION ACT)
(For both non suit filed and suit filed accounts) l) Particulars
of the Borrowers and Owner of the secured property :
(Name of the partners / directors as the case may be) (Rs in
lakhs)
Name
Present Address / Unit Address
a)
b)
II. Particulars of the Co-obligants:
Name
Present Address
a)
b)
III. Nature of Account:
a) Account Number
b) Date & Amount of Limits Sanctioned
c) Sanctioning Authority
d) Purpose of Advance
e) Real Account Balance as on _______
f) Shadow Account balance as on ______
g) Provision held as on ____
h) Date of NPA
i) Reasons for a/c becoming NPA
j) Classification of Asset
k) Total recovery from the beginning
l) Date of Regd. Notice & Response of the Party
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Circular No.153/2007-BC-CST dt.08.08.2007 Details of Secured
Assets available for enforcement:
i) Nature of Mortgage/Charge on Security/ies with full
description such as location, identification marks, boundaries
etc.
ii) Name of the Owner of the secured assets iii) Value of assets
at the time of sanction. iv) Present Realisable value, as per
Branch estimation v) Date of last inspection of Securities, Name
&
Designation of the Official If there is depletion in original
securities/reduction in value, reasons for the same:
Details of Documents (In cases of Non Suit Filed Accounts):
i) Validity of the Documents
ii) Mode of Creation of Security & its validity.
Details of Suit Filed (In cases of Suit Filed Accounts*):
i) Date of filing suit and OS/OA No. ii) Plaint amount iii)
Stage of suit/OA. iv) Details of Stay /injunction/ prohibitory
orders if
any, which are in force against Bank regarding charged
securities.
v) Whether Decreed/RC Issued
Recommendations of the Branch Manager:
Date: Place Branch Manager
Remarks / Observations/Recommendations of RO
Date: Place: Regional Manager
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Circular No.153/2007-BC-CST dt.08.08.2007
Format –B
(Notice to Borrower/s and surety/ies- Non Suit Filed Account
)
Andhra Pragathi Grameena Bank --------------------- BRANCH Ref
No: Date: To Borrower/s: Surety/ies: 1. 1. 2. 2. 3. 3. Dear Sir,
NOTICE U/S 13(2) OF THE SECURITISATION AND RECONSTRUCTION OF
FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT, 2002 1)
We have, at your request, granted to borrower/s various credit
limits for an aggregate amount
of Rs……………………and we give below full details of various credit
facilities granted by us :
Sl. No.
Nature of facility Limit Outstanding liability as on……………….
1
2
3
4
5
Total
2) As you have defaulted in repayment of your liabilities, we
have classified your account/s as
Non Performing Asset in accordance with the directions or
guidelines issued by the Reserve Bank of India.
3) In view of continued default in payment as against agreed
terms of loan documents, the whole
amount has become payable. Hence a sum of
Rs.…………….(Rupees………………………………………………………….. ...…………………………………) is due
alongwith interest from …………. and costs etc.
4) We also inform you that inspite of our repeated notices and
oral requests for repayment of the
entire amount due to us, you have not so far paid the same.
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Circular No.153/2007-BC-CST dt.08.08.2007 5) You are aware that
the various limits granted by us are secured by the following
assets
(secured assets) owned by -------------------------(Name of the
owner): a) b) c) d) 6) For the reasons stated, we hereby call upon
all of you to discharge in full your liabilities to us
within a period of 60 days from the date of this notice, failing
which, we will be exercising the powers under Sec.13 of the
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act against the secured assets
mentioned above. The powers available to us under Sec. 13 of the
Act inter-alia includes (i) Power to take possession of the secured
assets of the borrower including the rights to transfer by way of
lease, assignment or sale for realising secured asset, (ii) Take
over the management of the business including the rights to
transfer by way of lease, assignment or sale & realise the
secured debt, and any transfer of secured asset by us shall vest in
the transferee all rights, or in relation to, the secured asset
transferred as if the transfer had been made by you.
7) The amount realised from exercising of the powers mentioned
above, will first be applied in
payment of all costs, charges and expenses, which in the opinion
of us have been properly incurred by us or any expenses incidental
thereto, and secondly applied in discharge of the dues of us as
mentioned above with contractual interest from the date of this
notice till the date of actual realisation, and the residue of the
money, if any, shall be paid to you.
8) Please take note that after receipt of this notice, you shall
not transfer by way of sale, lease or
otherwise any of the Secured Assets referred to in this notice,
without prior written consent of the Bank (Secured Creditor). If
done it is an offence punishable Under Section-29 of the Act.
9) Please take further note that this is without prejudice to
the rights of the Bank to proceed
against all of you before the DRT / Competent Court for recovery
of the entire balance amount outstanding or any part there of along
with interest payable and costs till the date of realization.
Authorised Officer Place: Date: Note: Wherever required,
necessary changes in the format may be made in consultation with
Panel / Retainer Advocate.
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Circular No.153/2007-BC-CST dt.08.08.2007
Format –C
(Suit Filed Accounts)
(Notice to Borrower/s and surety/ies) Andhra Pragathi Grameena
Bank --------------------- BRANCH
Ref No: Date: To Borrower/s: Surety/ies: 1. 1. 2. 2. 3. 3. Dear
Sir,
NOTICE U/S 13(2) OF THE SECURITISATION AND RECONSTRUCTION OF
FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT, 2002
1) We have, at your request, granted to the borrower/s various
credit limits. 2) We also inform you that in spite of our repeated
notices and oral requests for repayment
of the entire amount due to us, you have not so far paid the
same. Pursuant to your default, the Bank has filed suit OS/OA
No.______ before the court/tribunal at _________________ on
_________ for recovery of an amount of Rs.________ with future
interest, compounded quarterly/monthly @_______ (mention rate) from
_________ and costs etc. As per the said claim, you are liable to
pay Rs……………….. as on ……………which carries further interest at the
said rates.
3) We have classified your account/s as Non Performing Asset in
accordance with the
directions or guidelines issued by the Reserve Bank of
India.
4) You are aware that the various limits granted by us are
secured by the following assets (secured assets) owned by
----------------------------( Name of the owner)
a) b) c) d)
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Circular No.153/2007-BC-CST dt.08.08.2007 6. For the reasons
stated, we hereby call upon all of you to discharge in full your
liabilities to us
within a period of 60 days from the date of this notice, failing
which, we will be exercising the powers under Sec.13 of the
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002, against the secured
assets mentioned above. The powers available to us under Sec. 13 of
the Act, inter-alia includes (i) Power to take possession of the
secured assets of the borrower including the rights to transfer by
way of lease, assignment or sale for realization of secured debt,
(ii) Take over the management of the business including the rights
to transfer by way of lease, assignment or sale & realization
of the secured asset, and any transfer of secured asset by us shall
vest in the transferee all rights, or in relation to, the secured
asset transferred as if the transfer had been made by you.
7. The amount realised from exercising of the powers mentioned
above, will first be applied in
payment of all costs, charges and expenses, which in the opinion
of us have been properly incurred by us or any expenses incidental
thereto, and secondly applied in discharge of the dues of us as
mentioned above with contractual interest from the date of this
notice till the date of actual realization of, and the residue of
the money, if any, shall be paid to you.
8. Please take note that after receipt of this notice, you shall
not transfer by way of sale, lease or
otherwise any of the Secured Assets referred to in this notice,
without prior written consent of the Bank (Secured Creditor).
Further in view of realisation of Suit/OA wherein the Secured
Assets are subject matter, any sale etc by you is subject to the
decision of the Court/DRT and not binding on the Bank, besides
being an offence punishable under Section-29 of the Act.
9. Please note that the notice issued herein is without
prejudice to the rights and contentions of
the Bank in pending Suit/Application for the reason that, it
would cover personal remedy and other uncharged movable and
immovable properties of all of you and we reserve our rights to
continue the proceedings initiated against you in the said suit. In
the event of your failure to remit the dues within 60 days and bank
opts to sell the securities in terms of the powers under the said
Act and if the sale proceeds of the secured assets are not
sufficient to discharge your debt in full, the pending suit for
recovery of the balance amount from you shall be continued against
all of you as mentioned above.
Authorised Officer
Place: Date: Note: Wherever required, necessary changes in the
format may be made in consultation with Law
Officer/Panel Advocate.
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Circular No.153/2007-BC-CST dt.08.08.2007
FORMAT-D
(To be published in newspapers, if the original Notice issued
under Sec 13(2) of SARFAESI Act 2002 is returned undelivered) To:
Borrower/Surety: 1) 2) 3) In respect of loans availed by you which
have become NPA with balance outstanding of Rs. -------------- (
---------------------------) as on -------------- , we have already
issued detailed demand notice dated ----------- under Sec 13(2) of
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act 2002 by Courier/ Registered
post with acknowledgement due to you which has been returned
undelivered with following remarks,
----------------------------------------------------------------------------------------------------------------------------------------------------------------------
---------------------------------------. We have indicated our
intention of taking possession of securities owned by no.---- of
you as per Sec 13(4) of the Act in case of your failure to pay the
amount mentioned above within 60 days. Brief Details of Security:
You are advised 1) to collect the original notice/cover addressed
to you and returned by Courier/Postal Authorities from the
undersigned for more and complete details and 2) to pay the balance
outstanding amount with interest and costs etc., within 60 days
from the date of notice referred to above to avoid further action
under the SARFAESI Act.
Authorised Officer
If photographs of parties are available, the same may also be
published. This format may be used for both suit filed and non-suit
filed cases.
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Circular No.153/2007-BC-CST dt.08.08.2007
FORMAT – D-1
INTERIM REPLY TO THE OBJECTIONS OF THE BORROWER To:
BY CERTIFICATE OF POSTING ------------------------
------------------------ (Borrower/Owner) Dear Sir, Sub: Notice
issued under Section 13(2) of SARFAESI Act to you. ======== We
acknowledge the receipt of your letter dated …………/Notice dated
------ issued by you/ your Advocate, wherein, you have raised your
objections/made your representation in respect of the dues demanded
from you by the above said Demand Notice. As per the Amendments
made effective from 11.11.2004 to the SARFAESI Act, we have to
furnish our reasons within one week of receipt of your letter. You
have raised various objections / you have made representation,
which calls for a detailed study at our end to inform our stand to
you. Since, the time available is very short, we would be
furnishing our reply with our reasons for your objections/statement
within 10 days. Till then, this may be treated as our interim
reply.
AUTHORISED OFFICER
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Circular No.153/2007-BC-CST dt.08.08.2007
FORMAT- E
Format of Notice to be issued to the borrower/surety/owners of
security committing default after rephasement/ OTS
sanctioned/upgradation in response to Notice issued under Sec 13(2)
of Securitisation Act Andhra Pragathi Grameena
Bank----------------------Branch To: Borrower/Surety/owners of
security Sub: Notice under Section-13(2) of SARFAESI Act 2002. In
response to our above notice issued on __________ to you and others
the borrower has approached the Branch with a promise of repayment
of dues and as per the request dated………… (a) the Branch has
rephased the loan on ___________ permitting the repayment as per
the new schedule. But, the commitment is not kept up.
(OR) (b) the branch has sanctioned OTS proposal on __________ .
But the commitment regarding the repayment is not kept up.
(OR) (c) the branch has permitted further payment as per
original instalments after upgradation on……….. But the commitment
is not kept up. In view of the default committed again, our earlier
notice dated _________ stands revived and we are proceeding further
as indicated therein.
AUTHORISED OFFICER
-----------------------------------------------------------------------------------------------------------------------------------
Note : (1) Branches should mention (a) or (b) or (c) only in the
original. (2) This may be sent by Certificate of Posting.
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Circular No.153/2007-BC-CST dt.08.08.2007
FORMAT-F
MEMO TO BE FILED BEFORE DRT/COURT
IN THE DEBTS RECOVERY TRIBUNAL/ IN THE COURT OF
....................... (Name of the Court/place)
O.A.No/O.S.No.............of 200............ BETWEEN :
APPLICANT/PLAINTIFF AND : DEFENDANT
MEMO FILED ON BEHALF OF THE APPLICANT/PLAINTIFF
The applicant/plaintiff without prejudice to its contentions,
submits that in exercise of powers conferred on it under
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002, its Authorised Officer
has initiated action against the defendant/s No.s_____ by issuing
enforcement notice dated........under Section 13(2) of the said
Act. The Applicant further submits that further proceedings against
those defendant/s and the secured assets will be initiated/and
continued by its Authorised Officer/Agents by exercising powers
conferred on it under the said Act, independent of the above
pending proceedings in case of default by the defendant/s to
discharge the liabilities as demanded in the said notice, on the
expiry of 60 days notice period as provided by above said Act. If
any amounts are recovered under this process, the
applicant/plaintiff shall report the same to this Hon'ble
DRT/Court, the details of recovery made from those defendant/s. On
such reporting, giving details of money/ies recovered, the Hon'ble
Court/Tribunal may record part satisfaction to that extent only and
pass decree/issue RC for the balance amount as prayed for in the
Suit/OA after accounting for the amounts received and reported
during pendancy of this Suit/Application.
APPLICANT/PLAINTIFF
ADVOCATE FOR APPLICANT/PLAINTIFF
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Circular No.153/2007-BC-CST dt.08.08.2007
FORMAT- G
Monthly Progress report under Securitisation Act
Part A (Monthly report) Andhra Pragathi Grameena Bank -Branch:
-------------------------------------- Securitisation and
Reconstruction of Financial Assets and Enforcement of Security
interest – Act 2002 - Monthly Progress report as on ______ (to be
submitted by 10th of succeeding month)
(Rs in lakhs)
Accounts identified for issuing notices
Notices issued Amount recovered after issuing of notices under
the Act
No of
A/cs
Real
Bal
Shadow Bal
No of A/cs
Real Bal
Shadow Bal
Partial recovery Full recovery
No of A/cs
Amt recovered
No of A/cs
Amt recovered
Supplementary Information (Rs in lakhs)
S No
Particulars No of Accounts Shadow Balance
1 Notices issued in Suit filed Accounts
2 60 days notice period completed
3 Assets taken possession
4 Assets disposed off through Sale
Particulars of OTS proposals received /sanctioned after issuing
Notice under the Act
(Rs in lakhs)
OTS proposals received
OTS proposals under Negotiation
OTS Proposals sanctioned
1= (2+3) 2 3
No of A/cs
Total Dues
No of A/cs Total Dues
No of A/cs Total Dues
Offer Amount
Amount Recovered
*All figures reported shall be on cumulative basis
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Circular No.153/2007-BC-CST dt.08.08.2007
Part B (Monthly report) for the month of
-----------------------
ANDHRA PRAGATHI GRAMEENA BANK Branch:
__________________________
Detailed report to be submitted on monthly basis by 10 th of
succeeding month in respect of notices issued in all accounts from
the beginning. (Closed accounts shall not be deleted from the list
for the purpose of reporting)
(Rs in lakhs)
S
No
Name of the Borrower
Date of loan
Purpose of
advance
Documents valid up to
Date of issuing notice
Real balance
Shadow Balance
Asset classification
1 3 5 6 7 8 9 10 11
Nature of Security
Security value
Amt. recovered after issuing of notice
Status (60 days completed/possession taken/ sale notice issued/
auction held
Action Taken
12 13 14 15 16
Through sale of assets
Thru OTS
Branch Manager Date:
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Circular No.153/2007-BC-CST dt.08.08.2007
FORMAT- H
Application for Empannelment of new Valuers
1 Name of the Valuer
2 Address: Office
Residence:
3 Date of Birth and Age
4 Educational Qualifications
5 Memberships: Institute of valuers Indian Institution of
Engineers or any other institute (Specify)
6 Experience as Valuer
7 Whether Panel Valuer for the Govt. Organisations/Banks. If so,
since when (submit copies of empanellment)
8 Specify: valuer for valuation of a) Land, Buildings other
immovables b) Machinery, Vehicles
9 Area of specialization, if any
10 Any other Information
Signature of the Valuer Place: Date:
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Circular No.153/2007-BC-CST dt.08.08.2007
FORMAT- I
(Indemnity bond to be executed by the Approved Valuer)
THIS DEED OF INDEMNITY is made on this day of 2007 between
Sri/Smt/ M/s.______________ _____________________________________
hereinafter called the Valuer of the one part and Andhra Pragathi
Grameena Bank, a Bank functioning under the Regional Rural Bank
Act, 1976 with its Head Office situated at Kadapa, Andhra Pradesh,
hereinafter called the Bank. The terms `The Valuer‟ and `The Bank‟
shall mean and include their heirs, representatives, the Executors,
Administrators and Assigns. WHEREAS the Bank h