Mentoassociates.com – Legal Articles

With the introduction of SARFAESI Act 2002, it has become easy for banks and other financial institutions to recover loans advanced from defaulting borrowers. If a borrower has taken a loan by giving some collateral security and if he defaults in the repayment of the said loan, then the bank or the financial institution can take the possession of the collateral security, in most cases an immovable property and then manage or even sell the same to recover the debt after issuing a 60 days notice. The borrower is forbidden form approaching the civil court or other authorities against any such actions. However, after the said action by the bank, the aggrieved party can approach the Debt Recovery Tribunal against such an action.
Some of the defenses against the action of banks under the SARFAESI Act include:
a) Non-issuance of 60 days notice
b) Non-classification of the account as Non Performing Asset.
c) If the collateral security is an agricultural land, then   proceedings under SARFAESI Act is not permitted.
d) Action of the bank  barred by Limitation Act, 1963
e) Non delivery of Possession notice to the borrower.
f) Non publication of Possession notice in the news paper.
g) Non service of notice of 30 days, for sale of the secured assets after taking possession of the same.
h) If the amount due is less than 20 percent of the principal amount and interest thereon.

A Cheque bounce case normally takes an average of one year to complete the proceedings before trial court. The following are the important stages in a cheque bounce case.
1) Filing of complaint: The complaint need to be filed before the jurisdictional magistrate within 30 days from the accrual of the cause of action. The complainant need to be present before the magistrate at the time of filing. The original documents need to be shown to the magistrate. If prima-facie a case is made out, the magistrate will post the matter for sworn statement.
2) Sworn Statement: At this stage, the complainant needs to enter the witness box and give further details regarding the case. If the magistrate is satisfied that there is some substance in the case of the complainant, then he will issue a summons to the accused.
3) Appearance of Accused: On receipt of summons, the accused need to appear in the court. If he does not appear in the court, the court will issue an arrest warrant against him. After appearance, the accused is supposed to take a bail from the court with or without sureties. If the accused is unable to furnish a surety then he can deposit a cash security, instead of surety. This cash security is refundable to the accused after the conclusion of the case.
4) Recording of Plea: In the next stage, the court will ask the accused as to whether he has committed the offence or not. If the accused admits the guilt, the court will immediately give him punishment. If he pleads innocence, the court will post the matter for evidence.
5) Evidence: The Complainant has to furnish his evidence, normally by way of affidavit; this is known as examination-in-chief. He needs to produce all documents in support of his case like bounced cheque, dishonor memo, copy of notice etc. Later complainant will be cross examined by the accused. If there are other witnesses in support of the complainant, then their evidence also has to be recorded.
6) Statement of the Accused: After the Complainant side evidence is over, the court will put some questions to the accused regarding his guilt. An accused needs to give his version to the same.
7) Defence Evidence: After the Accused statement the court will give an opportunity to the accused to leave his evidence. The accused can also produce documents in support of his case, as well as witnesses in his support. Accused and his witnesses will be cross examined by the complainant. After this, the case is posted for arguments.
8) Arguments: Both the Complainant and the accused will submit their arguments before the court. They can also furnish judgments of high courts and Supreme Court in support of their case. Normally a written argument containing a gist of the oral argument is also furnished to the court.
9) Judgement: After the arguments, case is posted for judgement. If the court finds that the accused has committed offence, he will be punished with fine or imprisonment. If he is innocent, the court will acquit him. If accused is convicted, then he needs to suspend his sentence, for a period of 30 days with in which time, he can file an appeal before the sessions court.