Small Loans

Friends, you must have read/heard  about the large Business Houses and Industrialists defaulting on bank loans, which runs in thousands of crore  rupees. Generally these people get away when they default on repayment etc and bank is in no position to recover their dues because of these people’s political and other connections. Many  defaulters leave the country , you are aware about the cases of Vijay Mallaya, Nirav Modi, Mehul Choksi and many more. But have you heard about how banks deal with the loan defaulters who have failed to repay few lakhs of rupees. Today morning I read a very interesting news item,  which I want to share with you :

A small time Businessman who  ran a debt of Rs 58 lakhs and  had to close his Printing has approached Bombay High Court  to save his 1 BHK flat in Mumbai, which he pledged with a bank as co lateral when he took the loan from the bank.

In his plea to HC , he mentioned that big business houses and industrialist with unpaid loans running into crores of rupees have not been touched, but small & medium businessmen and traders are being harassed by bank under section 14 of  Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI), which allows a Magistrate to order the dis possession of  of a borrower on an application by the lending bank, without giving a hearing to the affected parties.

In this case the borrower in 2016 bought a Chinese Printing machine for Rs 32 Lakhs to start a business. He had sought a loan loan of Rs 1.5 Cr from the bank to run the business. The bank sanctioned only Rs 55 lakhs and his request  for the balance amount was rejected without giving any reason.  The business soon started running into loss as he was not able to arrange for more funds needed  and soon it ran into heavy losses and he had to wind up . he could sell the imported Printing Machine for Rs 7 Lakhs only. The Bank declared his dues as Non Performing Assets (NPA) and initiated proceedings to recover the amount. Based on the Bank’s application the Metropolitan Magistrate passed an order for taking possession of his flat.

In his plea to HC through his advocate,  he has urged the court to restrain the Bank and its official from dispossessing him and his family from their home. Further he has requested the Union Govt to bring the requisite legislation to exclude small and medium businesses who have avail loans upto Rs 5 Cr from the purview of SARFAESI Act, which is now starts from NPA of rs 1 lakh. His advocate while pleading this case said that  It’s a  shame on judicial system of the country when over Rs 7.6 Lakh crores is classified as NPA of 500 big business houses and some businessmen have ran away overseas to escape from criminal cases in the courts against them, and whereas small businessmen traders who can not repay the loan amount for some genuine reasons are dispossessed of their co lateral security asset without giving them chance to explain their position, this amounts to  not observing the first principle of natural justice.

Friends, after reading this story I felt like applauding the advocate who filed this plea on behalf of his aggrieved client. This was bound to happen one day, when ordinary people see few individuals getting away after doing scam running into Crores of Rupees , where as an ordinary person who for  genuine reason of default is made to suffer. In this case the loan was taken in 2016 and we have just entered 2018 and for few months of default bank took a drastic step of enforcing SARFAESI act to recover its dues of Rs 58 Lakhs.   I have not heard or read for any of the big defaulter any financial institution has enforced this act and said that from this date we are going to dispossess you from your business/manufacturing premises. In the case being cited, the correct course, before enforcing the act, would have been, the Bank should have asked the borrower please sell your 1 BHK flat and repay your loan. According the report the pledged flat is in Andheri area of Mumbai, where no 1 BHK flat is available for less than Rs 80/85 lakhs.

Waiting for your views/feed backs/comments on this matter.