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One of the key provisions of the SARFAESI Act is the issuance of a 13(4) notice. Let's understand what this notice is and whether it is mandatory for banks and financial institutions to issue it.
What is a 13(4) notice?
Section 13(4) of the SARFAESI Act provides for the issuance of a notice to the borrower before the sale of the secured assets. This notice is commonly referred to as a 13(4) notice.
The notice informs the borrower about the bank's intention to take possession of the secured assets and sell them off. It also provides the borrower with a time period within which they can repay their dues and avoid the sale of the assets.
Is it mandatory to issue a 13(4) notice?
The short answer is no. The SARFAESI Act does not mandate the issuance of a 13(4) notice before the sale of the secured assets. However, it is advisable for banks and financial institutions to issue a 13(4) notice to the borrower before taking possession of the secured assets.
Issuing a 13(4) notice provides the borrower with an opportunity to repay their dues and avoid the sale of the assets. It also ensures that the bank or financial institution has complied with the principles of natural justice.
However, in certain cases, where the borrower has absconded or is intentionally avoiding repayment of their dues, issuing a 13(4) notice may not be practical or necessary.
Conclusion
In conclusion, while the SARFAESI Act does not mandate the issuance of a 13(4) notice before the sale of secured assets, it is advisable for banks and financial institutions to issue such a notice to the borrower. This provides the borrower with an opportunity to repay their dues and avoid the sale of the assets, and also ensures that the bank or financial institution has complied with the principles of natural justice.
