Bengaluru is home to one of the biggest business ecosystems in India consisting of Startups, Tech companies, manufacturers, traders, service providers and small businesses. Working capital loans, Term loans, Overdrafts and various other banking services are crucial to the functioning of these businesses.

An unexpected business disruption, delayed receivables, change in market dynamics or unplanned expenses can impact your ability to repay. If your instalments go unpaid for a certain duration, your account may get classified as NPA as per the applicable banking norms.

As a business owner, the stress doesn't end with the loan account. Your credit history, business reputation, relationships with suppliers and vendors, salaries of your employees and even your personal guarantees come under scrutiny.

Many borrowers take a long time in approaching a lawyer as they feel that if they are consulting a lawyer, he will straightaway file a suit. In reality, when a borrower consults a lawyer at an early stage, they are more aware of the gravity of the situation and refrain from taking any action which can harm their case.

Business Loan NPA stands for Not Paying Attention to a loan account as per the terms and conditions of repayment prescribed under Banking laws. After a loan account becomes NPA, the lender will start recovering his dues as per the nature of the loan and security offered.

It is important to know that NPA doesn't mean you will lose your asset or shut down your business immediately as a businessman. It all depends on the nature of loan whether its secured or unsecured, documents executed, amount outstanding, guarantee provided, etc. along with what measures has been taken by the lender.

Bank Loan recovery issues in India are different for various types of loans depending upon the security created by way of mortgage, hypothecation or pledge.

If the Loan is Secured then SARFAESI Act.

If the loan is secured against any property/assets, the bank starts SARFAESI act proceeding. ( Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ). The secured creditor can issue notice of demand and proceed further in the manner prescribed under this Act. Subject to any remedies available to the borrower before Debt Recovery Tribunal ( DRT).

DRT Proceedings

As the name suggests DRT proceedings are mainly initiated by banks and financial institutions for recovery of debts. Loans which have defaulted leads to filing of recovery suits by Banks. Such borrowers need assistance of Lawyers / Advocates who can guide them regarding pleadings, documents, objections etc., At times the DRT proceedings also require compliance with various technicalities.

Loan Documents

Any contract rights you got with the bank at the time of taking Loan. Loan sanction letter, any Security or Guarantee documents, correspondence with bank, Loan documents etc., will be very important to analyze the legal standing of the borrower.

You may need legal advice if :-

• You are a businessman or entrepreneur and your working capital/ term loan account has been classified as NPA.
• Your Company has received recovery notices from the bank or financial institution.
• You are a borrower against whom action for enforcement of security is likely to be initiated.
• If you are a director/promoter who has given personal guarantees to the banks.
• If you are an entrepreneur seeking explanation on settlement talks with lenders.
• If you are facing disputes with lenders on outstanding loan amount.

Several businessmen and entrepreneurs continue to negotiate with banks without realizing the legal ramifications of written correspondence. An incorrect admission, partial reply or failure to respond to notice period can prejudice your rights in the future.

Normally this process starts when the borrower starts getting notices from the bank after he faces difficulty in repayment of loan. These notices can be in the form of reminder notices, demand notices or other debt recovery notices.

Typically a legal analysis begins with reviewing the following:

• Loan documents/repayment track
• Outstanding calculation
• Security given by borrower for loan
• Notice from bank
• Correspondence between borrower and bank

Once the records are analyzed, borrower can figure out if he needs negotiating, representation, settlement talk or has to approach before any suitable forum.

If you want to know more about loan recovery process in general. You can also refer to loan recovery process on Loan Settlement Lawyer site.

When a Borrower Needs To Consult a Lawyer:

• Loan account is NPA'ed by bank.
• Bank has started sending recovery letters.
• When you have received SARFAESI notice.
• Loan is related to property/business.
• Guarantor is being asked to repay the loan.
• Need legal scrutiny before agreeing to settlement terms.
• Calculations seem wrong on outstanding amount.
• Any kind of Recovery seem legally flawed.

BK Singh (Loan Settlement Advocate) reviews your loan agreement, recovery letters, and whatever records you have and guides you on the right legal course of action.

Loan Settlement Lawyer offers legal advice to loan borrowers in case of loan defaults, recovery harassment and other issues related to NPAs.

Generally we discuss the entire financial and legal history including the loan agreements, correspondence with the lenders, securities provided, financial position of the borrower etc.

Loan Settlement Lawyer may be able to assist borrowers who are at the receiving end of recovery by:

• Analyzing the actions taken by the bank and documents exchanged.
• Explaining rights of the borrower.
• Analyzing possibilities of settlement.
• Making suitable representations.
• Dealing with legal issues related to recovery.
• Managing court proceedings if necessary.

The facts in every loan dispute are different. The potential outcome would depend on the facts available on record such as documents, position adopted by the lender and the law applicable to the facts. Further it also depends upon the stage of the proceedings.

Owners of small and medium businesses spread across Bengaluru and other cities in India can consult Loan Settlement Lawyer Advocate BK Singh to understand their legal standing before making any crucial business decisions.