10 Tips to Save from recovery agents for Un-Secured Loan Default due to Business Losses- Non Payment of EMI-No willful Default

10 Tips to Save from Legal Battle for Un-Secured Loan Default due to Business Losses- Non Payment of EMI-No willful Default

A person starts a business with a dream to fulfill his aspiration to do something on his own. Put all his efforts through his own knowledge and through experts to make the business success. We all know that business needs finance to startup & setup the roots of the business. For that we go to banks and NBF’s to get loan and ease the pressure of finance to accomplish our dream to be an entrepreneur. 

The Finance support from the financial institutes in the form of loans helps us to purchase the assets needed to run the business and further supports us to manage the operational cost of the business. But if the business doesn’t go well and the operational cost becomes higher than the earnings than it becomes tough to manage the business and paying EMI’s for the availed loans becomes difficult. 

When the EMI gets delayed the financial institutes from whom the loan has been taken starts following up. After the non-payment of the EMI’s for 3 months in a row the financial institutes declare the person as a Non Performing Assets i.e. NPA. 

Once the person is declared as NPA than the financial institutions starts issuing notices through the Advocates for the payment of the loan or starts Arbitration Proceedings as per the signed contract or sometimes presents the full loan amount of the cheque in the Banks which was taken at the time of loan sanction as a security even the amount is not recoverable at the time of presenting that cheque and issues notice under 138NI Act.

The tips below will help in saving from the Legal Battle due to Business Losses or close down and relieve your stress from living in the dark.
       1. Make the list of all loans mentioning in the below table.

S. No.
Loan Name
Loan No.
Loan Amount
Total No. of EMI
No. of EMI Paid
 No. Of EMI Pending 

     2. Write an email/ letter to each of financial institution mentioning the reason of default and request for few months deferment and rescheduling of the loan repayment. This pre-information will display the honest intention of the defaulter and protect the defaulter from the charges of cheating/fraud later on if the legal procedure takes place. The sample letter can be checked from this link https://kapretail.blogspot.com/2020/06/debt-handling-sample-format-to-bank-deferment-request-rescheduling-emi.html.

     3. At this stage the institutions telecallers/recovery agents keep on following for the payment which becomes very stressful to attend each & every call because the job of telecaller/recovery agent is just to recover the defer amount and not giving any resolution. To avoid it and to lower the stress, talk directly to the Banks/NBF representatives, explain the problem which led to non-payment of the loan emi, who can provide you the relief of deferring payments for few months and further reschedule your loan Emi’s or any other relief within their powers.

    4.Make a list of smaller assets available personal or purchased for the business and try to sell those assets at reasonable price to pay at least one of the pending the loan emi from the three emi’s which was not paid, this will take you out from the institutions NPA list and you will get time for further strategy. You can choose the online platform like OLX, Quikr to sell the assets.

Note: (Check the T&C before posting products on these platforms, as these platforms have list of prohibited Products not to be sold on these platform)

     5. Make a list of Valuable assets like any land and put that in sale for the Full & Final Settlement of the Loan after negotiation. Banks & NBF’s settle the loans on the reduced amounts to close the loans.

     6.Ask the representatives of the financial institution to whom the issues are already discussed to put hold on any sort of legal action or legal notice or institution of legal procedure. Discuss with them all type of possible solution to reschedule the loan payment and try to have documented conversations on emails which can be helpful to prove your honest intention to pay out your debt. Do take the copy of contract & Statement of Loan Account.

    7. Still after requesting, the financial institutions in the lieu to start legal proceedings either by presenting the security cheque (exceeding the legally enforced Debt) and issues the legal notice under section 138 NI Act & other sections of IPC or start the arbitration proceedings than u need to act accordingly. At this stage the debt recovery case will be moved to the legal section of the financial institution.

     8. If the proceedings are put under Arbitration & Conciliation Act than a notice of Arbitrator will be served as per the contracted terms in the contract signed at the time of loan sanction and the proceedings will be done as per the applicable law of A&C Act.

    9.Other course of action can be used is the presenting the cheque in the bank which was taken at the time of sanctioning loan with the amount of full loan amount along with penalties and interest. If that is the case where the cheque presented with the amount which is not legally recoverable debt i.e. the amount which is not due at the time of presenting the cheque than it can be challenged in the court of law as it is not maintainable under the provisions of 138 NI Act. If such notice u/s 138 NI Act is issued and received by the person and asked to clear the dues within 15 days than a reply to the notice to be sent with the help of an expert. Sample Format for the Reply to the notice can be checked from this link https://kapretail.blogspot.com/2020/06/sample-format-for-reply-to-notice-us-138niact.html.

  10. Now days an alternative dispute resolution method such as mediation can be used to settle the disputes when it reached to the level of legal proceedings. The proceedings under Arbitration & Conciliation act can also sort out through mediation in order to make it less formal. The legal proceedings of debt recovery can be resolved by the mediations in the case of cheque bouncing cases u/s 138 NI Act to avoid long battle in the courts and save the time & money.

Therefore landing up in such situation is not the end of the world. The person facing such situation in life firstly needs to make himself strong. There is always a way to solve the situation. So sit tight and make your strategic plan to come out of this situation. If you are not able to do it by yourself take the help of the expert. 

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