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Procedure For Notice

If the pre-conditions for taking action to enforce security interest are satisfied, then security interest may be enforced in the following manner:

The secured creditor can send a written notice to the borrower to discharge in full his liabilities within 60 days from date of notice failing which the secured creditor shall be entitled to exercise all his rights.

The notice shall give details of amount payable by borrower and the secured asset intended to be enforced by the secured creditor in the event of non-payment of secured debts by the borrower.

Measures In Case Of Non Payment

If the borrower pays within 60 days no further action is required. However if he fails to pay full amount within specified period the secured creditor can take one or more of the following measures to recover his dues.

1. Take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset
2. Takeover the management of secured asset of the borrower including the right to transfer by way of lease, assignment or sale and realise the secured asset.
3. Appoint any person as manager to manage the secured assets the possession of which has been taken over by the secured creditor.
4. Require at any time by notice in writing, any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower, to pay the secured creditor, so much of the money as is sufficient to pay the secured debt.

Rights Of Financial Corporation In Case Of Default

1. Where any industrial concern, which is under a liability to the Financial corporation under an agreement, makes any default in repayment of any loan or advance or any installment thereof or in meeting its obligations in relation to any guarantee given by the Corporation or otherwise fails to comply with the terms of its agreement with the Financial Corporation, the Financial Corporation shall have the right to takeover the management or possession or both of the industrial concern as the right to transfer by way of lease or sale and realise the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation.
2. Any transfer of property made by the Financial Corporation, in exercise of its powers under sub-section (1), shall vest in the transferee all the rights in or to the property transferred as if the transfer has been made by the owner of the property.
3. The Financial Corporation shall have the same rights and powers with respect to goods manufactured or produced wholly or partly from goods forming part of the security held by it as it had with respect to the original goods.
4. Where any action has been taken against an industrial concern under the provisions of sub-section (1), all costs, charges and expenses which in the opinion of the Financial Corporation have been properly incurred by it as incidental thereto shall be recoverable from the industrial concern and the money which is received by it shall, in the absence of any contract to the contrary, be held by it in trust, to be applied firstly, in payment of such costs, charges and expenses and secondly, in discharge of the debt due to the Financial Corporation, and the residue of the money so received shall be paid to the person entitled thereto.
5. Where the Financial Corporation has taken any action against an industrial concern under the provisions of sub-section (1), the Financial Corporation shall be deemed to be the owner of such concern, for the purpose of suits by or against the concern, and shall sue and be sued in the name of the concern.

Time Limit For Taking Action After Notice Is Served

The secured creditor can take action any time after the expiry of 60 days notice. There is no time limit. However action must be taken within reasonable time. The notice cannot be said to be perpetually valid. If the creditor does any act which is contrary to the intention of notice (e.g. reschedules loans or gives further time for repayment), it can be said that the notice has abated and no action can be taken against such notice.