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There Can Be Simultaneous Proceedings Under SARFAESI And Arbitration Act For Recovery Of Loan Arrears

The Supreme Court in M.D.Frozen Foods Exports Pvt. Ltd. & Ors. vs Hero Fincorp Ltd.  has held that NBFC is entitled to initiate both arbitration proceedings and SARFAESI proceedings with respect to a loan account, and that the ‘doctrine of election’ was not attracted in such a scenario. It was further clarified that there was no illegality in an Non-Banking Financial Company(NBFC) invoking SARFAESI Act for recovery of loan arrears with respect to an account classified as Non- Performing Asset(NPA) before the NBFC got notified under the Act. It was also clarified that the provisions of the SARFAESI Act would become applicable qua all debts owing and live when the Act became applicable to the borrowing, provided the following factors existed
:-

1) Existence of a present actionable debt;
2) Status of the person invoking the jurisdiction is that of a secured creditor;
3) Assets have been secured in satisfaction of the debt; and
4) That the debtor/borrower should have been declared an NPA.


Article referred: http://www.livelaw.in/can-simultaneous-proceedings-sarfaesi-arbitration-act-recovery-loan-arrears-read-judgment/

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