Why the objection right exists
In Mardia Chemicals v. Union of India, the Supreme Court observed that a borrower must be able to place a genuine dispute before the lender before harsh measures follow. Parliament responded by adding Section 13(3A), which requires the secured creditor to consider the borrower's representation and communicate reasons for non-acceptance within 15 days.
How to draft the objection
The objection should be precise. State the account, the notice date and each ground of dispute. Attach supporting documents such as payment receipts, statements and correspondence. Avoid emotional appeals and concentrate on facts, computation and law.
Common grounds of challenge
The following grounds regularly succeed, depending on the facts:
[ListParagraph] The account was not validly classified as an NPA under the applicable RBI norms.
[ListParagraph] The demand notice did not specify the correct amount or the secured assets.
[ListParagraph] The notice was not served in the manner required by the Rules.
[ListParagraph] The lender is not a secured creditor, or the Act does not apply to the asset or the loan.
[ListParagraph] Interest, penal charges or fees were computed contrary to the loan agreement or RBI directions.
[ListParagraph] The security interest was never validly created, for example because of defective mortgage documents.
[ListParagraph] The lender acted during a moratorium under the Insolvency and Bankruptcy Code.
What the bank must do
The bank's reply must deal with each objection with reasons. A cryptic or template rejection can itself be criticised before the Tribunal. Even so, the objection is not a stay, and enforcement can continue unless the Tribunal orders otherwise.
Moving to the Tribunal
If the objection is rejected and the lender takes any measure under Section 13(4), the borrower's remedy is an application under Section 17 before the Debts Recovery Tribunal within 45 days. The objection letter and the reasoned rejection then form part of the record and often shape the Tribunal's view on interim relief.
Practical advice
Keep proof of despatch, send the objection by a traceable mode and retain a copy. Do not wait for the bank's response before preparing the Section 17 application, because limitation runs from the date of the measure and not from the date of the bank's reply.
Frequently Asked Questions
Q. Does filing an objection stop the bank?
A. No. It does not automatically stay proceedings, but it creates a record and obliges the bank to respond with reasons.
Q. Is the bank's rejection of my objection appealable?
A. Not by itself. The remedy arises once a measure under Section 13(4) is taken, by way of a Section 17 application.
Disclaimer: This article is for general information only and is not legal advice. The law may change, and the facts of each matter differ.