RECOVERY OF LOANS BY BANKS (SPECIAL PROVISIONS) act

Arrangement of Sections

1. Short title.

2. Registered address of borrower.

3. Action by Board when default is made.

4. Authorisation of sale of mortgaged property.

5. Authorisation of Manager to take possession of mortgaged property.

5A. Application of sections 3, 4 and 5 in relation to loans exceeding rupees five million.

6. Procedure where Manager is appointed.

7. Procedure where borrower is dead.

8. Notice of resolution.

9. Notice of sale.

10. Payment before sale.

11. Upset price.

12. Default in respect of one of several loans on same property.

13. Recovery of expenses and costs incurred by the Bank.

14. Payment of excess.

15. Certificate of sale.

16. Order for delivery of possession.

17. Cancellation of sale.

18. Resale by the lender.

19. Limit of retention of property by the Bank.

20. Offence.

21. Regulations.

22. Interpretation.

23. Sinhala text to prevail in case of inconsistency.

4 of 1990,

24 of 1995,

1 of 2011,

19 of 2011.

AN ACT to provide for the recovery of loans granted by Banks for the economic development of Sri Lanka; and for matters connected therewith or incidental thereto.

[Date of Commencement: 6th March, 1990]

1. Short title.

This Act may be cited as the Recovery of Loans by Banks (Special Provisions) Act.

2. Registered address of borrower.

(1) Every person

(a) to whom any loan is granted by a Bank on the mortgage of property, or

(b) who has obtained probate of the will or letters of administration to the estate of a person to whom any loan has been granted by a Bank on the mortgage of property, or who, upon application made in that behalf by the Board, has been appointed by court to represent such estate, or

(c) to whom any right, title or interest whatsoever in any property mortgaged to a Bank as security for any loan, has pissed, whether by voluntary conveyance or by operation of law, shall register with a Bank an address to which all notices to him may be addressed.

(2) Any notice which is required to be served on any person to whom subsection (I) applies, shall be deemed to have been duly served on that person if is sent by post in a registered letter directed to that person at the address registered by him under that subsection and service shall be deemed to have been effected at the time at which the letter would be delivered in the ordinary course of post Provided that, Where any such person fails to register his address under subsection (1), the Bank shall publish in the Gazette and in at least three daily newspapers in the Sinhala. Tamil and English languages, a notice addressed to him and such notice shall be deemed to be duly given to him on the day on which such notice is last published.

3. Action by Board when default is made.

Whenever default is made in the payment of any sum due on any loan, whether on account of principal or of interest or of both, default shall be deemed to have been made in respect of the whole of the unpaid portion of the loan and the interest doe thereon up to date; and the Board may in its discretion, take action as specified either in Section 5 or in section 4;

Provided, however, that where the Board has in, any case taken action, or commenced to take action, in accordance with section 5, nothing shall be deemed to prevent the Board at any time from subsequently taking action in that case by resolution and section 4 if the Board deems it advisable or necessary to do so,

4. Authorisation of sale of mortgaged property.

Subject to the provisions of Section 7, the Board may by resolution to be recorded in Willing authority person specified in the resolution to sell by public auction any property mortgaged to the Bank as security for any loan in respect of which default has been made in order to recover the whole of the unpaid portion of such loan, together with the money and costs recoverable under section 13.

5. Authorisation of Manager to take possession of mortgaged property.

(1) Subject to the provisions of Section 7, the Board may by resolution to be recorded in Willing authority person specified in the resolution to enter upon any immovable property mortgaged to the Bank as security for any loan in respect of which default has been made or where the terms of any loan agreement are contravened in respect of such property to take possession of, and to manage and maintain such property, and to exercise the same powers in the control find management of such property as might have been exercised by the mortgagor if he had not made default, or contravened the terms of such agreement.

(2) Whenever any sum of money due on any loan granted for any agricultural or industrial undertaking on the security of any plant, machinery or other movable property to the Bank is in default or where the terms of any loan agreement are contravened in respect of such property, the Board may authorise any person specified in writing to enter and take possession of such agricultural or industrial undertaking in which such plant, machinery or other movable property is situate, and exercise the same power in the control and management of such undertaking as might have been exercised if such property had been pledged or mortgaged.

5A. Application of sections 3, 4 and 5 in relation to loans exceeding rupees five million.

(1) No action shall be initiated in terms of section 3 of the principal enactment for the recovery of any loan in respect of which default is made, nor shall any steps be taken in terms of section 4 or section 5 of the aforesaid Act, where the principal amount borrowed of such loan is less than rupees five million:

Provided however, at the time of default when calculating the principal amount borrowed due and owing to the Bank on the loan granted to such defaulter, the interest accrued on such loan and any penalty imposed thereon, shall not be taken into consideration.

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