Centre, Experts Differ On NPA Ordinance; Case Hearing Today

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New Delhi, September 19: : Defending the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Second) Ordinance, 2002, the government in its counter affidavit filed on Thursday says the ordinance seeks to root out weak creditor’s rights and time-consuming legal proceedings, the main reasons for mounting non-performing assets (NPAs). However, at a seminar organised by Associated Chamber of Commerce and Industry of India (Assocham), experts voiced concern that the bill is heavily biased in favour of lenders.

The ordinance empowers banks and FIs to take possession of securities and sell them without the intervention of the court.

According to the affidavit, such provisions are not peculiar to this ordinance as they exist in the State Financial Corporation Act, 1951 and the Small Industrial Development Bank of India Act, 1989. Moreover, such remedy is accepted in the international banking system.

The affidavit further says that since their inception in 1993 till March 31, 2002, the number of cases decided by Debt Recovery Tribunals (DRTs) is 23,393 and the amount involved Rs 18,555.51 crore. However, the actual amount recovered is only Rs 4,736.51 crore.

“At the present stage when non-performing assets have reached large proportions, unless remedy with a sense of urgency is taken, it would put in peril the commercial health of the banking sector and any interim stay of the operation of this law would run counter to public interest,” the affidavit says.

Union government counsel Jayant Bhushan took permission to file the counter affidavit from a division bench comprising chief justice SB Sinha and justice AK Sikri, which informed him that the matter would come up for hearing on Friday before a different bench.

The counter affidavit has been filed following a petition filed by Mardia Chemicals challenging the NPA ordinance as being unconstitutional. Senior advocate Kapil Sibal appearing for Mardia Chemicals had submitted that under the new ordinance, banks and financial institutions could take over the assets and management of any company which had defaulted in payments for more than six months by giving a notice of 60 days. The aggrieved company has no remedy against a notice served. It is only after 75 per cent of the amount claimed has been deposited that the company can file an appeal before the debt recovery tribunal.