Court order puts a spoke in banks’ loan recovery process in non-metros
COIMBATORE, JAN. 8:
Non-performing assets are mounting but our hands are tied, say bankers in non-metropolitan cities, pointing to a recent observation made by the Madurai Bench of the Madras High Court.
A Bench — comprising judges N. Paul Vasanthakumar, T. Mathivanan and P. Devadoss — observed that secured creditors in metropolitan areas could approach either the Chief Metropolitan Magistrate or District Magistrate for relief under the SARFAESI Act. The SARFAESI Act lets banks and financial institutions take possession of properties and auction them when a borrower fails to repay his/her loans. Before proceeding further on this, here is a look at how the NPAs in banks are handled.
Often, banks try to settle NPA cases out of court. If that doesn’t work, the banker issues a possession notice in newspapers that is mandated under Section 13 (4) of the Act, in order to initiate recovery proceedings.
Then the banker has to wait for 30 days for the party to come to settle the dues. If there is no response, the bank can initiate legal possession under Section 14 (this Section deals with persons who are eligible to take security possessions). The crux of the observation lies here.
The Madurai Bench was constituted following a reference made by a Division Bench to decide on whether the reference made in the SARFAESI Act to the Chief Metropolitan Magistrate under Section 14 would include Chief Judicial Magistrates in the non-metropolitan areas.
The observation was made in the case of K. Arockiyaraj vs The Chief Judicial Magistrate, Srivilliputhur, and the Housing Development and Finance Corporation and D. Visalakshi vs The Authorised Officer, Indian Bank, Sivagangai Branch.
But in non-metros, where the Chief Metropolitan Magistrate would not be available, the secured creditors could seek the assistance of District Magistrates alone, as no power is vested or given to Chief Judicial Magistrates to give assistance to secured creditors.
As a consequence of the above observation, banks have stopped issuing notice for possession under Section 13 (4) of the Act, a law officer of a nationalised bank told Business Line.
No power for CJMs
Though Section 14 deals with persons who are eligible to take security possessions, the observation has simply tied the hands of bankers in non-metropolitan cities. Following the observation of the Full Bench, all Chief Judicial Magistrates have returned applications and wherever orders were passed and advocate commissioner not appointed, orders have been withdrawn.
Though Section 14 deals with persons who are eligible to take security possessions, the observation has simply tied the hands of bankers in non-metropolitan cities. Following the observation of the Full Bench, all Chief Judicial Magistrates have returned applications and wherever orders were passed and advocate commissioner not appointed, orders have been withdrawn.
To take possession, the banker has to go along with the advocate commissioner. “But to get the orders passed we have to go to the District Collector now and most times they are tied up with other jobs,” the officer said.
“The number of applications pending with each of the banks is piling up as we cannot expect this to be done quickly. It takes more than a month to get the orders passed,” the officer lamented.
Asked why the bank had not gone on appeal, the officer said: “We want to, but are not a party to the case. But the pity is, even the Indian Banks’ Association has not taken up the Full Bench judgment as a Special Leave Petition.”
http://www.thehindubusinessline.com/industry-and-economy/banking/court-order-puts-a-spoke-in-banks-loan-recovery-process-in-nonmetros/article5554324.ece
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