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Borrowers can heave a sigh of relief

New Delhi, Sept. 15: In a move designed to bail out corporate borrowers under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, the government today told the Supreme Court that debt recovery tribunals (DRT) would be empowered to grant relief against banks and financial institutions attaching the properties of a borrower.

The main change proposed is an amendment to section 13 of the act under which, a bank or financial institution can attach the property of a borrower, take over management of a corporate and create third party interest.

Attorney-General Soli J. Sorabjee today submitted his proposals before a bench comprising Chief Justice V. . Khare, Justice Brijesh Kumar and Justice Arun Kumar. He said the government would bring changes in the act to ensure that banks or financial institutions issued notices before attaching properties of a borrower, based on which the borrower could move the DRT. The tribunal would be empowered to grant an interim relief, which would, however, stand vacated if it did not give its final verdict within 60 days.

Various companies owed over Rs 91,000 crore to banks and FIs out of which “almost 60 per cent of the non performing assets (NPA) estimated at Rs 53,777 crore were due to public sector banks”, he said.

To recover the loans, the Centre had brought the securitisation Act under which section 13 allows the attachment of even personal properties of a borrower. Several companies had challenged this provision.

On the apex court's indication that the provision has to be “re-drafted”, Sorabjee submitted his proposals.

Counsel for Mardia Chemicals Kapil Sibal and counsel for Amulet International Deva Sekhar along with other companies sought time to reply to the proposal. The apex court has set October 9 for further hearings.

Deva Sekhar contended that the procedure for attachment was “arbitrary” and “illegal” as the provision did not give any opportunity to a borrower to defend himself. Kapil Sibal, agreeing that NPA was in the increase, challenged the recovery procedure resulting in “arbitrary invocation of law”.

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