New Delhi, Jan. 22: The Supreme Court today reserved its verdict on the challenge to the constitutional validity of a few provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act under which banks and financial institutions have been empowered to attach, sell, create third party interests in and take over the assets of defaulting companies.

Various firms owe over Rs.91,000 crore to banks and financial institutions. “Almost 60 per cent of the Non Performing Assets (NPA) estimated at Rs. 53,777 crore are due to public sector banks,” attorney general Soli J Sorabjee had told the apex court during arguments.

The debts that large firms and business houses owe banks and financial institutions is estimated at Rs. 1,50,000 crore with interest.

A three-judge bench of Chief Justice V. . Khare, Justices Brijesh Kumar and Arun Kumar reserved the verdict after conclusion of arguments. The Securitisation Act, which was introduced in the form of an ordinance first and then passed by parliament, carries provisions to enable banks to recover their long-pending debts which have been classified as NPAs — or bad debts — under touch loan categorisation norms framed by the Reserve Bank of India.

During the hearing on the securitisation Act, two provisions came under attack: the first enabling banks and FIs to sell, take over management and create third party interest in the assets of defaulting companies and the second enabling them to even take over the personal property of a borrower like residential accommodation, farm house and even personal shares.

Amulet International's owner Sardar Bhupinder Singh's residential accommodation in the Kailash Colony area of Delhi was attached by the Punjab and Sindh Bank on which his counsel Deva Sekhar obtained a stay from the apex court.

Earlier, in his five-page written submission, Sorabjee said that before attaching the properties of a borrower, a bank or a financial institution should issue notices on which the borrower could move the Debt Recovery Tribunal. With this proposed change, the Act itself is set to undergo a drastic change, giving the borrower a chance to repay his dues before his property and business establishment are sold or taken over.