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`In the long run, this will discourage the small and medium entrepreneurs from taking risks and thereby thwart enterprise.'

MADURAI, Dec. 12

THE Confederation of Southern Small Industries Associations (CONSSIA) has stressed that certain safeguards were necessary for the SSI sector in the implementation of the recently passed Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002.

In a statement issued here on Wednesday, the President of CONSSIA, Mr A. Selvaraj, has regretted that the ordinance has been passed in Parliament without the stakeholders getting across their views.

While appreciating the basic intention of the law, which is to improve the mechanisms available to the creditors in ensuring security to the money advanced and also to recover the dues positively and quickly, the CONSSIA has its own apprehensions over its implementation, he said.

Mr Selvaraj pointed out that some of the provisions of the Act are beyond compliance. The application of this legislation against `wilful defaulters', as decided by the creditors, will always be one-sided and often misused.

With no provision for appeals in courts, except one Appellate Tribunal above the Debt Recovery Tribunal, the disposal of cases might be quicker but miscarriage of justice due to haste would occur, he pointed out.

Mr Selvaraj said the process of debt recovery under the new legislation might resemble the practice of collection through musclemen, indulged in by many private money lenders. In the long run, this will discourage the small and medium entrepreneurs from taking risks and thereby thwart enterprise.

The concept of rehabilitation, especially in the case of small and tiny sector units, he said, would be given a go by once and for all and would lead to the "annihilation'' of the otherwise viable and restorable small enterprises.

Exempting agricultural land from being offered as collateral security, he pointed out, would make the banks even more reluctant to offer loans. The recent action of taking over of the property of a hotel in Chennai by a nationalised bank has already started sending fear signals among the non-wilful defaulters, he mentioned.

Referring to the NPA of banks standing at Rs 70,000 crore, Mr. Selvaraj said the Government should not lose sight of the incipient sickness in the SSI sector, which warranted quicker rehabilitation and concessions.

Even the State-level Inter-Institutional Committee set up under RBI, he said, often took sides with bankers and disallowed the SSI associations from assisting the defaulting units in sub-committees where actual negotiations of package and settlement took place.

The CONSSIA, he said, would insist that the SSI associations should be permitted to act as facilitators for the sick units. He appealed to the Government to apply this law to the small units only after getting the consent of the State Rehabilitation Committee.

In any case, it should not be enforced in the SSI sector for amounts below Rs one crore, he added.

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