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Sarbajeet K. Sen
Richa Mishra

NEW DELHI, Dec. 15

BANKS and financial institutions (FIs) are opening up a new front in their offensive against defaulters. Lenders are now busy joining hands to drill a hole in Board for Industrial and Financial Reconstruction (BIFR) umbrella that for long was being used by defaulters as a shelter whenever creditors appeared to be on hot pursuit.

Backed by the Securitisation and Reconstruction of Financial Assets law that allows lenders to seek abatement of cases pending before the BIFR, banks and FIs have begun queuing up before the board seeking withdrawal of the pending cases. This would enable lenders to resort to the new legislation, which allows takeover and selling of assets of defaulters.

The new law provides that if 75 per cent of secured creditors (by value) agree, the matter pending before BIFR would abate.

"Banks and FIs have speeded up efforts on seeking withdrawal of BIFR cases. We have already had several meetings where the mandatory consent of the lenders has been obtained after which we have written to the Board seeking withdrawal of the cases," a top official of a public sector bank said.

BIFR officials also confirmed the development. "We have received quite a few reference from lenders. We are examining the requests and would take a view shortly," they said.

Bankers said that with several thousands of crores of lenders' funds locked up in BIFR cases, the queue for withdrawal of cases pending before it is likely to grow larger in the days to come.

An idea of the possible goldmine that lies hidden in BIFR cases can be gauged from the fact that high value non-performing assets (NPAs) (those above Rs 5 crore) aggregated Rs 8,163 crore as on March 31, 2002, in 603 cases pending at the board, while another Rs 1,905 crore were locked up in cases where rehabilitation was in progress.

"Action on this (abatement of BIFR cases) front would gain greater momentum in the days to come. During the period when the new law was in form of an Ordinance, lenders were going a bit slow. But after its passage by Parliament, most banks have issued instruction to their offices to arrange for creditors' meeting to expedite the process of abatement of BIFR cases," a banker said.

The provision allowing abatement of BIFR cases on consent of lenders was specifically incorporated in the new legislation to ensure that defaulting borrowers could no longer misuse the protection provided under the Sick Industrial Companies (Special Provisions) Act, 1985. SICA provides that all other litigation against the companies would cease till settlement of the cases before the board. The provision often made defaulting companies approach the BIFR to dodge the lenders.

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