The Hindu Business Line : Dual benefit for creditors: Morparia

REACTING to the Supreme Court order upholding the Securitisation Act, the Deputy Managing Director of ICICI Bank, Ms Kalpana Morparia, said: ``Although I have not seen the judgment, this is a landmark judgment in favour of creditors. There is a dual benefit from it, one for faster recovery of the existing non-performing loans in the banking system and secondly it will act as a deterrent against future borrowers turning defaulters since the Act ensures dispossession of assets. This will empower banks to proceed with the seizure and sale of assets after serving a notice and on expiry of a 60-day notice.''

She, however, declined to disclose any details on how the bank would proceed on the Mardia case.

Will the removal of the 75 per cent that the borrower earlier had to pledge at the DRT in order to stall a bank from selling the seized assets act as a dampener is the big question. ``... it will not act as a dampener,'' according to Ms Morparia. ``It is in the course of natural justice.

If the DRT were to hear my case and the borrower's case and decide that the sale of assets can happen it will. DRTs have been created exclusively for bank recoveries, so how can these courts slow down the recovery process.'' she said.

In November 2003, ICICI Bank had taken over a unit of Mardia Chemicals, located at Vatwa in Ahmedabad.

ICICI Bank will now be in a position to sell the seized asset and realise the value.

The bank will also be enabled to possess other assets that have been attached to the outstanding loan and sell the same.

The Supreme Court had stayed the sale of seized assets by banks/FIs earlier.

There are said to be a few thousand notices that banks have sent out to seize property in the Indian banking scenario. But banks/FIs were unable to proceed with the sale of these assets since the Supreme Court had stalled sale of assets and the constitutional validity of the Act had been questioned. In many of the cases where banks had served notices, the borrowers had come forward with compromise settlements.

ICICI Bank had issued a notice in July to Mardia and on expiry of the required 60-day period; it took over the assets of the closed unit in consultation with all lenders.

This was carried out just two days after Parliament passed the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Bill 2002,

The exposure of ICICI Bank to the Ahmedabad-based, dyes and dyes intermediaries company, is Rs 110 crore (principal amount) and with overdue interest works out to Rs 392 crore.

More Stories on : Non-Performing Assets | Securitisation | Courts/Legal Issues

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