The Hindu Business Line : Securitisation Act amendment Bill tabled in Lok Sabha

THE Minister of State for Finance, Mr S.S. Palanimanickam, has introduced two Bills in the Lok Sabha to replace the Enforcement of Security Interest and Recovery Debts Laws (Amendment) Ordinance, 2004 and the Securities Laws (Amendment) Ordinance, 2004.

The first Bill seeks to amend the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFESI), the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and the Companies Act, 1956.

The amendment has been sought in the light of the Supreme Court's judgment in the case of Mardia Chemicals Ltd, where the requirement for a deposit of 75 per cent of the amount claimed before entertaining an appeal by the Debt Recovery Tribunal (DRT) under Section 17 (2) of SARFESI was declared as violating Article 14 of the Constitution.

Following this, the Finance Minister, Mr P. Chidambaram, in his 2004-05 Union Budget speech, promised to amend the relevant provisions of SARFESI "to appropriately address the Supreme Court's concerns regarding a fair deal to borrowers while, at the same time, ensuring that the recovery process is not delayed or hampered."

Accordingly, the new Bill provides for the borrower to make an application before the DRT without making any deposit, while, at the same time, making it necessary for the tribunal to "dispose of such application within 60 days from the date of such applications so that the total period of pendency of the application with such tribunal shall not exceed four months."

The Bill further enables any person aggrieved by an order made by the DRT to file an appeal to the Debt Recovery Appellate Tribunal (DRAT) after depositing 50 per cent of the debt due from him as claimed by the secured creditor or determined by the DRT, whichever amount is less.

It also amends the Recovery of Debts Act to enable banks or financial institutions to withdraw, with the DRT's permission, the application made to it and, thereafter, take action under SARFESI.

An amendment of the Companies Act has also been sought to provide that any reference made under Section 424A shall abate if the secured creditors representing three-fourths in value of the amount outstanding have taken recourse to recovery under SARFESI.

All these amendments had been carried out through an ordinance promulgated on November 11, which is now being sought to be replaced by a Bill.

The second Bill that was tabled on Monday is similarly aimed at replacing an ordinance promulgated on October 12 to enable corporatisation and demutualisation of stock exchanges. Demutualisation, basically, separates ownership, voting rights and management from the right to trading. Accordingly, an amendment of the Securities Contracts (Regulation) Act, 1956 and the Depositories Act, 1996 have sought.

The Bill for carrying out these amendments was originally introduced by the previous National Democratic Alliance Government last year, but lapsed because of the dissolution of the 13th Lok Sabha.

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