(5th September 2009)
By considering the recommendations of Narasimham Committee II and Andhyarujina Committee to address the concerns over the mounting NPAs of the financial institutions and to provide the necessary leap for the FIs to keep pace with international institutions, GoI enacted the SARFAESI act (Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest) in 2002. This act largely facilitates the asset recovery and reconstruction.
Interface with BIFR: SARFAESI act allows the banks and financial institutions to take possession of securities, sell them and reduce non performing assets without the intervention of courts, regardless of the reference of the firms to the BIFR. In a way SARFAESI act restricts the BIFR jurisdiction and allows the secured creditors to possess the corresponding assets without its discrimination. Thus SARFAESI act may be viewed as the legislative action that undermines the efficiency and relevance of BIFR in its pursuit of protecting the potentially viable industrial units. Hence, the note calls for the reexamination of the provisions of SICA in the light of changed institutional and legislative framework.
(Views expressed above are personal and comments and suggestions are encouraged)