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The Kerala Assembly has passed the Kerala Single Dwelling Place Protection Bill, which aims to protect a defaulted debtor’s mortgaged property from being taken over by banking entities under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. This is the first time in the country that a state has enacted its own legislation to insulate debtors.
The Bill
The Bill is envisaged to prevent the situation where families are losing their single dwelling place through eviction on account of non-repayment of loans raised from financial institutions after mortgaging their house/dwelling place. This will cover all financial entities, including banks, co-operative banks, and the Kerala State Financial Enterprises (KSFE), which are functioning within the state.
Criteria
The loan amount should not exceed Rs 5 lakh, and the loanee should not have more than 5 cents of land in municipal areas and ten cents in rural areas. The outstanding amount, including the loan, its interest, penal interest and other incidental expenses, shall not exceed Rs 10 lakh. The applicant should not have other properties, and their annual income should not exceed Rs 3 lakh.
The protection shall not be available to those loans raised except for education, treatment, marriage, house building/ house renovation, agriculture and creation of livelihood for self-employment.
How a debtor will get relief
A family/individual who loses their dwelling place on account of the attachment or the recovery proceedings initiated by a financial institution due to the non-repayment of a loan raised by mortgaging their single dwelling place is eligible for the protection.
There will be dwelling place protection committees at the district and state levels. An aggrieved person can apply to the district level committee, which will have the district development commissioner as the chairman and senior functionaries of the agriculture, panchayat, district disaster management and lead bank as members. Both parties will be heard, conciliation measures will be explored, and if the committee is convinced that there is no option for repayment, the application will be referred to the state committee with a recommendation that the government take over the debt.
Upon receipt of the recommendation, the state-level committee will again hear parties concerned and make a decision either rejecting the plea or ordering the government to take over the debt. It also has a provision to absorb the outstanding loan into any housing scheme of the government. Aggrieved parties can move an appeal before the Chief Secretary to the government or an Additional Chief Secretary.
The government will constitute the Kerala Dwelling Place Protection Fund, and as per existing plans, Rs 10 crore will be set apart in a year.
Why the Bill
In 2017, the Kerala Assembly passed a resolution asking the Centre to amend the SARFAESI Act, 2002. The state wanted to exempt outstanding loans below the amount of Rs 10 lakh and residential plots up to five cents from the purview of the Act.
But the Union government did not give any relief to benefit the small-scale debtors. Hence, the state came out with its own legal remedy. The Bill is also meant to give protection for around 4 lakh houses constructed for BPL families under the state’s Life Mission scheme.
