SC upholds Constitutional validity of Securitisation Act

The securitisation and reconstruction of financial assets and enforcement of Security Interest Act could not be fully enforced by banks and FIs as a private company had moved the Supreme Court challenging the validity of the legislation.

As a result, banks could not fully implement the stringent NPA law despite slapping over 15,000 legal notices on defaulting companies to recover bad loans worth about Rs 20,000 crore. In many cases, the companies rushed to banks for a compromise settlement and paid a portion of the loans. But in other cases, banks and FIs had to attach the properties of defaulting companies.

Although banks and FIs attached properties in many of the cases, they could not sell the properties as the matter was sub-judice. With the apex court upholding the Securitisation Act, banks can now go ahead with auctioning of the attached properties to recover their non-performing assets and use the money for productive purposes.