I f banking sector has to be seen sustaining itself and not allowed to undergo its assets involving substantial amount(s) going haywire, the requisite legal support in protecting and realising the proceeds of such assets as security against sanctioned loans , must be there otherwise it could spell doom for its very survival. In other words, commercial and banking transactions must find the existing legal framework keeping pace with the changing practices and reforms in banking and commercial sector. Unless banking sector is empowered to gain possession of the securities and to sell them without any intervention of the courts or tribunals , neither wilful default in repaying Bank debts nor the lengthiest and very often less effective conventional legal remedy to realise the ”eaten away ” money could be brought under control and realised. Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act of 2002 addresses the concerns of the banking institutions in respect of gaining possession and causing to be sold those securities which are charged to the bank to secure the loans advanced by them , usually in terms of substantial amounts in case of default and non payment by the borrower the dues owed by it plus interest etc. The said Act was enacted by the Parliament in late 2002 which empowers banks to take possession of and arrange auctioning of the said security, charged to it by the borrower in respect of a loan account after the latter is classified as Non- Performing Asset or NPA. The securities can be residential or commercial properties but must be duly charged to the bank either by mortgage or by any other effective charge. Although the Act is a sort of cushion and the final recourse to banks , it was not made applicable or it could not be that effective in the then state of Jammu and Kashmir and beyond notifying and indentifying the said property , banks could hardly recover their loans by causing such properties to be sold. In fact, High Court in 2017 gave a ruling that the said Act collided with the state’s own laws like section 140 of Transfer of Property Act but Apex Court set aside the verdict of the High Court and held that since the Act was passed by the Parliament , it was, as a whole, applicable to the entire country including Jammu and Kashmir. Since the Act duly empowers Chief Metropolitan Magistrate or District Magistrate to ensure that the creditor bank was in a position to take possession of the secured security charged to it by the concerned defaulter borrower or borrowers, the issue attained importance and due sensitivity . For undertaking the said process , the duly authorised officer of the lending bank or lending financial institution usually requests such legal authority whose jurisdiction the charged property or the security falls in, to take into possession such property and all the related documents thereto and pass the same on to the creditor bank . For this, usual steps deemed fit by the designated legal authority could be taken , including using force in case of resistance from the defaulter borrower which in its opinion was necessary. The action of the concerned Magistrate cannot be questioned by any court or tribunal as per the relevant sections of the said Act. It is , however, found that there was deficit of cooperation and support from the District Magistrates in the entire process in the UT which besides emboldening the defaulting borrowers was leading to the asset account swelling in interest and other charges and putting constraints on the liquidity of the lending banks. While the Act duly amended in 2019 lays emphasis on selling of the secured property after taking into possession within 60 days, slackness from legal support has been causing delays and deferring of realisation of sale proceeds . Taking serious note of the non-cooperation of the District Magistrates with the banks in most of the cases, the Union Ministry has taken up the issue with the Finance Department which is expected to initiate necessary follow up and adopt other measures including arranging deciding of the fate of all those cases under the said Act that are pending for over 60 days
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