Defaulters fire appeals against debt ordinance

MUMBAI: At least 10 petitioners (bank defaulters) are giving final touches to petition applications to be filed before the Bombay High Court against the legal proceedings initiated against them by banks, to takeover their assets under the new debt ordinance.
Sources said the Bombay High Court will hear the first petition on October 28, filed by a Global Trust Bank (GTB) borrower.Verma Builders, a GTB borrower, filed a petition before the court last month after the bank served 60 days’ notice to takeover the builders’ secured assets, including the real estate. The builder owes around Rs 4 crore to GTB along with interest and principal. This case assumes significance since the Supreme Court has already heard a similar petition filed by Mardia Chemicals, challenging the constitutional validity of the new ordinance — The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Ordinance, 2002.
The ordinance was repromulgated after the term expired, but could not be turned into an Act. As per the ordinance, the secured lenders get explicit rights to sell, lease or even change the company management after issuing a 60-day notice. Also it gives banks the upper hand in negotiating loan agreements. SC had held that the banks can takeover the defaulters’ assets, but can’t sell them.
The order was based on the view that if Parliament does not pass the Bill, the rights of the borrower will be damaged. The HC petition filed by Verma Builders is also on the similar grounds that the ordinance is not an Act as yet and so can’t be used for taking legal recourse. ‘‘Several bank defaulters have decided to seek HC intervention for vacating banks’ proceedings,’’ a lawyer said. Banks and institutions have started lobbying with lawmakers, senior bureaucrats and top government functionaries to ensure that the Bill, allowing sweeping powers to salvage bad loans, is passed in the winter session of the Parliament.