Amendments to Debt Recovery Laws: Impact of the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2013

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The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (Securitisation Act) was enacted with the objective to counter the slow pace of recovery of defaulting loans and mounting levels of nonperforming assets of banks and financial institutions.

The Securitisation Act empowered the banks and financial institutions either directly or through an asset reconstruction and securitisation companies (which were brought into existence in terms of the Securitisation Act) to acquire the physical assets of the defaulting borrowers without interference of the judicial / quasi judicial authorities in the event of the borrower failing to make the payments.

The enactment is now a decade old and it has achieved some positive results in the nature of secured creditors getting the armour in their hands to recover their debts without inordinate delay. However, to overcome the shortcomings in the principal enactment and to resolve the issues faced by the secured creditors to recover their debts, a need was felt to amend the Securitisation Act.

Accordingly, the Securitisation Act has now been amended in terms of the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2012, with effect from 3rd January 2013, which has not only strengthened the hands of the secured creditors to liquidate their dues expeditiously but also brought in certain procedural variances to the principal enactment.

The Amendment Act deals with a series of amendments both substantive and procedural; however, the amendments, which will have a material impact in the recovery process, are being elucidated in this article. Kevin White Jersey

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