To ensure speedy redress of the 70,000 debt recovery cases pending across the country, a Joint Committee of Parliament has suggested major changes to the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Bill, which was introduced in May.
The Committee report, which is expected to be tabled in the Lok Sabha on Friday, proposes amendments ranging from definitions to several terms such as ?company?, ?financial lease?, and ?secured creditor? besides deletion of a ?redundant? clause on penalties on Asset Reconstruction Companies (ARCs) if they fail to comply with the RBI?s directions. According to those in the know of the development, it is virtually a new Bill now.
The Bill seeks to amend a set of laws, including the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI), the Recovery of Debts due to Banks and Financial Institutions Act, 1993, the Indian Stamp Act, 1899 and the Depositories Act, 1996.
Persons familiar with the development told BusinessLine that the Committee has proposed the insertion of a new section to empower the Reserve Bank of India to audit and inspect ARCs from time to time. ?We are of the view that the RBI or any other agency such as the Comptroller and Auditor-General of India, as entrusted by the RBI, should hold special forensic audit of the ARCs so that the issue of wilful defaults can be put to an end,? a Committee member said.
The Committee has changed the definition of an ARC to a ?company incorporated under the Companies Act, 2013 and registered with RBI? for the purpose of asset reconstruction and securitisation. This was done after the RBI complained that the current definition is ambiguous.
The Committee has suggested changes to Section 3(3)(f) of the SARFAESI Act to enable the sponsor of an ARC to hold up to 100 per cent stake in the ARC and permit non-institutional investors to invest in securitisation receipts. The panel noted that the amendment made to the Stamp Duty Act, exempting a bank or financial institution from paying stamp duty, should be used only for acquisition of financial asset or asset reconstruction to ensure that it is not misused.
It also noted that the conversion of debt into shares of any borrower company by the secured creditors shall not affect the rights of the secured creditors to recover the balance amount of debt.