Hon'ble Judges/Coram:
Rohinton Fali Nariman and Sanjay Kishan Kaul

JUDGMENT

Sanjay Kishan Kaul, J.

1. Leave granted.

Prologue:

2. Borrowers want to see the colour of their money in haste. The problem arises when loans have to be repaid. All kinds of techniques were and are deployed, to prolong the legal endeavours to recover the debts by lending institutions. Thus, the procedure became cumbersome and time consuming, affecting the lending activity.

3. An endeavour towards banking sector reforms, was the setting up of Expert Committees known as The Andhyarujina Committee', and The Narasimham Committee I and II'. To facilitate the disposal of the claims of recovery made by various banks and financial institutions, the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as the 'RDDB Act') was enacted, providing for specialized tribunals, exclusively dealing with the jurisdiction of the civil courts. This was followed up by the implementation of the suggestions of the aforesaid two Committees, for bringing in a law empowering financial institutions to take possession of the securities and to sell the same without the intervention of the Court-thus the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the 'SARFAESI Act').

4. The 'Statement of Objects and Reasons' for bringing in the SARFAESI Act, itself shows that the absence of legal provisions for facilitating securitisation of financial assets of banks and financial institutions was the reason for its enactment. The legal framework relating to commercial transactions had not kept pace with the changing commercial practices and financial sector reforms. The slow pace of recovery of defaulting loans and the mounting levels of non-performing assets of banks and financial institutions had resulted in the setting up of the aforesaid two Committees.

5. It need be emphasized that any impetus to the industrial development of the country by encouraging banks and other financial institutions to formulate a liberal policy for grant of loans had to be necessarily coupled with a quick and efficacious recovery process. The background and salient features of the SARFAESI Act ha........