A long drawn out legal battle has come to an end with the Hon’ble Supreme Court pronouncing that SARFAESI Act is applicable to cooperative banks and that the cooperative banks can proceed against the delinquent borrowers for recovery under the Act.
A government order for inclusion of multi state cooperative banks under the SARFAESI Act was challenged by borrowers in different states and many High Courts had given conflicting judgments over the years, each of which landed up in the Supreme Court in the last few years.
They were heard by different benches and finally it was included as one of the matters to be heard by a Constitutional Bench that was being set up to hear other constitutional matters.
Given the importance of the case for cooperative banks and the fact that over 150 urban banks, state cooperative banks and district central cooperative banks were involved, Jyotindra Mehta, President, NAFCUB decided to take the initiative and to request the Solicitor General of India, Sh. Tushar Mehta who had earlier been associated with the issue some years back in the Gujarat High Court, to appear before the Bench of Hon’ble Supreme Court on behalf of the cooperative banks. The Solicitor General agreed to appear on behalf of the cooperative banking sector.
The case was heard in five consecutive sittings and judgment was pronounced on Tuesday. The Hon’ble Supreme Court ruled that the SARFAESI Act was applicable to cooperative banks.
With this long pending legal battle going the way of the cooperative banks, they will be encouraged to pursue recoveries of long pending dues with renewed enthusiasm and reduce their NPAs.
SARFAESI Act is particularly valuable tool for cooperative banks as their loans ticket size are smaller than those of commercial banks and cost of protracted litigation many times becomes disproportionately high.
A very good number of borrowers particularly in personal loans segment regularize the accounts even as notice under the SARFAESI Act is served on them by the banks. Therefore, non- availability of such an effective legal tool to cooperative banks all these years was a big handicap for them.
It is a matter of satisfaction for NAFCUB that its timely intervention in the matter has helped the sector in a big way and thousands of pending cases will now be cleared, read a release from the apex body of UCBs and credit co-ops in the country.
