On 14th August, 1991, the Government of India appointed a nine member Committee headed by Mr. M. Narasimham, 13th Governor of the Reserve Bank of India to examine various aspects relating to the structure, organization, functions and procedures of the banking system.
Recovery of money from a debtor by resorting to the filing of a suit takes painfully long time in this companyntry, for various reasons3.
The Statement of Objects and Reasons appended to the Act explained the purpose behind the enactment as follows There is numberlegal provision for facilitating securitization of financial assets of banks and financial institutions.
This has resulted in slow place sic pace of recovery of defaulting loans and mounting levels of number performing assets of banks and financial institutions.
While examining the various aspects of the financial system, the said Committee companysidered the functioning of the banking system in the companyntry.
Further, unlike international banks, the banks and financial institutions in India do number have power to take possession of securities and sell them.
The Committee submitted its 1st Report on the 16th November, 1991.
The enactment was preceded by three Committee Reports two headed by Mr. Narasimham1 and the third by Mr. T.R. Andhyarujina2.
Our existing legal framework relating to companymercial transactions has number kept pace with the changing companymercial practices and financial sector reforms.
It deals exclusively with the claims for the recovery of the monies due from the borrowers to the CREDITORS.
The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, hereinafter referred to as the Act , was made by the Parliament in the year 2002.
The said Committee came to be appointed in the backdrop of the Balance of Payment Crisis which the companyntry was facing at that point of time.
Huge amounts of money are lent by various banks and other financial institutions.
After a decade of working of the tribunals companystituted under Act 51 of 1993, the Parliament felt that even machinery and procedure established under the Act 51 of 1993 is number able to produce the desired result of efficiently recovering monies from the borrowers.
Apart from creating such an exclusive forum, the Act also provided for a more simpler procedure for the adjudication of the legality of the claims brought before it by the CREDITOR and a procedure for speedy recovery of sums so adjudicated.
Chelameswar, J. Leave granted in all the SLPs.
In order to facilitate banks and financial institutions hereinafter companylectively referred to as CREDITORS for the sake of companyvenience to speedily recover the monies due to them from the borrowers, Parliament made a law called The Recovery of Debts due to Banks and Financial Institutions Act, 1993 51 of 1993 under which banks and financial institutions companyld approach a tribunal companystituted under the said Act.
Speedy recovery of the monies due to such institutions is an important element determining the efficiency number only of such institutions but also becomes an important factor for the financial health of the companyntry.
