In a major boost to the cooperative banking sector, the Supreme Court of India has pronounced a judgment Tuesday noon in its favor on the issue of securitization. The judgement led to euphoria among the cooperators who have been demanding this for many years.
Jyotindra Mehta, President NAFCUB, said,” the judgment has come as a great relief for 1540 urban cooperative banks, as a very large number of borrowers, mostly wilful defaulters, were taking advantage of ambiguity in interpretation of the SARFAESI Act: by various courts and were not returning the loan amounts for years.”
“I am sure this development will have a positive impact on the morale of urban banks many of whom would reduce their NPAs and become stronger in a short period of time”, Mehta added.
Tracing the history of the issue, NAFCUB President Jyotindra Mehta said that ever since this Act came for commercial banks some 15-20 years ago, cooperative banks have been trying to be included as one of the beneficiaries of the Act.
“It was after much effort by many of us that a favorable judgement has come”, Mehta said adding that it would strengthen the UCBs with necessary teeth to deal with defaulters and help them reduce NPAs.
In its judgment, the apex court allowed cooperative banks to act against the defaulting borrowers under the Securitization Act-a provision availed only by commercial banks and scheduled banks so far. The borrower has to be first notified and given a time frame of 60 days and so, after which the bank can confiscate his properties.
Solicitor General of India and a noted lawyer Tushar Mehta represented the matter for the Gujarat State Cooperative Bank as well as Gujarat Urban Cooperative Bank Federation.
“Tushar Mehta, in fact represented the cooperative sector”, informed NAFCUB President who was excited about the judgement.
More than 160 cooperative banks were busy fighting borrowers across several courts in the country on the issue. These were clubbed by the Supreme Court which constituted a constitutional bench to hear the matter.
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.
Earlier, Sahakar Bharati had also urged the government to include all Urban Co-op Banks under Securitization and Reconstruction of Financial Assets and Enforcement of Security.
