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N.K.Assumi (Advocate)     18 August 2009

Securitisation act and Article 371-A of the Constitution:


“The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002”.  The SARFAESI Act, 2002 is to curtail the delay in the process of adjudication between the Banks and its borrowers.  The question of recovery by the Banks and Financial Institutions will arise when the borrowers commit default in repaying the debt. When there is default, then, the Banks will categorize the account as “Non-performing Asset” in accordance with the norms prescribed by the Reserve Bank of India. Under this SARFAESI Act, 2002, the Banks are given powers under section 13 to carryout the adjudication exercise. Under section 4 (a) to (d) empower the Bank to secure the assets of the barrower. Now if the assets is immovable property can the bank transfer by way of lease, assignment or sale such immovable assets of the barrower despite tha facts that the same is covered by Article 371-A of the constitution oof India. This query is only in the context of Article 371-A.


 6 Replies

Arul Kumar (Legal Consultant & Professor at Law)     18 August 2009

Your message is very interesting and brain storming.

Article 371A provides as follows:

371A. (1) Notwithstanding anything in this
(a) no Act of Parliament in respect of—
(i) religious or social practices of the Nagas,
(ii) Naga customary law and procedure,
(iii) administration of civil and criminal justice
involving decisions according to Naga customary
(iv) ownership and transfer of land and its
shall apply to the State of Nagaland unless the Legislative
Assembly of Nagaland by a resolution so decides;
Special provision
with respect to the State of Nagaland.
Now the question is whether SARFAESI Act 2002 is implemented in the State of Nagaland after passing necessary Resolution in the Assembly, which gives the right to own, transfer of land and it's resources. It is really a technical issue and needs deep analysis of different laws.

Y V Vishweshwar Rao (Advocate )     18 August 2009

 Dear assumi !      it is good discussion  !

N.K.Assumi (Advocate)     18 August 2009

Dear Sir.Visheshwar Rao, This Article was seen as a blessing but it is now turning out to be a monster like the black cobra swallowing the white mongoose. Infact our previous MP Mr.Asangba, had raised this issue in the Lok Sabha, but it is the Nagaland Legislative Assembly that has to act. As for Sir.Anil, so far no resolution has been passed in the Nagaland legislative assembly but may be it is in the offing in the interest of Financial Institutions in Nagaland. But, in any case this is going to be very difficult for the Financial institutions in Nagaland.

N.K.Assumi (Advocate)     18 August 2009

Not only SARFAESI Act, 2002 but from the schemes of Article 371-A, even the Environmental Laws is facing the same fate. 

Bhumik Dave (Law officer)     19 August 2009

Thanks 4 very intelignt queston.

N.K.Assumi (Advocate)     19 August 2009

Dear Sir.Dave, this is a serious issue facing the Nagas. The architect of our State hood took pride in inserting the 13th Amendment of the Constitution of India, giving birth to this Article 371-A, a minature Constitution within the Constitution, and of course our Naga leadres solemnly shook hands with one another as a sign of great achievement never knowing that they were manufacturing a frankestein for the future. Time has come to have fresh look at this Article.

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