UNIQUE ENGINEERINGWORKS,THROUGH ITS PARTNER SRI ASHISH PANT Vs. UNION OF INDIA,THROUGH SECRETARY,MINISTRY OF FINANCE,GOVT. OF INDIA,NEW DELHI AND OTHERS

JUDGEMENT

(1.) BY this writ petition, petitioner seeks to challenge the constitutional validity of The Securitisation & Reconstruction of Finan­cial Assets and Enforcement of Security Interest Act, 2002 [hereinafter referred to for the sake of brevity as Non-Performing Asset (NPA) Act, 2002].

(2.) BACKGROUND FACTS Extra-ordinary and urgent situations de­mand extra-ordinary remedial measures particularly in economics and finance. With globalization, India has become a signa­tory to various International Conventions, which require India to reduce its gross fis­cal deficit, which was 10% of G.D.P around 21st June 2002. Banking is one of an important economic organ to revi­talize the economy. However, on 21st June 2002 the non-performing assets of banks had reached a figure of Rs. 90,000 crores (approximately ) and therefore, the Gov­ernment came out with an Ordinance known as Securitisation and Reconstruction of Financial Assets and Enforcement of Se­curity Interest Ordinance, 2002 which has been substituted by the Act on 19th July 2002 with effect from 21st June 2002. That Act briefly is called as Non-Perform­ing Asset Act, 2002 (hereinafter referred to as NPA Act 2002) In the banks, there were higher value loan accounts, which are secured by the borrowers handing over their assets as and by way of security to the banks against which the banks lend mon­eys. On account of non-payment of prin­cipal and interest amounts, the margin between the value of the assets pledged/mortgaged/charged narrow down vis-a­vis the amounts lent to the borrowers. Con­sequently, the assets became non-perform­ing. Under the circumstances, Reserve Bank of India has issued guidelines on 4th July 2002 after the Ordinance defining these non-performing assets. These assets have become sub-standard, doubtful and loss assets on account of non-payment of dues because these assets cannot service the loans sanctioned by the banks in fa­vour of the borrowers. It is under these cir­cumstances that NPA Act, 2002 has been enacted. There is one more reason for enactment of this Act, 2002. On account of mounting arrears of cases in Civil Courts, recovery was delayed and therefore, the Government enacted The Recovery of Debts Due to Banks and Financial Institu­tions Act, 1993 (hereinafter referred to for the sake of brevity as the DRT Act, 1993). However, assets, which were charged for maintenance of higher value loan ac­counts, could not be sold under the re­covery machinery provided under the DRT Act, 1993, till the final decree. Even in cases where suits were filed before the Civil Courts, Receivers were appointed from time to time, but such Receivers had no power to sell the assets pending the suits. Under the circumstances, the Non-Perform­ing Asset (NPA) Act, 2002 has been en­acted.

(3.) SCOPE of NPA Act, 2002 read with Reserve Bank of India Guidelines dated 4th July 2002:­- For the sake of clarity, we quote, hereinbelow, the following sections of Non­Performing Assets (NPA) Act, 2002;