Moa Jamir
Two contending arguments, in recent times, have been put forwarded in public the domain regarding the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (the SARFAESI Act).
The first was from the Nagaland Bar Association raising various concerns regarding the implementation of the Act on September 29. Apart from infringement of the constitutional rights conferred by Article 371A, the Act “would be highly disastrous to the members of the business community and entrepreneurs as well as the legal heirs and dependants of deceased servicemen, having unpaid money loan in particular and the state economy in general,” it stated. “It would be much wiser and also legally and constitutionally consonant on the part of the state legislators not to succumb to the pressure…”
In a dissenting note, the Business Association of Nagas (BAN) on October 3 said “every effort must be given in supporting the State Government in implementing the SARFAESI Act 2002 in sync with provision of Article 371A(1)(a)(iv).” Stating the imperative of funds for any businesses, it asserted that “without finance, there is no business and without business the economy is dead.”
Both sides have put forwarded convincing arguments.
In reply to the NBA, the State Finance Department on October 1 said that non-implementation of the Act has been detrimental to the overall economic growth of the State as it has restricted the flow of credit to the people. It further informed that the “feasibility of implementing the Act in harmony” with the provisions of Article 371A and the Nagaland Land and Revenue Regulations (Amendment) Act, 2002 is being explored by a “Select Committee of Nagaland Legislative Assembly (NLA).
What is SARFAESI Act then, first passed by the Parliament on December 17, 2002? The Act, according to an explanation in The Hindu’s Business Line, essentially empowers banks and other financial institutions to directly auction residential or commercial properties that have been pledged with them to recover loans from borrowers. “Before this Act took effect, financial institutions had to take recourse to civil suits in the courts to recover their dues, which is a lengthy and time-consuming process,” it elaborated. The Supreme Court in May 2020 also held that the provisions of the Act will apply to cooperative banks, and not just commercial banks.
Accordingly, while the flow of credit is important, some provisions of the Act such as empowerment of banks and financial institutions to take possession of the secured assets against default in repayment, as noted by the NBA, seem to be inconsonant with the provision of Article 371A.
As such, Chief Minister Neiphiu Rio, himself had told the 5th session of the 13th NLA in February 2020 the Act cannot be implemented in Nagaland in its present form as it comes in “direct conflict with the landholding systems and restrictions on the transfer of land as in Article 371A - Special provisions on transfer of land and its resources, the Nagaland Land & Revenue Regulation (Amendment) Act 1978, Land & Revenue Regulation (Amendment) Act 2002.
The Morung Express then reported that Rio further informed as a Central Act, the requisite amendment has to be carried out by the Union Government and the State Finance Department on November 22, 2019, had requested the Department of Financial Services of the Government of India to modify the Act to restrict the transfer of property to indigenous inhabitants of Nagaland “for which reply is still awaited.”
After ‘lying low’ for almost one year, the issue cropped up again on February 15 this year when the NLA decided to refer the Act to an NLA Select Committee. According to news reports, the Select Committee on September 14 informed that it is planning to introduce the Act in the next NLA session.
The recent debates on the issue could be construed as relevant interventions on the issue. As inferred from the above, the present predicament is the direct offshoot of the State Government’s inability to address these concerns comprehensively. Ergo, it is imperative that before its introduction, the State Government made available the draft in the public domain for pre-legislative scrutiny and solicit feedback to address all concerns. Devoid of any formal opposition in the House, it is the only mechanism for ‘securing’ and safeguarding the general public from any adverse consequences of the Act.
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