ARC Body calls for safeguards against filing of criminal cases

economictimes.indiatimes.com:

Association of Asset Reconstruction Companies (ARCs) has sought the finance ministry's intervention to issue advisory to state governments to direct authorities to build in adequate safeguards in initiating criminal cases against lenders and its officials while pursuing their duty as per prescribed recovery norms. The letter follows an increasing number of criminal cases against lenders, which are aimed to intimidate and stall recovery efforts.

The industry has raised concerns over criminal action against ARC officials despite their merely following due process of law as mandated in IBC and Sarfaesi. Under Section 32 of the Sarfaesi Act, lenders have been given protection for action taken in good faith.

It specifies that no suit, prosecution, or other proceeding can lie against the Reserve Bank, Central Registry, or any secured creditor or any of its officers for anything done under provisions of Sarfaesi. Despite this, creditors are being implicated in various criminal charges by borrowers and related vested interests to delay and derail the recovery process and create a sense of fear in follow up and recovery of bad loans and pressurise the ARCs.

In keeping with the spirit of this provision, ARCs want the government to issue appropriate advisory to relevant authorities to exercise restraint in initiating criminal cases against individual employees of creditors who are merely following a permissible recovery mechanism in compliance with law. However, only when mala fide intent and criminality in conduct of the officials or the institution is established beyond doubt, a criminal case against an institution or individual pursuing legitimate avenues of recovery or resolution should be filed.