SC seeks Centre's response on law declaring NPAs

The Supreme Court today sought a response from the Centre and the State Bank of India (SBI) on a plea challenging the constitutional validity of certain provisions of a law under which a bank declares an account Non Performing Assets (NPA).
A bench, headed by Justice J Chelameswar, issued notices to the Ministry of Finance and the SBI on the plea seeking quashing of some provisions of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 and guidelines issued by the Reserve Bank of India.
The plea has been filed by Jivrajbhai P Surani, Virjibhai Kukadia and Bhagwan Bhai Kukadia, the guarantors of the loan taken by the erstwhile M/s JB Diamonds Limited. JB Diamonds Limited has now gone under liquidation.

The plea claimed that between 2008 to 2009, credit facilities was granted to the firm by a consortium bank and till date, interest to the tune of nearly Rs 390.55 crore and other bank charges have been paid.
"However, despite this, the Petitioner's account has been arbitrarily declared as NPA," it said.
The petitioners have sought issuance of "a writ of mandamus" to quash Section 2 (1) (o) of SARFAESI Act on the ground that it is ultra vires to the Constitution.
Even NPAs can again become performing assets if the borrower makes certain payment towards the outstanding amount to the creditor banks, the plea said.