Non-performing assets (NPAs) have become a cause of permanent concern not only for banks and financial institutions, but to the economy also. It may be possible for the banks and financial institutions to adopt certain measures to bail assets out from the non-performing category.

Huge arrears of cases in civil courts, inadequate number of judges, lack of proper infrastructure were and are some stumbling blocks in the process of recovery of monies due to banks and financial institutions. Legislation and tribunals, once rays of hope, have dimmed in importance. The constitutionality of the Banks & Financial Institutions Act, 1993 (DRT Act) is pending before the Supreme Court.

A major problem for lenders is the absence of information about details of immovable and movable assets of the guarantor(s) to the advance facilities, against whom a decree or recovery certificate has already been obtained. Cases where funds are systematically siphoned off by managements to nurture sister concerns are also quoted by banks to illustrate another serious problem. In terms of rule 41 of order 21 of the Code of Civil Procedure it is possible to file an application in execution proceedings for compelling the judgement debtors to disclose his or their assets on affidavit. If the judgement debtor disobeys the order of the court he can be detained in civil prison for a period not exceeding three months. The aforesaid provision would not be applicable in respect of recovery proceedings before the "Recovery Officer" appointed under the DRT Act, since provisions of the CPC are not applicable to the proceedings under the DRT Act. The second and third schedules to the Income Tax Act, 1961, and the Income Tax Act (Certificate proceedings) Rules, 1962 which govern the recovery procedure before the "Recovery Officer" under the DRT Act do not contain a provision similar to Rule 41 of the CPC.

Thus the banks and financial institutions will have to rely upon either internal sources or investigative agencies for finding out the details of the properties belonging to the judgement debtors.For tackling the problem of non-availability of the details of the assets belonging to the judgement debtors section 138 of the Income Tax Act can be effectively utilised provided the government issues necessary notification whereby banks and FIs can be notified as the authorities or bodies who can seen information from the income tax authorities.

Appropriate guidelines can also be laid down specifying the conditions and circumstances under which such information can be sought. The esoteric nature of the information available with the income tax department can still be preserved while allowing the banks and financial institutions to seek such information.

When the income tax department seeks information from the institutions to bring to book the tax evaders, there is no reason why these information should not be shared in the interest of the economy.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.