MUMBAI: The Reserve Bank of India may have plans to revive the debt-laden sector through the Insolvency and Bankruptcy Code, but lawyers and bankers say the platform could be misused by promoters of companies to stall other recovery procedures against them, like under the dreaded Sarfaesi Act.
Under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (Sarfaesi Act), banks and other financial institutions are allowed to auction residential or commercial properties of borrowers to recover loans.
“We have seen certain cases in NCLT (National Company Law Tribunal) where borrowers have used the insolvency platform to block Sarfaesi and other recovery proceedings,” said a PSU banker wh…
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