Sarfaesi and RDB Acts :Empowering debenture trustees: Govt to seek AG advice

IE :Sandeep Singh , Amitav Ranjan : New Delhi, Wed Sep 25 2013, 01:19 hrs

As the government is contemplating to amend Sarfaesi and RDB Acts or pass a notification to empower debenture trustees (DTs) to carry out speedy recovery of the dues to debenture holders as had been earlier proposed by the Sebi, the law ministry has given a go ahead to the finance ministry to seek the opinion of the Attorney General on steps that can be taken to empower the DTs.

A letter dated July 26, 2013, written by the additional government advocate said, "As approved by Hon'ble MLJ (ministry of law and justice) this matter may be placed before learned Attorney General for his considered opinion on the issues."

The issues on which the AG's advice has been sought relate to three points — whether the Central government can notify DTs as financial institutions under Sarfaesi Act and the RDB (Recovery of debt due to banks and financial institutions) Act. Whether such DT will be within its right to take recourse to Sarfaesi and RDB Acts for recovery of principal and interest amount of debenture which is due to individual debenture holders and thirdly whether amendment in Sarfaesi Act and RDB is necessary to enable DTs to carry out recovery proceedings under these acts. The Acts enable banks and financial institutions to recover their dues, however, common investors are not able to do so and it has been proposed to recognise the debenture trustees as financial institutions by either amending the Acts or issuing a notification which in turn will give them the ability to recover debenture holders' dues.

Sebi chairman UK Sinha had written a letter to the finance ministry on December 3, 2012, urging it to consider amending the Acts in a manner that it empowers the DTs to carry out recovery proceedings swiftly.