Dues from defaulters: Govt seeks first right of claim

New Delhi, Oct. 27: 

The Government has included a provision in the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Bill 2011, which will allow it to have the first claim on dues from defaulting borrowers from the sale proceeds of any asset seized by banks from them.

An Income-Tax Department official said that a total of Rs 3,700 crore is due as direct taxes alone from sick industrial units whose cases are pending before the Board for Industrial and Financial Reconstruction (BIFR).

The Financial Services Secretary, Mr D. K. Mittal, told Business Line that “Government dues have a bigger profile than the dues to banks. More people get affected because of Government dues.”

Government dues involve income-tax, capital gains, Excise and Customs duties, beside sales tax/VAT at the State level. The Bill is to be introduced in the winter session of Parliament.

It seeks to amend the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act 2002 and the Recovery of Debts due to Banks and Financial Institutions (RDBF) Act 1993.

Initially there were differences between the Revenue Department and the Financial Services Departments over the proposal. The former was in favour, but the latter was not. But finally the former won the day, sources added. 

At present, in the case of sick companies and matters filed before the BIFR, the Government has to wait for the BIFR's order on whether it or banks get the dues first. There is no estimate of the dues for the cases pending before the Debt Recovery Tribunals (DRTs).