Kohima: The Nagaland Legislative Assembly, on Thursday, introduced a resolution on the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act, 2002) during the ongoing assembly session in Kohima.

While the SARFAESI Act empowers banks and financing institutions to take possession of the mortgaged assets in repayment of loan and realise money by selling the secured assets, Article 371A(1)(a)(iv) states that no Act of Parliament in respect of ownership and transfer of land and its resources shall apply to the state of Nagaland unless the legislative assembly of Nagaland by a resolution so decides.

As opinions have been expressed on the applicability of the SARFAESI Act, its non-implementation has been detrimental to the overall economic growth of the state, restricting the flow of credit to the people.

“Banks have been reluctant to provide loans in the absence of secured assets and an effective mechanism for the expeditious recovery of dues in case of default in loan repayment,” the resolution stated.

As per the resolution introduced by Nagaland Chief Minister Neiphiu Rio, financial institutions shall not transfer any land to a person other than indigenous inhabitants of Nagaland except with the previous sanction of the state government.

Also, the Nagaland Land and Revenue Regulations (Amendment) Act, 2002, amended the Assam Land and Revenue Regulations, 1886, by inserting proviso permitting transfer by way of mortgage in favor of banks, registered co-operative societies and financing institutions with the condition that such entities shall not transfer any land to a person other than the indigenous inhabitants of Nagaland except with the previous sanction of the state.

“The provisions of SARFAESI Act, 2002, cannot override any provision of the Constitution of India. The tenor of Article 371A will apply at the stage when the banks/financial institutions would make an attempt to transfer the ownership of the property through the process of auction. Therefore, the Banks/Financial Institutions are obligated to respect and follow the mandatory constitutional protection article,” the resolution stated.

The resolutions were recommended to the Assembly by a Select Committee constituted on February 19 this year.

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