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Bankruptcy Act ’ineffective' against big loan defaulters

By Inam Ahmed
Certain loopholes in the newly enacted Bankruptcy Act is preventing the commercial banks from applying it against corporate Joan defaulters with whom majority of the defaulting loans are lying, according to banking circle.
Legal experts said the Bankruptcy Act has been formed keeping in mind the "natural individual" and not organisations.
"This has left the Act virtually ineffective against the big defaulters which are basically companies and other government and non-government or-
ganisations." said a senior banker of a nationalised commercial Bank.
The Janata Bank had recently taken a move to file cases under this new law against some big defaulters who are essentially business organisations. The list had been prepared. but later, upon advice from its legal adviser, these names had Been dropped and only five individuals had been served with notices to sue them.
The legal wing of the Janata Bank has given the opinion that it seems from 11 (ka) and (Kha) clauses of the Bankruptcy
Act that "natural persons' have been meant to indicate the status of a debtor.
Clause nine of the law describes the debtors as 'he/she' and also refers to his wife, sons and daughters which applies in case of 'natural persons.'
This new law has been formed taking cue from the insolvency Act of 1920. The old law absolves corporations, companies or associations from its application.
The Bankruptcy Act in its 11(2) clause had similarly left out the parliament, the Judiciary and government bodies, charity and religious organisations, statutory bodies and autonomous organisations from its purview.
Moreover, the district Judge courts have been empowered to deal with the cases under the Bankruptcy Act. The district judge can delegate his power to the additional district Jud^.
But the cases under the law have not been given priority in the district or additional district Judge courts and no time frame has been mentioned to dispose of the cases. Janata Bank s legal wing observed This will lead to unusual pro longs t ion of cases, they said
"Unless these shortcomings are removed, our bad loans cannot be recovered " said the Managing Director of a private bank Previously, the cases against the loan defaulters got stuck with the courts for years. Our expectation was that the new law would expedite the process which H has not done "