Legal Question in Banking Law in India

"Assignment of debts" vide 'Assignment Deed' between two Banks has been held to be legally tenable vide the Banking Regulation Act for companies under liquidation and whose assets are held with the Official Liquidator as per Supreme Court decision of APS Star, but the remaining contentions in law adjudicated by the Hon'ble High Court of Gujarat were remanded back for its final decision . What is the current position about this vexed issue of assignment of bad , irrecoverable debts in the hands of the original lender bank, as assignor being transferred through this purported mechanism of "assignment of debts" without transferring the underlying 'secured assets' and security interest to yet another bank as assignee, when it is undisputed that the debts of the borrower remain irrecoverable by the original lender bank irrespective of its transfer to another bank and whether it shall not lead to another financial anarchy akin to the sub prime loan catastrophe?


Asked on 11/03/11, 8:33 am

1 Answer from Attorneys
J. Radhakrishnan independent Practice

In the instant case assignment of debt includes the securities. The assignor bank is no longer in control of the same. It is for the assignee to recover the assigned debt including enforcing the security interest covering the same. Your question leading to sub prime loan is hypothetical.

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Answered on 11/04/11, 7:40 am


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