Politics · India Bureau
Supreme Court Validates ARCs' Authority to Pursue Cheque Dishonour Cases
The Supreme Court has upheld the legal right of Asset Reconstruction Companies to step into the shoes of banks in pending cheque dishonour proceedings after acquiring loans under the SARFAESI Act. The ruling provides clarity on ARCs' enforcement powers in criminal cases involving bounced cheques.
LSN India ·
India's apex court has affirmed that Asset Reconstruction Companies possess the statutory authority to replace banks as complainants in ongoing cheque dishonour cases following the acquisition of loans and associated securities. The Supreme Court's decision upholds an earlier Bombay High Court judgment that addressed the procedural rights of ARCs in criminal prosecutions under the Negotiable Instruments Act.
The ruling clarifies that when ARCs acquire non-performing loans from banks under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, their rights extend beyond civil recovery mechanisms to include representation in criminal proceedings involving dishonoured cheques. This affirms ARCs' standing to pursue cases through the criminal justice system where cheques have been presented but payment has been refused by the drawee bank.
The judgment addresses a significant gap in India's debt recovery framework by establishing that ARCs inherit the full spectrum of enforcement rights from financial institutions. This development is expected to strengthen the position of ARCs in pursuing defaulting borrowers and enhancing recovery prospects across their loan portfolios.
The decision carries implications for banks that have assigned stressed assets to ARCs, as it confirms that the acquirers can independently pursue all available legal remedies. Industry observers note that the ruling provides greater operational clarity for ARCs engaging with criminal courts and law enforcement agencies in recovery proceedings.