Kathmandu. The constitutional bench of the Supreme Court (SC) has issued an interim order not to implement the amended provision of Section 12 (F) of the Land Act, 2021 that allows banks and financial institutions to sell their non-banking assets registered in their names within three years and if they fail to sell them within the stipulated period, they can sell only with the approval of the government.

Chief Justice Prakash Man Singh Raut and Justices Kumar Regmi, Hari Prasad Phuyal, Manoj Kumar Sharma and Dr. A five-member constitutional bench including Nahakul Subedi issued the interim order in response to a writ petition filed by the Bank and Financial Institutions Confederation of Nepal (CBFIN) on November 24, 2002 naming the government and the Ministry of Land Management, Cooperatives and Poverty Alleviation as defendants. With the issuance of the order, the way has been opened for the sale of non-banking properties registered in the name of banks and financial institutions for more than 3 years without the approval of the Government of Nepal.

The Act, 2081 to amend some of the Nepal Acts related to investment facilitation, by adding Section 12 (F) to Section 12 of the Land Act, 2021 by adding Section 12 (F) to Section 12 of the Land Act, 2021 (2021) has allowed the concerned bank or financial institution or cooperative organization to auction the land taken by the bank or financial institution or co-operative organization while auctioning the land taken by the bank or financial institution or cooperative organization for loan security. The government had to take permission from the Government of Nepal to sell the land within 3 years from the date and if the land was not sold within that period, it would have to take permission from the Government of Nepal to sell such land. Prior to the amendment, there was no such time period in the Land Act for the sale of non-banking assets in the name of banks and financial institutions.

The Bank and Financial Institutions Confederation of Nepal (CBFIN), an umbrella organization of the banks and financial institutions, had filed a writ petition at the Constitutional Bench of the Supreme Court seeking to nullify the amended provision of Section 12 (f) of the Land Act as it contradicted the Article 17 (2) (f) and Article 25 of the Constitution of Nepal.

Hearing the same writ petition, the constitutional bench of the Supreme Court said, “Since the banks or financial institutions have to keep the non-banking assets compulsorily as they cannot auction the security held by them, the investment of the bank will be at risk if the Government of Nepal does not allow the sale of the non-banking assets after three years. “If the provisions of Section 12 (F) of the Act are implemented, the banks and financial institutions will suffer irreparable loss and in view of the convenience and balance, the Supreme Court (Operation of the Constitutional Bench) Rules, 2021 has issued an interim order in the name of the respondents in accordance with Sub-rule (4) of Rule 19 of the Rules 19 of the Land Related Act, 2021,” reads the order.

After this order, due to the economic contraction seen in the country, the recovery of loans of banks has been affected and there is some relief to manage the sale and sale of non-banking assets that are piling up in the name of banks and financial institutions.