The finance ministry, after consulting the law ministry, has indicated to banks and financial institutions that they can go ahead and sell assets of defaulting borrowers as the Supreme Court order restraining ICICI from disposing of assets of Mardia Chemicals pertains only this particular borrower.

The ministry is of the view that the SC order in the Mardia Chemicals Vs ICICI does not preclude banks from recovering their dues by resorting to sale of defaulters assets.

Despite this assurance, banks and financial institutions are chary about selling off the assets they have taken possession of for fear of being drawn into litigation by recalcitrant borrowers.

"Banks wait for 60-days after slapping recovery notices on the defaulters. If during this period the borrowers do not come for compromise, banks take possession of the assets. When it comes to selling the possessed assets banks are treading gingerly," said a banker clued in to the developments.

The recovery process under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (Sarfaesi Act) has been bogged down as the Supreme Court has stayed the sale of security under the Act in the case of Mardia Chemicals Vs ICICI.

Besides the Mardia Chemicals Vs ICICI case, the problems encountered by banks under the Act include borrowers taking recourse to relief undertaking legislations in states like Maharashtra, Gujarat, Rajasthan and Madhya Pradesh, thereby preventing banks from enforcing the Act; valuation for the purpose of fixing reserve price for sale is becoming a contentious issue and has become one of the reasons for slowing the implementation of the Act.

"While the legal view is that action under Sarfaesi Act can be initiated even when a suit is pending before the debt recovery tribunal, it is the experience of banks that the tribunals object to such actions," the banker said.

Public sector banks have managed to recover only Rs 440 crore (Rs 4.40 billion) from 7,656 sticky accounts. The money was recovered between June 21 last year -- when the Sarfaesi Act was passed -- and March 31 this year.