** **A landmark decision has seen the Supreme Court strike down a key provision in the Land Act, granting banks greater flexibility in managing mortgaged assets.**
📍 ** Nepal
The Supreme Court of Nepal, led by Chief Justice Sapana Thapaliya and comprised of five judges, has ruled that Clause 12(C) of the 2021 Land Act is unconstitutional. This decision, announced on Baishakh 21, 2083 (April 21, 2023), stems from a legal challenge regarding the forced sale of non-banking assets by banks to recover loans. The clause previously mandated that banks must sell assets within three years of a foreclosure or obtain government approval if they couldn’t, raising concerns about detrimental effects on banking operations, investor interests, and property rights.
The core of the ruling centered on the argument that Clause 12(C) infringed upon constitutional rights to business and property, specifically sections 17(2)(c), 18, and 25. The court recognized that the forced sale requirement created undue pressure and interfered with the legitimate operations of financial institutions. The court declared the entire clause invalid, effectively removing the obligation for banks to forcibly liquidate assets.
The immediate impact of this ruling is significant. Banks will now be permitted to retain land assets even if they exceed land limits established during the original land ceiling. This decision is expected to provide stability to the banking sector and potentially unlock investment opportunities.
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