Tribunals, a boon to bankers

THE RECOVERY of Debts Due to Banks and Financial Institutions Act, 1993, was enacted in the context of large number of banking cases were pending in overburdened civil courts. The recommendations of Tiwari Committee and later Narasimham Committee resulted in passing of the said DRT Act in 1993, mainly for the purpose of recovery of NPAs of banks and FIs. This hurried legislation, however, had kept some lacunas; hence the subsequent amendments, namely, The DRT (Procedure) Amendment Rules, 1997, and the recent The Recovery of Debts Due to Various Financial Institutions (Amendment) Bill, 2000.

At present, there are nearly 44,000 cases pending in various DRTs involving around Rs. 38,000 crores. DRTs are still in an infant stage; it may take longer time to get required infrastructure, uniform procedures and well defined and settled laws. The Tribunals and the Appellate Tribunals are not bound by the procedures for civil courts; but they are governed and guided by the Principles of Natural Justice. The pecuniary jurisdiction for DRT is fixed at Rs. 10 lakhs and above. The decision of the Appellate Tribunal is final. Predominant consideration is to curtail the delays in the disposal of cases on flimsy grounds and thus to render quick justice to the parties.

The procedures adopted in DRTs are very simple and uncomplicated. Unlike higher costs in civil courts, the DRT proceedings are cheaper. Within 30 days of filing DRT application, summons are sent to the defendants, who have to immediately submit their reply statements. Evidences are admitted in the form of sworn affidavit. Defendants are given the opportunity to cross examine bank's witness. As per the DRT Act, the Tribunal has to decide the case within six months from the filing of case.

The aggrieved party can go for appeal before the Debts Recovery Appellate Tribunal. Here, the judgment-debtors have to deposit 75 per cent of the decreed dues for preferring appeal. Recovery proceedings are initiated, by the Recovery Officer of the DRT, by attachment and sale of the secured properties, as provided for tax recovery, under the Income-tax Act, 1961.

Problems in recovery

The defendants, who place all sorts of hurdles to protract the proceedings and hence decision in the case within the stipulated period of six months is practically impossible. Usually, the defendants manage to evade the service of summons. Then, fresh summons/ private summons are issued and, if again returned, paper publication is made.

If the defendant still chose not to appear, then he is called absent and set ex parte. Later, the defendant comes with a set aside petition, on flimsy grounds solely to frustrate the proceedings after long duration and the Tribunals are compelled to consider such petitions, invoking the principles of natural justice.

The defendants also try their luck filing various writ petitions before High Courts. The usual defence, taken by defendants are that, they did not execute any of the loan documents (produced by the applicant) or created any mortgage of immovable properties as claimed by the banker. They also add that all those documents are forged or concocted with the connivance of bank officials or that the bank officials obtained their signatures on blank forms and blank stamp papers, promising grant of loans and subsequently converted them into loan documents, without disbursing any loan to them.

In some other cases, forged title deeds are deposited, pertaining to the same property or non-existing property, for different loans taken from numerous banks. Economic offences are treated very lightly in India in contrast to foreign countries.

The provisions of the Board for Industrial and Financial Reconstruction (BIFR) and the Sick Industrial Companies (Special Provisions) Act are misused and abused by many larger industrial borrowers. For larger dues, if the industrial immovable properties are put to auction sale, it is difficult to get any bidders, for want of accounted money.

The Recovery of Debts Due to Various Financial Institutions (Amendment) Bill, 2000, became effective from January 17, 2000. The tribunal can make an interim order (injuction or stay or attachment) against the defendant to debar him from transferring, alienating ... or disposing of any property and assets belonging to him. In the case of disobedience of an order made by the Tribunal, or breach of any of the terms on which the order was made the Tribunal may order the properties of the person guilty of such disobedience or breach, to be attached and may also order such person to be detained in the civil prison.

The Tribunal has the power to appoint a receiver of any property, to remove any person from the possession or custody of the property and commit the same to the possession, custody or management of the receiver ... for the realisation, management, protection, preservation and improvement of the property, the collection of the rents and profits thereof, the application and disposal of such rents and profits and the execution of documents as the owner himself has, or can appoint a Commissioner for preparation of an inventory of the properties of the defendant or for the sale thereof.

Where a certificate of recovery is issued against a company registered company, the Tribunal may order the sale proceeds of such a company to be distributed among its secured creditors in accordance with the provisions of Sec. 529A of the Companies Act, 1956.

Wide residuary powers are given to DRT so that ``the Tribunal may make such orders and give such directions as may be necessary or expedient to give effect to its orders or to prevent abuse of its process or to secure the ends of justice."

The major impediments in the way of expeditious recovery of dues to banks and FIs are taken care of, while amending the DRT Act. Most of the practical problems faced during the DRT proceedings are also solved. The amended DRTs and the chairpersons of the Debt Recovery Appellate Tribunals, who can take stern action against wilful defaulters and arrest the mounting NPAs, which is presently around Rs. 58,000 crores in the banking system.

Raju O. F.

Manager, South Indian Bank and Liaison Officer for Debts Recovery Tribunal, Chennai.

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