Lok Adalats to help banks, NBFCs recover loans

BL : Mumbai :Thursday 21 November 2013

In probably a first-of-its-kind exercise that could aid the loan recovery efforts of banks and non-banking finance companies, the National Legal Services Authority will organise Lok Adalats in all districts on November 23.

The Authority seeks to reduce the number of pending cases relating to recovery of loans as well as dishonour of cheque cases in various courts.

Free legal services

The Authority was constituted under the Legal Services Authorities Act, 1987. This legislation provides free legal services to the weaker sections of the society and allows organisation of Lok Adalats for amicable settlement of disputes.

According to Reserve Bank of India data, in 2011-12, scheduled commercial banks referred 4,76,073 loan recovery cases aggregating Rs 1,700 crore to Lok Adalats. They recovered Rs 200 crore via this channel. The ratio of the amount recovered to the amount referred to works out to 11.8 per cent.

Besides Lok Adalats, banks have two other channels to recover their loans — the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI Act) and Debt Recovery Tribunals (DRTs).

Loan value

According to M.R. Umarji, Chief Legal Adviser, Indian Banks’ Association, small value loans up to Rs 20 lakh can be amicably settled between the borrower and the lender using the forum of Lok Adalats.

Umarji said claims pending before the Motor Accident Claims Tribunal too would be taken up for settlement on November 23.

Lok Adalats can take cognizance of cases where either two parties to a dispute agree to utilise the services of the forum or one of the them makes an application to the court (and the court is prima facie satisfied that there are chances of a settlement) for referring the case to the Adalat

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The Lok Adalat is vested with the same powers as are vested in a civil court under the Code of Civil Procedure while trying a suit in respect of: the summoning and enforcing the attendance of any witness and examining him on oath; the discovery and production of any document; and the requisitioning of any public record or document or copy of such record or document from any court or office.