B S :M J Antony | New Delhi
October 8, 2013 Last Updated at 21:48 IST
Two tough laws have not speeded up the recovery of debts due to banks and have disappointed both the lender and the borrower
There has been a trend to set up tribunals in every sector in recent years, led by the hope that they will deliver decisions cheaper and faster, untrammelled by the procedural tangles of the civil courts.
But they are showing the same symptoms of full-fledged courts, such as massive arrears, hundreds of vacancies, inadequate infrastructure and poor funding. Several jurists now feel that tribunalisation is an experiment that failed.
When it comes to debt recovery this could weaken banks and financial institutions. Courts have been lamenting this situation in several judgments; the latest coming from the Supreme Court.
In an eight-year-old dispute over a home-loan recovery, the court threw a slew of rhetoric questions such as: "To what extent the defaulters be given protection in the name of balancing the stringent powers vested on the banks and the statutory safeguards prescribed in favour of the loanees? Even assuming there are legal lapses and abuses, how long the statutory tribunals take to put the controversy to rest being oblivious of the fact that the concept of flexibility is insegragably associated with valuation of asset?" In a desperate vein the court cited the Bhagavad Gita, "Awake, arise, O, Partha!" (Standard Chartered Bank vs Dharminder).
In January this year, the Supreme Court devoted ample time to the plight of the debt recovery tribunals (DRT) and delivered a judgment with instructions to the government on remedying the situation (Union of India vs DRT Bar Association).
In an eight-year-old dispute over a home-loan recovery, the court threw a slew of rhetoric questions such as: "To what extent the defaulters be given protection in the name of balancing the stringent powers vested on the banks and the statutory safeguards prescribed in favour of the loanees? Even assuming there are legal lapses and abuses, how long the statutory tribunals take to put the controversy to rest being oblivious of the fact that the concept of flexibility is insegragably associated with valuation of asset?" In a desperate vein the court cited the Bhagavad Gita, "Awake, arise, O, Partha!" (Standard Chartered Bank vs Dharminder).
In January this year, the Supreme Court devoted ample time to the plight of the debt recovery tribunals (DRT) and delivered a judgment with instructions to the government on remedying the situation (Union of India vs DRT Bar Association).
However, the new judgment shows that the directions have not been followed and there has been little improvement on the ground. In fact, the current slowdown in the economy is supposed to have increased the pendency of cases by 70 per cent.
Some 43,000 cases in 33 DRTs across the country have tied up Rs 1.43 lakh crore this financial year. Three DRTs in the Mumbai region alone have a total pendency of 3,632 cases involving Rs 43,401.37 crore, according to finance ministry data.
It was with high hopes that two stringent laws were passed to wipe out non-performing assets. The working of the Recovery of Debt Due to Banks and Financial Institutions Act, 1993 and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, have since disappointed both the lender and the borrower. The latest judgment involving Standard Chartered Bank is a telltale example.
It was with high hopes that two stringent laws were passed to wipe out non-performing assets. The working of the Recovery of Debt Due to Banks and Financial Institutions Act, 1993 and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, have since disappointed both the lender and the borrower. The latest judgment involving Standard Chartered Bank is a telltale example.
The appellate tribunal took nearly five years to dispose of the case. "It has totally forgotten the obligation cast on it by the Act," the judgment said and added that it was "perplexing" to note that the tribunal kept on granting adjournments without reason and disposed it of with a "laconic" order.
In the 2010 judgment, United Bank of India vs Satyawati, the court had remarked that "tribunals have become synonymous with those of the regular courts and the lawyers use every possible mechanism and dilatory tactics to impede expeditious adjudication of cases. The flawed appointment procedure greatly contributes to the malaise of delay." In Transcore vs Union of India, the court pointed out the effect of inflation on the original claims and counterclaims before the tribunals.
It has been 10 months since the Supreme Court passed a series of directions to improve the working of the DRTs.
In the 2010 judgment, United Bank of India vs Satyawati, the court had remarked that "tribunals have become synonymous with those of the regular courts and the lawyers use every possible mechanism and dilatory tactics to impede expeditious adjudication of cases. The flawed appointment procedure greatly contributes to the malaise of delay." In Transcore vs Union of India, the court pointed out the effect of inflation on the original claims and counterclaims before the tribunals.
It has been 10 months since the Supreme Court passed a series of directions to improve the working of the DRTs.
It is pertinent to recall some of the directions so that the government might wake up (though it is difficult to waken someone who pretends to slumber). Dealing with the tribunals working in cramped tenanted buildings, the court stated that if sufficient space is available in a government building, space from the concerned department will be allotted on a permanent basis.
If space is not available in government buildings but sufficient space is available in public sector undertakings' buildings, the DRTs may move there on a permanent lease/rental basis. If neither is possible, suitable land may be purchased for construction of a building, or a suitably constructed building may be purchased from public authorities.
Other important suggestions: Fill all anticipated vacancies for the posts of senior officers as and when they arise, implement the "e-DRT Project" to automate and improve DRT services by building information technology systems as expeditiously as possible, streamline recruitment and promotions.
Other important suggestions: Fill all anticipated vacancies for the posts of senior officers as and when they arise, implement the "e-DRT Project" to automate and improve DRT services by building information technology systems as expeditiously as possible, streamline recruitment and promotions.
The central government had initiated some of these ideas and had consented to the court suggestions.
The court had stated that if its suggestions are not complied with the matter it could be brought before it again. In the event, there has neither been any little step towards implementation nor a reminder to the court about the continuing plight of the tribunals.
Though the high courts have been empowered to superintend the tribunals, they have also not been able to do much, assuming they are aware of the judgment and directions. With legal remedies turning into a nightmare, the lender and the borrower will start looking at each other with deep suspicion, affecting economic growth.
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