Staff crunch forces debt recovery tribunals to put off cases

Anita Bhoir & Maulik Vyas, ET Bureau :Mumbai :Dec 10, 2012, 05.28AM IST

Debt recovery tribunals (DRTs), an important mechanism for loan recovery by banks, are foundering amid charges of lack of professionalism and shortage of staff as bad loans are crippling banks. 

The disposal of cases has been falling as a few members have to handle enormous amount of claims and the delaying tactics employed by defaulters by going in appeal against every order are defeating the purpose.

In fact, bankers at a recent meeting with the finance ministry officials have charged that unjustified orders are being passed by some DRT officials in connivance with promoters who want to protect their assets.

 "We had complained about the unilateral stays that the registrars of the debt recovery tribunals are granting to the borrowers without giving banks a proper hearing,'' said a bank chairman, who did not want to be identified.

"The issue was raised by us at a DRT forum where finance ministry officials were also present."

There are at least 33 DRTs and five appellate bodies to deal with cases. Although the mechanism was brought in with a noble aim to decide on the cases within 6 months, the lack of adequate staff and timely replacements have hit their operations. 

With corruption spreading, some say, even DRTs are not immune to it. "Borrowers are taking advantage of the debt recovery appellate tribunal and appealing against the order issued by the DRTs,'' said advocate Ravi Goenka of Goenka Law Associates, who represents financial institutions like asset reconstruction firm Arcil and OBC.

"According to the law, DRTs have to dispose off cases in six months, but it's taking almost two to three years.'' In 2011-12, of the total amount recovered through the Sarfaesi Act, DRTs and Lok Adalats registered a decline of 8.2% at 14,400 crore, from 15,700 crore a year earlier despite a surge in bad loans.

There is only one member looking after the Western region comprising entire Maharashtra, Gujarat and Goa. For a long time, the post of presiding officer was vacant and presiding officer of the Kolkata bench was looking after the Western region appellate tribunal as additional portfolio. Mumbai-based banks had to go to Kolkata to file a case in most of the cases, said a lawyer representing a bank.

The long duration taken by DRTs to decide on the cases is reflected in the fact that the Oriental Bank of Commerce and Bank of India are still fighting a case to recover dues from former stock broker Ketan Parekhin a case relating to the 2001 securities scandal. He was barred from trading at the Indian stock exchanges till 2017.

During June to December 2012, some important cases involving companies like

 Som Developers (owing 390 crore to SBI, UBI and other banks),

 Sterling Biotech ( 322 crore debt towards a subsidiary of LIC) and

 Aeroflex ( 181 crore towards SBI) were admitted.

 "The DRTs were to finish cases in six month. However, they are not able to adhere to the timeline as they have become like a civil court,'' said the legal head of a private sector bank.