DRTs default in Recovery of NPAs Amounts
Debt Recovery Tribunals (DRTs) and Debt Recovery Appellate Tribunals (DRATs) were set up all over India under Recovery of Debts due to Banks & Financial Institutions, 1993 (RDDB&FI Act) to expeditiously deal with cases, called Original Applications (OAs) filed by banks and financial institutions against borrowers and guarantors who had defaulted in repaying the money and interest payable thereon to the banks and financial institutions. As per the norms, duly established by Reserve Bank of India (RBI), and overdue amount has to be classified as Non Performing Asset (NPA) if the borrower fails to service the interest on the borrowed sum for three months.
Over past three decades, the size of NPAs has alarmingly grown from several Thousands of Crores of Rupees to unmanageable over Seven Lakhs Crores of Rupees. The Government along with RBI introduced different schemes from time to time to arrest this menacing growth of NPAs but unsuccessfully. Even setting up Assets Recovery Companies (ARCs) and Assets Management Companies (ARMs) did not solve the gigantic problem of NPAs faced by Banks and Financial Institutions.
It is reported that top 10% of the defaulter borrower companies alone owe more than 50% of the entire unpaid amounts of public money running into more than 7,50,000 Crores Rupees lying locked in NPAs. This scary figure will cross 11,00,000 Lakhs Crores Rupees if we add the amounts under Corporate Debt Restructuring (CDRs) schemes to reschedule outstanding unpaid debts by corporate.
So, let us examine the reasons as to why DRTs and DRATs have failed in their efforts to recover public money lying locked in the form of NPAs. As per the Scheme launched by the Government of India, the DRTs have been set up under the provisions of RDDB&FI Act, 1993 (51 of 1993) for expeditious adjudication and recovery of debts due to bank and financial institutions. At present there are 33 Debts Recovery Tribunals, 6 Debts Recovery Tribunals in the process of being established and 5 Debts Recovery Appellate Tribunals. Each DRT is headed by a PO who is equivalent to a District Judge and each DRAT has one Chairperson - equivalent to a High Court Judge. The location of the DRAT is one each in Delhi, Mumbai, Chennai, Kolkata and Allahabad. The DRTs are located in various parts of the country including 3 DRTs each in Delhi, Mumbai, Chennai and Kolkata; 2 DRTs each in Ahmedabad and Chandigarh and one each in Allahabad, Aurangabad, Bangalore, Coimbatore, Cuttack, Ernakulum, Guwahati, Hyderabad, Jabalpur, Jaipur, Lucknow, Madurai, Nagpur, Patna, Pune, Ranchi and Vishakhapatnam. The role of the DRTs has been further enhanced by the SARFAESI Act, 2002, which provides for aggrieved parties to make appeals before the DRTs. The Banks and FIs file applications (OAs) for the recovery of their dues to the respective DRTs. The borrowers also file appeals or applications, called Securitization Applications (SAs), against the action of the Banks under SARFAESI Act. The Presiding Officer has the jurisdiction, power and authority to entertain and decide on the applications filed by the banks and financial institutions. Each Debts Recovery Tribunal has two Recovery Officers (ROs). The work amongst the Recovery Officers of a DRT is allocated by the Presiding Officer (PO) of the Tribunal.
Anybody aggrieved by the orders of Recovery Officer can file an appeal to the Presiding Officer of the DRT concerned, and aggrieved with the order of the PO of a DRT can file appeals before the DRAT concerned. The jurisdiction of ROs, DRTs and DRATs also depends on the location of the immovable secured assets, such as a house or office or factory which has been mortgaged to a bank by the borrower, and the bank or financial institution has taken physical or symbolic possession thereof under Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI Act).
The first and foremost problem is the dismal number of DRTs and DRATs in the country as is evident from above. There are twenty nine states and seven union territories in the Union of India. Therefore, even if there are at least five DRTs and just one DRAT in each State and Union Territory, we need 145 DRTs and 36 DRATs.
This is followed by lack of infrastructure and competent manpower made available to the DRTs and DRATs. The Chairperson of Delhi DRAT recently announced in open court that intends to make a strong recommendation to the Ministry of Finance, Govt of India, that Recovery Officers as at present do not have the required legal qualification of LLB, and therefore, fail to understand, and consequently, misinterpret court orders passed by POs, causing wholly avoidable delays in recovery under huge backlog of pending cases in DRTs.
Similarly, the Scrutiny branch of a DRT lacks a legally educated and competent in-charge who invariably fails in carrying out proper and thorough scrutiny of OAs filed by banks and financial institutions leading to serious legal objections raised by lawyers representing borrowers and guarantors. Banks take painfully long time to remove the said legal objections. As a result, cases keep pending and multiplying at worrisome rate in DRTs and huge amounts and sums of public money keep mounting and remain locked for years together.
This needs to be taken serious note of especially in view of the fact that the RBI has given a deadline of March 2017 for all banks to clean up their balance sheets, which also requires these lenders, banks & FIs to set aside huge chunk of capital in the form of provisions. RBI governor Raghuram Rajan has given a clear message to banks to deal with the NPA problem upfront, instead of postponing it and worsening it.
Therefore, there is an urgent need to make available to DRTs a legally competent and efficient infrastructure and manpower. It is common knowledge that most of the Pos, ROs do not have sufficient number of stenographers to take down daily orders passed by them in cases. On an average, a PO or RO passes almost 5-60 order every day. In the absence of experienced and trained stenographer, unacceptable delay is caused in getting written orders passed by Pos and ROs.
By Mohan Murti Shandilya,
Senior Managing Partner,
Chatterjee & Company, Estd. 1939.
Advocates, Solicitors & Corporate Legal Advisors,
Tel: +919811037485; E-mail: firstname.lastname@example.org
(to be continued)