Set right debt re­cov­ery tri­bunals

The Pak Banker - - Front Page - R.n. Pradeep

AN­NOUNC­ING the last credit pol­icy re­view, the RBI men­tioned that the rise in non-per­form­ing as­sets (NPAs) was 'dis­turb­ing.' The ref­er­ence was to the steep rise in NPAs of the bank­ing sec­tor in the first quar­ter of the cur­rent fis­cal, from 2.9 per cent in March to 3.25 per cent in June.

How­ever, the re­cov­ery of NPAs has failed to keep pace com­men­su­rately. The rise in pen­dency of cases in Debt Re­cov­ery Tri­bunals (DRTs) is pro­long­ing the de­ci­sion on cases, keep­ing the banks, fi­nan­cial in­sti­tu­tions (FIs) or as­set re­con­struc­tion com­pa­nies (ARCs), which buy out NPAs from banks and FIs, in wait­ing, even as the as­sets pledged with lenders are los­ing value.

The pace of NPA re­cov­er­ies, in­clud­ing un­der the Se­cu­ri­ti­sa­tion and Re­con­struc­tion of Fi­nan­cial As­sets and En­force­ment of Se­cu­rity In­ter­est (Sarfaesi) Act, may not pick up pace, un­less some grey ar­eas in func­tion­ing of DRTs are ironed out.

The num­ber of cases pend­ing with DRTs is mount­ing day-by-day. With more and more lenders and ARCs started ap­proach­ing DRTs, the pile of pend­ing cases touched 67,524 in 33 DRTs and five Debt Re­cov­ery Ap­pel­late Tri­bunals (DRATs) by March 2012. That is a whop­ping 80 per cent jump in a span of 15 months, from 37,616 cases pend­ing by the end of 2010.

It is expected in terms of sub­sec­tion 24 of Sec­tion 19 of the Re­cov­ery of Debts due to the Banks and Fi­nan­cial In­sti­tu­tions Act (RDDB Act) that the tri­bunal shall deal with the ap­pli­ca­tions by it as ex­pe­di­tiously as pos­si­ble and en­deav­our shall be made by it to dis­pose of the ap­pli­ca­tion fi­nally within 180 days from the date of re­ceipt of the ap­pli­ca­tion.

But it is ob­served in prac­tice that this hap­pens rarely. The pre­sid­ing of­fi­cers (PO) and ap­pel­late au­thor­i­ties (AA) are expected to record the rea­sons in com­pli­ance with the pro­vi­sions of the leg­is­la­tion. How­ever, that is not be­ing done, per­haps think­ing that the is­sue could be dragged to the higher courts. There is a need to ad­here this process.

Though the de­lay in de­ci­sion in DRTs mostly oc­curs due to dila­tory tac­tics adopted by the de­fault­ing bor­row­ers, ad­min­is­tra­tive is­sues like not fill­ing the va­cant po­si­tions of pre­sid­ing of­fi­cers and ap­pel­late au­thor­i­ties (AA) of DRTs and DRATs in time are also ac­cen­tu­at­ing the prob­lem. Many months have passed with­out an ap­pel­late author­ity at some DRATs.

Un­less the AA dis­poses the cases, the ap­pli­cants can­not go to any other fo­rums for fi­nal res­o­lu­tion and en­force­ment of se­cu­rity in­ter­est by lenders/an ARC. Even the num­ber of DRTs and DRATs in op­er­a­tion is not com­men­su­rate with the growth in num­ber of cases filed, of late.

Ex­pe­ri­ence shows that res­o­lu­tion of cases per­tain­ing to NPAs at an early stage en­ables banks and FIs to reap the ben­e­fit of 'go­ing con­cern' value of the con­cern in de­fault, through merg­ers and ac­qui­si­tions or sale of busi­ness. With the pass­ing of time, re­al­i­sa­tions from the same will keep fall­ing, also af­fect­ing the pos­si­bil­ity of putting the as­sets (or na­tional re­sources) into use at the ear­li­est. As such, early res­o­lu­tion of NPA cases would ben­e­fit all the stake­hold­ers.

Even the Key Ad­vi­sory Group on the ARCs, headed by Alok Nigam, has also sug­gested re­moval of bot­tle­necks for en­sur­ing timely clear­ance of cases.

Se­condly, some of the DRTs still continue to grant stay or­ders with­out proper dis­tinc­tion. Like any other court it be­comes a rou- tine, and an avoid­able de­ci­sion con­sid­er­ing that NPA re­al­i­sa­tion calls for early de­ci­sions.

Fi­nally, when the DRTs pass their de­ci­sion, en­force­ment of se­cu­rity in­ter­est has to be done by the re­cov­ery of­fi­cers (RO). But there are not many qual­i­fied ROs, even this is the case with many of the bank of­fi­cials be­ing ap­pointed, who are lack­ing in knowl­edge about the due le­gal process.

The gov­ern­ment has called for ap­pli­ca­tions for the po­si­tion of RO and in that they have en­cour­aged of­fi­cers from banks to ap­ply, even though the po­si­tion calls for a dif­fer­ent mind­set.

If bank of­fi­cers were to be the best bet for re­cov­ery of dues as ROs, they would have done it so well when they were act­ing as au­tho­rised of­fi­cers (AOs) or law of­fi­cers of the banks. Both ROs and AOs have ju­di­cial pow­ers in en­forc­ing the re­cov­ery process. Though ARCs are sup­posed not to miss an op­por­tu­nity in re­al­is­ing the max­i­mum pos­si­ble rev­enue at the ear­li­est out of the NPAs it has ac­quired, most of them are not ex­ploit­ing the avail­able op­por­tu­ni­ties like seek­ing dec­la­ra­tion of the list of as­sets at the dis­posal of the de­fault­ing bor­rower, once the for­mer pos­sesses the de­cree from a DRT.

There is no sep­a­rate pro­vi­sion for re­sort­ing to this means in Sarfaesi Act, but it is avail­able un­der the Civil Pro­ce­dure Code.

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