DRT Solutions Weekly Mail – 120th Issue dated 27^th August ’10

All Weekly mails right from 1^st Issue to latest, click links above

(1)    We have now formally commenced preparations for the proposed DRT Conference at Indore on 25th and 26^th December 2010. A separate web page vide click at  Proposed DRT Conference 2010 at Indore has been launched on our web site. This web page will have date wise record of various information and activities of the proposed conference. It will be a gathering of our clients, their advocates, interested borrowers, guarantors and professionals from various disciplines coming from various parts of the country. The objective of the conference is to share experience and provide latest practical knowledge in respect of defence for borrowers and guarantors

(2)    The last conference held in May 2008 at Indore was so successful that many of the attendees made several queries as to when the next  conference will be held. The entire proceedings were video recorded and the DVDs were highly popular past 2 years. It was first attempt and now we hope to perform much better.

(3)    In the proposed conference there will be 2 sessions, one on 25^th December ‘10(Saturday) from 4 PM to 9 PM. Another on 26^th December ’10 (Sunday) from 10 AM to 5 PM. The complete proceedings will be video and audio recorded.

(4)    The participant fee for both the days will be Rs. 4500=00 per participant. It will include the cost of arrangements at venue, hard copies of conference materials, lunch and dinners, DVDs etc. There is early bird discount of 10% if the said fee is received on or before 30^th September ‘10. The registrations will close by 31^st November ’10. The participant fee may be remitted to our ICICI Bank current A/c no 09160500353 of DRT Legal Solutions in Ratlam Kothi Branch Indore IFSC Code ICIC0000916.

(5)    Those who wish to attend the conference may send following details to us by e-mail at ramkishandrt@gmail.com :-

(a) Name (b) Designation (c) Phone nos (d) Postal Address (c) Topics of interest.

(6)    All the details about the program, venue, hotels etc. will be announced through weekly mail and will also be available on the said separate web page on the Conference.

(7)    All the interested persons may offer their suggestions. The gist of the same will be published on the special web page vide click at Proposed DRT Conference 2010 at Indore  Depending on these interactions, the program of the conference will be suitably designed for maximum benefits to the participants.

(2) Hurried Adjudications in DRTs – Precautions and Remedial Measures   

Several among our clients all over the country are facing acute problems due to hurried adjudications in DRTs. Some of the problems and our comments including suggested solutions are as under:-

Problem The POs are undertaking huge no of hearings in a day and are very quick to dispose off the matters. As a result they are not prepared to listen fully the arguments of the defendant litigants and their advocates.

Comments :-

(a)    Points to be pressed during arguments be prepared and kept ready. Just before commencement of the arguments, the said points to be pressed be handed over. The PO is duty bound to listen point wise arguments. Further he is duty bound to deal with all the said points in his written order.

(b)     Insist for his orders in writing. Be calm, composed and respectful. Always have two persons present during proceedings so that there is no scope of missing of any hearings.

(c)    Take certified copy of the order. If any point has not been dealt with in the order, submit an application under Sec 151 of CPC i.e. inherent powers of the court with reference to the Supreme Court ruling vide (2008) 2 Supreme Court Cases 95, Mohd. Akram Ansari vs Chief Election Commissioner. As per this ruling, the PO is duty bound to deal with all the points pressed during the arguments.

(d)    Despite above submit a Review Petition first followed by Appeal to DRAT.

(e)    Obtain certified copies of all the proceedings and orders. Always submit written arguments.

(f)      If possible make a written record of the proceedings so that nothing is left to the memory.

(g)    Until and unless, above is done, never jump to higher courts as they are also heavily overloaded and the tendency is to read only the lower court judgment and to find fault with the litigants.

(h)    With above approach, complete happenings in DRTs will get recorded in writing. Things will get corrected at the foundation stage. It is a tedious, time consuming and expensive process but there is no alternative as there is saying ‘Justice Hurried Justice Buried’

Problem The POs are insisting for final arguments instead of deciding the interlocutory applications.

Comments :-

(a)    DRT is akin to a trial court where facts are to determined by the application of well defined process of adjudication. In this context, the Supreme Court ruling vide AIR 1969 Supreme Court 1167 Swaran Lata vs Harendra Kumar Para 6 will be quite useful. This judgment be kept ready and read out to the PO and submitted in written arguments.

(b)    As per Art. 141 of the Constitution, all courts in India including the DRTs are duty bound to follow the law laid down by the Supreme Court. If there is any violation, it is regarded as ‘Error Apparent on Face of Record’ and duty of the court is to correct the said error. Otherwise, an application under section 151 of CPC, Review and Appeal or the remedial measures.

(c)    The DRTs are required to work in accordance with the Principles of Natural Justice which are much wider than the limited scope of CPC.

(d)    Hence on vital points like inspection of documents and cross examination of bank officials, the DRTs are duty bound to deal with the interlocutory applications before insisting for final arguments.

(e)    Several of our clients have followed the above approach and have been successful in winning their cases in DRTs.

DRT Solutions Weekly Mail – 119th Issue dated 20^th August ’10

(1) Bombay High Court orders in favour of Borrower – matter of Inspection of Bank Documents   

One of our clients in Mumbai submitted an application in DRT for Inspection of Bank Documents in the case of Securitisation Appeal. The said application was dismissed by the DRT. The said client appealed to DRAT Mumbai. The DRAT Mumbai also dismissed the said appeal. The said client approached Bombay High Court. Finally the Bombay High Court ordered the bank to provide inspection of the bank documents. The details of this important judgment will be published in the weekly mail as soon as the certified copies of the order and proceedings are received.  

Our Comments  

(1)    One of the ingredients of proper trial of any Bank Litigation is production and inspection of documents. All the material documents are in power and possession of the bank. In almost all the cases we find that the banks oppose production and inspection of the said documents for the fear of losing the legal battle. Judgments as above will help the borrower in achieving more meaningful trial where the real truth will come out and justice will be achieved.

(2)    Another important ingredient is Cross-examination of Bank Officials. In this respect we have already covered the case of our another client who submitted an application for cross-examination of bank officials. In this case also DRT and DRAT decided against the borrower but subsequently the Patna High Court decided in favour of the borrower ordering cross-examination of the bank officials.

(3)    It is needless to mention that the first prerequisite of bank litigation is proper pleadings and then perfect contest on all dates. Such approach combined with inspection of documents and cross-examination of the bank officials will definitely result in winning the bank cases against the banks.  

(1) SC cautions High Courts so that unnecessary writs are not filed particularly when Appeal under Sec 17 of the Securitisation Act is pending in DRT – Our views supported in a news release 

The following news item (in The Asian Age) supports our views vide link

http://www.asianage.com/india/sc-cautions-hcs-recovery-debts-940  

SC cautions HCs on recovery of debts

Aug 04th, 2010 - S.S. Negi |

The Supreme Court has come down heavily on the high courts for interfering in debt recovery cases of nationalized banks and other public sector financial institutions’ through writ jurisdiction and the debt recovery tribunals for their failure to expedite the recoveries of non-performing assets.

Though the tribunal initially functioned with a great zeal but “with the passage of time the proceedings before them became synonymous with those of the regular courts - - ,” the apex court in a judgment said. A bench of justices G.S. Singhvi and A.K. Ganguly while deciding a petition of United Bank of India challenging the interference of the high court, pointed out that the Parliament passed new enactment — Securitisation and Reconstitution of Financial Assets and Enforcement Act in 2002, to ensure fast recovery of the NPA, which at one time were to the tune of Rs 1,20,000 crore.

But the unnecessary interference by HCs using their special powers of writ jurisdiction under Article 226 of the Constitution, again had created problem for tribunals in for fast decisions in the NPA cases.

“It is a matter of serious concern that despite repeated pronouncements of this court (SC), the high courts continue to ignore the availability of statutory remedies under the Debt Recovery Tribunal Act, 1993 and the SARFAEST Act, 2002 and exercise jurisdiction under Article 226 for passing orders which have serious adverse impact on the right of banks and other financial institutions to recover their dues.”

Cautioning the HCs against using writ powers under Article 226, the bench said “we hope and trust that in future the HCs will exercise their discretion in such matters with greater caution, care and circumspection.”

Terming the DRT Act and SARFAESI Act as “most radical legislative” enactments by Parliament to tackle the malaise of NPA, the apex court said the HCs should allow the cases to be handled by the tribunals under the provisions of these legislations.

Our comments 

(1)    The bank bureaucracy is not prepared to abide by the provisions of various law applicable to them, according to which first they have to make all out efforts to revive and help the business and industries and when its not possible to do so, last recourse should be taken to legal fight in the court of law including DRTs. Such provisions are numerous and comprehensive. The violations thereof are legally regarded as wrong doings inviting loss and damages which may result in counter-claim or damage suit.

(2)    The courts including DRTs are also bound by various provisions of law which again are numerous and comprehensive. Since the said courts and DRTs are trial courts, the facts are to be determined judicially which again call for specific procedural and substantive laws.

(3)    A knowledgeable defendant borrower is within his rights first to frame his pleadings and then to contest his case based on the said provisions of law. 

(4)    The above process is bound to take time. Any hurry or short-cut will result in violation of law and will result in further additional time.

(5)    In fact the DRTs will require much more time than the civil courts for the simple reason that Principles of Natural Justice have much vast scope compared with CPC. Further as usual since the  bank advocates normally oppose any and all actions by the defendant borrowers, the matter is dragged to higher courts.

(6)    It is needless to mention that on account of exhaustive pleadings, inspection of documents and cross-examination of bank officials along with application of above mentioned vast provisions of law, the bank litigations in DRTs will take much more than the time taken by the civil courts which required 15 to 20 years.

DRT Solutions Weekly Mail – 118th Issue dated 13^th August ’10

(1) SC fires the High Courts so that unnecessary writs are not filed particularly when Appeal under Sec 17 of the Securitisation Act are pending in DRTs – Interesting dialogue with an Advocate 

The above news item in the last weekly mail brought lot of comments from the litigants and the advocates. One interesting dialogue with an advocate is reproduced below. The name of the said advocate has been altered for the obvious reasons:-

(1) On Fri, Aug 6, 2010 at 9:22 PM, Advocate Ganguli wrote:-

Kindly forward to me the SC judgment.

(2) On Sat, 7 August, 2010 5:57:43 AM, Mr. Ram Kishan replied :-

Dear Mr. Ganguli,

The judgment is attached.

With best wishes,

Ram Kishan

(3) On Sat, Aug 7, 2010 at 6:57 PM, Advocate Ganguli wrote:-

Thanks. Nothing new. No ratio. What legal implication! A judgment to be forgotten soon.

(4) On Sun, 8 August, 2010 4:47:33 AM Mr. Ram Kishan replied:-

Dear Mr. Ganguli,

My views are as under:-

The implications are serious and eye opener for the borrowers and guarantors facing bank litigations in DRTs. They are as under:-

(1)   The HCs are heavily overloaded. The judges have no time to study the case file. They simply go through the conclusions and make up their mind to dispose off the cases accordingly. Even they have no time to listen to the arguments oral or written. Further they are under pressure due to disposal norms. The final outcome is a slipshod disposal based on common sense and not legal sense without anything being near to justice.

(2)   On account of above, the litigant suffers rather he is made a fool. For all such slipshod exercise he is made to shell out substantial amount directly to the Advocate and indirectly worries by way of being driven to higher bench or to the Supreme Court. He is fooled again where he is made to spent much greater amount and the outcome is virtually nil.

(3)   Thus on account of ignorance of the litigants, the advocates are getting enriched and the judges are enjoying huge salaries and perks.

(4)   It is high time to educate the public of such sorry state of affairs in the present judicial system.

(5)   Common public may not understand but the public in DRT litigations i.e. borrowers and guarantors is a different class. If the things are made known to them in correct perspective, they will be cautious of not approaching the higher courts.

(6)   Let us be sincere and honest. The purpose and objective of judicial system is to find out truth and reach to the justice. This is possible only when the judges have one or two cases per day. They are also human being. They should have the workload which they can dispose off thoroughly well in court time. They should not be under pressure to dispose off quickly as at present. Everything should be on paper. The judges should study and be prepared before the appearance of the advocate. The purpose of the arguments should be to raise questions to understand the matter. Despite these if there is any error or mistake, the same should be corrected by Review. The matter of Review should be attended to with much more thoroughness.

(7)   With above approach the facts will be truly determined judicially. There will be substantial material for higher court. But then the Higher court should also loaded as above with sufficient time.

(8)   My above observations are  based on study of working of judicial system in developed countries. Enough material is available on internet. I shall provide the references in the weekly mails.

With best wishes,

Ram Kishan

(5) On Mon, Aug 9, 2010 at 2:45 PM, Advocate Ganguli replied

i salute u. i cannot but agree with u.

Our Further Comments 

It is a question of mindset. The Judicial Community in developed countries have undergone sea change but in India the Advocates and Judges are not still able to come out of the mentality formed during British Rule. The following aspects need to be paid attention to:-

(a)    In USA, the Bar Association is making efforts to educate the public about the Judicial system so that the judicial community is kept in high image and reputation. Whereas in India, they do not want the public to be educated.

(b)    In UK, the working of Tribunals and Courts  since 1957 are being kept under the watch of Public. The judicial system are analyzed and improved by the management and technical experts but in India, the judicial officials don’t want any advice and guidance from outsiders leave alone the experts.

(c)    Justice Krishna Iyer at Page 133 of his Book ‘Law, Lawyers and Justice, 1988 edition has said that ‘Indian Judicial System is backward by 200 years. There are no real efforts to improve the said backwardness.

(d)    As per Article 141 of the Indian Constitution 1950, the law laid down by the Supreme Court shall be binding on all courts. The High Courts of Karnataka, Himachal Pradesh and Madhya Pradesh even have pronounced that the violation of law laid down by the Supreme Court will amount to ‘Error Apparent on face of Records and hence to be reviewed and corrected’ It is a sorry state of affairs that the law laid down by the Supreme Court is being violated openly and reviews are not being allowed. No system has been evolved yet to ensure compliance of the law laid down by the Supreme Court.

(e)    The Law of Torts, Consumer Protection Act and RTI are being applied to Public and other bodies but the Judicial Community does not want to apply any principles of such laws to them.

(f)      As per the SC in S.P. Gupta vs Union of India (AIR 1982 Supreme Court 149 ), the Judiciary is also one of the instrumentality of State whose primary duty and sole objective is to render justice. On account of emphasis on disposal, the said objective has gone to back seat. In the said Judgment, the Supreme Court said that the Judges in India should have an active and creative roles towards the weaker party. In bank litigations, the borrower only when he is in financial troubles is required to face the mighty banks but the Judiciary instead of having any sympathy with the borrowers is inclined only towards bank recoveries.

(g)    There are now more than 3 crores cases pending in the courts and such pendency is continuing to go up further with passage of time. It is surprising that such pendency has not become overnight. The question is that when it was 5 lacs and why it was allowed to go upto 10 lacs. Subsequently no effective actions were taken when it went upto 50 lacs. Still at the present level of 3 crores, there is no seriousness. Even one of the sitting High Court judges stated that it will take 320 years to clear the pendency.    

(h)    The time has come when it should be admitted that the remedial measures can not be devised by the Judiciary. The only solution, as was in UK in 1957, is to involve public in setting right the Judicial Machinery.  

Recently we came across a real practical instance of use of management and technology in thwarting coercive recovery by the law deptt of a bank. The facts are as under. The real names have been altered to maintain the professional secrecy :-

(a)    The bank sent a recovery agent to the house of Mr. Manish Tondon, the borrower. The said agent said that he was Altaf Hussain and he threatened the borrower to clear the bank dues otherwise be prepared for dire consequences. The borrower refused to discuss the matter with Mr. Hussain and desired that he will talk directly with the bank officials only. Mr. Hussain had to return without any promise from the borrower.

(b)    Sensing that the bank official may come next day, Mr. Tondon fitted spy camera for video recording and voice recorders for audio recording.

(c)    Next day one of the bank officials Mr. Chawla came along with Mr. Hussain. They threatened with dire consequences and used unparliamentary  language to scare the borrower Mr. Tondon and his family. The entire incidence was video and audio recorded.

(d)    After the said persons left, the borrower prepared the CD of the video and audio record of the incidence as well as the transcript of the same. He filed FIR along with the said CD and transcript. Further he sent e-mail to the bank including the Chairman informing them about the said incidence including recording of the same.  and the said bank official followed by a legal notice

(e)    The bank officials sent Mr. Hussain who tendered his apology.  The discussions of Mr. Hussain were again video and audio recorded.

(f)      The bank officials subsequently made telephone calls to the borrower. The said calls were also recorded.

(g)    The borrower is contemplating initiating legal proceedings claiming loss and damages on account of the said incidence.

DRT Solutions Weekly Mail – 117th Issue dated 6^th August ’10

(1) Importance of Pleadings – Why expertise is required in preparing pleadings relating to Banking Litigations

At times we are approached by Borrowers and Guarantors facing litigations in DRTs. Whenever we study their cases, one of the most glaring deficiencies are found to be poor and incomplete pleadings. In this respect the following aspects need to be taken care of:-

(a)    The person who drafts the pleadings must be having mastery over facts and mastery over law. We feel sorrow to add that the legal community like the Advocates are not fully aware about the facts. Even the litigant borrowers do not know the relevant facts in respect of bank litigations. Thus the whole case starts a built-in weakness on account of ignorance about the facts though howsoever one may be strong in legal aspects.

(b)    The relevant facts relate to banking, industry, finance, RBI Guidelines, various wrong doings committed by the banks and financial wrong doings, consequent loss and damages, various categories of such loss and damages etc.

(c)    The relevant laws relate to RBI Act 1934, Banking Regulations Act 1949, IDR Act 1951, SFC Act 1951, IDBI Act 1964, Bank Nationalization Act 1970, DRT Act 1993, Securitisation Act 2002, CPC 1908, Evidence Act, Law of Torts, Law of Damages, various RBI Guidelines, SICA 1985, Constitution of India, CRPC,  IPC etc.

(d)    One should have knowledge based on real practical experience in conducting trials including cross-examinations in the trial court.

(e)    It is only when one has got mastery over all the matters mentioned above, then only he should undertake drafting of pleadings of WS, Counter-claim, SA, various applications, affidavits, Review Petitions, Appeal, IAs (i.e. interlocutory applications) etc.

(f)      It is needless to mention that on every date perfect know-how is required so that results on that day do not go haywire than the correct course of action. Once again this is possible when there is mastery of facts and mastery of law including procedure of law. This is more so during trials in DRTs when practical knowledge of trials is very much required. It is needless to mention that knowledge of law alone or knowledge based on practice in High Court and Supreme Court will never help in DRTs. That is why we insist that the DRT Advocate should be a Senior Trial Lawyer who has proven knowledge and experience of several real trials.

(g)    On account of above and based on our experience of bank litigations for more than 20 years, we have evolved methods and practice on account of which several of our clients are winning against banks and financial institutions.

(2) SC fires the High Courts so that unnecessary writs are not filed particularly when Appeal under Sec 17 of the Securitisation Act are pending in DRTs  

Our Further Comments

Our observations past 20 years is that on account of ignorance of the borrowers and guarantors facing bank litigations in trial courts, matters are driven to High Courts by way of seeking issue of writs under Article 226 of the Constitution or by way of Revision particularly when the proper course of action should have been Review. In fact had there been perfect pleadings and perfect adjudication on every date, such a situation would have not arisen.

In the above judgment, the SC has drawn attention to several of its judgments since 1964 when unnecessary writ petitions are filed and admitted in High Courts.

Our advice to our clients is that until and unless the facts involved are not judicially determined in the trial courts or DRTs, one should never approach High Courts otherwise the whole case would be lost.
 

DRT Solutions Weekly Mail – 116th Issue dated 30^th July ’10

(1) Our Client wins DRT Case of Rs. 90 crores – Copy of Judgment available on our web site

“ In an attempt to speed up activities under the SICA, the Supreme Court on Friday said it would not entertain any petition opposing moves to revive sick companies.

It was expected that by revival of the sick units, idle investment in them would become productive and by closure, the locked up investment in unviable units would get released for productive use elsewhere. Importantly revival was to help workers keep their jobs.

A bench comprising of the Chief Justice SH Kapadia, Justice KS Radhakrishnan and Justice Swatanter Kumar said it would not allow anyone to put a spoke in any matter relating to revival of a sick company.

We want to make it clear to all the lawyers that if a company is getting revived, we will not interfere, the CJI said indicating that the apex court was in favour of giving revival of sick companies a chance.”   

DRT Solutions Weekly Mail – 115th Issue dated 23^rd July ’10

(1) Securitisation Act 2002 is a complete code

Apparently the banks and financial institutions thought to rejoice due to intended expeditious judicial actions but it was a double edged sword. Now they are repenting. They thought that recovery will enter into a fast mode but instead they are getting exposed expeditiously for the wrong doings and illegal acts which were not coming to light so early in civil courts where the recovery suits were taking 15 to 20 years.

Anyway if we examine thoroughly the scheme of the above mentioned acts, it would be concluded that the Securitisation Act is a complete code in itself. This presumes that the secured creditor has followed scrupulously all the applicable RBI Guidelines (which they utterly fail in almost all the cases), have acted as per the RBI Act 1934, Banking Regulations Act 1949 and Bank Nationalization Act 1970 in light of the Constitution of India and Supreme Court verdict of 1969 in the matter of Kripack. In almost all the case, the bank and financial institutions are totally failing to abide by the said legal provisions.

Keeping in mind the above legal framework, once the Securitisation Act has been invoked, there is no option or the alternative but to complete the adjudication till the end. In case the lender loses the Securitisation Application u/s 17 of the Act ( as recently happened in the matter of National Flask when 4 banks lost recovery of Rs. 90 crores after a tooth and nail fight of 4 years), the only option is Appeal to DRAT and nothing else. Any other option i.e. issue of another notice, arbitration, invoking DRT Act etc. will legally fail and no recovery will be possible. On the other hand, the borrower may win his damage suit.

The bitter lesson for the secured creditor is that right from the opening of the account, they should be law abiding and help the borrower in time of need otherwise legal action will only boomerang on them. In most of the cases, since the borrowers are not having knowledge and resources, the secured creditors were having easy victory but those days are getting over. This will be proved by some of the future leading judgments.

(2) Some of the borrowers are winning their cases using the knowledge contained in our web site and weekly mails

Sachin Thakker <sachin.thakker@gmail.com>

To Ram Kishan <ramkishandrt@gmail.com>

Date  Fri, Jul 16, 2010 at 10:52 AM

Subject Re: DRT Solutions Weekly Mail - 114th Issue dated 16th July '10

Mailed –by  gmail.com

Signed –by gmail.com

Dear Sir,

I have been following your weekly mails since 2 years now and look forward to them every Friday morning. Indeed you are doing such a wonderful task which needs laurels and applauds .I am a victim of bank harassment since 2004 but only with the help of your weekly mails and your website, I have been able to update my knowledge and strongly fight my case with the bank whose position weakens with every discussion. Your site has also helped me with the judgments of various courts including Hon Supreme court of India, relevant to my case which makes my case even stronger. I sincerely thank you for your excellent guidance through your mails and site.

Sir, I sincerely request you to mail me the copy of the judgment of the case mentioned below in your today’s weekly mail about your client winning the case in DRT of Rs 90 crores. It will indeed add a lot of value to my knowledge and help me in my defence.

Though there is no court case currently going on in my matter as it had been rejected by the DRT in 2004 only as the lawyers too at that point of time were not fully equipped with the defence in Securitization Act. This resulted in the bank taking the physical possession of my residence. It was very painful for us as my mother was suffering from Cancer and my child was only 2 years old. The approach of the bank was totally inhuman. My lawyer advised to file a writ in the Mumbai High court which too was dismissed as the lawyer who was not well equipped with the right knowledge could not defend. This is a matter with a co-operative bank.

By my good luck I surfed through your website and following the advices regarding inspection of documents, various court orders and exhaustive knowledge on the said Act was able to find a complete chaos in my bank statements and wrong doings of the bank. The bank till date is not able to answer to them. The chairman, earlier administrators (as the bank was dissolved for 5 years) were not able to explain all the illegal doings in our accounts. We proved on paper and they have decided to settle the case from 90 Lacs to 23 lacs. Since we have suffered a lot, I have offered much less and I am sure they would do it as I have kept my papers ready to complain in the RBI and Ministry of Finance.

It was only coz of your continuous mails and guidance through them that i have been able to achieve this.

I sincerely thank you and applaud you for your efforts. It feels a privilege to be associated with you. Justice is not lost in this country coz of lawyers like you. God Bless you Always Sir.

Looking forward to the copy of judgment.

Thanking you,

Warm Regards,

Sachin Thakker. 

DRT Solutions Weekly Mail – 114th Issue dated 16^th July ’10

(1) Our Client wins DRT Case of Rs. 90 crores – Copy of Judgment available

Our comments

This judgment must be studied by the DRT litigant borrowers and guarantors as well as their advocates. It proves our following long held convictions:-

(a) DRT is a trial court for adjudication of facts where procedural law based on principles of natural justice is applied.

(b) The said procedural law can go beyond CPC.

(c) In bank litigations, the facts are contained in documents.

(d) All the material documents must be discovered and inspected.

(e) All the controversial facts must be discovered. Even the tool of cross-examination may be required.

(f) The highest bank official including the Chairman and Managing Director must be impleaded as necessary party right from inception.

(g) Claim for loss and damages or counter-claim must be raised from the inception.

(h) The borrower will have to take full interest so that the matter is not left to the Advocate only. All the date must be attended. All the court proceedings must be watched.

(i) The important tools like Review and or change in court must be used.

(j) If possible experienced trial lawyer who has fought many suits from beginning to end involving damages need to be employed.

(2) Another instance of Govt Policy confirming our contentions as to why Chairman of the Bank must be made a necessary party 

This refers to the news item at Page 2 in The Economic Times, Mumbai dated 14.07.10 titled ‘MHA to hold phone cos CMDs liable for unverified J & K users’ The Ministry of Home Affairs have threatened to make the CMDs liable for any unverified mobile connections. A time of one week has been given to achieve 100% verification level otherwise face actions at the level of CMDs including cancellation of license.

This approach of the Govt validates our contentions that the CMDs of the bank must be made necessary party right from inception on account of several RBI Guidelines which are not being followed by the CMDs.

DRT Solutions Weekly Mail – 113th Issue dated 9^th July ’10

(1) Precautionary & Remedial   Measures when the Banks or  Financial Institutions threaten Physical Possession under Securitisation Act

Nowadays the secured creditors are paying much greater attention to recovery through Securitisation Act. At times they are misusing the tool of physical possession. Hence the following analysis will be useful to those borrowers who are threatened with physical possession. We have also mentioned the precautionary and remedial measures:-

(a)    Normally the banks should not take physical possession. Instead the symbolic possession will be better for both i.e. lenders as well as the borrowers.

(b)    Initially the banks are required to serve the prescribed Demand Notice u/s 13(2) of the Act, which provide a period of 60 days. This notice is required to be served to all the borrowers and guarantors. If the authorized officer has a reason to believe that the borrower or his agent is avoiding the service of the said notice or that for any other reason, the service can not be made, the service shall be affected by affixing a copy of the demand notice on the outer door or some other conspicuous part of the house or building in which the borrower ordinarily resides or carries on his business or personally works for gain. The secured creditor is also required to publish the contents of the said notice in two leading news papers one in vernacular language having sufficient circulation in that locality.

(c)    Where the borrower is a body corporate, the said demand notice shall be served on the registered office or any of the branches of such body corporate as specified above.

(d)    Where there are more than one borrower, the said notice is required to be served on each borrower.

(e)    On receipt of the said notice, the said borrower and guarantors may make any representation or objections to the authorized officer of the bank as per sec. 13(3A) of the act within the said period of 60 days. If possible, efforts should be made to include all the wrong doings of the bank as well as all consequent the loss and damages suffered. Since the said loss and damages are more than the claim of the bank, there is no debt due. As a result only symbolic possession could be taken but not the physical possession.    

(f)      The said authorized officer is bound to reply within a week to the said representation with due application of mind.

(g)    Upto the above stage, the secured creditor can not initiate any action for taking possession.

(h)    Just after the delivery of the said reply, the secured creditor may initiate actions under sec. 13(4) which includes taking possession also.

(i)      For taking possession, the secured creditor has to serve a notice in prescribed form and also advertise in two leading news papers of the locality where the substantial part of the business of the borrower is held as security for the debt.

(j)      Normally the said possession initially should be symbolic i.e. on paper. But some of the bank officials for ulterior motives, threaten the borrowers for taking physical possession.

(k)    If there is such threat of physical possession, the following remedial measures are advised:-

(i)                  As soon as one comes to know about the said threat, communication must be made to the bank higher officials such as the Chairman and Managing Director and other such higher officials with copy to the authorized official stating that as per law the proposed physical possession would by illegal. The relevant provisions of law must be quoted as well as the loss and damages due to wrong doings of the bank.

(ii)                On the spot a letter must be kept ready holding the visiting bank official responsible individually, officially and jointly responsible if they act illegally.

(iii)              Since the said officials may refuse to accept such letter, the borrower must arrange to have a video record by using a handycam so that complete interactions is video recorded and a CD made.

(iv)              Looking to such letter and video recording, the said officials will not insist for taking physical possession and may be satisfied with symbolic possession only.

(v)                The entire incident must be covered in writing and letter be sent to all concerned including the Chairman of the bank.

(vi)              Despite above, if the said official insist for physical possession, the same should be resisted being a illegal act.

(vii)            A writ may be immediately filed in the High Court only on this limited point.

(viii)          The borrower must go through various digests of drt cases wherein he will find several judgments favoring him.

(l)      We have observed that under above facts and circumstances, the said threat for physical possession will be foiled. The basic philosophy behind physical possession is that the banks are not supposed to take and keep the properties with them. They must arrange auction, fix up the buyer and only after this they should go for taking physical possession. At this stage, if there is any resistance from the borrower, then only, they can invoke Sec 14 of the act.

(m)  The borrower may maintain a stand that he will file appeal u/s 17 within 45 days of action u/s 13(4), no physical possession can be taken till the said appeal is decided fully.

(n)    It is needless to mention that the said appeal must include loss and damages and being akin to a civil suit (as per the law laid down by the Supreme Court in the matter of Mardia Chemicals) must be fought thoroughly by experienced trial lawyer. Such contest will definitely take several years due to inherent legal process as well as due to resistance by the usual tendency of the bank bureaucracy to deny and fight upto the highest court.

(o)    With above approach, several of our clients are in a strong position against the bank. Ultimately in one case as reported in the last weekly mail, one of our clients even won the Securitisation Appeal against 4 banks, the amount involved being more than Rs. 90 crores.  

(2) It is not what happens to us that hurts us. It is our response that hurts us

Mr. N.K. Sharma, ex-GM(Law) has sent us the following useful story:-

On his first day in office, as President Abraham Lincoln entered to give his inaugural address, one man stood up. He was a rich aristocrat. He said, “Mr. Lincoln, you should not forget that your father used to make shoes for my family.” And the whole Senate laughed; they thought they had made a fool of Lincoln.

But certain people are made of a totally different mettle. Lincoln looked at the man directly in the eye and said, “Sir, I know that my father used to make shoes for your family, and there will be many others here, because he made shoes the way nobody else can.

He was a creator. His shoes were not just shoes; he poured his whole soul into them. I want to ask you, have you any complaint? Because I know how to make shoes myself. If you have any complaint I can make you another pair of shoes. But as far as I know, nobody has ever complained about my father’s shoes. He was a genius, a great creator and I am proud of my father”.

The whole Senate was struck dumb. They could not understand what kind of man Abraham Lincoln was. He was proud because his father did his job so well that not even a single complaint had ever been heard.

Remember: “No one can hurt you without your consent.”

“It is not what happens to us that hurts us. It is our response that hurts us.”

DRT Solutions Weekly Mail – 112th Issue dated 2^nd July ’10

(1) Our Client wins in Securitisation Appeal against 4 Banks in DRT – amount involved nearly Rs. 90 crores and a tooth & nail fight of 4 years

(1)     The PO DRT II Mumbai in his order dated 29.06.10 in respect of Securitisation Application No 33/2006 allowed the same asking the 4 respondent banks to redeliver possession of the properties within 4 weeks.

(2)     This has been most historic legal fight in DRTs for a period of nearly 4 years by law departments of 4 banks against securitization notices dated 30.12.05 and 02.01.06 for Rs. 64.44 crores  and banking aspects of Representation & Objections, NPA, Accounts, Inspection of Documents etc.