(2) DRT PO changes his stand after the writ is filed against him in High Court
One of our clients from
Mumbai informed that the PO Madurai disregarded giving any decision on pending
interim applications as well as appeal pending in DRAT Chennai. The said PO
made use of a very old ex-parte order to quash certain proceedings and created
all pressures to undertake final arguments. Since such approach of the said PO
were against the Principles of Natural Justice, the said client and his
advocated filed a writ in High Court.
Surprisingly the
behaviour of the said PO changed completely. He informed the client that he
would dispose off the pending applications first and also pay attention to all
the pending matters.
Our Comments:-
(a)
as usual the POs
in DRTs are under great pressures to dispose off the DRT cases as early as
possible. The said pressure emanates first from the DRT Act to dispose off the
case in six months. The bank advocate simply mentions that so much amount of
public funds are due. The Ministry of Finance and bank officials also apply
pressures for quick disposal. All these result in efforts by POs even by
disregarding the basic principles of Natural Justice
.
(b)
Noticing such
behaviour of POs all over the country from the feedback of our clients, we
advised them to create records of the POs by application of law and procedure of
law by keeping everything in writing. On account of hurry, the POs are found
making mistakes in their orders. Hence such orders must be reviewed and
appealed. Such approach in the above case in Madurai resulted in massive records
against the PO Madurai
.
(c)
When the
behaviour of PO became erratic, the writ was filed in High Court. It appears
that on account of the said writ, the PO had no option but to abide by law and
procedure of law
.
(d)
The bank
litigation involve numerous and complex facts relating banking, industry and
finance which need to be judicially determined. Even simple application of
principles of Natural Justice will result in lot of time particularly when the
bank do not provide the documents and try to hide their wrong doings. In almost
in respect of all our clients, since the counter-claims and or damage suits have
already been filed, the overall case will definitely take several years. This is
due to huge workload in DRTs, poor management, old technology of court practice,
no specialized knowledge of banking, industry and finance
.
(e)
Those borrowers
who do not pay attention to all these facts will have to face quick decrees and
executions. No remedy will be possible in higher courts and the case will be
lost
.
DRT Solutions Weekly Mail – 49th Issue dated 17th April ’09
(1) Further Interactions on Application on OA Dismissal in DRT Mumbai
One of our clients at
Mumbai has communicated the written reply filed by the bank to the written
arguments submitted by our client. Our comments are as under:-
(a)
Reply by the Bank
;- “Once the OA has been numbered by the Registry of the DRT, it is certain that
the Registry is of the view that there is no technical inadequacy in it.”
Our Comments:- If the OA primarily and ab-initio violates any
law, the violation will continue to remain so even if the Registry has numbered
it. The defendant borrowers are within their rights to submit the matter before
the PO that the OA deserves to be dismissed on account of the said violations.
This is akin to ‘Rejection of Plaint’ as per the provision of O-7 R-11(d) of CPC
1908
.
(b)
Reply by the Bank:- “If the Application of the
defendants is entertained then it will defeat the very provisions of the RDDB
Act. The RDDB Act is a special law for speedy recovery of the amounts due under
the financial facilities that were granted to the borrower by the bank
.”
Our Comments:- None is authorized to violate the legal procedures
in case of any Act including the special acts and hence can not cause any
injustice. If the bankers desire speedy recovery, it is all the more important
that they prepare the OA in such a manner that there is no violation of law
prescribed under the DRT Act, DRT Rules, Banker’s Books Evidence Act, Evidence
Act, IT Act, law laid down by the Supreme Court etc
.
(2) High Court admits writ against injustice being caused by the PO DRT
One of our clients at Madurai
has strongly felt that injustice was being caused by the PO DRT Madurai on
account of the following
:-
(a)
PO was insisting
for conducting final arguments without deciding the pending
IAs.
(b)
PO was not
prepared to wait till the relevant Appeal is decided by the
DRAT.
(c)
PO made a
reference to an ex-parte order of few years back which though was not set aside
but the court itself ignored it by continuing the proceedings
.
(d)
PO was having a
partisan attitude towards the bankers
.
(e)
There were
several other grievances
.
The said client and his
advocate created sufficient record about all the above matters and filed a writ
in the High Court. At the time of motion hearing, when all these matters were
pointed out, the Govt Pleader could not reply properly and hence the said writ
was admitted
.
Our Comments:- We have all along been emphasizing to insist for following the
prescribed law and procedure of law at the trial court perfectly at every stage
and on every date. One must exhaust all possibilities at the bottom court first.
This will result in creation of sufficient records of the adjudication. Such
records will be of immense use as in the above case to point out Injustice if
any. The Judge is a Public Servant and he has no power or authority to violate
any law or procedure of law. He has to be always reasonable and fair. Democracy
is rule of law and not rule of persons
.
DRT Solutions Weekly Mail – 48th Issue dated 10th April ’09
(1) Query on Review
One of the mail recipients, an Advocate from Delhi has sent us
following query:-
‘I request
you to explain in the forthcoming weekly newsletter, your further opinion on "
Review", in the background of the following SC judgments:-
"A
power of review is not to be confused with appellate power which may enable an
Appellate Court to correct all manner of errors committed by Trial Court.
Reference may be made in this connection to the decision in the case of A. T.
Sharma -vs- A.P. Sharma reported in A.I.R. 1979 S.C. 1047.
In the case of Thungabhadra Industries -
vs - The
Government of Andhra Pradesh reported in A.I.R. 1964 S.C. 1372 it was
pointed out that there was a distinction which is real, though it might not
always be capable of exposition, between a mere erroneous decision and a
decision which could be characterised as vitiated by error apparent. A review
is by no means an appeal in disguise whereby an erroneous decision is reheard
and corrected but lies only for patent error. Where without any elaborate
argument one could point to the error and say here is a substantial point of law
which stared one in the face and there could reasonably be no two opinions
entertained about it, a clear case of error apparent on the face of the record
would be made out."
Our Comments:- are as under:-
(a) Review and Appeal are
two distinct and separate remedies provided under the CPC.
(b) The provision of
Review will only be applicable in respect of ingredients mentioned in Sec 114
and O-47 of the CPC and hence the errors coming only under the perview of the
said ingredients can be corrected by invoking the Review
.
(c) On the other hand,
the scope of Appeal is not to any such ingredients. The only limitation in
Appeal is that new matter can not be considered whereas the Review is possible
for New Matters as per the provisions of O-47
.
(d) Review is done by the
same judge whereas Appeal is carried out by the higher bench
.
(e) Review is to be filed
first and if during the limitation period the Review is not decided, Appeal may
be filed. First Review will be decided and if the decision is favorable, the
Appeal may be withdrawn. On the other hand, if the Review is rejected, the
Appeal may continue
.
(f) The scope of Review
has been widened by the Supreme Court to include misconception of facts or
misconception of law. Any violation of the law laid down by the Supreme Court
also comes under the scope of Review
.
(g) Review is an
important provision existing right from inception of English Law. In our
country, the advocates and the judges are not paying adequate attention to such
important provision of law. An impartial and serious Justice Delivery System
will appreciate such provision as it serves to correct the mistakes right from
inception instead of matter going to higher courts and then getting it remanded
to lower court. Hence logical approach would be to accurate and correct right
from the inception. Overall time taken in thorough trial in the beginning will
be much less than the trial being conducted hurriedly and then time being wasted
in appeal and remand. Swaran Lata (AIR 1969 SC 1167) is a famous case where the
Supreme Court remanded the case for retrial after 18 years. Had the advocate
been serious right from the beginning, such a debacle would have not happened
.
(h) In view of above, we
have been emphasizing the importance of perfect trial at every stage and on
every date. Even such perfection may take time but overall time will be much
less as well as the quality will be much superior
.
(2) Proposed Discussions at Chandigarh & Delhi
Mr. Ram Kishan will be in Chandigarh and Delhi with effect from
23rd April ’09. On 25th and 26th April, he will
be meeting with two American Attorneys. He will also be calling on few retired
Chief Justices of Supreme /Court of India. All these interactions will be video
recorded and the DVDs will be available to interested persons. The discussions
will be mainly centered on improving efficiency of Trials in DRTs, improving
management and technology in court rooms and solving legal problems of borrowers
and guarantors. Mr. BS Malik, the President of Legal Forum of India will be
present during all these interactions.
RT Solutions Weekly Mail – 47th Issue dated 3rd April ’09
(1) Mr. Ram Kishan will be in Delhi during 2nd Week of April ‘09
We have our US joint venture web site
vide
www.usindolegal.com This web site is hosted and maintained by us from
Indore. Mr. Anand Ahuja and his Associate Attorney Stephanie Ovadia from New
York will be visiting India during 2nd week of April ’09. We will
have an interactive session at Delhi in which Mr. Malik and Mr. Ram Kishan will
also be present. The details of the date and venue will be announced in due
course of time. The entire session will be video recorded and will be available
in form of a DVD.
(2) The Bank Officials have become afraid of our Damage Suits and Counter-claims
This refers to news item titled ‘Fear of
Suits raise Demand for D&O Insurance covers’ of )published at Pg 13 of The
Economic Times Mumbai dated 16th March ’09. The Directors and Chief
Executives of Banks are going for the said insurance covers despite there is
rise in premium rates. They will be further scared when the NCLT (i.e. the
Companies Bill 2008) bill is enacted (in fact lying with the Govt and Court
since 2002) as it provides for class action suits. As per the said news item,
large part of damage claims are against the managements of the banks including
MD, CEO and Legal Heads These damage claims have triggered the said Insurance
Cover
.
We are incorporating the above
development in the pleadings as well as the cross-examination. We shall also get
the terms and conditions of the said insurance cover as additional public money
is being spent by the Banks.
The above has also validated our demand
for Insurance covers for the Promoters which we have been voicing since 2001.
DRT Solutions Weekly Mail – 46th Issue dated 27th March ’09
(1) Filing of Counter-claim after filing of WS – not barred
One of our clients from Bhubneshwar is preparing to file
counter-claim at a late stage. Objection has been raised that since the WS has
been filed long back, the counter-claim can not be filed in view of the Sec.
19(8) of the DRT Act 1993.
We have found in several cases in past also, such objections have
been raised. The confusion arises due to improper interpretation of the relevant
provision in the said Sec. 19(8) of the DRT Act.
This matter has been settled long back by the Supreme Court and
the interpretation of law is as under:
-
(a)
The provision of counter-claim in DRT Act is
exactly same as that in Order 8 of CPC 1908. The said provision in CPC was made
in 1976 amendment
.
(b)
The Supreme Court in the matter of Mahendra
Kumar vs State of Madhya Pradesh vide citation 1987 AIR (SC) 1395 has laid down
“ What is laid down under Rule 6-A(1)
is that a counter-claim can be filed, provided the cause of
action had accrued to the defendant before the defendant had delivered his
defence or before the time limited for delivering his defence has expired,
whether such counter-claim is in the nature of a claim for damages or not. The
High court, in our opinion, has misread and misunderstood the provision of Rule
6-A(1) in holding that as the appellants had filed the counter-claim after the
filing of the written statement, the counter-claim was not maintainable. The
finding of the High court does not get any support from Rule 6-A( 1) of the Code
of Civil Procedure. As the cause of action for the counter-claim had arisen
before the filing of the written statement, the counter-claim was, therefore,
quite maintainable
.”
(c)
Since the loss and damages in Industrial
Finance are based on continuing cause of action, there is no bar of limitation.
Hence the above ruling of the Supreme Court is applicable so long as the trial
has not been completed.
(2) The Co-operative Banks are not authorized to invoke Securitisation Act.
One of our clients from Mumbai has approached us about the action
to be taken in respect of Notice received from them from their lender viz. a
Co-operative Bank. We have advised them to submit prescribed Representation and
Objection to the Bank stating that the matter is under consideration of the
Supreme Court of India. If this does not satisfy the Bank, then a writ petition
may be filed in the High Court.
DRT Solutions Weekly Mail – 45th Issue dated 20th March ’09
(1) An Important Judgment of the Supreme Court which has highly discouraged the
Bankers
This refers to the news item with the caption ‘The Final word on
secured lending’ at page 13 of the Economic Times Mumbai dated 18th
March ’09 which is based on the Judgment of the Supreme Court of India delivered
on 27th February ‘9 This judgment dilutes the rights of the banks
under the DRT and Securitisation Acts. These acts do not create first charge in
favor of the banks, financial institutions and other lenders. The effect of the
said Supreme Court judgment is that the claims of the State Govt. for arrears of
sales tax and other taxes, if given a statutory first charge over the properties
of the assesses, will have the priority over the claims of the secured
creditors.
Our Comments :- The above news item has been prepared by Mr. MR Umarji, Chief
Advisor (Law) IBA. Mr. Umarji is the person who originally drafted the
Securitisation Act. He is the former Executive Director of the RBI. He has also
authored a book on the Securitisation Act, 2nd Edition of which was
published in 2004. The said judgment has heavily discouraged the bankers. Our
view right from the inception has been that even Mr. Umarji and the bank
officials are not paying requisite attention to the Constitution of India as
well as various enactments which if applied with an unbiased application of mind
will conclude that the best recovery is out of running of the business and not
the securities. Above referred judgment of the Supreme Court has strengthened
our views. Since the dues of the Govt and the dues of the workers will rank
senior to that of the secured creditors, the intended recoveries by the bankers
through the Securitisation Act and DRT Act will have to move to back seat.
Litigation aspects will create new complications and hence delays.
(2) The Bankers feel that DRTs are a Failure
One of our clients from Mumbai has sent us a copy of a news item
‘DRT recovers 32% of dues in six years’ published in the Times of India.
According to the RBI, in the period 2001-07, of the Rs. 1,88,00,000 outstanding
amount, DRTs could recover only 32% i.e. 62,983 crores. One of the Borivli
residents has filed a PIL in Bombay High Court. The said PIL says that the
Ministry of Finance has failed to expedite the functioning of DRTs. Even the
Securitisation Act of 2002 failed to help reduce the burden on DRTs. The lender
and borrowers are hand in glove in the settlements and there is no scrutiny by
RBI, DRTs or any other authority. The amount written off by banks in 2000 was
Rs. 4,500 crores which went up to Rs. 13,490 crores in 2004. In the meantime the
Govt has pumped in Rs. 37,000 crores to maintain the capital adequacy ratio of
the banks.
Our Comments :- On account of the poor recovery results as mentioned above,
the Bank Officials generally feel that the DRTs are a failure. This is born out
of their mistaken view that the DRTs are the Recovery Arm of the banks. We have
been emphasizing that the DRTs are Courts and the more borrowers become aware of
the working of the courts, not only the DRTs will take more time but with the
tools like Counter-claims or Damage Suits, the recovery will be nearly
impossible even in decades. The scenario will be more difficult for the banks
when the NCLTs will come into play when the big borrowers who are availing BIFR
stay will start fighting DRTs cases. As a result there will be several judgments
coming from the courts which will favor the borrowers. Finally the DRTs will be
reduced to nothing better than the civil courts. That is why we have been
telling since 2001 that instead of forming new courts like DRTs, the existing
civil courts should have been improved. Now the DRTs are suffering the same ills
of mismanagement and lack of technology as in civil court apart from chaos due
to heavy workload resulting into more reviews, appeals and change in courts.
(3) Cross-examination of Bank Officials is a must in Counter-claim and or Damage
Suits
It was said that the cross-examination is a rarity in the DRTs
but in respect of several of our clients we find that the cross-examination is
going to be a regular feature in all the DRT cases. This we predicted in 2001
itself. Our view is based on the normal behavior of the Bank Officials emanating
from the buearacratic and dominating attitude after the Nationalization of the
Banks in 1969. As a result, they have been mostly ignoring the RBI Guidelines
resulting into serious wrong doings which are questioned in the legal defence by
the borrowers in DRTs. The usual denial mode adopted by the bank officials
creates a situation for the cross-examination of the concerned bank officials.
Ultimately the said wrong doings will come out by an effective
cross-examination. The person cross-examining the bank officials should have
mastery of facts and mastery of law in the arena of banking, industry, finance,
CPC, Evidence Act and Banking Laws.
DRT Solutions Weekly Mail – 44th Issue dated 13th March
’09
(1) Reference to High Court u/s 113 of CPC
As
per Sec 113 of CPC 1908, subject to such conditions and limitations as may
be prescribed, any Court may state a case and refer the same for the opinion of
the High Court, and High Court may make such order thereon as it thinks fit.
An
important proviso was added to the above section in 1951 by way of CP Code (Am) Act 24
according to which where the Court is satisfied that a case pending before it
involves a question of as to the validity of any Act ……, the determination of
which is necessary for the disposal of the case ……., the Court shall state a
case setting out its opinion and the reasons thereof, and refer the same for the
opinion of the High Court.
On
account of the above proviso, the scope of Sec 113 has become much wider than
Art. 228 of the Constitution
as the later is only confined to substantial questions of law as to the
interpretation of the Constitution and nothing else.
We
intend to utilize the above in questioning certain deficiencies of the
Securitisation Act in DRTs. The progress will be reported in Weekly Mails in due
course of time.
(2) Judge had to personally pay the Costs
As
per citation AIR 1968 Bombay 439LS Sherlekar vs DL Agarwal, the High Court held
and directed the subordinate Judge to personally pay the costs of the other
party’s Counsel.
This shows that Justice is above all, even the Law bends before Justice. The
Courts are meant only for Justice and nothing else.
(3) Chances of Winning against Bank in Recovery Litigations- Importance of
Perfect Trial
We
are repeatedly being approached by the Borrowers facing DRT cases enquiring as
to chances of winning against bank. The chances are quite high provided
following aspects are kept in view:-
(a) The person preparing
the pleadings should have mastery of facts and mastery of law.
(b) The facts include those
relating to Banking, Finance, Industry and Business.
(c) The law includes that
relating to Pleadings, Constitution, Torts, Damages, CPC, Law of Evidence,
Banking including RBI.
(d) The advocate should also
have above mastery of facts and mastery of law.
(e) The Indian Courts are
heavily overloaded to the extent of even 9000 per cent compared with those in
developed countries. Hence the disposal on every date is likely to be defective.
Even a single defect will seriously affect the chances of winning. There is no
other option but to ensure that such defect does not occur. This requires hard
work and patience in bringing everything in writing.
(f) All the material facts
are to be judicially determined. The procedural law laid down by the Supreme
Court vide citation AIR 1969 Supreme Court 1167 Swaran Lata vs Harendra Kumar
has to be strictly followed.
(g) The bank cases are based
only on documents. All the documents are in possession of the banks. Full use of
CPC Order 11 will result in getting all the documents or getting the defence of
the banks closed in respect of damage suits or counter-claim.
(h) Since the banks do not
admit their wrong doings in pleadings, there is no option but to examine the
bank officials (at least Chairman and Branch Manager) in witness box by a person
having mastery of facts and mastery of law.
(i) Since
the common sense of the judges is in favor of the banks, nothing should be left
for any decision by the judge i.e. complete admission of the wrong doings of the
banks must be obtained before any decision is taken by the Judge.
(j) The above assumes that
a perfect counter-claim or Damage Suit has been filed at proper time resulting
in a situation of ‘No Debt Due’
(k) The above may take a
long time but if any hurry is caused, the chances of winning will come down
drastically. Any correction by Higher Courts will not be possible.
(l) All our clients who
are following our guidance and advice are definitely progressing to win their
cases against the bank.
(m) Each case is different
from the other.
(n) Until and unless success
is obtained in DRTs (i.e. Trial Court) or the facts have been judicially
determined, one should never approach High Court or Supreme Court. These courts
can not do anything about the facts. If by chance one has to approach these
higher courts, each and every fact should have clearcut determination by the
lower courts otherwise it may boomerang and future corrections will be
impossible.
(o) The advocates of our
clients are requested to hold periodical dialogues with us so that there is no
lacuna or deficiencies in the trial.
(4) Future of Trial Courts in India
We
are repeatedly being approached by the Borrowers facing DRT cases enquiring as
to the future of trials (i.e. in DRTs) in India. Our views are as under:-
(a) The UNO finalized a
model IT Act (Information and Technology Act) in 1998 and sent to all its member
countries to enact the same in their individual country.
(b) Accordingly India
enacted the IT Act 2000.
(c) At the instance of Dr.
Abdul Kalam Azad, the then President of India, on 9th July 2007,
laptops were distributed to 15,000 Judges in the countries with the provision of
3 months training.
(d) The Supreme Court of
India and the High Courts are continuously adopting modern IT technology in
their court rooms. The Annul Chief Justices’ Conference is emphasizing use of
such technology in Trial Courts and accordingly e-courts are being established.
All the 14,000 courts are being interconnected with an outlay of Rs. 450 crores
in next 5 years.
(e) Many of the Advocates
have started using modern IT tools in their day to day operations.
(f) We have developed a
superior method of ‘Video Arguments’ for the first time in India and
demonstrated the same on 10th July 2007 before the District Judge,
Indore. The said method was also demonstrated before the Legal Forum of India on
4th May 2008 and before the All India Conference of Chartered
Accountants on 22nd February 2009.
(g) The TV Program like
‘Aapki Kachahry’ by Dr. Kiran Bedi will become a Model for commencing such
Courts not only in the country but throughout the world. As a result the bulk of
the small cases will be decided by such community courts.
(h) At present 70% of the
litigations are at the instance of the Govt or Public Sectors. The scheme of
Ombudsman will come up in a large way. A mandatory certificate from Legal Audit
or Ombudsman will settle most of the case before coming to the regular courts.
(i) The
Alternative Dispute Redressal by way of Lok Adalat, Arbitration and Mediation
will be more effective in reducing the incidence of cases coming to the regular
courts.
(j) Legal Education of the
litigants as we have started for our clients will improve the quality of
disposal on every date of the litigations.
(k) As in USA and UK,
complete proceedings of the courts will be video recorded, televised online,
transcribed on the same day and all such information available on the internet
on the same day will definitely improve the quality of disposal on every day.
The requirement of ‘Open Court in presence of parties’ will be truly served.
(l) On account of all the
above measures there may be separate ‘Bar Association of Trial Lawyers’ as in
USA.
(m) Most of the above will be
achieved in next 5 years.
(n) The litigants of the
DRTs will give the lead as they constitute the most competent and able litigants
being Entrepreneurs, Businessmen and Industrialists who have capabilities as
well as the resources to bring in better management and improved technology in
the DRTs (i.e. Trial Courts) in India.
Note:-This
issue of the weekly mail is prepared and published from Sagar where Mr. Ram
Kishan is staying with effect from 11th March to 15th March
’09.
It is the application of modern technology which enables 24X7 working
irrespective of place of work.
DRT Solutions Weekly Mail – 43rd Issue dated 6th March
’09
(1) Impact of E-mail to CMD of a Public Sector Bank
In
respect of one of our clients from Indore, the Authorised Officer of the Bank
took objections to the reply being submitted by the Advocate of our client. He
was informed that the proceedings being quasi-judicial in nature, no such
objection is tenable in the eyes of law. When this matter was complained through
an E-mail endorsement by Mr. B.K. Dubey, our Senior Advocate to the CMD of the
Bank, the Law Division of the Head Office of the said Bank, immediately on the
same day replied through E-mail as under (name of the bank and its officials
have been suppressed to maintain professional secrecy). We wish that the
problems of the borrowers are also handled with such seriousness and urgency.
Our contention is proved that the CMD of the Bank must be informed and made as a necessary
party in the DRT pleadings will definitely improve the overall quality of the
defence.
From: Bhupendra
Dubey
Sent: Thursday, March 05,
2009 6:08 PM
To:
Cc: Ram Kishan
Subject: Fwd:
---------- Forwarded message ----------
From:
LAW
Date: Thu, Mar 5, 2009 at 4:05 PM
Subject:
To:
Shri BK Dubey,
Advocate
Dear Sir,
We have received your email message
dated 5.3.2009, addressed to Chairman & Managing Director, which has
been brought to our notice.
We have since advised the concerned
official that the representations received from the advocates, on
behalf of their clients, under SARFAESI Act, be also appropriately
replied by the authorized official.
Our authorized official has already
replied to the representation which you have raised directly to your
client. However, we are advising the authorized official to send
copy thereof to you.
Regards
CHIEF MANAGER(LAW)
LAW DIVISION
H.O., NEW DELHI
(2) DRT Mumbai rules that until and unless Counter-claim has been decided, no
recovery action can be taken by the Bank
One
of our Associate Advocates from Mumbai has informed that one of the DRTs in
Mumbai has ruled that since the counter-claim was more than the claim of the
bank and hence there was ‘No Debt Due’, no coercive action for recovery can be
taken under the Securitisation Act. The details of the case shall be given in
the future Weekly Mail when the same are received by us.
(3) SC Ruling – ‘Statutory First Charge in favour of State has primacy over
right of banks to recover its dues.
Mr.
Rajendra Seth, Mumbai has been kind enough to communicate us copy of an
important Supreme Court ruling decided on 27th Feb.
2009 in the matter of Central Bank vs State of Kerala, Civil Appeal No 95 of
2005 according to which “statutory charge created in favour of the state has
primacy over the right of the bank to recover its dues under the Securitisation
Act or DRT Act.”
(4) Limitation in the matter of Counter-claims or Damage Suits of Borrowers
We
continue to receive several queries in respect of the limitation in the matter
of Counter-claims or the Damage Suits filed by the borrowers and Guarantors
against the banks and FIs in DRTs.
In
almost all the cases, we have found that the loss and damages caused are
continuing in nature and are covered under Sec. 22 of the Limitation Act, 1963
reproduced below:-
“22.
Continuing breaches and torts. – In
the case of
a continuing breaches of contract or in the case of a continuing tort, a fresh
period of limitation begins to run at every moment of the time during which the
breach or tort, as the case may be, continues.”
In
view of above and in the event of continuing cause of action, there is no
limitation for initiation action for counter-claims or damage suits by the
borrowers and guarantors.
(5) Court Fee in the matter of Counter-claim or Damage Suits of Borrowers
The
court fee in the matter of Counter-claims or Damage Suits of the Borrowers will
depend on the following facts and circumstances:-
(a)
In DRTs, the maximum court fee is Rs. 1.5 lac depending on the quantum of Loss
and Damages.
(b)
In civil court, one has to find out the schedule laid down under the Court Fee
act of the State where the subject Counter-claim or Damage Suit is filed. In
many of the States, it is ad-valorem and varies from 10% on wards. In some
States like Maharashtra, the maximum court fee is Rs. 3 lacs.
(c)
Depending on the quantum of the Loss and Damages, the court fee is calculated
and if is beyond the financial means of the litigant, it is waived in accordance
with the procedure laid down in Order 33 of the CPC applicable to ‘Suits by
Indigent Persons’
(d)
In case of Co-operative Courts, the maximum court fee is Rs. 15,000=00
(e)
In certain Union Territories, the Court Fee is Rs. 6,000=00 maximum.
DRT Solutions Weekly Mail – 42nd Issue dated 27th Feb. ’09
(1) ‘Video Arguments in Judicial Proceedings’ – Special Address delivered in All
India Conference of CAs on 22.02.09 at Indore
Mr. Ram Kishan delivered a special address on ‘Video Arguments in
Judicial Proceedings’ on 22.02.09 in Dhirubhai Ambani Auditorium. Daly College,
Indore during the 4th Technical Session of the National Conference
of the CAs. A background paper was already published on our web site vide link
http://www.drtsolutions.com/courtech.htm
The ‘Present Method of Oral
Arguments’, its deficiencies vis a vis ‘Proposed Method of Video Arguments’ were
explained along with extract from an actual case. It was entirely a new concept
to the large gathering of CAs. Mr. R. Bupathy, Chairman of the Session and Past
President, ICAI, Chennai himself appreciated, took keen interest and desired to
spend exclusive time. The entire address was video recorded and a DVD will be
available in due course of time.
(2) Cross-examination of Bank Officials:-
We have received several queries regarding cross-examination of
the bank officials. Our views are as under:-
(a)
As per provisions under Sec. 22 of the DRT Act,
the bank officials can be examined.
(b)
In some cases when DRT PO has declined
cross-examination, the High Courts in appeal have ordered to conduct
cross-examination in accordance with the principles of natural justice as well
as the provisions u/Sec 22 of the DRT Act.
(c)
The stage for the cross-examination is reached
only after all efforts have been made to discover the facts contained in the
documents and the bank officials have declined to provide the required
documents.
(d)
The sole purpose of the cross-examination of
the bank officials is to obtain their admissions for the wrong doings committed
by them.
(e)
The person conducting cross-examination should
have mastery of facts and mastery of law relating to banking, industry, finance,
evidence, contract, torts and damages. The principle of direct and best evidence
is to be kept always in view.
(f)
We have advocates as well as retired bank
officials who have been specifically trained to conduct cross-examination of the
bank officials.
(g)
In
bank litigation, the cross-examination of the bank officials is one of the most
important tools to extract facts and admissions from the said bank officials.
(3) Damage Suit and or Counter-claim in Bank Litigations:-
We continue to receive several queries on this important subject.
Our views are as under:-
(a)
If the bank has filed an OA (Original
Application) u/s 19 of the DRT Act and stage has been reached to file WS. Under
such situation, the Counter-claim must be filed along with the WS. It is
needless to mention that pleadings in the said Counter-claim has to be quite
exhaustive as in a civil suit for damages. All the facts relating to project
report, financial application, sanction, correspondence, balance sheets, all
categories of loss and damages etc. must be pleaded along with the documents. It
is needless to mention that the person drafting the said counter-claim should
have mastery of facts and mastery of law relating to banking, industry, finance,
torts and damages.
(b)
We have seen that in many cases, the pleadings
of the counter-claim are contained only in few paragraphs whereas the pleadings
in properly drafted counter-claims run in 80 to 150 pages excluding the
documents.
(c)
In some cases, the counter-claim has not been
set up the decree has been passed by the DRT and the borrower is at the stage of
appeal. The said borrower must file his damage suit in the civil court.
(d)
After passing of the decree by the DRT, if
there is any possibility of retrial, counter-claim may be filed in DRT before
restart of the trial.
(e)
In almost all the cases, we have found that the
amount of counter-claim or damages are much more than the claim of the bank and
hence there is no debt due. Hence till the damage suit or the counter-claim is
decided, no recovery action can be initiated.
(f)
The loss and damages suffered are continuing in
nature and hence there is no limitation. Hence the damage suit or counter-claim
can be filed at any time.
(g)
If the pleadings of the said damage suit or
counter-claim are prepared thoroughly and are contested properly, it will be
nearly impossible for any bank to recover their alleged claim which is always
much less than the damage suit or the counter-claim of the borrowers.
Ultimately, the banks will have no option but to settle the matter if the
borrower agrees and the settled amount has been seen ranging from 3% to 20% in
respect of many of our clients.
DRT Solutions Weekly Mail – 41st Issue dated 20th Feb. ’09
(1) Update on Gujrat High Court Kotak Mahindra Judgment holding debt assignment
or its substitution illegal:-
In continuation of above matter reported in news item in 37th
issue of weekly mail, the ICICI Bank has filed a SLP No 2240/2009 in the Supreme
Court along with several SLPs. The petition was called on hearing on 16.02.09.
It was ordered that if these SLPs are dismissed, the assignor banks and the
assignee banks will have to reverse the transactions which they enter into
during the interim period to be stipulated by the Supreme Court at the final
hearing which will be held on 16.04.09.. Such order was passed to ensure that
the secured debts do not go unrepresented. Further the SC directed that any
disbursement to secured
creditors shall, where the debt stands assigned, be made to the assignees. This
order will not be construed as an acceptance of the assignments pending the
present Special Leave Petitions.
(2) Query on provision of Counter-claim in Securitisation Act:-
With reference to the item no 2 In the
last issue of the weekly mail, one of the mail recipients has raised a query
reproduced below:-
I wonder why a field expert like you you have
changed from your earlier learned stand that a Securitisation Application is in
lieu of a civil suit and damages can be claimed in an SA.
Besides Mardia, I also find that iIn the case of
Jammu and Kashmir Bank Ltd. v. Jai Lakshmi Dravid, as is reported in I (2007)
BC 227, the Punjab and Haryana High Court had held:
"Para 5. The argument that the question of title
cannot be examined by the Debt Recovery Tribunal in the proceedings under
Section 17 of the Act is not tenable inasmuch as all objections which are
available to a person against the proceedings initiated by the Bank are to be
raised before the Tribunal."
I request you to give a detailed rely to the said
issue in the forthcoming newsletters.
Our comments
There is no change in our
stand. It is a question of strategy based on convenience due to existing legal
provisions. Looking back to the history, the well defined provision of
counter-claim in CPC 1908 was incorporated in 1976. Similarly it was done so in
DRT Act 1993 in 2000. Such well defined amendment in Securitisation Act is still
awaited. These do not mean that there were no counter-claims in civil courts
prior to 1976 or in DRTs prior to 2000. They were there but one has to justify
on the basis of fundamentals of law. Same thing will have to be done in the
arena of Securitisation Act till there is well defined amendment. That is why
our first approach is to explore possibility of filing counter-claim if there is
any existing OA under DRT Act or there is any possibility of the same. If such
situation does not exit, then there is no option but to file the damage claim in
the appeal (i.e. civil suit) under section 17 of the Securitisation Act. That is
why initially we mention in the said appeal about the loss and damages reserving
our rights to file such claim in due course of time.
(3) Strategy for Borrowers’ litigation in DRTs :-
Several borrowers have been discussing with us about their
strategy in DRT litigations. The following analysis will have a practical
utility:-
(1) The Indian courts are heavily overloaded. Recently on 16th
Feb 2009, it was reported in a news item that in Delhi High Court, a bench is
disposing about 13,800 cases in a year. While making a comparison, it was
informed that similar bench in UK disposes only 150 cases in a year. This means
that our courts are overburdened nearly 90 times. If the aspects of management
and technology is also considered, our courts are much more overloaded even
beyond 90 times.
(2) The above is a stark reality which no one can shut his eyes.
The result is that the trials in almost all the cases will be defective. That is
why we have been emphasizing importance of review in almost all the interim
orders. If these initial defects are not corrected at the trial stage, the
Higher Courts will not be able to do anything.
(3) The civil suits in UK are decided in about one year. This
means if thorough work is done in our courts, the suits will take 90 years. That
is why we have been concluding that a thorough trial in DRTs will take 10 to 20
years.
(4) In view of above, we have been emphasizing our clients that
they have to organize their litigation of counter-claim on thorough basis. Since
the litigation is going to last for more than 10 to 20 years, the borrower must
concentrate earning of wealth.
(5) Under the above facts and circumstances, since in almost all
the cases, the counter-claim being much more than the claim of the lenders,
there is no debt due and hence the recovery action as per law can not take place
for the said period of 10 to 20 years, it would be worthwhile concentrating on
earning. This will also create a strength for better litigation as well as
settlement if any. All this is possible if one has prepared a thorough
counter-claim followed by thorough fight on every date. That is why we have been
emphasizing that the Counter-claim is the ultimate and the only defence for the
Borrowers in DRTs.
