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DRT Solutions Weekly Mail – 70th Issue dated 4th
September ’09
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above
(1) Power of Law & Power of Public in democracy is Supreme, even above the
Chief Justice, Supreme Court of India, case of RTI Act:-
Power of Law and Power of Public in democracy is supreme, even it
is above the Chief Justice, Supreme Court of India as may be seen from the
news item “Chief Justice’s Office falls under RTI:HC” vide Pg 2, The
Economic Times, 3rd Sept ’09 Mumbai, extract reproduced below:-
“It is a ruling which will have far reaching implications for the
higher judiciary, the Delhi High Court on Wednesday (i.e. 2nd
Sept ’09) said the Chief Justice of India is a public authority and his
office falls within the purview of the Right to Information Act. The
information about the disclosure of assets given to the CJI by the judges at
the time of their appointment shall be revealed to the public in accordance
with the provisions of the Act, said the court. It is in sharp contrast to
the Chief Justice of India KG Balakrishnan’s stand that his office was
outside the ambit of the transparency law.
“CJI is a public authority under the RTI Act and the CJI holds the
information pertaining to assets declaration in his capacity as Chief
Justice. That office is a public authority under the Act and is covered by
its provisions, “ said Justice Ravindra Bhatt.
The court said “declaration of assets by the Supreme Court Judges
is an information under the Section 2(f) of the RTI Act. The information
pertaining to declaration given to the CJI and the contents of such
declaration are information and subject to the provisions of the RTI Act.”
The HC turned down plea of the SC, which has said that the disclosure of
information on assets given to the CJI by other judges was ‘unworkable’.
(2) Justice can often be done better by a good layman than by a bad lawyer:-
The following extract from Page 76 of the book “Natural Justice” 2nd
Edition, by Paul Jackson, 1st Indian Reprint 1999 published by
Universal Law Publishing Co. New Delhi is self explanatory:-
Lord Denning, resiling slightly from what seemed to be the absolute
rule he had propounded in
Pett,
admitted that
“It may be good thing for the proceedings of a domestic tribunal to
be conducted informally without legal representation. Justice can often be
done in them by a good layman than by a bad lawyer” (at p. 605)
Our Comments
(1) Our experience from various All India Cases in the DRTs show
that the Borrower litigants must hire services of experienced trial lawyers
( at least 15 to 20 years) in DRTs instead of inexperienced DRT Lawyers who
have no previous experience of any trial in civil courts.
(2) The litigants must attend all the dates and watch performance
of experienced trial lawyers before hiring their services .
(3) It is needless to mention that the stakes of the litigants are
highest and any lapse as above will be near impossible to correct in higher
courts .
DRT Solutions Weekly Mail – 69th Issue dated 28th
August ’09
(1) Comments on the M.J. Antony’s Column in 'Business Standard':-
Our clients from Pune, Ludhiana and Mumbai have made a reference to
the contents of the recent column of Mr. Antony in 'Business Standard' titled
‘Debt collection pangs’/ August 26, 2009. Our comments are as under:-
(a) The recourse to remedy under law is available to every
citizen including a borrower. Such action should not be termed as ‘stalling
recovery proceedings’ If the lenders desire expeditious recoveries, they
should seriously carry out legal audits before approaching the court of law.
The courts are not meant to perform the functions of bank recoveries.
(b) Further it is wrong to term the recent statutes as
‘powerful weapons in the hands of banks and financial institutions in the
matter of non-performing assets ’
(c) The new courts and the recent statutes in the form of
DRTs and the new Acts will also serve as a platform to bare open quickly
(which was not so in civil courts) the wrong doings and misdeeds being
committed by the beauracracy in banks and financial institutions .
(d) On the same fundamentals, if claims of the banks are
intended to be decided expeditiously, the counter-claims of the borrowers
will also, in turn, will be decided quickly. With passage of time, the Debts
Recovery Tribunals may also become Damages Recovery Tribunals.
(e) If the law of the land goes against the banks (i.e. one
of the parties), it should not be termed as ‘blow to the fast track
procedure envisaged by the SARFAESI Act)
In judicial process whether normal or fast track, none of the
courts has any power and authority to cause any injustice.
(f) As a whole, a mature judicial mind should not talk about
any judgment going against anybody rather the outcome should be accepted as
attaining justice for the deserving party whether bank or borrower.
(g) It is wrong to say that ‘clever borrowers can put impediments
and dodge their obligations by moving the civil courts’ Everybody including
the borrowers have full rights to defend themselves using the available
provisions of law.
(h)
Mr. Antony is not aware about the counter-claims, damage suits and
intricacies of trials in DRTs. There is no short cuts to the road of
justice. The procedure of civil courts which were taking 15 to 20 years can
not be just compressed to 6 months in case of DRT Act or 2 months in case of
Securitisation Act rather the actual cases will take much more than the said
15 to 20 years for the simple reason that the procedures are also to be
developed in DRTs which was already so in form of CPC 1908 in civil courts.
(i)
The SC judgments like 'Indian Overseas Bank vs Ashok Saw Mills' decided on
16.7.09 being in all favour of Borrowers show the tremendous powers
possessed by DRTs.
(2) Legal Issues - Counter-claim or Damage Suit must be based on the
Constitutional Law and Administrative Law including Principles of Natural
Justice :-
We have received several queries on legal issues to be framed
during the trial of Counter-claim or Damage Suits filed by the Borrowers.
Our comments are as under:-
a)
Any dispute to be resolved by any trial court
including DRTs involves Issues of Facts and Issues of Law vide O-14 of the
CPC 1908.
b)
It is assumed that perfect pleadings have been
drawn up by a person having mastery of facts and mastery of law.
c)
We have dealt with factual aspects in various
weekly mails in past and hence the same is not being repeated here .
d)
None has paid adequate attention to the aspects
of framing of legal issues. If proper provisions of law i.e. constitutional
law and administrative law including principles of natural justice are
applied, numerous legal issues will emerge .
e)
In certain cases, we have drawn up the pleadings
based on the above provisions of law. It will take some time when the stage
of framing of issue comes .
DRT Solutions Weekly Mail – 68th Issue dated 21st
August ’09
(1) Bandwagon of ‘Public Funds’:-
One of our
clients at Chandigarh who is forwarding our weekly mails to his circle, sent
an interesting reply from a Manager of a Financial Institution reproduced
below. As per our policy, we don’t disclose the identities as interaction on
concepts are more important than the person concerned. The said mail and our
comments are as under:-
Shri
We have
gone through your mail as below, giving showing how the public money is
lying unutilized at DRTs.
You would
appreciate that Money invested by banks and/or public financial
institutions in the projects are also public money, for which they are
bound to repay to publics with interest etc. If promoters will not repay
their dues, bank/public institutions are bound to repay public and for this
act these institutions will again borrow money from public. By using these
deed of act their health deteriorate , therefore, is not the moral
responsibility of the promoters to repay their obligations.
Please
note that the above communication is issued without prejudice to the
litigation matter filed by against you in DRT.
Manager
(1)
In British
days, the Courts had limited work and were working comfortably. The
fundamentals of Management is that anyone including the Judge is a human
being. The workload should be designed in such a manner that as any other
employee, he should be able to complete his thorough work during the office
time.
(2)
As soon as
we got freedom, the scenario changed completely on account of following
factors:-
(a)
We collected
all the constitutions of the world and designed our constitution by taking
bests among them .
(b)
We never
bothered to conceive as to what will be its impact of courts overworking and
management .
(c)
The
important aspects of our constitution were (i) Fundamental Rights of the
citizens which never existed in British days and (ii) Separation of
Executive, Legislative and Judicial functions with the built in concepts
that the public being the Master will have ultimate control over the
bureaucrats in the said 3 functions i.e. Executive, Legislative and
Judiciary .
(d)
On account
of above, tremendous load (something like 100 times ) came on the courts.
But no body bothered to introduce Judicial Reforms till date .
(e)
It is
mockery of law and justice as the system does not have even adequate time to
adjourned the cases. The Judiciary kept itself isolated without getting it
examined by Management Experts or introducing any modern technology .
(f)
It is sad
that our Judges (even Supreme Court) visit the developed countries but never
bother to change the system in our country .
(g)
Now all the
information is available on internet. Our courts are in bullock cart age.
The judges and advocates are using latest mobile, cars and other gadgets but
in court room they don’t want to introduce the latest technology and
management systems .
(h)
On account
of above a Civil Suit in our courts take 15 to 20 years as against 9 month
USA with highest level of quality .
(i)
Instead of
improving the civil court we created DRTs with only change that the time
schedules have been laid down for the bullock cart. Instead of 15 years we
have laid down the time as 6 months. Since DRTs were found taking time, we
created Securitisation Act reducing the time as 2 months. It is nothing but
mockery of highest order .
(j)
In view of
above, let us examine the advocacy being carried out by the Banks and their
Advocates. They want to justify the coercive enactment on the bandwagon of
‘Public Funds’ In their conduct and behaviour they are not clear about the
‘Public Fund’ as may be seen from the following analysis .
(k)
In democracy
everybody is governed by Rule of Law to achieve Justice. The Rule of Law is
contained in Constitution of India and for DRTs in addition there is
governance of Principles of Natural Justice .
(l)
They say we
want to follow norms of NPAs as in developed countries. That is totally
mistaken because the courts are not on international standards .
(m)
Securitisation Act 2002 could only be enacted along with Lenders’ Liability
as in developed countries. We have not done so even after 7 years .
(n)
It was
proposed in 1984 that the DRTs will be manned by persons having knowledge of
banking, industry and finance. That has not been done even after 25 years .
(o)
After the
enactment of Bank Nationalization Act in 1969, the method of lending was
changed from Security Oriented to Project Oriented i.e. there should not be
any securities like personal guarantee and collateral except the
proportionate value of mortgage assets .
(p)
It is sad
that proper appraisals are not being done, enhancement of limits and revival
or rehabilitation takes huge amount of time and the unit is loaded with all
costs of delays .
(q)
Since the
above things are not being done, it can only be said that the bank
officials are making only fools statement about the “Public Funds’ as they
themselves are committing numerous defaults and wrong doings as mentioned
about. When some one comes before court of law, he should have clean hands
otherwise he is not entitled for any relief .
(r)
This is just
for information that all the above facts are pleaded by us in counter-claim
and or damage suit. In almost all the cases, the damages are more than the
claim of the bank and hence there is ‘No Debt Due’ Our contention is that
you pay our money we shall immediately pay your so called ‘Public Funds ’
(s)
We repeat
that No businessman will commit any default so long he is earning money. If
there is any problem of non-payment, it is on account of his business
suffering. If the banks and institution care for ‘Public Funds’, they should
help in setting right the business and not mindless recovery that too out of
his savings and survival which was so in British days but not in our welfare
state. In all the cases being handled by us the said mindless approach
vanishes when these officials are cross-examind. The best recovery is by
running of the business and not coercive recovery like Pathans .
DRT Solutions Weekly Mail – 67th Issue dated 21st
August ’09
All Weekly mails right from 1st Issue to latest, click links
below:-
(1) Strategy for Satisfactory Trial in DRTs:-
We have received several queries regarding the strategy for
satisfactory trial in DRTs. Our comments are as under:-
(1)
DRT is a specialized Trial Court for judicial
determination of material facts in the matter of DRT Act and Securitisation
Act. It is first stage of trial in the hierarchy of judicial process .
(2)
Many of the problems are being faced by the
defendant litigants as they are unable to find suitable trial lawyers for
DRTs. In fact, even in civil courts, competent trial lawyers are limited in
numbers and such lawyers are extremely busy and hence they are unable to pay
any attention to the newly created tribunals like DRTs and DRATs intended to
be guided by the Principles of Natural Justice rather than the CPC. Such new
tribunals and the new procedures could not attract the established trial
lawyers. We have observed that most of the DRT lawyers are young advocates.
On account of these reasons, we have been advising our clients to involve
themselves under our guidance and advice. Many of such clients who have
followed our advice have been greatly benefited .
(3)
One must study the law laid down by the Supreme
Court in the matter of Swaran Lata vs Harendra Kumar vide citation AIR 1969
Supreme Court 1967 Para 6. As per Article 141 of the Constitution of India,
the law laid down by the Supreme Court shall be binding on all courts in
India. Hence the DRTs being courts, the said judgment in the matter of
Swaran Lata shall be binding on the DRTs.
(4)
The DRT Act 1993 does not bar application of Law
of Torts and Law of Evidence .
(5)
As per the DRT Act 1993, the DRTs shall not be
bound by the CPC 1908 but shall be guided by the principles of natural
justice. As per the law declared by the Supreme Court in the matter of ICICI
Bank vs Grapco Industries vide citation AIR 1999 Supreme Court 1975, on
account of the principles of natural justice, the DRTs can even travel
beyond CPC 1908. Thus scope of DRTs is much wider than the civil courts. As
an example, in CPC, no appeal can be made against the order of Review,
whereas in DRTs all orders including Review are appealable .
(6)
The DRTs and DRATs right from inception i.e.
conceptual stage in 1984, are supposed to be manned by persons having
knowledge of banking, industry and finance. So long as this is not being
implemented, the borrower (including his advocate) will have to pay special
attention to the technical aspects relating to the material facts concerning
banking, industry and finance. If the opposite side or the PO raises any
objection, his attention can be drawn to the Report of the Tiwari Committee
published by RBI in 1984.
(7)
The DRT Act and Securitisation Act are focused
and conditional enactments aiming at efficient operations. Beyond the
content of the enactment, nothing has been done regarding management and
technology. Civil Courts used to take 15 to 20 years against which the DRT
Act aims at 6 months and Securitisation Act aims at 2 months. It is only in
respect of ignorant clients, cases are being decided quickly. Such cases
mostly involve small amounts. On the other hand, legally strong defendants,
the matter is even taking more time compared with the civil courts as the
additional aspect is development and evolution of procedure .
(8)
One has to be thorough and strict right from the
day one as well as on every date. The pleadings should be drafted by person
having mastery of facts and mastery of law. It is needless to mention that
the counter-claim/damage suit is the only and ultimate defence. Efficient
and experienced trial lawyer be employed so that adjudication on all dates
is perfect and complete. Cross-examination of bank officials must be
conducted by a person having mastery of fact relating to banking, industry
and finance as well as law of evidence .
(9)
It is needless to mention that the courts
including DRTs in our country are highly overloaded and hence emphasis being
on disposal rather than decision results in injustice to the borrowers and
guarantors. The higher courts also being heavily overloaded rarely interfere
with the judgments of the DRTs. That is why repeatedly tell our clients that
the DRT is the only and last court for trial of facts. If this aspect is
ignored, no corrective measures should be expected from the higher courts.
(10)
We are approached by many borrowers who did not pay attention to all the
above aspects and as a result the trial in DRT was totally defective and
incomplete. It becomes an Herculean task to handle such cases. Further
complications are created due to inactions in lower courts and deposits in
higher courts .
(11)
On account of above, we have been empowering our clients right from the day
one. Those who have heeded to our guidance are in much better position. In
many cases the banks are approaching them to settle the matter at 20%, 10%
and even less than 5%.
(12)
We shall be glad to guide our clients right from the day one. The only
requirement is that the client himself will have to take the lead and
constantly interact with his advocate.
(13)
We are confident that in future when the DRTs will have supervision of
public so that they have independent and impartial views, when advocates and
judges trained in banking industry and finance will be manning the DRTs,
benches are increased so that there are only 2 to 3 cases per day, modern
management tools and technology is used, lenders’ liability bill is enacted,
no personal securities/collateral are taken, RBI has real control over the
banks, few cases of damages are decided against the banks etc., the present
scenario will change. The time frame is highly uncertain and unknown. It is
interesting to know that UK took more than 150 years to achieve effective
and efficient tribunals. It needs high level of courage to adopt the
judicial system developed in USA and UK which gives more emphasis to achieve
justice rather than disposal and recovery as in our country.
(2) India in 1835:-
Mr. K.C. Maheshwari of Indore has sent an interesting mail, extract
reproduced below is self explanatory:-
LORD MACAULAY'S ADDRESS TO BRITISH PARLIAMENT.
FEB. 2 , 1835
"I have
traveled across the length and breadth of India and I have not seen one
person, who is a beggar, who is a thief. Such wealth I have seen in this
country, such high moral values, people of such caliber that I do not think
we would ever conquer this country unless we break the very back bone of
this nation, which is her spiritual and cultural heritage and, therefore, I
propose that we replace her old and ancient education system, her culture,
for if the Indians think that all that is foreign and English is good and
greater than their own, they will loose their self esteem, their native
culture and they will become what we want them a truly dominated Nation."
DRT Solutions Weekly Mail – 66th Issue dated 14th
August ’09
DRTs, Background and Fundamentals of Law:-
We have received several queries and concerns on the recovery
oriented expeditious approach of DRTs. Our comments are as under:-
(a)
Formation of DRTs was proposed by Tiwari
Committee vide the RBI’s 1984 publication titled ‘Report of the Committee to
examine the Legal and other difficulties faced by Banks and Financial
Institutions in Rehabilitation of Sick Industrial Undertakings and suggest
Remedial Measures including changes in Law ’
(b)
At page 77 of the said Report, setting up of
special Tribunals was proposed. It was said that these tribunals (DRTs and
DRATs) should be manned by persons having specialized knowledge in the
functioning of banks, financial institutions and industry .
(c)
Accordingly the DRTs and DRATs were established
consequent on enactment of DRT Act 1993. The constitutional validity of this
Act was questioned by the Delhi Bar Association in 1994. Before declaring
the said validity in 2000, the Supreme Court of India asked the Govt to
amend the said Act and accordingly the provision of Counter-claim was
incorporated in DRT Act in 2000 .
(d)
The DRTs so far have been manned by only Legal
Persons i.e. the level of District Judges in DRTs and by High Court Judges
in DRATs; thus the original recommendation as in (b) above has not yet been
implemented. This is a major deficiency in present working of DRTs. The
material facts relating to banking, industry and finance are not being
properly understood and adjudicated upon and hence most of the trials in
DRTs continue to be defective. Such defects can not be corrected or cured by
the higher courts as they also are headed by only legal persons. We have
emphasized these defects since 2001 in our web site as well as in our
various articles published in ‘Financial Express’ and ‘Economic Times’ The
litigant borrowers must keep this aspect in mind and take remedial measures
in pleadings and adjudication on all dates at all stages .
(e)
As per Sec 22 of the DRT Act 1993 relating to
‘Procedure and Powers of the Tribunal and the Appellate Tribunal’, it is
laid down that these tribunals shall not be bound by the procedure of CPC
1908 but shall be guided by the principles of natural justice. The scope of
the principles of natural justice is much wider than the CPC. The litigant
Borrower must have in-depth study of the same. Incidentally it is mentioned
that originally the said principles were evolved for the Judges and later on
inducted into Administrative Law. This is another most important aspect in
DRTs. The litigant Borrowers must be quite vigilant and alert that on all
dates at every stage, the said principles are not violated by the Judges
(known as POs i.e. Presiding Officers of the DRTs or Chair Persons of the
DRATs) as well as the Bank Officials .
(f)
As per the said Sec 22, it is further laid down
that these tribunals shall have powers to regulate their own procedure. This
is yet another important aspect. The borrowers should be alert and vigilant
that any procedure evolved by the DRTs and DRATs should not violate the
principles of natural justice and Constitution of India as well as the law
laid down by the Supreme Court of India. Trial has to be conducted as laid
down by the Supreme Court in judgments like Swaran Lata vs Harendra Kumar
vide citation 1969 Supreme Court 1967 para 6. Further vigilance is required
in respect of adherence to the Indian Evidence Act 1872. It is needless to
mention that the CPC 1908 has taken nearly 200 years to evolve. Further the
procedures of Tribunals has taken more than 150 years to evolve in UK. Hence
the procedure of DRTs and DRATs also will take several decades in our
country .
(g)
The DRT Act 1993 and Securitisation Act 2002 are
ambitiously conditional with reference to time i.e the matter to be decided
within 6 months. This is ridiculous. On one hand, the evolution of
procedures itself will take several decades; the principles of natural
justice being wider than CPC; the normal time in DRT trial will be much more
than the civil courts which take 15 to 20 years. This is more so that the
working continues to be manual without any new technology. Computers were
provided to all the judges in July 2007 with 3 months training (Rs. 40
crores of public money was spent) and despite all pressures by the High
Courts and Supreme Court, the said computers are still not being used by the
Judges .
(h)
In view of above, the Judges in DRTs (being only
legal persons and not having specialized knowledge of banking, finance and
industry), guided by principles of natural justice (which is more wider than
CPC), not having suitable procedure evolved and without any modern
management and technology will commit several defaults in trial which will
only be counteracted by alert and vigilant litigant borrowers resulting into
proper trials (which of course will take several years )
(i)
The litigant borrowers have no option but to use
the only and ultimate defending tool of damage suit/counter-claim in the
above mentioned trial otherwise the trial will be incomplete and whole case
will be lost .
(j)
The most important stages are pleadings,
discovery of facts in documents and cross-examination for all these we have
developed special expertise .
(k)
If the above is not understood and done by the
litigant borrowers, the case will be quickly decided against him. The lapses
and defects will be very difficult to cure in the higher courts. The appeal
has been made very difficult due to near impossible condition of deposits
which is inherently be cured in the original trial otherwise will be
difficult in higher court .
(l)
Thus for the knowledgeable litigant borrower, the
DRTs offer an unique opportunity to get all the material facts judicially
determined. If the process is hurried, there is possibility of quicker
decision on the counter-claim compared with the civil courts. In fact many
of our clients have greatly benefited by our guidance and advice as well as
the empowerment provided by us which in turn help their advocates .
(m)
It is needless to mention that we have done lot of research and accordingly
use fundamentals of law enshrined in Jurisprudence, Principles of Natural
Justice, Law laid down by the Supreme Court and Constitution of India at
every stage right from the pleadings and trial on every date. That is why
our article published in ‘The Financial Express’ in 2001 was aptly titled as
‘Who’s afraid of debt recovery tribunals?’ and since then our belief is
getting more and more strengthened when our clients are achieving success in
their cases. The day is not far when the ‘Public Servants’ in Judiciary and
Banking will be dethroned with the application of law and procedure of law
and the ‘Public’ will guide and monitor the management and functioning of
the tribunals as in UK and USA. The present litigants have an important role
to play to achieve leading judgments. They should bear the pain and
sufferings which is a price to be paid to achieve the real democracy. They
should not be disheartened and demoralized due to present emphasis only on
recovery by hook or crook in the cloak of judicial process. Persistent and
strict adherence to law and procedure of law will alone enable to achieve
complete and ultimate justice.
DRT Solutions Weekly Mail – 65th Issue dated 7th
August ’09
(1) Defence Strategy in respect of Securitisation Act:-
The
Banks and FIs are giving preference to invoking Securitisation Act for
expeditious recovery of their alleged overdues. Many of our clients have
been repeatedly approaching for knowing and understanding overall strategy
to be adopted by the borrowers in defence. Our views are as under:-
(a) The RBI Guidelines in respect of NPA should be studied
thoroughly well.
(b) If there is any likelihood of account becoming NPA on account
of wrong doings of the bank, one should make necessary preparations to
counteract the impending Notice under Securitisation Act. First of all he
should study the Securitisation Act with emphasis on Sec. 13 and onwards of
the said Act.
(c) It must be understood that as soon as the said Notice is
received, the borrower will get 60 days free time during which he must make
his representation or objection to the bank .
(d) As per the scheme of the Act, the secured creditors have been
vested with powers to take actions mentioned in Sec. 13 of the Act without
intervention of the court of law. Thus for such provisions they are required
to act just like a court to discharge their functions in a quasy judicial
manner under Administrative Law keeping in view the principles of natural
justice. The Supreme Court in the matter of Mardia Chemicals has also said
that the said proceedings has to be conducted by the ‘Internal Mechanism’ of
the secured creditors.
(e) As per Sec. 34 of the Act, no civil court shall have
jurisdiction to entertain any suit or proceeding in respect of any matter
which a DRT or DRAT is empowered by or under this Act to determine and no
injunction shall be granted by any court.
(f) We have repeatedly advised that the counter-claim or damage
suit against the lender is the only and ultimate defence .
(g)
In view of above facts and circumstances, the borrower must prepare his said
representation or objection just like a total defence containing all the
wrong doings of the secured creditor as well as the loss and damages
suffered and address the same to the authorized officer as if the same is
being submitted to the said ‘Internal Mechanism’ (a quasy judicial court)
(h) As per the Act, the secured creditor is required to consider
the said representation or objection within 7 days and communicate the
reasons for non-acceptance if any. As per the Supreme Court in the matter of
Mardia Chemicals, the said consideration should be with due application of
mind. Thus the said ‘Internal Mechanism’ or the said quasy judicial Court of
the secured creditor must adjudicate the said representation or objection
keeping in view the principles of natural justice .
(i) Under the above facts and circumstances and when the loss and
damages are much more than the claim of the bank i.e. ‘No Debt Due’
situation, even any action under Sec 13(4) becoming questionable, a solid
foundation for defence is laid down .
(j) Further any notice under Sec 13(4) for symbolic possession with
paper publication becomes cause of action for filing appeal under Sec 17
before DRT .
(k) As per Sec. 13(10) of the Act where dues of the secured
creditor are not fully satisfied with the sale proceeds of the secured
assets, the secured creditor may file an application in DRT for recovery of
the balance amount .
(l) As per the Supreme Court, the said Appeal under Sec. 17 of the
Act is akin to a civil suit. The foundation already laid down in the said
representation or objection along with the decision of the said ‘Internal
Mechanism’ will now provide complete defence in the said civil suit in form
of the action under Sec. 17 .
(m) As per Sec 17(3), the DRT is required to examine the facts and
circumstances of the case and evidence produced by the parties.
(n) As per the Sec 17(7) of the Act, the DRT may dispose of the
application u/s 17 in accordance with provisions of the DRT Act.
(o) If all the above is considered together i.e. civil suit as per
Mardia, bar of civil court, judicial determination of facts based on
evidence and application of principles of natural justice; the proceedings
in DRT emerges to take shape of complete proceedings of a suit with
procedure based on principles of natural justice. As per the Supreme Court,
the procedure under the principles of natural justice can travel beyond the
Civil Procedure Court and hence even there are no limitation of CPC, the
scheme of the Act is self sufficient, exhaustive and exclusive with the aim
to attain complete justice .
(p) All the above aspects are to be pleaded properly by the expert
persons having mastery of facts relating to banking, industry and finance
and mastery of law of torts, damages, banking, evidence, principles of
natural justice. One has to be perfect on every date and in every
proceedings. All the material facts need to be judicially determined. All
the affidavits submitted by the bank officials be examined thoroughly.
Ultimately much will depend on the cross-examination of bank officials which
must be conducted by the experts in banking and evidence. It is needless to
mention that we have highly trained persons for such cross-examinations.
(q) We are just carrying on the court system established by the
British for their Police Raj with practices and legacies of without any
fundamental rights of the citizens, without any separation of powers and no
action against the state or state bodies. The banks continue to behave with
practices based on security oriented financing with least effect of
nationalization and project oriented finance where the payment of interest
and repayment of loans is out of profit instead of any security .
(r) In developed countries like USA, the time schedule for suits is
9 months and that too when they have highly developed applications of modern
management, latest IT technology, humanly possible workload on judges,
specifically trained advocates and judges, public monitored tribunals,
unbiased and independent tribunals, highly developed and efficient revival
and rehabilitation mechanisms etc .
(s) With passage of time, judicial system in our country also will
improve. The borrowers now are getting much better informed and equipped
particularly due to growing literature, precedents of bottom courts
available for analysis and internet resources. They inturn will empower
their advocates which will definitely have snowballing effect on the judges.
This is how the law is developing in the bottom courts. Much will depend as
to how the cases are pleaded and contested at every point of adjudication at
every point of time and ultimately the verdict given by the Supreme Court .
(t) Hence if one is thorough at every point of time, the
adjudication in DRTs will take considerable time which not only will make
the case strong but the advantages of future developed judicial system will
also accrue to such litigants. In this respect again the adjudication of
counter-claim or damage suit will prove to be the highest determining factor
of ultimate and final defence. As a whole one has to be always careful that
until and unless all the material facts are judicially determined, the
matter should not be moved to higher courts and if any occasion arises to
move to higher courts, it should be confined to such matters only where
facts have been judicially determined and decisions on legal issues if any
only are required and not otherwise.
(u) The borrowers are entitled for the above exhaustive and perfect
approach on account of highest possible powers donated to the creditor for
the simple reason as to when the powers are high, the standard of duty is
also correspondingly high. The approach has to be more cautious due to
obvious smell of partisan and biased approach of the DRTs towards the
alleged secured creditors .
(2) Concepts and Law relating to ‘Possession’ and ‘Ownership’ particularly
with reference to the Securitisation Act:-
The borrowers must study the concepts and law relating to
‘Possession’ and ‘Ownership’ particularly with reference to the
Securitisation Act. Our views are as under:-
(a)
Any good book on ‘Jurisprudence’ i.e. Science of
Law has separate chapters on ‘Possession’ and ‘Ownership ’
(b)
Even separate books are available on these two
important topics .
(c)
Concept of ‘Possession’ is multi-faceted and
multi-dimensional. Possession may be ‘constructive’, ‘permissive’,
‘symbolic’, ‘prescriptive’, and ‘adverse’. In law possession means a
capacity of a person having such control on property that he legally enjoy
it to the exclusion of others having no better right than himself .
(d)
Possession has also the effect of creating
ownership either by obtaining control by the user and possession for a
length of time prescribed by law which is technically known as prescription .
(e)
In the legal sense, the term ‘ownership’ carries
the connotation of right over a thing to the exclusion of all other persons.
It implies noninterference by others in the exercise of that right and must
be distinguished from mere holding a thing in one’s possession. Normally the
ownership implies the right to possess, the right to use, the right to
manage, the right to the capital and right to income .
(f)
When these concepts are specifically applied to
the matters being dealt with under the Securitisation Act, the actions under
Sec 13(4) can only be initiated when there is ‘Debt Due’ and all efforts to
‘Revive and Rehabilitate’ have failed. Further notice for ‘Symbolic
Possession’ with advertisement will be the cause of action to approach to
DRT by an application (akin to a civil suit) under Sec 17 of the Act.
Consequently till the said suit is finally decided, the physical possession
and ownership of the alleged secured assets of the borrower can not be
disturbed.
DRT Solutions Weekly Mail – 64th Issue dated 31st
July ’09
(1) Multiple Recovery Actions by Banks - Comments:-
We have observed that the Banks are indulging in multiple recovery
actions. Our comments are as under:-
(a) In one of the cases at Mumbai, the bank invoked Securitisation
Act. Our client filed an appeal under sec 17 of the Securitisation Act.
During the pendency of the said appeal, the bank also invoked the DRT Act.
The later action needs to be questioned on account of following reasons:-
(i) The Securitisation Act is itself a complete code. Invoking DRT
Act results in multiplicity of litigations involving avoidable costs and
time. Further there may be contradictory decisions on interlocutory
applications or during the various stages of adjudications resulting into
injustice .
(ii)
The ratio decidendi in Transcore is entirely different and hence the same is
not applicable in the above facts and circumstances.
(iii) In view of above, an application may be made and filed in DRT
to withdraw the OA. If the verdict of the DRT is not in favour of borrower,
the order must be reviewed and appealed to higher courts .
(2) WS on Counter-claim received from Bank – Legal Actions thereon :-
One of our clients at Ranchi has received WS (filed by the bank) on
their counter-claim filed against the OA. Following actions need to be
taken:-
(a) In most of the cases, the banks deny all the facts pleaded by
the borrower in his counter-claim. Such facts must be examined by an expert
having knowledge of banking, industry, finance and law .
(b) In all the bank litigations including this case, the facts are
contained in the documents and all documents are in power and possession of
the bank. Hence all the relevant documents must be inspected in original.
The bank is duty bound to provide the certified copies of the said
documents.
(c) After having copies of all the documents, the borrower must
study all the documents from all the angles and then issues must be framed
and settled .
(d) After getting the claim affidavit, the borrower must initiate
actions for cross-examination of the bank officials .
(e) All the bank officials (specifically including the Chairman of
the bank and the Branch Manager and other bank officials) should be
cross-examined by a person having mastery of facts (relating to banking,
industry and finance) and mastery of law of evidence. The aim is to get all
the relevant facts wrong doings judicially determined including admission
by the bank officials .
(f) The complete evidence of the bank officials must be video
graphed .
(g) The final arguments must be held by legal experts having
mastery of facts and mastery of law .
(h) We have trained and expert persons available for all the above
functions.
DRT Solutions Weekly Mail – 63rd Issue dated 24th
July ’09
All Weekly mails right from 1st Issue to latest, click links
below:-
1-10
11-20
21-30
31-40
41-50
51-Latest
(1) Export Credit & Customer Service to Exporters – RBI Master Circular:-
(a) The RBI in Para No 2.6.2 of the RBI Master Circular No DBDO.DIR
(Exp.) BC.01/04.02.02/2007-08 dated July 2, 2007 has stated that “ As the
post-shipment guarantee is mainly intended to benefit the banks, the cost of
premium in respect of the Whole Turnover Post-Shipment Guarantee taken out
by banks may be absorbed the banks and not passed on to the exporters.
(b) The above has also been informed by the FIEO News in its May
2008 issue. The FIEO (i.e. Federation of Indian Export Organisations) has
been setup by the Ministry of Commerce, Govt. of India). Any complaint as
above against the banks may be lodged with the FIEO with copy to RBI. This
may also be pleaded as one of the wrong doings in the counter-claim/damage
suit filed against the banks, OA Dismissal Application and or the Appeal u/s
17 of the SARFAESI Act. Further the vouchers and relevant documents of the
banks may be called while calling for production and or inspection of
relevant documents during trials and cross-examination.
Our Comments :- In most of the cases, it is observed that the
banks are passing on this expanses to the exporters. Hence complete accounts
right from the inception may be checked up and the Banks asked to correct
such wrong debits.
(2) Precautions & Prudence for Entrepreneurs with particular reference to
DRT Litigations:-
We are having constant interactions with the entrepreneurs facing
litigations in DRTs. Our observations are as under:-
(a)
Entrepreneurs are the real change agents for the
society. Any society desiring rapid development and growth should create
such environment which encourages the entrepreneurs and entrepreneurship.
USA is the foremost among such societies. In India, all odds are against the
entrepreneurs .
(b)
The entrepreneurs desire wealth, power and
status.
(c)
There are productive and unproductive
entrepreneurs. Here we are concerned with productive entrepreneurs in the
arena of business and industry .
(d)
There are all attractions and allurement for the
entrepreneurs by the Govt agencies like Deptt. of industry, banks and
financial institutions. Red carpet welcome is given to new entrepreneurs.
Nobody talks about the pitfalls, problems and agonies during disputes
arising even out of circumstances which are beyond control of the
entrepreneur.
(e)
Most of the entrepreneurs are so enthusiastic
that do not look to the ground realities even for the negative aspects .
(f)
We have seen that the entrepreneur has worked
hard, created residential properties for self use, created wealth for old
age but the banks and financial institution insist for having such
properties as collateral and his personal funds to be invested as equity.
Further he is made indebted to his relatives and friends .
(g)
It is pathetic to find that there are inordinate
delays by the banks in sanctions of limits, revision in limits etc and as a
result the business becomes sick. Huge time and resources are consumed in
the exercise of Revival/Rehabilitation etc. Studies after studies are
conducted for the viability. Despite positive studies, the revised funds are
not sanctioned. During such period, the business catches chronic sickness
and hence the rehabilitation is not done. During such period the
entrepreneur is sucked out financially and rendered even penniless. After
such stage recovery actions are initiated .
(h)
It becomes a fight between mightiest with the
weakest. In fact such recovery actions should not be entertained by the
courts as is done in some countries. But our bureaucracy in banks so cruel
that not only suits are filed, they are contested with all might leading to
recovery certificates.
(i)
Under the above facts and circumstances, the
entrepreneur should first pay attention as how wealth is generated .
(j)
It is well known that DRTs and Courts are biased
towards the borrower litigants. Hence the fight becomes all the more
difficult .
(k)
There are many alternatives/options/plans as to
earn wealth so that first survival is ensured .
(l)
The court battle is long drawn, time consuming
and hence expensive .
(m)
Earlier the Civil Courts were offering lot of time for litigations but those
situation has been altered with the onset of DRTs .
(n)
If the DRT/Court battle for the bank litigation
including counter-claim is fought thoroughly well on every date with mastery
of law and mastery of facts, there are chances to win against the banks.
(o)
We have observed that the bank litigations can
not be left to advocates only. The entrepreneur himself will have to take
active interest.
(p)
We have all along encouraged the entrepreneur to
fight the legal battle thrusted upon him treating the same as a new
opportunity. The legal knowledge is as essential as marketing, technology,
management, finance etc.
(q)
As emphasized the trial court like DRTs are very
important. It’s a foundation and hence success in DRTs is most essential
otherwise there is no scope for corrections in higher courts. Unfortunately
there is dearth of competent DRT lawyers. On account of sheer grabbing the
business, the advocates have brought down the rates to such a low level that
its not possible for competent advocates to work on such low rates. Hence
the entrepreneurs are advised not to be trapped by such advocates otherwise
the mistakes committed in trial will not be possible to be corrected later
on and the whole case will be lost completely .
(r)
Competent DRT advocacy requires lot of knowledge
and experience at every point of time. Lot of research is required to be
done as the whole atmosphere is against the borrowers. The major factor is
huge overburden on the Judges and as a result there is natural tendency to
dispose the matter rather than decision based on justice which itself
requires lot of time and energy.
(s)
Looking to the requirements, we offer complete
guidance and advice to the entrepreneurs at every point on every stage of
the bank litigations .
(t)
Our strength is treasure of knowledge and
experience focused on bank litigation for several years and still continuous
research being done. Further we are daily flooded with real problems from
our clients all over the country. Such active involvement further enriches
our knowledge and experience. Our team discusses and analyses each and every
such new problems to find out innovative solutions. Such knowledge and
expertise has its own cost but compared with the gains, such cost is peanut.
We prefer to be engaged in extending our services to professional clients
who also prefer and appreciate such services on account of results .
DRT Solutions Weekly Mail – 62nd Issue dated 17th
July ’09
(1) Balance Sheet of the Borrower & alleged Admission of Debt:-
One of our clients at Mumbai has raised a question whether the
borrowings shown in the balance sheet amount to admission of debt. He also
made a reference to a judgment of Bombay High Court. Our comments and
precautionary actions to be taken are as under:-
I.
No document including the Balance Sheet is to be
read in isolation. Complete correspondence, facts and circumstances are to
be taken into account and then only the Balance Sheet or its part can be
interpreted .
II.
If the lender has committed any wrong doing
resulting into loss and damages, the incidence of the said loss and damages
are to be considered in working out the debt due .
III.
In the 13th Issue of our weekly mail
dated 8th August 2008, on the topic of ‘Admission in Balance
Sheet’ we have already made the comments reproduced below:-
(a) Whenever copy of any balance sheet is sent
to the secured creditor or is filed in the Court of Law including DRT, it
must be clearly mentioned by way of ‘Important Note’ that:-
“The loss and damages caused to the borrower by
the lender is much more than the amount lent. Hence the figs of the borrowed
amount shown in this balance sheet after due adjustments with the said loss
and damages results in ‘No Debt Due’, rather the borrower is entitled to
recover substantial amount from the creditor. Under these facts and
circumstances, the figures of borrowed amount in this balance sheet can not
be considered as admission, if any, of the claim of the creditor .”
(b) Whenever any action is initiated by the
creditor based on the alleged admission in the balance sheet, reference can
always be made to the above ‘Important Note ’.
IV.
The borrower should also ask for the balance
sheet of the creditor to ascertain whether the debt has been written off or
the counter-claim or damage suit is not mentioned. These facts will
contribute towards admission if any of the creditor .
(2) Illegalities should not be allowed to be continued at any stage during
the DRT trials:-
The general observations about the DRT Trial is
that the system is biased in favour of the banks and FIs. Our observations,
comments and remedial measures are as under: -
(a)
It is well known that the trials in civil courts
take 10 to 20 years and even more. Hence the trend all over the world has
been towards Tribunals. In banking litigations, the DRTs have been formed
and NCLTs will come up .
(b)
In DRT Act, it has laid down that endeavour
should be made to dispose of the suit finally within 6 months. The suit
which was taking 10 to 20 year and even more is now intended to be within 6
months. Civil courts had certain limitation of CPC but in case of DRTs, the
said limitation has been removed and hence real trial in DRTs will take even
more time than the civil courts. Hence the POs in DRTs are in a fix as to
how to complete the trials in 6 months, which is practically not possible.
Hence they are inclined to adopt short cuts or violations of law and
procedure of law .
(c)
Under these facts and circumstances, the borrower
and his advocate must be quite vigilant so as not to allow any illegality at
any point of time. If it happens, one must immediately examine whether one
has to invoke jurisdiction of Review or Appeal. It is needless to mention
that the legal issues can be raised at any stage of the trial and one need
not wait for its being part of the entire trial. As per the principles of
natural justice, any illegality should not be allowed to be continued and
should be set right without any delay .
(d)
If there is any scope of Review, it must be filed
first. The Review Petition must be exhaustive followed by Oral Arguments and
Written Arguments. In complicated matters, we can even provide ‘Video
Arguments’
(e)
If the Review Order is not favourable, one should
file Appeal against the said Review Order (In CPC, appeal against Review is
not permissible, but in DRTs, since every order is appealable, review order
also can be appealed against )
(f)
The matter if needed will have to move the route
DRAT, High Court and Supreme Court .
(g)
The DRT Litigants have to prepared for the time
and resources consumed in the above process. The replies being submitted by
the bank in different courts must be kept in view. A persistent effort alone
will bring justice to the borrowers .
(h)
Many of our clients all over the country have
achieved tremendous success in getting justice by following the above
process .
(i)
As regards the time, it will take more than 10 to
15 years or more. The time will be cut down only when the Judges have only 1
or 2 cases per day, they use modern management and modern IT tools, the
judges and advocates in DRTs are imparted special training in banking,
industry, finance, management and technology etc. The DRTs should have
technical member having expertise in banking, industry and finance. Further
tribunals need to have supervision and control by citizen counsels as in USA
and UK. Till all these happen, the existing litigants will have to face the
brunt of long drawn battle and substantial resources as the mighty banks
will continue to fight from DRT to Supreme Court. It is assumed that the
borrower has filed a counter-claim/damage suit as it is the only and
ultimate defence .
DRT Solutions Weekly Mail – 61st Issue dated
10th July
’09
(1) Pleadings in Defendants’ Counter-claim in DRTs:-
The specific provision of counter-claim in DRT Act was made
by the Govt. in the year 2000 at the instance of the Supreme Court while
deciding the writ petition of Delhi Bar Association filed in 1994
questioning the constitutional validity of the DRT Act 1993.
Such provision is not a new matter e.g. such specific
provision of counter-claim was made in 1976 in the CPC 1908 .
There are several cases where counter-claims have been
awarded since 1976 in civil courts and on the same analogy, counter-claims
have been awarded in DRTs .
As has been emphasized on our web site since 2000, the
counter-claim is the only and ultimate defence in bank recovery cases being
adjudicated upon in civil courts or DRTs .
It is needless to mention that the person drafting the
counter-claim should have mastery of facts (relating to banking, industry
and finance) and law relating to banking, damages, torts, principles of
natural justice, CPC and accounts .
Since properly drafted counter-claim is a relatively new
phenomena in DRTs, we have found different practices in various DRTs through
our clients. Further in respect of Industrial Finance, the actual facts have
neither been pleaded nor adjudicated upon. Pleadings drafted by us are under
adjudication in various DRTs since 2001 .
Until and unless proper pleadings are made right from
inception, the results of such deficient pleadings will result in a most
important lacuna making the defence as weak right from inception.
It
is well known fact that the DRTs are inclined to act in favour of banks and
FIs. Many of the borrowers who rushed to DRTs without proper pleadings
quickly lost their cases. Since the DRTs are the technical tribunals with
relatively of recent origin, the procedures and judgments are getting
evolved. In next 5 to 10 years, some leading judgments are expected mostly
based on the pleadings submitted by our clients, exhaustive pleadings now
suggested by us may not be needed after 5 to 10 years. This is how law
evolves.
(2) Necessary Parties in Defendants’ Counter-claim in DRTs:-
We have been emphasizing that the Branch Manager and the
Chairman of the bank are the most essential necessary parties in the bank
litigations. The RBI since 1976 have laid down specific duties of the
Chairman in several RBI Guidelines and hence if the Chairman of the bank is
not made a party, those RBI Guidelines will not be fully applicable and
hence the desires of the Govt expressed through such guidelines will not be
implemented. Similarly the Branch Manager is another vitally important
party. Hence exhaustive pleadings about the Branch Manager and the Chairman
must be made, the relevant documents inspected and these officials must be
cross-examined to elicit the vital facts for judicial determination. Any
shortcoming, lacuna and or deficiency in this respect will render the case
of the borrower weak and the same will never be possible to be corrected
subsequently by any means.
(3) Important aspects in Defendants’ Counter-claim in DRTs:-
(1)
As
emphasized by us since 2001 on our web site, first and foremost is the
pleadings .
(2)
The
second most important aspect is perfect adjudication on each and every date .
(3)
The next
important aspect is judicial determination of facts by way of inspection of
material and relevant documents and cross-examination by persons having
mastery in evidence and banking.
(4)
If any
of the above point is missed or ignored, the case of the borrower will
become weak and the lacuna/deficiency will not be possible to be corrected
by any means afterwards.
(4) Response and Behavior of Banks towards Borrowers’ Counter-claim in
DRTs:-
(1) While
contesting the Borrowers' Counter-claims, the Banks have the role of a
defendants. As usual, they apply the same tactics to delay the matter as is
done by the defendants.
(2)
The response and behavior is quite different compared with the situation
when the bank is a plaintiff while pursuing its OA when they want to hurry
up and repeatedly mention about the importance and delay in recovery of
public funds.
(3) Such intentional delays caused by the
banks in fact delays the adjudication of their own claims. Since in all most
all the cases, the counter-claim is more than the claim of the bank, there
is 'no debt due' and hence the claim even if decreed can not be executed
until and unless the counter-claim is decided .
(4)
Usually the courts also do not pressurize to expedite the counter-claim as
compared with the OA, the counter-claims get delayed. Thus as a whole,
these facts and circumstances directly and indirectly help the borrowers
only.
(5) As emphasized repeatedly, the essential
requirements are perfect pleadings and perfect adjudication on all dates .
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