For reference of such judgments please click DRT Judgments Favourable / Useful to Borrowers

Legal Forum of India

The Indian Judiciary has huge pendency and is highly mismanaged as may be seen from the following facts:-

(1) Recently (vide news paper reports dated 02.04.11) the Supreme Court sitting judge G.S. Singhvi has said that 'Getting justice is a herculian job for common man - our system is miserably plagued by inordinate delay and exorbitant cost for getting justice. It is an irony that justice comes first in any civilized society but here even after six decades of the independence, we are still struggling with the idea of social justice.' In the same news item, Chairperson of the Rajasthan Bar council Mr. N.S. Choudhary said that cheap and easy justice is still a riddle in India, which amounts to the failure of Indian judicial system

(2) About an year back (vide news paper reports dated 07.03.10) Andhra Pradesh sitting judge Mr. V. V. Rao has said that there are more than 3 crore cases pending in Indian courts and it will take 320 years to clear the pendency. Now the pendency has increased to 5 crore pending cases.

(3) The well known Supreme Court Judge, Justice V.R. Krishna Iyer in his famous book 'Law, Lawyers and Justice' 1988 edition at page 133 had said that Indian Judiciary is backward by 200 years compared with developed nations.

(4) While all round judicial reforms are needed in  a comprehensive manner, we have mainly focused on improvement in management and application of modern technology in the Indian Judiciary. We have also spotted a practical area for implementation i.e. DRTs starting with defence of borrowers and guarantors. With such objectives we have held two All India Conferences at Indore i.e. first in May '08 and second in Jan. '11. under the banner of 'Legal Forum of India' We have developed a method of 'Video Arguments' for the first time in the country. Our weekly Mails had become quite popular for more than two and half years but now we have discontinued the same. Now we are concentrating only on the defense of borrowers and guarantors in DRTs and our main work is preparation of pleadings and good after sales service to our clients.

The forum intended to initiate actions in the following areas as well but the activities of the said forum has been slowed down and is limited only to the discussions with our clients only:-

 (1) Better Management & Improved Technology in Indian Judiciary :- The well known Supreme Court Judge, Justice V.R. Krishna Iyer in his famous book 'Law, Lawyers and Justice' 1988 edition at page 133 had said that Indian Judiciary is backward by 200 years compared with developed nations. The forum will spearhead implementation of better management techniques and improved technology in Indian Court Rooms. The Govt and the Judiciary has taken lot of measures for working of the DRTs online particularly after the Corona in 2020.

(2) Questioning the legal validity of the Securitisation Act :- Despite the Supreme Court of India declaring the said Act legally valid, still there are several provisions of the said Act which are questionable. The constitutional wing of the forum will go in depth and prepare its recommendations. Accordingly, the forum will initiate filing of suitable action before an High Court where the forum can monitor, provide proper guidance and pursue up to the Supreme Court. This task is gigantic particularly when the Act has already been declared valid. Whole exercise has to be done with application of superb knowledge of constitutional law.

(3) Proper Implementation of the Provisions of existing Securitisation Act :-  

(4) Seeking for Enactment - Lenders' Liability Act:-  

(5) Implementation of Fair Practice Code (as framed by Indian Banks' Association) by Banks & FIs :-  

 (6) Some of the areas already spotted are as under:-

(A) Framing of Illegal Bank Documents and Getting signatures under undue influence :-  

(1)     Most of the documents got signed from the borrowers and guarantors contain one sided terms and conditions. Since the documents are got signed at the time of acute financial needs, the said signatory has no option but to sign the said documents under undue influence. At times signatures are taken on blank printed forms

(2)     When the above illegalities are pointed out during the litigation, the said signatory is silenced that he should have not signed if the documents had above such deficiencies and illegalities. He feels cheated and becomes victim of a serious deliberate trap and wrong doings 

(3)     Such wrong doings are pointed out in all the written statements and pleadings of the borrowers and guarantors. Lot of time and efforts of the litigating entrepreneurs, industrialists and businessmen as well as the  advocates, courts and judges is being wasted on these matters with no remedies to the suffering party  

(4)     The only solution is to have a proper legislation specifically on bank documentation so that it will not be possible to commit above wrong doings and illegalities. 

(5)     There are several such matters requiring legislations. One of the aims and objectives of this forum is to frame a draft legislation, move the same as a bill in the parliament, convince the house members to pass such bills. This is a genuine need. The industrialist and business community is paying huge amount to the national exchequer apart from huge contribution to the political parties and hence with concerted efforts, such bill can be turned into legislation.  

(B) Absence of impartial third party between lenders and borrowers 

(1)     At present in India, there is no independent and impartial third agency between the lender and borrowers. In USA, legal agencies are appointed as third such agencies right from the beginning. 

(2)     In existing system in India, the so called third agencies such as Ombudsmen are not impartial as they are appointed by the lenders only. The RBI does not listen to individual cases. The Ministry of Finance does not have any independent outlook. The judicial system like civil courts take years to give verdict. The DRT’s decisions are mostly biased in favour of lenders. 

(3)     In view of above, agencies such as industrial associations, CAs, law firms and or advocates must be assigned the task of the said third agencies right from the stage of signing of the documents or creation of mortgage so that during any disputes, both the lender and borrower approach them for resolution or arbitration.  

(4)     Suitable legislation for the above will result in expeditious dispute resolution during the financial transactions and as a result the assets will not be idling for years as at present. Further such proceedings even will be helpful during the legal trials.   

(C) Calculations of NPA and rehabilitation of sick units 

(1)     There is basic lacuna in calculations of NPAs and preparation of rehabilitation plans. The cost of unreasonable delay or wrong doings by the lenders is never considered as part of the overburden.  

(2)     The third agency will ensure that such expenses are invariably incorporated and in that eventuality, the correct calculations of NPAs or rehabilitation plans will emerge conforming to the principles of justice, equity and good conscience.

(D) Provision of legal expenses for borrowers whose business or industries have become sick 

(1)     It is observed in the cases of sick industrial or business units, the recovery suits are filed by the lenders in DRTs and the borrowers do not have financial resources to fight legal battles.  

(2)     On the other hand the lenders have unlimited access to finances for legal expenses. Further they have well established law departments, experienced law personals, experienced advocates on their panel etc. Since such comprehensive battles have not taken place in past, there are not many precedence in favour of the borrowers and guarantors. The complete legal battle is on most unequal footings.

     (3)     There must be provision of legal expenses so that if there is any litigation after the unit becomes sick, the expenses must be made available. 

(4)     The proposed legislation may take care of the above requirements.  

(E) Provision of survival and legal expenses for certain borrowers whose business or industries have become sick 

(1)     There are certain borrowers like Seed Capital Assisted Entrepreneurs who are solely dependent on their project and there is no other source of income for them. This will be will known at the initial appraisal of the project. If such project become sick due to reasons beyond control of the said borrower, there must be provision for survival and legal expenses for the said borrower till such time he gets another source of income.  

(F) Initiation of legal action especially against those borrowers whose business or industries have become sick 

(1)     All the factors must be considered before initiating the legal action. The third agency must have the consent for the same. The legal expenses are to be provided. Rehabilitation of the sick unit should be the first consideration. 

(G) Dealings with the banks and FIs in respect of industrial and business finance are based on law of torts rather than contracts 

(1)     Treating the above transactions of industrial and business finance under the law of contracts is a grave legal error. There may be contract in respect of security measures but the financial assistance is based on torts only 

(H) Amendment in Sec 138 NI act under special circumstances 

(1)     The sec 138 ni act dealing with dishonour of cheques needs amendment in respect of special circumstances when the limits are under renewal or being sanctioned or being extended, the banks should not dishonour the cheques issued for the needs of the business and if they do so, the criminal provisions will be applicable to them instead of the borrowers. The said 138 NI Act has now undergone several amendments.

(I) Personal guarantee of the directors of the borrowing company 

(1)     The lenders are providing financial assistance after full satisfaction of technical and financial appraisal of the viability of the industry or business and hence no such personal guarantee should be called for. In case it is insisted, the directors of the lenders should also render such personal guarantee in the interest of justice, equity and good conscience. 

(J) RBI Guidelines and provisions thereunder

(1)     The RBI Guidelines have been held statutory and mandatory in several Supreme Court judgments. All the connected legislations need to be suitably amended. The provisions under the RBI Guidelines dealing with all the aspects of Industrial Finance and Business Finance should find place in the proposed legislations.

(K) Several other areas like Income Tax, Excise, Sales Tax, Payment of Minimum Wages Act, Provident Fund Act etc require review and suitable amendments keeping in view the state of industrial and business sickness  

(1)     After the basic legislation, all the connected legislations like RBI Act, Banking Regulation Act, DRT Act, Securitisation Act, Income Tax Act, SFC Act, Excise, Sales Tax Act, Payment of Minimum Wages Act, Provident Fund Act, Civil Procedure Code, Indian Penal Code etc need to be suitably amended. Several amendments have now taken place.

(L) Unreasonable delay in provision of working capital, giving inadequate working capital as well as many of the above mentioned wrong doings must be held criminal with prescribed jail terms 

(1)   When dishonour of cheques is a crime with jail terms, not submitting returns to Registrar of Companies is a crime with jail terms, why the above mentioned underfinancing should not be a crime with jail terms. 

(2)  It is most commonly talked about that the industrialists and businessmen are diverting funds but if some one goes in depth it would be found that if such a thing happens it is due to collusion of the officials of the lenders and if jail term is awarded to the borrowers, the said officials would also get the equal jail term rather more as they are doing such wrong doings in several cases.

(3) There is no social security for the industrialists and businessmen for which also legislation is needed. Business is fraught with uncertainties and there are lot of circumstances which are beyond control of the borrowers, In our country there is no 'no fault liability' legislation. The 'Securitisation Act' was to be passed with 'Lenders Liability Act' Whereas the Securitisation Act has been passed, the Lenders Liability Act has not yet been framed.

(M) All the court judgments must include a conclusion as to which area of the case requires new legislation 

(1)     A law is needed which should require all the judgments to include specific comment of the judge whether any new legislation is required

(2) Till such time such new law is made, time bound program be made to examine the existing judgments and the substance of new legislation located. 

(3) Several recommendations of the Law Commission are pending for legislation, those affecting industrialists and businessmen need to be implemented in form of legislation.

(N) Capability and competency of industrial and business community to achieve above legislations 

(1)     The industry and business sector is generating huge revenue for the government and the society. The political parties get contributions for their various purposes including elections. The industrial and business community is within their rights to have the above and other legislations which are based on justice, equity and good consciousness. 

(O) Your views and suggestions are invited

(1)     We are forming the ‘Legal Forum of India' to achieve the legislations in the proposed focus area as above. There will be other focus areas in future in the arena of better management and improved technology in Indian Judiciary. 

(2)     In the meantime, we request you to discuss the above among the industrialists and businessmen. Your and their views as well as suggestions may kindly be mailed to us at our id ramkishandrt@gmail.com If you desire to interact with us, you are welcome to visit us with prior appointment on phone. 

(3)     With your views and suggestions, we shall continuously enrich this page.   

Thanking you and with warm regards, 

Ram Kishan

Legal Forum of India

ramkishandrt@gmail.com

Phone nos – M – 0969110 3689, Off-cum-res – 073 1404 9358

Explanatory Comments

(1) Industrial activity is the most essential as well as beneficial activity for the modern human society. The industrial units are the real temples which provide livelihood to the people and generate real wealth for the masses. The society which supports entrepreneurs and new industrial units becomes richer at faster rate compared with the society which does not do so. The glaring example is China whose per capita income prior to 1970 was lower than India and now it is double. The masses are gainfully engaged and hence are happier, healthier and have much lesser crime rate. The production and productivity have been rising continuously. The Chinese goods have been flooding the market. China embarked upon the reforms in 1980, whereas India started the same in 1991. But after Corona in 2020, the situation has changed particularly due to comprehensive approach of Prime Minister Narendra Modi. India ie Bharat is progressing at faster pace in several areas of human activities.

(2) In fact, our Constitution and the founding fathers supported the Industrial Activity. Accordingly IDR Act 1951 (Industrial Development and Regulation Act) and SFC Act 1951 (State Financial Corporation Act) were enacted. With passage of time, the Government felt that the private banks were not helping the masses. But instead of reforming them, the Government took a retrograde step by nationalizing the private sector banks in 1969. The new public sector banks were intended to be controlled by all pervasive legislation operating through RBI Guidelines being mandatory and statutory as per the RBI Act 1934 and Banking Regulations Act 1949. The said public sector banks progressively adopted the typical attitude of governmental bureaucracy and as a result openly ignored the law laid down through the said RBI Guidelines. The neta babu raj with its ever increasing corrupt attitude added fuel to the fire.

(3) On account of above, the industrial sickness grew rapidly to the noticeable level as early as 1970. Accordingly the IRCI ( in short for Industrial Reconstruction Corporation of India Ltd ) was set up in April 1971. The RBI convened a meeting of banks, IDBI and IRCI in December 1974 to discuss the problems encountered in rehabilitation of sick industrial units. The RBI issued detailed guidelines from time to time. Since there was no significant impact on the incidence of industrial sickness, further detailed guidelines were issued in 1976 specifically dealing with the rehabilitation of sick industrial units. The fundamental mistake committed by the RBI and the Government at that time in 1976 and it is continuing till date is that there was and still there is no mechanism for effective implementation of the said guidelines. Issuing of the guidelines since 1976 has no meaning if these are not seriously followed by the banks. Any attempt for implementation through court of law is highly time consuming and uncertain due to opposing fights by the banks. Either banks are privatized or there is efficient and strong judiciary. Since both do not exist, the banks are not serious to abide by the statutory and mandatory RBI Guidelines. The RBI is reduced to only immobile barking dog. Since 1976, every year as a ritual, the RBI went on issuing warning after warning without creating any fear among the banks. As a result, the industrial sickness continued to grow. Banks were taking time at their sweet will to sanction working capital limits. The renewal and enhancement is delayed. The viability studies are being conducted repeatedly and even after finding the unit viable, the limits are not sanctioned or renewed. The cost of delay caused by the banks is never considered in the rehabilitation plan. Thus the industrial unit already sick are overburdened without its fault. The inefficient banks convert the incipient sickness into regular and then chronic malady. With passage of time, due to limitation, the recovery suit is filed by the banks.

(4) All the above problems are well known since 1976. The RBI went on issuing guidelines after guidelines without achieving any compliance by the banks. Some entrepreneurs submitted these problems in courts in their written statements but due to financial stringency, they could not fight till the end. The banks without any problem for legal expenses and with strong law department and counsels virtually killed these entrepreneurs in the legal battles also. With such state of affairs, the banks have become more arrogant and corrupt.

(5) In view of above, the NPAs continued to grow. Whenever the Government applied pressure through RBI, the banks came up with excuses blaming the entrepreneurs and long drawn judicial process. In order to satisfy the banks, many of their suggestions like special courts in form of DRT Act 1993 and coercive legislations like the 'Securitisation Act 2002 and the Companies (Amendment) Act 2002 were enacted.

(6) The above legislations created at the instance of banks, in fact, boomeranged on the banks themselves. Some of the financially strong borrowers filed huge counter-claims against the banks. Since the judicial process in DRT became quicker compared with the civil courts, the banks were cornered legally due to their open violations of the statutory RBI Guidelines in existence since 1976. The application of the Law of Torts and several other concepts as highlighted in this web site since 2001 drove the bank to a losing corner. Many of our clients are now in a strong position and are winning the battle. The top level of banks is now worried about the consequence of the huge counter-claim increasing daily due to the interest. In desperateness, in one case, the bank has sent the feeler to borrower to waive off the entire loan if the counter-claim is withdrawn. The borrower has flatly refused. In another case, the bank has appointed a most Senior Supreme Court advocate in DRT itself. In another case, the bank officials are refusing to come to witness box for evidence and cross examination.

(7) The wrong doings of the banks past 30 years has come to full circle resulting into huge counter-claims. The banks will lose heavily in DRT but will fight the battle in appeal to High Courts and Supreme Courts. Since this knowledge has widely spread, there will be spate of counter-claims. All the cases will ultimately will land before the Supreme Court. This process will take few years.

(8) Let the above fight continue. Some of the borrower whose life has been totally ruined will continue to fight till the end. We provide complete knowledge from the stage of pleadings, interim applications, interim arguments, cross-examination and final arguments in DRT, ADRT, High Court, and Supreme Court.

(9) During the above mentioned fights of our clients we have observed that there are lot of common defence put forth by all the borrowers. Lot of time of the society is getting wasted in adjudication of these common points. The borrower has to plead, the bankers have to reply, the DRT PO has to adjudicate. the appellate courts like ADRT, High Court and Supreme Court are also require to spend time on the said common matters. As outline above in this web page, if efforts for legislation are made, the huge wastage of time by all these bodies will be saved and thus the society will be benefited. Keeping these aspects in view only the suggestion has been made. The industries and business community is paying huge money by way of taxes and  contributions to political parties. Hence this community is strong enough to get such legislations which are only for equity and justice and not for any favourable position.

(10 The present system of adjudication between borrower and lenders is heavily loaded in favour of lenders. This is highly against equity, justice and good conscience. The litigation starts when the borrower is unable to pay the interest on loans or unable to pay the installments of the loans. In most of the cases, it happens when his business or industry becomes sick or is closed. Many a times, such situation arises due to circumstances beyond his control. Thus when the borrower is having acute shortage of finances, the recovery suit is filed by the lenders. He is not having even funds to engage competent lawyers. He himself does not have intricate knowledge of banking and related laws. On the other hand, the lender has no problem in spending funds on litigation, has well experienced law department, has experienced counsels, has vast machinery of government and judiciary in their favour. The fight is most unequal. It is just like a fight between weak sick child with a well fed strong wrestler. In fact initiation of such fight itself is questionable. The whole process is a show during which the wrestler kills the child and is declared winner.

(11) New units of industry and business are continuously needed and desired by the society to fulfill the aspirations of the entrepreneurship. The resultant additional benefits are wealth creation, employment and better quality of life for the masses. Hence the same are supported, directed and implemented by the Government. In fact the Constitution of India lays down such activities as statutory duties of the Government and all its functionaries. Accordingly several enactments and legal provisions support such creations including expansion and diversifications.

(12) In view of above in present scenario, the litigation as above will continue. Absence of proposed legislation is no way a lacuna in the present litigations. The efforts for the legislation as proposed is a long term measure in the interest of society including banks.