Best Defence for Borrowers is Counter-claim in DRT, in OA as well as in SA
-
Pl contact us on phone as soon as you receive notice under
Sec 13(2) of Sarfaesi Act, we shall advise and explain this particular
aspect in detail. There is specific legal provision of counter-claim in DRT
Act and hence the same can be pleaded in reply to the OA. As regards SA,
there is specific legal precedent by way of a 2011 ruling of DRAT Delhi for
details of which you may please click here at
http://www.drtsolutions.com/counterclaim-SA.htm
Counter-claim can be filed at any stage
since it is based on law of torts and continuing cause of action and hence
there is no limitation.
Appeal to DRAT - Problem of 25% Deposit - Only Solution is Appeal as Indigent
Person :-
As per Sec 18 of the SARFACEI Act, 25% of the amount of debt claimed by the
secured creditor or determined by the DRT whichever is less is to be deposited
in DRAT before the Appeal is entertained. If the borrower is not having this
amount but he intends to appeal, he should file the Appeal as Indigent Person
vide details in O-33 of CPC.
DRT Cases particularly those who have just received notices u/s 13(2) or 13(4)
will be greatly benefited if they ring to us at Mob - 9691103689 (from 11AM to 6
PM on weekdays:-
You get instantaneous advice on the said mobile no
Best Approach in DRTs for Borrowers & Guarantors :-
(1)
If you are our client, our consultation is available to you at any time on
24/7 basis. (2) We encourage you to acquire basic knowledge so that you may
interact with us as well as your advocate properly. (3) We insist that you
must always be present in the Court along with your advocate. If you have
any problem in the court, you get
instantaneous
advice on our mobile no. 9691103689.
We follow best after sales service. Some of our clients who came to us for
even more than 15 years back still contact us and get the same service.
Safeguards under Sec 13(2) of Sarfaesi Act -
Pl contact
us
on
phone as soon as you received notice under
Sec 13(2) of Sarfaesi Act, we shall
advice you for necessary precautions and safeguards. Just
after filing the Representation and Objections under Sec 13(3-A), the
Secured Creditor i.e. the Bank is required to give reply within 15 days with
due application of mind. It is observed in most of the cases, the said reply
is not given properly with due application of mind, the Borrower may consult
us and may file a
writ petition before the High Court. You will be greatly benefited if
you study our relevant page of this web site by clicking here
Securitisation Act-Comments
Safeguards under Sec 14 of Sarfaesi Act -
Pl contact us on phone as soon as you received notice under
Sec 13(2) of Sarfaesi Act, we shall advice you for necessary precautions and
safeguards. As soon as you get notice u/s 13(4), please check up whether the
bank has filed any application before the Magistrate or CMM. Check up the
said document and if necessary, file SA with an injunction application before the DRT.
You will be greatly benefited if you study our relevant page of this
web site by clicking here
Securitisation Act-Comments
Best Defence for Borrowers is Counter-claim in DRT, in OA as well as in SA
-
Pl contact us on phone as soon as you receive notice under
Sec 13(2) of Sarfaesi Act, we shall advise and explain this particular
aspect in detail. There is specific legal provision of counter-claim in DRT
Act and hence the same can be pleaded in reply to the OA. As regards SA,
there is specific legal precedent by way of a 2011 ruling of DRAT Delhi for
details of which you may please click here at
http://www.drtsolutions.com/counterclaim-SA.htm
Appeal to DRAT - Problem of 25% Deposit - Only Solution is Appeal as Indigent
Person :-
As per Sec 18 of the SARFACEI Act, 25% of the amount of debt claimed by the
secured creditor or determined by the DRT whichever is less is to be deposited
in DRAT before the Appeal is entertained. If the borrower is not having this
amount but he intends to appeal, he should file the Appeal as Indigent Person
vide details in O-33 of CPC.
DRT is the first Court of Fact :-
All
the material facts are to be pleaded with documentary evidence so that the said
facts can be proven. The counter-claim is to be pleaded. In almost all the
cases, the counter-claim is more than the claim of the bank and hence there is
no debt due. Under such facts and circumstances, no recovery can be made till
the debt due is decided.
DRAT is the Court of Appeal :-
Appellate
DRT ie DRAT is the Court of Appeal. If the final order issued by the DRT is
defective, it can be questioned in DRAT. As per the Securitisation Act, the
Appeal in DRAT requires minimum deposit of 25% of the debt due or as determined
by the DRT whichever is less. If the borrower does not have this amount, as
stated above, he
should appeal as an Indigent Person.
The borrowers must understand this particular aspect. If you
have any doubt, please discuss with us on phone M-9691103689.
High Court is the Court of Law and the Supreme Court is Court of Justice :-
These
aspects must be understood thoroughly.
The borrowers must understand this particular aspect. If you
have any doubt, please discuss with us on phone M-9691103689.
Exhaustive details on SARFAESI Act :-
The
borrowers who desire to have further exhaustive details on the SARFAESI Act may
visit the specific page by clicking
Securitisation Act-Comments
Borrower should be serious about the happenings in the above Courts :-
(1) The
borrower should discuss the matter with his advocate at least a week in advance.
(2) The borrower must always be present in the court along with his advocate.
(3) If there is any shortcomings by the advocate, the borrower must point out
the same before the judge. (4) The borrower must ensure that written arguments
are always submitted. (5) The borrower must go through the DRT Act, SARFAESI Act
and CPC so that there are no violations of law. (6) The borrower must go through
digests on these Acts so that he is aware of and can submit important and
relevant judgments to his advocate. (7) The borrowers must understand these
important aspects. If you have any doubt, please discuss with us on phone
M-9691103689.
Attitude of Banks, DRTs and Courts:-
There
is predominant role of bureaucracy. The bank officials instead of taking
action at their ends, they push the matters to DRTs and Courts which are heavily
overloaded. The judges either adjourn the matter or take obviously short
decisions. The advocates simply help such system which results in long drawn
pendency. There are now more than 5 crores cases pending in courts. If the
borrowers pursue their cases vehemently, the bank advocates adopt such attitude
so that the case is unduly delayed. They even push up the cases from DRT Act and
SARFAESI act to Arbitration Act. The banks adopt measures such as declaring the
borrowers as wilful defaulters without following the prescribed RBI Guideliens. All these require the borrowers to understand
that the fight is long drawn and expensive. If you
have any doubt, please discuss with us on phone M-9691103689.
Pleadings in DRTs should include all the facts with documents about the
Business, Industry, Borrower and the applicable laws including RBI Guidelines :-
DRT
is a trial court. Since normal practice of banks and their advocates is to deny
all the facts pleaded by the borrower, the borrower has a right to prove all
such facts by the application of law of evidence. Hence borrower should be
careful to plead only those facts which can be proved without any hitch. As
stated above and at various places in this web site, counter-claim by the
borrower is the only complete defence. The pleadings relating to counter-claim
are to be based on project report, balance sheets, actual achievements as well
as the injuries and damages suffered elaborating direct pecuniary loss, loss in
business opportunities, loss in image, reputation and damages suffered due to
stress and mental tension, aggravated damages and exemplary damages. The
borrower may study other pages of this web site particularly
Notes-Law of Torts and
Notes-Damages
The
borrowers must understand these important aspects. If you have any doubt, please
discuss with us on phone M-9691103689.
Discovery of Facts:-
As stated above, the pleadings must contain all the material facts. The source
of facts is the documents. Sometimes the supporting documents are not available
with the borrower but are available with the banks. Normally the banks do not
supply the said documents. The borrowers may use the tool of RTI Act to obtain
such documents. Even during litigation, the borrower may invoke the provisions
under Order 11 of CPC to discover the facts as well as the documents.
If you
have any doubt, please discuss with us on phone M-9691103689.
Main Problem in Industrial Finance:-
It is on account of
difference in the approach of the term lender and working capitol provider. The
term lender looks to the security by way of fixed assets. On the other hand the
working capitol provider looks to the viability of the project and profit
generated. The intervening facts and circumstances are ignored. Many good
projects are suffering due to this approach. The borrower should keep this
aspect in mind when approaching to the financial institutions and the banks.
Survival during Litigation and longevity:-
During
bank litigation, one of the most important aspect is survival. The borrower has
numerous problems and challenges such as home and office expenditures, court
fees, advocates fees etc. It must be understood that the bank has no such
problems and it will fight from DRT to Supreme Court. Before entering into the
litigation, the borrower must assess and estimate such expenditures and decide
the sources from which such expenditures will emanate and then only the
litigation should be undertaken or negotiations for settlement be carried out.
It is a fight between the weakest and the mightiest.
Since
the battle is long drawn, the borrower must pay attention to health of his own
and that of his family. Longevity and financial strength will alone ensure success in the litigation.
That is why our website has lot of material on these aspects. I myself is very
cautious. My date of birth is 01.01.1943 and my wife is 5 years younger. We both
keep our self hale and hearty though I am above 81 years. If you
have any enquiry, please discuss with us on phone M-9691103689.
Importance & Necessity of Self
Study of Legal and Health Aspects:-
The
DRTs and other courts are heavily overloaded. The judges are overburdened. Hence
it is not possible for them to deliver relevant, comprehensive and quality judgments particularly
due to complex
facts of business, industry and law involved in DRT Litigation. The borrowers
are therefore advised to study the relevant legal books pertaining to DRT Act,
SARFAESI Act, CPC, Principles of Natural Justice, RBI Guidelines and digests relating to all these
legal aspects. Important digests are - (1) by Dr. R.G. Chaturvedi on Law and
Practice of Securitisation and (2) by Srivastava on Securitisation Debt Recovery
Laws. They should study all these and discuss with their advocates.
They must always be present in the DRT and other courts. With passage of time,
they will understand the relevant legal aspects. They should help their
advocates in drafting the legal
documents to be submitted in DRT and other courts of law. As stated above,
longevity, financial strength and adequate free time are also very important. This is how they can achieve success. Its a long drawn battle
involving full time and expenses. The judgments thus obtained will help not only
the borrowers but to the whole society.
Future of DRTs:-
The
sphere of DRTs as Tribunals is questionable as they are already overloaded. In
England, it took more than 150 years for the tribunals to be bound up. The
administrative tribunal in our country was also closed. The problem is that the
functioning of tribunals is based on principles of natural justice the scope of
which is quite vast to encompass justice, equity and good conscience.
Procedurally it goes even beyond CPC. To expedite the bank recoveries, the Tiwari Committee of RBI came up with the proposal of DRTs in 1970. The BIFR Act
came in 1985 and it was rescinded later on in 2016. The DRT Act was enacted in
1993. When difficulties were experienced in DRTs, the Securitisation Act was
enacted in 2002. The NCLT Act was enacted in 2013. All these have complicated
the judicial process and have created huge burden on High Courts and Supreme
Court which are already overloaded. Many DRTs do not have Presiding Officers.
All the DRTs are also heavily overloaded. Under such facts and
circumstances, the DRTs do not have promising future.
Use of Modern Technology in DRTs:-
The
DRTs have started using modern judicial and court room technology. All the cases
and documents can be filed online. The status of pending cases are also
available online. The DRT advocates are well aware about the use of relevant
technology.
History & Comments on SARFAESI Act
Our Comments as on 18.10.13 vide our weekly mail 284th issue vide item
no
(1) therein reproduced below:-
Sec 14 of Securitization Act – Possession – Conditions Precedent,
Problems & Suggestions
Consequent on our views expressed in last weekly mail, there has been
lot of comments, feedback and interactions with the recipients of the
weekly mail. Most important feedback was from Mr R.P. Agarwal, Senior
Advocate who made reference to the latest SC Judgment
(Standard Chartered Bank vs V. Noble Kumar decided on 22.08.13)
While
we are still working on the said SC Ruling, on face of it, we can say
that it will severely affect the small borrowers or those borrowers who
do not pay attention to the judicial process right from the stage of
receiving notice u/s 13(2).
In
respect of remedial measures against the said SC Ruling, the borrower
should be adept in the 9 clauses of the affidavit to be submitted by the
bank along with the application u/s 14 before the Magistrate. The
defence against the said clauses must be built in in the Representation
and Objections against the notice u/s 13(2). The borrower must file
caveat before the Magistrate just after submitting the said
Representation and Objections and must have the liason with the office
of the Magistrate so that he secures opportunity to submit his defence
against the said 9 clauses of the affidavit. It is needless to mention
that all this should be possible particularly due to following
environmental factors:-
(a) There
are more than 3 crore cases pending before the civil courts and AP HC
sitting judge has said that it will take 320 years to clear the
pendency.
(b) Justice
Krishna Iyer has said in respect of judicial system that we are 200 years behind
the developed countries.
(c) UK
took 157 years to attain proper working of tribunals and we do not want
to learn from their experience.
(d) The
RBI Guidelines since 1976 are being openly violated by the banks. There
is scant regard for serious implementation in respect of appraisal,
revival and rehabilitation.
(e) There
is single point program only for recovery even to the extent of ignoring
principles of natural justice and constitutional rights. To meet such
aim, the DRTs were established, the DRTs are not being transferred from
Ministry of Finance to Ministry of Law despite 15 years old verdict of
SC. The bank officials are being posted as POs and Recovery Officers in
DRTs.
(f) In
order to cover up lapses of the banks in genuine appraisal, revival and
rehabilitation, attention is being diverted to misuse of public funds,
shortage due to NPAs etc. Example is being given to quick and forceful
recoveries in developed countries. But no comparison is made to
developed judicial systems which efficiently decides equally the claim
of the bank as well as the counter-claim of the borrowers. The book
‘Lender Liability and Banking Litigation’(update 2012) published by ‘Law
Journal Press, New York’ opens with the sentence ‘Multimillion dollar
verdicts against financial institutions have become almost commonplace.’
(g) Thanks
to our constitution, the knowledgeable borrowers who are able to fight
against the above adverse environment which is seriously affecting the
growth of entrepreneurship in our country. Day is not far when few
verdicts in the matter of counter-claims against the banks will alone
confirm our contentions that best recovery is out of generation of funds
rather than coercive recovery out of the securities. In the meantime,
large number of small borrowers will be sacrificed resulting into huge
outcry but small recoveries.
In view of above our suggestions to mitigate against the SC Ruling are
as under:-
(A) Representation and Objections against the Notice u/s 13(2):- Under
the present environment and in the context of the prevailing law as well
as the law laid down by the Supreme Court in the said SC Judgment, this
becomes most important document. It contains all the points on which the
affidavit covering 9 points will be filed by the authorized officer u/s
14 before the Magistrate. It is observed that this document is not being
prepared properly by the borrowers. Further in most of the cases, the
banks are also not considering and replying the same with due
application of mind (as desired by SC in the matter of Mardia
Chemicals). Our suggestions are as under:-
(a) All
the wrong doings committed by the bank e.g. under financing, inadequate
and delayed working capital, delays in sanction and flow of bank funds,
violations of RBI Guidelines, delays and non-implementation of viability
studies, delays in revival, rehabilitation and restructuring, impact and
responsibilities for the external causes and conditions beyond control
of the borrower, real reasons for the defaults committed by the
borrowers etc have been thoroughly pleaded in the said Representation
and Objections..
(b) Assessment
of the Loss and Damages suffered due to the above wrong doings and
impact on the ‘Debt Due’ is included in the said Representation and
Objections. In case the said Loss and Damages are more than the amount
claimed by the bank, the situation of ‘No Debt Due’ is clearly pleaded
in the said Representation and Objections.
(c) Incidence
of ‘NPA’ should be thoroughly questioned based on the relevant RBI
Guidelines as well as the internal policies of the bank.
(d) The
claim of the Bank is thoroughly examined and pleaded with reference to
the accounts statements submitted by the Bank.
(e) The
details of the securities and security interest created is thoroughly
examined and pleaded with reference to the documents executed.
(f) Copies
of the said Representation and Objections should be endorsed to the
Chairman of the Bank.
(g) For
the above, whatever documents are needed, the same should be asked for
from the bank before submitting the said Representation and Objections.
(h) Since
as per Mardia, the banks are duty bound to reply to the said
Representation and Objections with due application of mind within 15
days, the pleadings in the said Representation and Objections should be
quite exhaustive so that there is no scope for the bank to say that they
had any difficulties in replying with due application of mind.
Comments:- In
the present environment and prevailing law as well as the law recently
declared by the SC, the above mentioned Representation and Objection
will become highly essential for the following reasons:-
(a) The
application of the bank u/s 14 is to be accompanied by an affidavit duly
affirmed by the authorized officer of the bank declaring 9 points viz
dealing with:-
(i) total
financial assistance granted and total claim of the bank on the date of
filing of the application.
(ii) Borrower
has created security interest over various properties or bank is holding
valid and subsisting security interest over such properties and claim of
the bank is within limitation.
(iii) Borrower
has created security interest over such properties giving details of the
properties.
(iv) Borrower
has committed default.
Comments:- If
the default is caused due to wrong doings of the bank, that needs to be
pleaded in the said Representation and Objections. This needs to be
pointed out to the Magistrate based on the Injunction Suit mentioned
below.
(v) Consequent
on default, account has been classified as NPA.
Comments:- If
the NPA declaration is wrong, that needs to be pleaded in the said
Representation and Objections. This needs to be pointed out to the
Magistrate based on the Injunction Suit mentioned below.
(vi) Notice
u/s 13(2) served on all borrowers and guarantors.
(vii)Representation
and Objections of the Borrower considered with due application of mind
and reasons for non-acceptance, if it is there is communicated within 15
days.
Comments:- If
the non-acceptance is wrong, that needs to be pointed out to the
Magistrate based on the Injunction Suit mentioned below.
(viii) Borrower
has not made any payment despite notice and hence the bank is entitled
to take possession u/s 14.
Comments:- The
borrowers can make use of this clause suitably.
(ix) Provisions
of this Act and Rules had been complied with.
Comments:- This
is one of the most important part of the Affidavit. The borrower should
cover the lapses on part of the bank in the said Representation and
Objections and put up before the Magistrate at appropriate time. The
same be covered in the Injunction suit given below and a later date in
the SA to be filed u/s 17.
(b) If
the bank rejects the said Representation and Objections without due
application of mind, one can file ‘Declaratory and Injunction Suit’ in
civil court. Till that suit is decided, the authorized officer should
not invoke Sec 14 for physical possession. Even if he invokes, the
Magistrate cannot issue orders against the bank’s application u/s 14.
(c) As
per Mardia, nobody can be left remediless. Further as per the provisions
of law u/s 13[3(A)], 34 and 37 of the Act combined with the principles
of natural justice, the above mentioned Injunction suit is one of the
best remedies. If there is any problem in the civil court, one may
approach the High Court.
(B) Caveat before Magistrate & Liason with his Offfice:- These
have been dealt with in detail in previous weekly mails in detail.
List of All Pages with Links of this Web Site may be seen vide clicking:-
DRT Solutions - Site Map for Borrowers & Guarantors
DRT Judgments Favourable to Borrowers and Guarantors – Now Full text of such
Judgments is being provided on this Web Site with Important Portions marked in
Red
For reference of such judgments please click
http://www.drtsolutions.com/DRT-Judgments.htm
Counter-claim Permissible in Securitisation Application u/s 17,
rules DRAT Delhi
Vijaya Bank versus B. L. Gupta decided on 16.03.11 by Debts Recovery
Appellate Tribunal, Delhi
upholding that counter-claim can be filed in the application u/s 17 of
the Securitisation Act in DRT. This is validation of our contentions
past nearly 10 years. The full text of the judgment is given on our web
site vide link
http://www.drtsolutions.com/counterclaim-SA.htm The important
portions of the judgment has been marked in Red
Comments by DRT Solutions
:-
Our comments are as under:-
(a)
Past nearly 10 years we have been telling our clients to include loss
and damages (i.e. counter-claim) in their application u/s 17 of the
Securitisation Act. In fact in several of the said applications drafted
by us, we have done so e.g. in case of one of our clients from Bangalore
in 2006.
(b)
We have voiced our contentions in our web site, DRT All India
Conferences held at Indore in 2008 and 2011 as well as in our weekly
mails.
(c)
In the above DRAT Delhi judgment, reference has been made to the SC
Judgment of 2004 in the matter of Mardia Chemicals.
(d)
As a whole our contentions are based on the following legal analysis:-
(i)
The borrower as a citizen has fundamental rights of fair trial under the
constitution of India and the said rights can not be abridged or
curtailed by anybody or by any enactment including the Securitisation
Act of 2002.
(ii)
Since Sec 34 of the said Securitisation Act has barred the civil court,
the said rights of fair trial for the borrowers are to be ensured and
assured by the DRTs.
(iii)
Since as per Mardia in 2004 and now specifically explained by the DRAT
Delhi in 2011, borrower’s counter-claim has to be adjudicated upon by
fair trial by the DRTs.
(iv)
The DRTs may adopt expeditious and summary process to judicial
determination of the bank claims but for the counter-claim of the
borrower, full and exhaustive trial has to be conducted and carried out
as he was entitled in the civil court before the said bar due to
Securitisation Act of 2002.
(v)
Since in most of the cases, we have found that the said loss and damages
or counter-claim is much more than the claim of the bank, there is the
situation of ‘No Debt Due’ and hence no recovery action on the
securities can be initiated till the said ‘No Debt Due’ is judicial
determined by the full and fair trial.
(vi)
On account of above, the DRT Act, Securitisation Act and DRTs have
limited role or function as it would have been better to improve the
civil courts as a whole instead of creating new forums like DRTs.
(vii)
We don’t want to learn from the experience of other countries. In UK,
the tribunals were introduced in 1800. It took more than 150 years to
find out correct solution i.e. by Sir Frank Committee in 1957.
(viii)
As told by eminent justice Krishna Iyer that our courts are 200 years
behind the courts in developed countries.. There are 73 countries whose
judicial systems are better than us. The only and better solution is to
improve the courts based on the system developed in those countries
which have better judicial system.
(ix)
Since the relevant institutions like Govt, Law Commission, Bar Council
of India and Law Colleges are not doing desirable work (and they will
not do for obvious reasons), the public has to come forward. While
litigants in civil courts can not do much, those in DRTs can do much
better as the Businessmen and Industrialists as litigants are much more
competent and resourceful. Till the judiciary and judicial systems are
improved, we cannot have real democracy i.e. rule for public, rule by
public and rule of public as against rule by Bureaucrats & Politicians,
rule of Bureaucrats & Politicians and rule for Bureaucrats &
Politicians.
(x)
The full and fair adjudication of claim for loss and damages or
counter-claim will alone bring to light the wrong doings committed by
the bureaucracy in the banks and financial institutions after which only
the banks and the said institutions will improve and after that only the
hold of the politicians on these institutions will come down. Thus the
DRT litigants have a great responsibility and role to play.
Highlights:-
All problems of Debts NPA Recovery
Tribunals i.e. DRTs, NPA Recovery and securitisation / securitization Act,
ARCIL i.e. Asset Reconstruction Company
(India) Limited, are tackled by us. People from all
over the country are phoning us, then visiting and getting their problems
solved. Please visit Home Page and other Pages also
Extract from DRT Solutions Weekly Mail – 245th Issue dated 18th January ’13
Our Comments on Recent Amendment to the Securitisation Act
Our comments are as under:-
(a) The
bill was finally passed by the parliament on 20.12.12. Accordingly the sections
2, 5, 9, 13 and 14 of the Act were amended.
(b) In
section 2 of the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (hereafter in this Chapter referred
to as the 54 of 2002. principal Act), in clause (c), after sub-clause (iv), the
following sub-clause shall be inserted,
(c) namely:—
“(iva) a multi-State co-operative bank; or”.
Our Comments
(d) The
DRTs will now have jurisdiction over the multi-state co-operative banks. This
will cause increase on the number of cases and workload of the DRTs. The
relevant pending Supreme Court case will have to be decided as early as
possible.
-------------------------------------------------------------------------------------------------------------------------
(e) In
section 5 of the principal Act, after sub-section (4), the following sub-section
shall be inserted, namely:—
“(5) On acquisition of financial assets under sub-section (1), the
securitisation company or reconstruction company, may with the consent of the
originator, file an application before the Debts Recovery Tribunal or the
Appellate Tribunal or any court or other Authority for the purpose of
substitution of its name in any pending suit, appeal or other proceedings and on
receipt of such application, such Debts Recovery Tribunal or the Appellate
Tribunal or court or Authority shall pass orders for the substitution of the
securitisation company or reconstruction company in such pending suit, appeal or
other proceedings.”.
Our Comments
(f) If
there are wrong doings committed by the bank, one should implead the said bank
despite the above mentioned application.
--------------------------------------------------------------------------------------------------------------------------
(g) In
section 9 of the principal Act, after clause (f), the following clause shall be
inserted, namely:—
“(g) to convert any portion of debt into shares of a borrower company:
Provided that conversion of any part of debt into shares of a borrower company
shall be deemed always to have been valid, as if the provisions of this clause
were in force at all material times.”.
Our Comments
(h) This
will have no impact on the borrowers. The aim appears to clean up the balance
sheets of the bank.
--------------------------------------------------------------------------------------------------------------------------
(i) In
section 13 of the principal Act,—
(a) in
sub-section (3A), for the words “within one week”, the words “within fifteen
days” shall be substituted;
Our Comments
This will have no impact on the borrowers.
-----------------------------------------------------------------------------------------------------------------------------------
In section 13 of the principal Act,—
(b) after
sub-section (5), the following sub-sections shall be inserted, namely:—
“(5A) Where the sale of an immovable property, for which a reserve price has
been specified, has been postponed for want of a bid of an amount not less than
such reserve price, it shall be lawful for any officer of the secured creditor,
if so authorised by the secured creditor in this behalf, to bid for the
immovable property on behalf of the secured creditor at any subsequent sale.
(5B) Where the secured creditor, referred to in sub-section (5A), is declared to
be the purchaser of the immovable property at any subsequent sale, the amount of
the purchase price shall be adjusted towards the amount of the claim of the
secured creditor for which the auction of enforcement of security interest is
taken by the secured creditor, under sub-section (4) of section 13.
(5C) The provisions of section 9 of the Banking Regulation Act, 1949 10 of 1949.
shall, as far as may be, apply to the immovable property acquired by secured
creditor under sub-section (5A).”.
Our Comments
It appears that the banks are in desperate hurry to clean up their balance
sheets. In longer run it will recoil on the banks only. They will be flooded
with the unsalable properties which may cause ultimate loss to the banks. There
may be scandals due to purchase of such properties by the bank officials. There
will be multiple litigations. It is reiterated that we must raise loss and
damages or counter-claims against the bank if the borrower desires to have
ultimate defence. In that situation, the banks will not be able to apply this
amended section due to ‘No Debt Due’ situation. Actually smaller borrowers will
become innocent victims and as a whole it will bring great disrepute to the
banks and immense problems to the politicians.
----------------------------------------------------------------------------------------------------------------------
(c) in
the opening portion of sub-section (9), and in the Explanation thereto, for the
words “three-fourth”, occurring at both the places, the words “sixty per cent”.
shall be substituted
Our Comments
It will only result in increase in number of cases and workload on the DRTs.
-----------------------------------------------------------------------------------------------------------------------
6. In section 14 of the principal Act,—
(a) in sub-section (1), the following provisos shall be inserted, namely:—
“Provided that any application by the secured creditor shall be accompanied by
an affidavit duly affirmed by the authorised officer of the secured creditor,
declaring that—
(i) the aggregate amount of financial assistance granted and the total claim of
the Bank as on the date of filing the application;
(ii) the borrower has created security interest over various properties and that
the Bank or Financial Institution is holding a valid and subsisting security
interest over such properties and the claim of the Bank or Financial Institution
is within the limitation period;
(iii) the borrower has created security interest over various properties giving
the details of properties referred to in sub-clause (ii) above;
(iv) the borrower has committed default in repayment of the financial assistance
granted aggregating the specified amount;
(v) consequent upon such default in repayment of the financial assistance the
account of the borrower has been classified as a non-performing asset;
(vi) affirming that the period of sixty days notice as required by the
provisions of sub-section (2) of section 13, demanding payment of the defaulted
financial assistance has been served on the borrower;
(vii) the objection or representation in reply to the notice received from the
borrower has been considered by the secured creditor and reasons for
non-acceptance of such objection or representation had been communicated to the
borrower;
(viii) the borrower has not made any repayment of the financial assistance in
spite of the above notice and the Authorised Officer is, therefore, entitled to
take possession of the secured assets under the provisions of sub-section (4) of
section 13 read with section 14 of the principal Act;
(ix) that the provisions of this Act and the rules made thereunder had been
complied with:
Provided further that on receipt of the affidavit from the Authorised Officer,
the District Magistrate or the Chief Metropolitan Magistrate, as the case may
be, shall after satisfying the contents of the affidavit pass suitable orders
for the purpose of taking possession of the secured assets:
Provided also that the requirement of filing affidavit stated in the first
proviso shall not apply to proceeding pending before any District Magistrate or
the Chief Metropolitan Magistrate, as the case may be, on the date of
commencement of this Act.”;
(b) after sub-section (1), the following sub-section shall be inserted, namely:—
“(1A) The District Magistrate or the Chief Metropolitan Magistrate may authorise
any officer subordinate to him,—
(i) to take possession of such assets and documents relating thereto; and
(ii) to forward such assets and documents to the secured creditor.”;
(c) in sub-section (3), after the words “the District Magistrate”, the words
“any officer authorised by the Chief Metropolitan Magistrate or District
Magistrate” shall be inserted.
Our Comments
The implications are huge. Massive comments are needed. It will only result in
numerous legal complications to the bank officials, the Magistrates, POs of the
DRTs, High Courts and the Supreme Court particularly when loss and damages or
counter-claims have been raised by the borrowers. On the other hand small
borrowers will greatly suffer as they do not have adequate knowledge and
resources to the desired legal fight. Ultimately the banks will suffer as the
amount recovered will be small but the disrepute will be massive.
-------------------------------------------------------------------------------------------------------------------------
7. After section 18B of the principal Act, the following section shall be
inserted,
namely:—
“18C. (1) Where an application or an appeal is expected to be made or has been
made under sub-section (1) of section 17 or section 17A or sub-section (1) of
section
Insertion of new section 18C.
Right to lodge a caveat.
18 or section 18B, the secured creditor or any person claiming a right to appear
before
the Tribunal or the Court of District Judge or the Appellate Tribunal or the
High Court, as the case may be, on the hearing of such application or appeal,
may lodge a caveat in respect thereof.
(2) Where a caveat has been lodged under sub-section (1),—
(a) the secured creditor by whom the caveat has been lodged (hereafter in this
section referred to as the caveator) shall serve notice of the caveat by
registered post, acknowledgement due, on the person by whom the application has
been or is expected to be made under sub-section (1);
(b) any person by whom the caveat has been lodged (hereafter in this section
referred to as the caveator) shall serve notice of the caveat by registered
post, acknowledgement due, on the person by whom the application has been or is
expected to be made under sub-section (1).
(3) Where after a caveat has been lodged under sub-section (1), any application
or appeal is filed before the Tribunal or the court of District Judge or the
Appellate Tribunal or the High Court, as the case may be, the Tribunal or the
District Judge or the Appellate Tribunal or the High Court, as the case may be,
shall serve a notice of application or appeal filed by the applicant or the
appellant on the caveator.
(4) Where a notice of any caveat has been served on the applicant or the
Appellant, he shall periodically furnish the caveator with a copy of the
application or the appeal made by him and also with copies of any paper or
document which has been or may be filed by him in support of the application or
the appeal.
(5) Where a caveat has been lodged under sub-section (1), such caveat shall not
remain in force after the expiry of the period of ninety days from the date on
which it was lodged unless the application or appeal referred to in sub-section
(1) has been made before the expiry of the said period.”.
Our Comments
This is a welcome provision as it has vindicated our stand about the
caveats. Legally knowledgeable borrowers will intelligently use this tool
compared with the bankers. The litigation process will result in greater
justice to the alert and conscious party. It is needless to mention that the
‘No Debt Due’ situation is a must. Again the small borrowers will have
painful process due to lack of knowledge and resources to fight.
Amendment 8. In section 23 of the principal Act, after the proviso, the
following proviso shall be of section 23. inserted, namely:—
“Provided further that the Central Government may, by notification, require
registration of all transactions of securitisation, or asset reconstruction or
creation of security interest which are subsisting on or before the date of
establishment of the Central Registry under sub-section (1) of section 20 within
such period and on payment of such fees as may be prescribed.”.
Our Comments
At the moment there is no impact as the Central Registry has not yet started
functioning.
Insertion of 9. After section 26 of the principal Act, the following section
shall be inserted,
new section namely:— 26A.
Rectification “26A. (1) The Central Government, on being satisfied— by Central
Government (a) that the omission to file with the Registrar the particulars of
any in matters of transaction of securitisation, asset reconstruction or
security interest or registration, modification or satisfaction of such
transaction or; the omission or mis-statement modification and of any particular
with respect to any such transaction or modification or with satisfaction,
respect to any satisfaction or other entry made in pursuance of section 23 or
etc. section 24 or section 25 of the principal Act was accidental or due to
inadvertence or some other sufficient cause or it is not of a nature to
prejudice the position of creditors; or
(b) that on other grounds, it is just and equitable to grant relief, may, on the
application of a secured creditor or securitisation company or reconstruction
company or any other person interested on such terms and conditions as it may
seem to the Central Government just and expedient, direct that the time for
filing of the particulars of the transaction for registration or modification or
satisfaction shall be extended or, as the case may require, the omission or mis-statement
shall be rectified.
(2) Where the Central Government extends the time for the registration of
transaction of security interest or securitisation or asset reconstruction or
modification or satisfaction thereof, the order shall not prejudice any rights
acquired in respect of the property concerned or financial asset before the
transaction is actually registered.”.
10. For section 30 of the principal Act, the following section shall be
substituted, namely:—
“30. (1) No court shall take cognizance of any offence punishable under section
27 in relation to non-compliance with the provisions of section 23, section 24
or section 25 or under section 28 or section 29 or any other provisions of the
Act, except upon a complaint in writing made by an officer of the Central
Registry or an officer of the Reserve Bank, generally or specially authorised in
writing in this behalf by the Central Registrar or, as the case may be, the
Reserve Bank.
(2) No court inferior to that of a Metropolitan Magistrate or a Judicial
Magistrate of the first class shall try any offence punishable under this Act
Our Comments
Such ideal provisions are not practical. They will result in numerous
litigations and headaches to the banks, registrars, courts and the central
govt. At the moment there is no impact as the Central Registry has not yet
started functioning.
After section 31 of the principal Act, the following section shall be inserted,
namely:—
“31A. (1) The Central Government may, by notification in the public interest,
direct that any of the provisions of this Act,—
(a) shall not apply to such class or classes of banks or financial institutions;
or
(b) shall apply to the class or classes of banks or financial institutions with
such exceptions, modifications and adaptations, as may be specified in the
notification.
(2) A copy of every notification proposed to be issued under sub-section (1),
shall be laid in draft before each House of Parliament, while it is in session,
for a total period of thirty days which may be comprised in one session or in
two or more successive sessions, and if, before the expiry of the session
immediately following the session or the successive sessions aforesaid, both
Houses agree in disapproving the issue of the notification or both Houses agree
in making any modification in the notification, the notification shall not be
issued or, as the case may be, shall be issued only in such modified form as may
be agreed upon by both the Houses.”.
Our Comments
This is a usual legal provision.
21.12.12 - Importance and Impact of Counter-claim- DRT Solutions Weekly Mail 241st
One of our clients from Orissa got Counter-claim prepared from us but
could not file it. The proceedings in DRT, DRAT and High Court resulted
in payment of certain deposit. Before fully honouring his full
commitment made before the High Court, he came to us nearly after three
years. We advised him to file the said counter-claim. We provided him
all necessary court judgments and citations. Accordingly the
counter-claim was filed and a situation of ‘No Debt Due’ was created.
Side by side, he hounoured his commitment about the deposit. When this
matter was put up before the High Court, the High Court in its order
asked the DRT to decide the counter-claim based on the law and the
procedure of law. We advised the said client to hire suitable advocate
having knowledge and experience of trials. Whenever, the counter-claim
is decided, the said deposit will have to be refunded with interest and
damages. Had the said counter-claim would have not been filed, the case
would have been closed without any benefit to the borrower on account of
the wrong doings committed by the bank. Hence it is reiterated in all
the bank litigations, one must file his counter-claim. It can be filed
at any stage and at any time. In one case we filed the counter-claim
even after 21 years
21.12.12 - Purchasing the Assets of Borrowers in Auction conducted by Bank or DRTs-
DRT Solutions Weekly Mail 241st
Several persons approach us for guidance and advice for purchasing the
assets of the borrowers through the auctions conducted by the banks or
DRTs. Our comments are as under:-
(a) First
we tell them that we don’t deal in such matter. Rather we protect the
properties of the borrowers so that such properties are not sold.
(b) Despite
above, if they intend to purchase, they must check all the records in
banks and DRTs. They should get no objection or confirmation from the
borrower/guarantor.
(c) In
many cases, the banks keep the buyers in dark about the legal
complications. As a result, the possession of the property becomes
difficult. Hence one should never believe the bank officials and instead
should carry out their own independent verifications.
14.12.12
- Bankers complaining against DRTs- DRT Solutions Weekly Mail 240th
Following news item appeared at page 3 of the Economic Times, Mumbai as
well as the internet edition :-
Shortage of staff forces DRTs to put off cases
http://economictimes.indiatimes.com/news/economy/finance/staff-crunch-forces-debt-recovery-tribunals-to-put-off-cases/articleshow/17551652.cms
(DRTs), an important mechanism for loan recovery by banks, are
foundering amid charges of lack of professionalism and shortage of staff
as bad loans are crippling banks. The disposal of cases has been falling
as a few members have to handle enormous amount of claims and the
delaying tactics employed by defaulters by going in appeal against every
order are defeating the purpose.
In fact, bankers at a recent meeting with the finance ministry officials
have charged that unjustified orders are being passed by some DRT
officials in connivance with promoters who want to protect their assets.
"We had complained about the unilateral stays that the registrars of the
debt recovery tribunals are granting to the borrowers without giving
banks a proper hearing,'' said a bank chairman, who did not want to be
identified. "The issue was raised by us at a DRT forum where finance
ministry officials were also present."
There are at least 33 DRTs and
five appellate bodies to deal with cases. Although the mechanism was
brought in with a noble aim to decide on the cases within 6 months, the
lack of adequate staff and timely replacements have hit their
operations. With corruption spreading, some say, even DRTs are not
immune to it. "Borrowers are taking advantage of the debt recovery
appellate tribunal and appealing against the order issued by the DRTs,''
said advocate Ravi Goenka of Goenka Law Associates who
represents financial institutions like asset reconstruction firm Arcil
and OBC.
"According to the law, DRTs have to dispose off cases in six months, but
it's taking almost two to three years.'' In 2011-12, of the total amount
recovered through the Sarfaesi Act, DRTs and Lok Adalats registered a
decline of 8.2% at 14,400 crore, from 15,700 crore a year earlier
despite a surge in bad loans.
There is only one member looking after the Western region comprising
entire Maharashtra, Gujarat and Goa. For a long time, the post of
presiding officer was vacant and presiding officer of the Kolkata bench
was looking after the Western region appellate tribunal as additional
portfolio. Mumbai-based banks had to go to Kolkata to file a case in
most of the cases, said a lawyer representing a bank.
The long duration taken by DRTs to decide on the cases is reflected in
the fact that the Oriental Bank of Commerce and Bank
of India are
still fighting a case to recover dues from former stock broker Ketan
Parekh in
a case relating to the 2001 securities scandal. He was barred from
trading at the Indian stock exchanges till 2017.
During June to December 2012, some important cases involving companies
like Som Developers (owing 390 crore to SBI, UBI and other
banks), Sterling Biotech (
322 crore debt towards a subsidiary of LIC) and Aeroflex ( 181 crore
towards SBI) were admitted. "The DRTs were to finish cases in six month.
However, they are not able to adhere to the timeline as they have become
like a civil court,'' said the legal head of a private sector bank.
Our Comments
(a) The
Tiwari Committee which proposed in 1984 establishment of DRTs
recommended that the DRTs’ Judges and Advocates should have specialized
knowledge in functioning of banks, financial institutions and industry.
The DRTs were constituted in 1993. Till date the original recommendation
of Tiwari Committee has yet been implemented. The DRT judges and
advocates continue to function in DRTs without the required knowledge of
banking, industry and finance. Hence instead of complaining about the
DRTs, the banks should organize training programe for the said
specialized knowledge. In reality it will also help the borrowers.
(b) DRT
is a trial court. The time of 6 months is too small a period. The civil
court normally take 15 to 20 years for a normal trial. In fact the DRTs
will take much more time as the procedure is yet to be established and
the DRT Advocate and Judges do not have specialized knowledge of
banking, industry and finance.
(c) On
account of defective trial in DRT, extra time is required in higher
court in appeal etc.
(d) Despite
Supreme Court verdict 15 years back, the control of DRTs is not being
transferred from Ministry of Finance to Ministry of Law. As a result,
the bank officials are being posted as Judges and Recovery Officers
resulting into biased judgments and orders. Such defective judgments and
orders create further delay due to appeal, review and revisions.
(e) The
element of corruption in DRTs is more or less same as in other courts or
even in banks.
(f) Instead
of complaining about DRTs, the banks should devise a system by which the
wrong doings committed by the banks are checked and corrected before
filing a case in DRTs. This will drastically reduce the cases being
filed in DRTs.
(g) Competent
and trained judges and advocates in DRTs with maximum use of modern
technology will alone reduce the time being consumed by the DRTs.
(h) In
this connection, it will be worthwhile to know that all the above
problems arose in UK also when Tribunals were established in 1800 and it
took 157 years to find a workable solutions through the recommendations
of Sir Frank Committee. But our beauracracy does not want to learn from
such experience. That is why our country is ranked 78th among
97 countries in respect of functioning of Judiciary. In 1988, eminent
Justice Krishna Iyer said that we are 200 years behind developed
countries.
(i) It
is reiterated that businessmen and industrialist facing litigation in
DRTs will definitely help in bringing about judicial reforms which will
contribute to the improvement of Judiciary as a whole. This is for the
simple reason that they compared with the ordinary public litigants in
civil courts are much more competent and capable.
20.07.12
- DRTs in Mumbai are staying the Adjudication in respect
of Co-operative Banks- DRT Solutions Weekly Mail 219th
Mr. Bharat Gandhi,
DRT Advocate, Mumbai has informed that the DRTs in Mumbai are issuing stay
orders in respect of recovery cases filed by the Co-operative cases. Earlier the
borrowers had to approach the Supreme Court which was issuing such stays and now
he need not approach the Supreme Court
13.07.12 - Receipt of Notice u/s 13(4) is Sufficient to Initiate
Action u/s 17 of the Securitisation Act - DRT Solutions Weekly Mail 218th
After in-depth study and based on the judgments delivered by the Supreme
Court and the High Court, we have come to the conclusion that one should
initiate action u/s 17 of the Securitisation Act just after receipt of the
notice u/s 13(4).
13.07.12 - If Banks depute Recovery Agents, Borrowers should make
Video/Audio Record the discussions with the said Agents - DRT Solutions Weekly
Mail 218th
It is observed that the banks are deputing Recovery Agents for various
activities. The Borrowers should make arrangements for recording telephone talks
with the said Agents. In case the Agents come to spot, all discussions and
dealings should be video recorded. At proper time the CDs containing the said
audio and video records should be sent to the banks as documents to be used in
future if necessary. It is needless to mention that simple gadgets and handicams
are available for said audio/video recording. The borrowers should practice in
advance to make trial recordings as well as the sample CDs so that the system
does not fail when the real need arises.
22.06.12 -
Dilemma of Indian Banks to move from Securitisation to DRT Act
due to Slump in Property Market - DRT Solutions Weekly Mail 215th
On account of slump in the property
market vide news below, the banks and FIs are in a fix. They have no interest to
invoke the Securitisation Act. In many cases, after issue of the legal notice
u/s 13(2), the secured creditors are postponing issue of possession notice u/s
13(4). They are now afraid to take possession of the secured assets as there may
not be any buyer. They have no option but to file OA under the DRT Act. In that
eventuality, they will have to face the counter-claims and hence the recovery
cases in the DRTs will be delayed. Further on account of sharp increase in NPAs,
there will more number of cases in DRTs.
Sunday, June 17, 2012
http://indiahousingbubble.blogspot.in/
While MMR reported the sharpest drop of around 58%, NCR slumped 57% from the
year earlier. Bangalore witnessed a drop of 18% in sales, the report added.
Sales in NCR dropped to 15,104 units from 35,420 units and it fell to 11,473
units from 27,676 units in MMR.
The two regions saw a residential supply of 107,731 and 89,461, respectively, in
the first quarter.
Samir Jasuja, founder and chief executive officer, PropEquity Analytics, said,
“In the coming quarters, there would be strong pressure on many micro markets
and we expect inventory overhang to increase and absorption could continue to
slow down. Mumbai in MMR and Gurgaon in NCR have seen the sharpest falls in
absorption.”
“If this trend continues, there could be a price correction of 5-20%, especially
in the micro markets of NCR, MMR and Hyderabad,” he added.
Bangalore hasn’t been as badly hit because of demand from genuine homebuyers and
end-users, apart from the fewer unsold properties.
Sales in the southern city fell 18% to 7,704 units from 9,410 units.
The other two markets are largely investor driven.
“Generally, investor-driven markets would see downward risks than end-user
driven markets,” added Jasuja.
15.06.12 - Before Declaring NPAs, Bankers have Numerous Duties to
Perform including Rehabilitation not only Once but Multiple Times - DRT
Solutions Weekly Mail 214th
One of our clients
Mr. Mukund Murthy from Mumbai has sent the following useful information:-
“Before declaring NPAs,
Bankers have numerous duties to perform
including rehabilitation not only once but multiple times – Important
Information for Borrowers and their advocates
Our Associate and Banking Expert has drawn attention to the
following important RBI Guidelines and circulars which will be highly useful to
Borrowers and their Advocates. These need to be studied and important aspects
included in the ‘Representation and Objections’ to notice u/s 13 of the
Securitisation Act as well as in the application u/s 17 of the said Act:-
(a) Even before the prudential norms to declare accounts as
NPA was brought by RBI to be implemented from 31st March 2004, RBI
issued a circular DBS.CO.OSMOS/B.C./ 4/ 33.04.006 / 2002-2003 dated September
12, 2002 on “Guidelines on preventing slippage
of NPA accounts” based on a study on preventing slippage of NPA accounts, addressed
to The chairman/ Managing Director/Chief Executive Officer – All Commercial
Banks (Excluding RRBs) which means it is applicable to all commercial banks
irrespective of whether they are Indian banks or foreign banks or multi state
co-operative banks. Since the circular cited now is issued previous to the
circular issued for declaration of NPA, the guidelines as prescribed in the
aforesaid circular has to be implemented first before declaring an account as
NPA.
(b) RBI Master circular DBOD No.BP.BC.10/21.04.048/ 2004-05
dated July 17, 2004 where in prudential norms are given. As per the said
circular of RBI, mere irregularity in the account cannot make it a Non
Performing Asset. It depends upon the nature of irregularity.
(c) RBI circular RPCD.PLNFS.BC.No.31/06.02.31/2005-2006
dated August 19, 2005 highlights the “Policy Package for Stepping up Credit to
Small and Medium Enterprises. - Further RBI circular RPCD.SME &
NFS.BC.No.9/06.02.31/ 2010-11 dated July 1, 2010 under lending to Micro, Small &
Medium Enterprises (MSME) Sector among other things states about Debt
Restructuring Mechanism for Micro Small and Medium Enterprises.
(d) That as per Government of India policy and RBI guidelines
and directives, it is apparent that an account can be classified as NPA only
when all the means of making the account performing, which includes repeated
rehabilitation fail to produce the desired result, and then and then only, the
legal proceedings under Securitization Act 2002 can be invoked and proceedings
initiated by issuing the notice u/s 13(2) of the said Act.”
01.06.12 -
Amendment of the SA - DRT Solutions Weekly Mail - 212nd
“We are getting
several cases where the SA has been prepared but it lacked important portions
like many of the wrong doings committed by the lenders and the loss and damages
on account of the said wrong doings. We advised our such clients that the SA
should be amended at the earliest possible opportunity. If it is not done, the
borrower shall be deprived of an important right and his case will become weak
and later on curing such weakness will not be possible. There are few judgments
of the Supreme Court of India which lay down that “ The Courts should be
extremely liberal in granting prayer of amendment of pleadings unless serious
injustice or irreparable loss is caused to the other side.”
01.06.12 - Exhaustive Application for Stay before DRT- DRT
Solutions Weekly Mail - 212nd
“Just after
receipt of notice u/s 13(4) it will be better to submit SA before DRT with an
exhaustive application for stay as early as possible. The SA may have even
provision for subsequent amendment. Such action will prevent the lender to
approach the Magistrate or direct auction of the secured assets.”
25.05.12 - ‘No Debt Due’ – Stages for Highlighting - DRT
Solutions Weekly Mail - 211th
“The banks are out
to misuse the coercive provisions of the Securitisation Act. In order to secure
favourable response from the Magistrate u/s 14 or from the PO DRTs u/s 17,
proper pleadings are to be made to emphasize the situation of ‘No Debt Due’ at
the following stages:-
(a)
In
the Representation and objections against the notice u/s 13(2), the loss and
damages should be pleaded stating that since the said loss and damages are much
more than the alleged dues of the bank and hence there is ‘No Debt Due’. Copy be
also sent to the Chairman and other higher officials of the bank.
(b)
In
the caveat filed before the Magistrate copy of the said Representation and
Objections be enclosed emphasizing the said ‘No Debt Due’ situation. Copy of the
said caveat be also sent to the Chairman and other higher officials of the bank.
(c)
In
the arguments before the Magistrate the said point of ‘No Debt Due’ be
emphasized. Also written arguments be submitted.
(d)
Despite above if the Magistrate order is not favourable, review be filed before
the Magistrate.
(e)
Just
after review, appeal be filed before the DRT.
(f)
Since every stage, sufficient records have been created followed by Review,
Appeal and Written Arguments, the Magistrate and PO DRTs will have no option but
to grant stay for taking the physical possession.
(g)
Despite above, if desired results are not achieved, one will have sufficient
records and documents to file Appeal before DRAT and then subsequently before
the High Court and Supreme Court.
18.05.12 - Misconceptions of a DRT Advocate – Action after Notice u/s 13(2)
- DRT Solutions Weekly Mail - 210th
One of our clients
arranged a conference call during which he, his DRT Advocate and we interacted,
his said advocate proposed certain actions against which our comments were as
under:-
(a)
The
bank sent the legal notice u/s 13/2 of the Securitisation Act against which the
borrower submitted the Representation and Objections within 60 days.
(b)
The
bank did not submit the reply within a week as prescribed u/s 13(3A).
(c)
The
bank did not take any further action. It was learnt that the bank officials
desired to cancel the first notice and to issue another notice.
(d)
The
said DRT Advocate proposed to file SA in the DRT. We told him that the SA can be
filed only after bank invokes any action u/s 13(4) or approaches to the
Magistrate u/s 14 but not before that.
(e)
The
said Advocate proposed to file suit in the civil court. We told him that such
action will ultimately not be of any use due to bar of civil court as per Sec
34.
(f)
The
said Advocate also proposed to file a writ petition in the High Court. We told
him that the High Court will ultimately advise to approach DRT at appropriate
time.
(g)
On
account of above such misconceptions, we have been advising our clients to go
through the relevant legal provisions and discuss the matter with us so that
unnecessary and ineffective actions are not indulged in. The borrower should
keep in view that all the government policies, RBI Guidelines, banking and
general laws and above all the Constitution support business, trade and
industries so that there is growth, employment and revenue generation. All these
should be pleaded properly and at every time, the borrower should strictly
follow the law and the procedure of law. Any shortcut and hurry will ultimately
go against him. We are always available for suitable guidance and advice at any
stage of litigation. Our web site and weekly mail are continuously updated to
provide latest practical knowledge.
(h)
On
account of professional ethics and other obvious reasons, we never disclose name
of the clients, advocates, DRTs etc but our aim is that the relevant knowledge
and experience must flow to one and all so that it will be useful to others.
18.05.12 - Proposal by a DRT Advocate – To file Injunction Suit against
Classification of Account into NPA - DRT Solutions Weekly Mail - 210th
One of well known
DRT Advocates proposed filing an Injunction Suit against classification of
account into NPA. We advised him not to do so on account of following reasons:-
(a)
The
proceedings in the civil court are barred due to Sec 34 of the Securitisation
Act and hence the efforts and expenses in the civil court will be wasted.
(b)
The
DRT is the most suitable jurisdiction as it is a specialized court for the
matters relating in business, industry and finance being dealt under the DRT Act
and Securitisation Act.
(c)
The
DRTs were formed on recommendation of the Tiwari Committee which in its report
published by the RBI in 1984 said that the proposed tribunals (i.e. DRTs) should
be manned (i.e. the DRT Advocates and DRT Judges) by persons having expertise in
banking, industry and finance. Hence the DRT advocates and judges should undergo
a training of at least 100 hours in banking, industry and finance. Such training
should be repeated every two years.
(d)
The
adjudication in DRTs is guided on the Principles of Natural Justice scope of
which is much wider than that in CPC. In fact the CPC is codification of the
said Principles of Natural Justice and hence the deficiencies in CPC could be
corrected in the DRTs.
(e)
Classification of account into NPA is one of the ingredients to invoke sec 13(2)
of the Securitisation Act. Such classification is a very tedious and exhaustive
process being based on relevant RBI Guidelines. This could be one of the
preliminary issues in the trial of the SA. If proper pleadings are made and
thorough trial of the said preliminary issue is carried out, in most of the
cases, the bankers will lose.
(f)
Hence in view of above, it will be better to carry out the proposed adjudication
in DRTs rather than the civil courts.
11.05.12 -
Sec 14 of Securitisation Act – Important Observations and Comments
- DRT Solutions Weekly Mail - 209th
On account of
legal ignorance, the borrowers and guarantors are highly scared of the physical
possession orders for which are obtained by the banks from the Magistrate u/s
14. Our observations and comments are as under:-
(a)
After possession notice u/s 13(4), the borrower is entitled to file application
u/s 17 before the DRT within 45 days of receipt and or publication of the said
notice in two news papers.
(b)
Hence we have been advising our clients to file caveat with the Magistrate so
that opportunity is given to the borrower to participate in the proceedings.
(c)
Further we have been advising our clients, to approach to DRT, the moment they
come to know that the bank has approached the Magistrate.
(d)
The
Magistrate is bound to take action on the said caveat as well as to extend
opportunity for hearing.
(e)
If
there are wrong doings by the bank upto the stage of 13(4), the Magistrate is
bound to refuse to act u/s 14.
(f)
In
case the Magistrate orders for physical possession, his order is appealable u/s
17 before the DRT.
(g)
Keeping all the above aspects and implications in view, we cove all the related
aspects when we prepare the objections and representation against the notice u/s
13(2) including the claim for loss and damages. Such pleadings become useful and
handy while dealing with the Magistrate as well as the DRT.
(h)
The
gist of the approach is that on account of huge loss and damages due to the
wrong doings of the bank, there is ‘No Debt Due’, hence there is no cause for
recovery. Until and unless this issue is settled by the DRT, no physical
possession can be taken. This will be done only after final order against the SA
u/s 17. As per the Supreme Court in the matter of Mardia Chemicals, the said SA
is in lieu of a suit. The adjudication of a suit takes time of several years.
Since the higher authorities in the bank are also impleaded in the said suit,
lot of pressure is created and ultimately, the bank officers have no option but
to settle as per the terms desired by the borrower.
(i)
In
above dealings, one should study and keep in view all the related case laws.
Even there may be occasions to file Review and Appeal.
04.05.12 -
Amendment of SA to include Loss & Damages
- DRT Solutions Weekly Mail - 208th
We are getting several cases where, the SA does not include various
wrong doings committed by the lender as well as the consequent Loss and
Damages. Under such facts and circumstances, the SA should be amended as
early as possible to include the said wrong doings as well as the said
consequent loss and damages. Normally such amendment should be allowed
by the DRTs. If there is any hitch, the DRT should be requested to pass
suitable order. After examining the content of the said order,
subsequent step should be taken to initiate Review and or Appeal. After
the amendment is allowed, the situation of ‘No Debt Due’ will be
achieved whereby the secured assets can not be touched till the complete
SA including the loss and damages are adjucated upon fully.
04.05.12 -
Cross examination of Bank Officials in SA
- DRT Solutions Weekly Mail - 208th
As per the law laid down by the Supreme Court in the matter of Mardia
Chemicals, the SA is in lieu of a suit. DRT being akin to a trial court
to determine the fact, if is convinced that the controversial facts
require oral examination of the parties and their witnesses, has full
powers to examine and cross examine the said officials. This will depend
on the pleadings, reply by the bank, relevant documents, issues framed
and material controversies.
13.04.12 -
Public Notice for Sale – during the Adjudication of SA – Arbitrary and
Illegal Action-
DRT Solutions Weekly Mail - 205th
Having constituted
the DRTs and having enacted the special acts like the DRT Act and the
Securitisation Act, the banks thought that they will have quick recovery of
their alleged dues. This was a wishful thinking. The DRTs are trial courts and
have to function in accordance with the law and procedure of law. The impatience
of the bank officials results in violation of the said law and procedure of law.
As a result the recovery gets inordinately delayed. We have observed that even
in the very initial stage of the SA, the banks are going for making public sale
notices of the secured assets. This is highly illegal and arbitrary. Our views
are as under:-
(a)
As
per the law declared by the Supreme Court of India in the matter of Mardia
Chemicals, the SA is in lieu of a suit on account of bar of civil court due to
Sec 34 of the Act. Hence all the wrong doings of the bank must be pleaded in the
SA including the loss and damages due to the said wrong doings. In almost all
the cases, the said loss and damages are much more than the alleged claim of the
bank and hence prima facie, there is ‘No Debt Due’, Under such circumstances, no
recovery action can be initiated by the bank till the SA is fully adjudicated.
(b)
In
view of above, any paper publication for sale of the secured assets before final
adjudication of the SA is arbitrary and illegal.
13.04.12 -
Asking for Deposit under ‘No Debt Due’ situation for Staying Disposal Action
is Arbitrary and Illegal-
DRT Solutions Weekly Mail - 205th
Under the ‘No Debt
Due’ situation described vide item no (1) above, asking for any Deposit for
staying disposal action is arbitrary and illegal. Our comments are as under:-
(a)
As
per the law declared by the Supreme Court of India in the matter of Mardia
Chemicals, the SA is in lieu of a suit. Accordingly the prescribed court fee is
paid on the SA.
(b)
Having paid the court fee and under the ‘No Debt Due; situation, if bank
initiates any recovery action, the same should be stayed (without any deposit)
till said SA is fully decided.
21.03.12 -
Illegal auctioning of assets - CMD of Financial Institution, its AGM (Law)
and Recovery Officer of DRT-1 Delhi get One Month Jail by High Court Delhi
for Contempt – Officers of the Financial Institutions are also fined Rs 3.5
lac and Rs. 1.5 lac to be paid from their pocket –
- DRT Solutions Weekly Mail - 202nd
(a)
Three news items are reproduced in the Weekly Mail 202nd Issue dated
21.03.12 and are self explanatory.
(b)
This weekly mail must be spread to all borrowers, guarantors and their
advocates as well as the Industrial Associations.
(c)
This will create a fear among the public servants indulging into illegal
disposal of assets by the banks and DRTs.
(d)
This has proved our contentions past several years that in all cases, the
Chairman of the bank must be impleaded as a necessary party.
(e)
It is reiterated that our pleadings must be thorough and perfect and we
must contest perfectly on all dates.
(f)
We must always file damages and or counter-claims in all cases for the
wrongdoings committed by the banks and Fis.
16.03.12 -
Our contention to include ‘Loss and Damages’ (i.e. Counter-claim) in the SA
gets support of Court of Law
- DRT Solutions Weekly Mail - 201st
Past several years, we have
been including ‘Loss and Damages’ in the SA filed by the Borrowers in the DRTs
under the Securitisation Act. We held this view on the basis of the 2004 verdict
of the Supreme Court of India in the matter of Mardia Chemicals wherein it was
held that the application u/s 17 of the Act is in lieu of a suit.
Mr. Bharat Gandhi, Advocate,
Mumbai recently sent us a copy of DRAT New Delhi Judgemant reported as 2012(1)
Bankers’ Journal 72 in the matter of Vijaya Bank vs B.I. Gupta wherein it is
held that counter-claim can be filed in SA u/s 17 of the Securitisation Act.
This judgment fully supports our above mentioned contention.
28.02.12 - Magistrate refuses to issue covering order for physical possession of
secured assets - DRT Solutions Weekly Mail - 198th
One of our
clients from Nagpur informed that the bank officials illegally took physical
possession and sold the secured assets. Subsequently the said erring bank
officials approached the Magistrate to issue covering order for physical
possession. The said Magistrated refused to issue such order. The borrower
should initiate criminal action against the said bank officials as well as
file damage suit against them and the bank.
Our Client wins in Securitisation Appeal against 4 Banks in DRT – amount
involved nearly Rs. 90 crores and a tooth & nail fight of 4 years
Entire Judgment reproduced vide link
DRT Orders in favour of Borrowers & Guarantors
DRT Solutions Weekly Mail – 72nd Issue dated 18th
September ’09
All Weekly mails right from 1st Issue to latest, click links below:-
(1) Securitisation Act – DRT Trials – Problems faced by Defendant Borrowers and
Solutions
We have received several queries on this
topic from our clients as well as those visiting our web site. Our views are as
under:-
(a)
It is
presumed that exhaustive objections, representation and facts have been
submitted before the lender under section 13(3-A) of the Securitisation Act ’02.
(b)
It is
presumed that the said objections, representation and facts include the claim of
loss and damages suffered by the borrower on account of wrong doings of the
secured creditor. In some cases where OA has been filed by the said creditor, it
is presumed that counter-claim has already been filed. It is presumed that the
said loss and damages or the said counter-claim are more than the claim of the
said creditor.
(c)
It is
presumed that exhaustive appeal has been filed u/s 17 of the said Act.
(d)
Under the
above facts and circumstances, the basis of the arguments will be as under:-
(A)
As per Art.
141 of the Constitution of India, the law declared by the Supreme Court shall be
binding on all courts within the territory of India.
(B)
The Supreme
Court in the matter of Mardia Chemicals (AIR 2004 SC 2371) has declared that the
said appeal u/s 17 is akin to a civil suit. Hence it is binding on DRTs to try
the said appeal as a civil suit.
(C)
The Supreme
Court in the matter of Swaranlata (AIR 1969 SC 1167) has laid down the procedure
by which trial of a civil suit is to be conducted. Accordingly the DRTs are
legally bound to follow the said procedure.
(D)
As per the
Supreme Court in the matter of Commissioner of Central Excise vs Uni Products
(I) Ltd [2009 STPL (Web) 19 SC] decided on 08.09.09. the tribunal (i.e. in our
case DRT) is the last authority on facts.
(E)
As per the
Supreme Court in the matter of Authorised Officer, Indian Overseas Bank vs
Ashok Saw Mill decided on 16.07.09 has declared that the DRT has full powers set
aside the actions taken u/s 13(4) and even status quo ante can be restored by
the DRT.
(F)
As per Sec.
22 of the DRT Act 1993, the DRTs and DRATs shall not be bound by the procedure
laid down by the CPC 1908 but shall be guided by the principles of natural
justice.
(G)
As per the
section 34 of the said Act ’02, no civil court shall have jurisdiction to
entertain any suit or proceedings in respect of any matter which a DRT or DRAT
is empowered by or under the said Act ’02 to determine. Hence the said appeal
u/s 17 is the only suit for adjudication.
(H)
As per the
Supreme Court in the matter of ICICI Ltd vs Grapco Industries Ltd. [1999 AIR
(SC) 1975], the DRTs can exercise the powers of civil court and even travel
beyond the scope of CPC for the purpose of natural justice.
(I)
When all the
above provisions of the law declared by the Supreme Court are to be followed by
the DRTs and in fact they are bound to do so, the trial of the said appeal u/s
17 should take not less than 15 to 20 years.
(J)
If any PO
wants to hurry up, he should be told and explained about the above provisions.
Despite this, if he hurries up the matter, application should be made to change
of court. If necessary a petition for writ of certiorari may be filed in the
High Court for the violations of principles of natural justice as well as the
law laid down by the Supreme Court.
(K)
Few of our
clients have followed the above provisions and have achieved success.
(L)
If any
clarifications are required the matter may be discussed with us on phone or in
person.
(2) Banks are preferring to invoke Securitisation Act
We have observed that the secured creditors are giving more
preference to invoke the Securitisation Act rather than the DRT Act. Our
comments are as under:-
(a)
In respect
of our clients, we have saved many of them by the various steps outlined by us
in various weekly mails.
(b)
The most
important aspect is perfect pleadings and perfect trial on every date. Another
most important aspect is perfect cross-examination.
(c)
If all the
legal aspects pointed by us are kept in view and if an experienced trial lawyer
is appointed, there is no reason for the borrower (if he has filed a
counter-claim or damage suit which are more than the claim of the bank and hence
there is ‘No Debt Due’) to win against the secured creditor.
DRT Solutions Weekly Mail – 65th Issue dated 7th
August ’09
All Weekly mails right from 1st Issue to latest, click links below:-
(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.
Important Victory of Our Client against Bank:-
One of our important clients at Chandigarh who filed damage suit of Rs. 1825
crores against a public sector Bank on 13.01.05 registered an important victory
on 03.03.07 when the Court waived the entire court fee despite all opposition by
the defendant Bank. The alleged dues of the Bank are Rs. 30 crores. Since the
damages are much more than the alleged claim of the bank, no recovery action can
be executed till the said damage suit is finally decided. The usual delay in the
litigation does not affect our client as the damages are increasing day by day
due to interest charges at rate which is much higher than the increase in the
alleged claim of the bank. The said damage suit was drafted by us and all
necessary advice and guidance was provided on all dates of proceedings.
Our approach of counter-claim or damage suit against the lenders fully endorsed
by authorities:-
Two leading authorities in law and banking both
having more than 40 years of experience in law and banking have fully endorsed
our approach to counter-claim in DRTs or damage suit against the lenders in
civil courts. You may click the pages
Video Interview - BS Malik, Sr.
Supreme Court Advocate
and
Video
Interview - GC Garg, Ex-Senior Bank Official
which give the contents of the video clips of interview
with them. You
may take out the print and study the same. Listening to the video interview will
be further useful. You may select the clips for replay for discussions with your
colleagues as well as the advocates.
You may obtain the VCDs from us to listen to their views which will
be quite useful to all the borrowers and guarantors as well as to their
advocates. The counter-claim or damage suit against the lenders are the only
legal defence and we specialize in framing such defence. We have handled several
such cases throughout the country. You may contact us on phone to know further
details
DRTs, DRT solutions,
Debts NPA Recovery Tribunal, DRTs matters, DRTs WS, DRTs Legal Opinions,
DRTs Arguments, DRTs Documents, Appellate DRTs, Bank litigations, securitisation /
securitization,
Counter-claims, NPA Recovery, NPAs Settlements,
checking of bank accounts and documents, 138 NI Act - Dishonour of Cheques etc., expertize in all these matters past 14
years. Legal
BPO and offshore BPO is our new activity for which we have launched new web site
www.usindolegal.com
Counter-claim is the only defence for the borrowers against Notice under
Securitisation Act
and or Original Application under the DRT Act:-
Under the present provisions of law,
the only legal defence for the borrowers is
Counter-claim giving quantum of loss and damages suffered due to wrong doings of
the lenders. The pleadings must be prepared by a person having mastery of facts
and mastery of law. The documents such as project report, application for
financial assistance, loan sanction letters, correspondence, balance sheets,
annual reports need to be referred to properly keeping in view the law of
pleadings, law of torts, law of damages, principles of natural justice, equity
and good conscience. If you are unable to get such pleadings prepared, our
professional services may be utilized. With our drafting of pleadings, you get
additional advantage of expert advice during course of litigation from beginning
to end. Since our clients are from all parts of the country and due to our
focussed attention, you get complete and exhaustive guidance. All our clients
are having upper hand over the lenders. In many cases the lenders have come
forward to waive total interest and settle at fraction of the principal amount.
In one of the cases the proposal of the lender is to waive the total claim provided
the borrower withdraws the damage claim, which the borrower has declined.
Counter-claim must be prepared much in advance of the Notice under
Securitisation Act or filing of the Original Application under the DRT Act:-
The
counter-claim or damage suit must be prepared much in advance of the recovery
action initiated by the lender. The most appropriate stage is as soon as the
lender declares the unit as NPA. The said counter-claim or damage suit must be
ready before the lender issued Notice under Securitisation Act or files Original
Application is filed by the lender in DRT. With such advance action only, the
counter-claim or the damage suit will attain proper quality standards from legal
considerations. As soon as the legal Notice from the lender under Securitisation
or DRT Act is received the said counter-claim or damage suit is updated and
filed before expiry of the Notice Period. Since prima facie there is no debt
due, the lender can not take any action for the possession of the assets till
the litigation pertaining to the said counter-claim or damage suit is decided by
the court of law. Even if any attempt is made by the lender to take possession,
the property can not be sold. Further steps in the DRT should be as outlined in
the next para.
Winning bank litigations in DRT:-
The first step is perfect pleadings drafted by a
person having mastery of facts and mastery
of law. The borrower must setup his counter-claim in money value based on law of
damages and law of torts. In almost all the cases, the counter-claim is much
more than the claim of the lender. These are the condition precedents before
commencement of litigation in DRT. The next important step is thorough
preparation of the case by the borrower as well as his advocate much in advance
of the commencement of the trial in DRT. The borrower and his advocate must
prepare at least 7 days before the date. In case the counter-claim has been
drafted by us, the outcome of the said preparation must be discussed with us on
phone so that our guidance is also available prior to the date. The proceedings
on the date must be properly recorded in the DRT. All the relevant facts must be
obtained much before the arguments and through preparation must be made. No
arguments be held at any stage till all the facts are discovered. Long dates
should be resisted. With proper alertness and vigilance by the borrower who must
work in unison with his advocate in advance will ensure winning bank litigations
in DRTs. It must be understood that the battle is long drawn, time consuming and
expensive. Even after winning in DRT, the borrowe and his advocate will have to
work hard in facing the appeals in ADRT, High Courts and Supreme Court. If the
pleadings are drafted by us, we provide all guidance from DRT to Supreme Court.
Important Extracts from the
SC judgment
in the matter of Mardia Chemicala
(1) Extract from
para 33 of the SC judgment,
dealing with issues to be decided:-
33.
Taking an overall view of the rival contention of the parties, we feel
the main questions which broadly fall for consideration by us are :
i) Whether it is open to challenge the statute on
the ground that it was not necessary to enact it in the prevailing background
particularly when another statute was already in operation?
ii) Whether provisions as contained under Section 13
and 17 of the Act provide adequate and efficacious mechanism to consider and
decide the objections/disputes raised by a borrower against the NPA Recovery,
particularly in view of bar to approach the
civil court under Section 34 of the Act?
iii) Whether the remedy available under
Section 17 of the Act is
illusory for the reason it is available
only after the action is taken under Section 13(4) of the Act and the appeal
would be entertainable only on deposit of 75%
of the claim raised in the notice of demand?
iv) Whether the terms or existing rights under the
contract entered into by two private parties could be amended by the provisions
of law providing certain powers in one sided manner in favour of one of the
parties to the contract?
v) Whether provision for sale of the properties
without intervention of the court under Section 13 of the Act is akin to the
English mortgage and its effect on the scope of the bar of the jurisdiction of
the civil court?
vi) Whether the provisions under Sections 13 and
17(2) of the Act are unconstitutional on the basis of the parameters laid down
in different decisions of this Court?
vii) Whether the
principle of lender's liability has been
absolutely ignored while enacting the
Act and its effect?
(2) Extract from
para 34 of the SC judgment,
stating that borrowers rights under the
constitution can not be ignored:-
34.
Liquidity of finances and flow of money is essential for any healthy and
growth oriented economy. But certainly, what must be kept in mind is that the
law should not be in derogation of the rights
which are guaranteed to the people under the Constitution. The
procedure should also be
fair,
reasonable and valid, though it
may vary looking to the different situations needed to be tackled and object
sought to be achieved.
(3) Extract from
para 44 of the SC judgment,
stating that borrowers objections, if any about
dues or in classification of NPA and or NPA Recovery be expeditiously be resolved:-
44.
Nonetheless dues or
disputes regarding
classification of
NPAs should be considered and resolved
by some internal mechanism. In our view, the above position suggests the
safeguards for a
borrower, before a secured asset is
classified as NPA. If there is any difficulty or any objection pointed out by
the borrower by means of some appropriate internal mechanism it must be
expeditiously resolved.
(4) Extract from
para 45, 46, 47 and 48 of the SC judgment,
purpose of 60 days notice and remedies to the
borrower to ventilate his grievance:-
45.
….we may consider as to what forums or remedies
are available to the borrower to
ventilate his grievance. The
purpose of serving a
notice upon the borrower under
sub-section (2) of Section 13 of the Act is, that a reply may be submitted by
the borrower explaining the reasons as to why measures may or may not be taken
under sub-section (4) of Section 13 in case of non-compliance of notice within
60 days. The creditor must apply its mind to the objections raised in reply to
such notice and an internal mechanism must be particularly evolved to consider
such objections raised in the reply to the notice. There may be some
meaningful consideration of the objections raised rather than to ritually reject
them and proceed to take drastic measures under sub-section (4) of Section 13
of the Act. Once such a duty is envisaged on the part of the creditor it would
only be conducive to the principles of fairness on the part of the banks and
financial institutions in dealing with their borrowers to apprise them of the
reason for not accepting the objections or points raised in reply to the notice
served upon them before proceeding to take measures under sub-section (4) of
Section 13. Such reasons, overruling the objections of the borrower, must also
be communicated to the borrower by the secured creditor. It will only be in
fulfillment of a requirement of reasonableness and fairness in the dealings of
institutional financing which is so important from the point of view of the
economy of the country and would serve the purpose in the growth of a healthy
economy……. At the same time, more importantly we must make it clear
unequivocally that communication of the reasons not accepting the objections
taken by the secured borrower may not be taken to give an occasion to resort to
such proceedings which are not permissible under the provisions of the Act. But
communication of reasons not to accept the objections of the borrower, would
certainly be for the purpose of his knowledge which would be a step forward
towards his right to know as to why his objections have not been accepted by
the secured creditor who intends to resort to harsh steps of taking over the
management/business of viz. secured assets without intervention of the court.
Such a person in respect of whom steps under Section 13(4) of the Act are
likely to be taken cannot be denied the right to know the reason of non-
acceptance and of his objections. It is true, as per the provisions under the
Act, he may not be entitled to challenge the reasons communicated or the likely
action of the secured creditor at that point of time unless his right to
approach the Debts Recovery Tribunal as provided under Section 17 of the Act
matures on any measure having been taken under sub-section (4) of Section 13 of
the Act.
46. ….it is necessary to communicate the reasons for not accepting the
objections raised by the borrower in reply to notice under Section 13(2) of the
Act more particularly for the reason that normally in the event of
non-compliance with notice, the party giving notice approaches the court to seek
redressal but in the present case, in view of Section 13 (1) of the Act the
creditor is empowered to enforce the security himself without intervention of
the Court. Therefore, it goes with logic and reason that he may be checked to
communicate the reason for not accepting the objections, if raised and before
he takes the measures like taking over possession of the secured assets etc.
47.
This will also be in keeping with the concept of right to know and
lender's liability of fairness to keep the borrower informed particularly the
developments immediately before taking measures under sub-section (4) of
Section 13 of the Act. It will also cater the cause of transparency and not
secrecy and shall be conducive in building an atmosphere of confidence and
healthy commercial practice. Such a duty, in the circumstances of the case and
the provisions is inherent under Section 13(2) of the Act.
48.
The next safeguard available to a secured borrower within the framework
of the Act is to approach the Debts Recovery Tribunal under Section 17 of the
Act. Such a right accrues only after measures are taken under sub-section (1)
of Section 13 of the Act.
(5) Extract from
para 64 of the SC judgment,
holding illegal the 75% deposit along with submission before Debts Recovery
Tribunal :-
64.
The
condition of pre-deposit in the present
case is bad rendering the remedy
illusory on the grounds that (i) it is imposed while approaching the
adjudicating authority of the first instance, not in appeal, (ii)there is no
determination of the amount due as yet (iii) the secured assets or its
management with transferable interest is already taken over and under control of
the secured creditor (iv) no special reason for double security in respect of an
amount yet to be determined and settled (v) 75% of the amount claimed by no
means would be a meager amount (vi) it will leave the borrower in a position
where it would not be possible for him to raise any funds to make deposit of 75%
of the undetermined demand. Such conditions are not alone
onerous and
oppressive but also
unreasonable and
arbitrary. Therefore, in our view,
sub-section (2) of Section 17 of the Act is unreasonable, arbitrary and
violative of Article 14 of the Constitution
(6) Extract from para 68 of the SC judgment,
stating that writs does not lie against Private Banks, Co-operative banks,
Foreign Banks etc. :-
68.
...So far remedy under
Article 226 of the Constitution of India is concerned, the submission is that
it may not always be available since the
dispute may be only between two private parties, the banking companies,
co-operative Banks or financial institutions, foreign banks, some of them may
not be authorities within the meaning of Article 12 of the Constitution of India
against whom a writ petition could be maintainable...
(1) The
High Court Gujrat
asked
Mardia Chemicals to 'To file
counter-claim against ICICI bank in DRTs'
vide page 6 of the Economic Times dated 13.03.03.
Our Comments:- This is legal
validation of our stand which we have emphasizing on this web site past
several months.
claim must be framed and kept ready so that as soon as the notice is
received, the counter-claim is filed within 60 days. Please study this web site and in
case of any difficulty or clarification contact us on our off. cum res. phones +91-731-4049358,
Mobile- 930-2103689
or through e-mail at our ID
ramkishandrt@gmail.com
