Ozg Sarfaesi / DRT Lawyer
Ahmedabad | Pune |
Kolkata | Bangalore | Delhi | Mumbai
VoIP Text / Phone
# 09811415837-61-72-84-92-94
Website: http://sarfaesi.ozg.in
Email: debt@liaisoning.com
Constitution of DRTs & DRATs:
After the constitution of Debt
Recovery Tribunals (DRT) and Debt Recovery Appellate Tribunals (DRAT) under
‘The Recovery of Debts due to Banks and Financial Institutions Act, 1993” and
after conferring the authority to entertain appeals from the aggrieved persons
under section 17 of SARFAESI Act, 2002, Banks have gained an upper-hand in the
course of recovery of their dues. It is
hard to see a Bank now going to Civil Court or facing a Civil Proceeding
in-respect of recovery of their dues.
Even Consumer Courts are discouraged or not entertaining complaints from
the borrowers against the Banks seeking stay-orders or discourage borrowers
initiating consumer proceedings anticipating some kind of recovery proceeding
by the Bank. With a great object of
speeding-up the Bank’s recovery process and to reduce their NPAs, Special
Tribunals called ‘Debt Recovery Tribunals’ were constituted. There was great opposition from the legal
fraternity against the continuance of creation of Special Tribunals like
National Company Law Tribunal etc. At the same time, there are professionals
supporting the creation of Special Tribunals as the matters like Tax, Company
issues etc. requires speedy disposal and specialist approach. It’s a deeper issue to look at as to why
Special Tribunals are not functioning as expected making the judiciary to
intervene constantly either under Article 226 or 227 of Constitution of India.
While some Special Tribunals are functioning well and justified, some are
criticized most often.
Criticism:
While the Banks or the Public
Financial Institutions must be very happy with the constitution of ‘Debt
Recovery Tribunals’, there are many complaints from the borrowers against the
functioning of ‘Debt Recovery Tribunals’ and ‘Appellate Tribunal’. It is also true that even unscrupulous
litigants tend to comment on the functioning of ‘Tribunals’ to their advantage.
Again, it all mostly depends upon the mind-set or the ability of the Presiding
Officer presiding a particular Tribunal. While some Presiding Officers
presiding the ‘Debt Recovery Tribunal’ are appreciated, some are criticized
most often. There is a perception that
the ‘Debt Recovery Tribunal’ functions as an agent institution for the Bank in
the course of their recovery of dues. It is most often criticized that the Debt
Recovery Tribunals support Banks irrespective of their mistakes and do not
support the borrowers despite having merit in their contention. The DRTs are not supposed to follow an
elaborate procedure and they are guided by the principles laid-down by the High
Courts and Supreme Court from time to time.
It is alleged that this helps the Banks to use the procedure before DRT
to their advantage. It is also known
that the Bank Officials do maintain very good relation with the staff attached
with the Debt Recovery Tribunals and Appellate Tribunals. There is a glaring difference between the
normal Court System and procedure; and DRT set-up. It is also alleged that the office attached
to the ‘Debt Recovery Tribunals’ try to delay the numbering of appeal papers
etc. being filed by the borrowers.
Infact, the Tribunals are supposed to be public friendly as opposed
Courts. The Tribunals are not supposed
to rely so much on technicalities like Courts. Looking at the practice, often,
one gets an impression that Courts are public friendly now-a-days than
Tribunals.
Dealing with the functioning of a
particular Presiding Officer in a Case, a Bench of Madras High Court headed by
Hon’ble Justice D.Murugesan & Hon’ble Justice K.K.Sasidharan, in W.P.No.11113
of 2012, reported in CDJ 2012 MHC 2971, was pleased to observe as follows:
“15. The appeal in question was
preferred by the petitioner and it was numbered as Appeal No.1/2009. The third
respondent was not a party to the proceeding. The third respondent in her
capacity as auction purchaser filed an application in I.A.No.278/2012 to
implead her as a party to the proceeding. The application was filed by Ms.
Sankaran Latha, Advocate, Coimbatore, on 27 March 2012. The application was
taken on file and allowed by the Debts Recovery Tribunal, Coimbatore even
without ordering notice to the writ petitioner or Bank. The application in
I.A.No.278/2012 does not contain any indication that before filing the said
application, copy has been served on the petitioner. We are not in a position
to understand as to how in a pending matter, an application could be moved by a
third party without giving notice to the other side whether it be the
petitioner or the respondent. Though the petitioner was not given notice in the
impleading petition in I.A.No.278/2012, he was given notice in I.A.No.285/2012
filed to review the order in I.A.No.522 of 2009. The Presiding Officer ought to
have issued notice to the petitioner before passing orders in the interlocutory
application to implead the third respondent as a party to the appeal. There is
no dispute that it is the discretion of the Court to implead a party to a
pending matter, in case, for an effective adjudication of the matter, presence
of such party is absolutely necessary. Even in such a case, before deciding the
issue, the petitioner who was instrument in filing the application should have
given due audience. The presiding officer appears to have ignored basic
principles of justice.
16. This Bench has been dealing
with Debts Recovery Tribunal cases for the last one year. We have come across
several such illegal orders passed by the Presiding Officer, Debts Recovery
Tribunal, Coimbatore. Writ petitions and Civil Revision Petitions have been
preferred not only by the borrowers but also by the Banks and other financial
institutions. In some cases, the Bank settled the matter with the principal
borrower or guarantor. The Presiding Officer was not in favour of such
settlement. This made the Presiding Officer to pass orders directing Chairman
and Managing Director of the Bank to submit a report, detailing the
circumstances under which the local officials settled the matter with the
principal debtor. In some of the matters involving Indian Overseas Bank, the
Presiding Officer permitted the borrower to auction and sell machineries and to
pay the amount even without notice to the Bank. This made the Bank to file writ
petitions before this Court and we have already stayed such orders. Bank would
be in a position to engage a counsel at Chennai and file writ petitions and
civil revision petitions. It is only the poor borrowers who have to pay the
amount, ultimately along with the litigation expenses incurred by the Bank. In
case the borrowers and the guarantors are affected, necessarily, they have to
engage a counsel here at Madras and file appropriate applications to challenge
such orders. This also would cause considerable expenses to the poor litigants.
17. There is no doubt that the
Debts Recovery Tribunal, Coimbatore, is entitled to pass discretionary orders,
in accordance with law. The problem is on account of passing orders violating
the mandatory provisions of law. The petitioner in the present writ petition
and the petitioners in other writ petitions as well as the Standing Counsel for
different banks jointly made allegations against the Presiding Officer stating
that he has been supporting a particular counsel and whenever the said counsel
is engaged, the officer would pass favourable orders to please that counsel,
flouting the legal provisions.
18. M/s Canara Bank, Kongu Nagar,
Tiruppur, filed a writ petition before this Court in W.P.No.9775 of 2012
challenging the order passed by the very same Presiding Officer restraining the
Bank from proceeding under the SARFAESI Act. The said order was challenged by
the borrower in W.P.No.2103/2012 complaining that the original application was
allowed even without permitting the borrower to file his statement. During the
course of hearing of those two writ petitions, the learned counsel for the
petitioner as well as the Bank made similar allegations against the Presiding
Officer. While disposing of those writ petitions, we have expressed our strong
displeasure in passing such orders in a hasty manner. The relevant paragraph or
the order reads thus:-
“10. There is nothing on record
to show that the borrowers have filed their counter in O.A.No.72 of 2011. In
fact, the first hearing itself was only on 14 September, 2011. We are not in a
position to understand the logic in passing such hasty orders by the Debts
Recovery Tribunal, Coimbatore. In fact, we have been witnessing many such
orders passed by the Presiding Officer, Coimbatore in a hasty manner and in
violation of the mandatory previsions of the statute. The members of the legal
fraternity time and again complained across the Bar that the Presiding Officer,
Debts Recovery Tribunal, Coimbatore is in the habit of keeping the records with
him till the appeal time is over and never issues the certified copy of the
order before the statutory period for filing appeal. We do not want to comment
anything n this, at this point of time, without giving an opportunity to the
Presiding Officer to offer his remarks.
11. The impugned order clearly
shows that the Debts Recovery Tribunal, Coimbatore violated all the canons of
justice in his attempt to dispose of matters. We are not in a position to
appreciate the course of conduct adopted by the Debts Recovery Tribunal to
dispose of the original application without giving an opportunity to the
parties either to file their statement or to make submissions.”
19. Factual matrix of the present
case clearly indicates that the Presiding Officer allowed the impleading
application filed by the third respondent without even issuing notice to the
petitioner. The factum of impleading coupled with the appearance of a
particular counsel made the petitioner to entertain a reasonable doubt that he
would not get justice from the Presiding Officer. We are not here to examine
the said issue in extensor more on account of the fact that we have not called
for a report from the Presiding Officer with regard have not called for a
report from the Presiding Officer with regard to such allegations. In any case,
the parties have now expressed their consent to transfer the matter to Debts
Recovery Tribunal, Chennai.
20. We are, therefore, of the
view that interest of justice would be sub-served in case the appeal preferred
by the petitioner in Appeal No.1/2009 is transferred from the file of Debts
Recovery Tribunal, Coimbatore, to the Debts Recovery Tribunal, Coimbatore, to
the Debts Recovery Tribunal II, Chennai.
21. The Registry is directed to
transfer the records received from the Debts Recovery Tribunal, Coimbatore,
directly to the Debts Recovery Tribunal II, Chennai, along with a copy of this
order so as to enable the Tribunal to take up the matter and dispose of the
same in accordance with law.
22. We have already extracted the
submissions made before us by the counsel on either side in the present writ
petition and the members of the Bar. In fact, the Bar was unanimous while
making submission that the Presiding Officer, Debts Recovery Tribunal,
Coimbatore, has been showing undue favour to a particular counsel and that
appearance of that counsel would tilt the balance in favour of the party who
has engaged the said counsel. Litigants should have a feeling that their cases
are heard by the Presiding Officer without bias. Judiciary would lose its name
in case parties entertain a reasonable doubt, about the integrity of the
Presiding Officer. We have been seeing many such orders passed by the Presiding
Officer, Debts Recovery Tribunal, Coimbatore, taking contradictory stand and
passing orders in violation of the settled legal principles. Therefore, we are
of the view that the matter requires consideration by the concerned
authorities.
23. The Secretary, Ministry of
Finance, New Delhi, and Ministry of Law and Justice, are directed to conduct an
enquiry and take appropriate action the matter.”
This is only a small reference of
the functioning of a particular Presiding Officer. But, infact, there were
serious issues and serious allegations most often.
Why High Courts are burdened with
DRT/SARFAESI matters now?
Initially, High Courts used to
entertain Writ Petitions in-respect of SARFAESI proceedings. Later-on, it is
complained that Bank’s recovery process gets hampered due to filing of Writ
Petitions in High Courts and High Courts passing stay or adverse orders.
Pursuant to the complaint or taking note of the situation at that time, there
were many judgments and the judgment of Supreme Court that the High Courts
should exercise restraint in respect of entertaining Writ Petitions pertaining
to SARFAESI matters. During this period, many Writ Petitions were dismissed or
disposed of at the admission stage itself and the High Courts were not granting
any relief or stay orders as prayed by the borrowers. This practice has
continued for a while though it was maintained that there can never be a
complete bar on the jurisdiction of High Courts under Article 226 of
Constitution of India in respect of Writ Petitions challenging SARFAESI
proceedings. It was termed as ‘self-imposed restriction’.
However, in the recent past, in
many cases as alleged, Banks took advantage of the powers under SARFAESI Act,
2002 and the functioning of DRTs and DRATs.
As a result, borrowers were struggling to get justice or advocate their
case properly. They complain as to how the numbering of appeal papers gets
delayed with the DRT, how the presiding officers will be on-leave without any
effective alternative arrangement, how the Bank proceeds with the SARFAESI
proceeding despite filing or pendency of an appeal under Section 17, the
practice of mandating the borrowers to deposit substantial amount as a
pre-condition for the grant of any stay-order, the delay and the pre-deposit
condition with the DRAT. There are several issues or complaints with the
SARFAESI proceedings and the functioning of DRTs and DRATs. When a borrower
fails to find a place to advocate his case properly and fairly, he will have no
option except approaching High Courts under Article 226 of Constitution of
India. According to me, understanding the plight of borrowers in some cases in
SARFAESI matters, the abuse of powers under SARFAESI Act, 2002 and the
functioning of Debt Recovery Tribunals and Debt Recovery Appellate Tribunals,
the High Courts do interfere with SARFAESI proceedings or the DRT proceedings
now in appropriate cases. No High Court interferes with the SARFAESI
proceedings initiated by the Bank or the proceedings pending before the DRT or
DRAT unless there is a strong case and justification.
All these issues make the High
Courts burdened with the DRT/SARFAESI matters despite having Special Tribunals
called ‘Debt Recovery Tribunal’ and ‘Debt Recovery Appellate Tribunal’. It is a
result of misuse or improper use of powers under SARFAESI Act, 2002 or the
failure of DRTs and DRATs to provide an effective relief to the borrowers in
appropriate or deserved cases.
Ozg Sarfaesi / DRT Lawyer
Ahmedabad | Pune |
Kolkata | Bangalore | Delhi | Mumbai
VoIP Text / Phone
# 09811415837-61-72-84-92-94
Website: http://sarfaesi.ozg.in
Email: debt@liaisoning.com
