DRAT CANNOT WAIVE THE CONDITION PRECEDENT OF MAKING DEPOSIT EVEN IF PROPERTY IS SOLD

While deciding Eskays Constructions P Ltd v Soma Papers& Industries Ltd [MANU/MH/2565/2016], Mumbai High Court held that even if the mortgaged properties have been sold by the secured creditor, DRAT cannot grant a waiver of the deposit to be made for filing appeal against the DRT order stipulated under Section 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

The High Court observed that the 2^nd proviso to Section 18(1) of the Act requires the borrower who wishes to prefer an appeal against the Order of DRT, to deposit 50% of the amount of debt due from him, as claimed by the secured creditors or as determined by the DRT, whichever is less. The 3rd proviso to Section 18(1) gives a discretion to the DRAT to reduce the aforesaid amount to not less than 25%, provided the DRAT gives reasons for the same which are to be recorded in writing. The High Court held that these provisions create a jurisdictional bar on the DRAT from entertaining an appeal filed by the borrower from an order passed under Section 17, unless the borrower makes the deposit. High Court pointed out in its Judgement that the words "debt due from him" have to be interpreted consistent with the object and purpose sought to be achieved by the SARFAESI Act. Unless the debt due is secured, the borrower cannot be allowed the luxury of litigation.

High Court had reached to this decision based on an earlier decision of Supreme Court in this regard in Narayan Chandra Ghosh v. UCO Bank [(2011) 4 SCC 548] wherein the Supreme Court has clearly held that the provisions of Section 18, and more particularly the second and the third proviso thereto are mandatory in nature and the DRAT has no power to grant full waiver of deposit. High Court observed that if such a waiver is permitted the same would be defeating the very purpose for which Section 18 was enacted, which is to curb unnecessary and frivolous litigation.

Supreme Court seeks data on the Corporate Entities with Debts in excess of Rs. 500 Crores

Taking note of rising bad loans, the Supreme Court on Tuesday in Centre for Public Interest Litigation v Housing & Urban Development Corporation Ltd [MANU/SC/0014/2017] asked the Centre to give the list of corporate entities against whom outstanding loans were in excess of Rs 500 crore, besides the empirical data on recovery cases pending for last ten years in debt recovery tribunals (DRTs) and their appellate bodies. A bench comprising Chief Justice T S Thakur and Justices A M Khanwilkar and D Y Chandrachud rued the lack of infrastructure and manpower at DRTs and debt recovery appellate tribunals (DRATs), which decide recovery cases and said the legislative changes on fast disposal of such matters will not yield results unless infrastructure is not "commensurate" with the burden of work.

The Bench has also asked the Centre to file an affidavit dealing with various issues and sought "empirical data on the pendency of cases for more than ten years and the list of corporate entities where the amount outstanding is in excess of Rs 500 crore". The court asked "whether the timelines set down in the amended legislation are capable of being achieved with the existing infrastructure including judicial personnel and staffing pattern of the debt recovery tribunals and debt recovery appellate tribunals".

Union Government has been asked by the Apex Court to file an affidavit specifically dealing with the following issues within a period of four weeks from the date of Judgement:

(i) Whether the timelines set down in the amended legislation are capable of being achieved with the existing infrastructure including judicial personnel and staffing pattern of the Debt Recovery Tribunals and Debt Recovery Appellate Tribunals;

(ii) The underlying basis, if any, upon which the revised timelines have been stipulated and whether any scientific study has been conducted on the availability of infrastructure;

(iii) Whether, and if so, what steps the Union government intends to adopt to enhance the infrastructure of Debt Recovery Tribunals and the Appellate Tribunals in terms of physical infrastructure, judicial manpower and non-judicial personnel required for the efficacious functioning of the Tribunals;

(iv) The specific plan of action including time-schedules within which the existing infrastructure would be upgraded so as to achieve the time frame for disposal indicated in the amended legislation; and

(v) Empirical data on the pendency of cases for more than ten years and the list of corporate entities where the amount outstanding is in excess of Rs. 500 crore.

The Bank Employees Associations had issued a statement last year that in all, there are 7,129 accounts with amount to the tune of Rs 70,540 crore in wilful defaulter accounts. These loans constitute about 18 percent of the overall bad loans (Rs 400,000 crore) of Indian banks and about 1 percent of the total loans (Rs 65 lakh crore approximately) given by the banking sector. They had also released a list of top defaulters also to the press

Specified Bank Notes (Cessation of Liabilities) Ordinance, 2016

The Government has issued the Specified Bank Notes (Cessation of Liabilities) Ordinance, 2016 clarifying the extinguishment of RBI’s liability towards these SBNs, and penalises ‘holding, transferring and receiving’ of the SBNs, beyond a certain threshold, during this interim period of transfer.

The Ordinance has made the holding of more than ten old currency notes, an offence punishable by a fine of fifty thousand rupees or five times the face value of the notes held.

Under the Ordinance any citizen of India who was outside India between 9^th November 2016 and 30^th December 2016 or other class of persons were given time period till 31^st December 2016. However vide its subsequent notification the Ministry has extended the time for Indian citizens who is a resident in India till 31^st March 2017 and who is not a resident in India till 30^th June 2017.