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DRT Solutions Weekly Mail – 330th Issue dated 5th September ’14

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(1) Banking Negligence also call for Large Compensation as in Medical Field 

The following news item may be viewed for the requirement of large compensation from the bankers for their wrong doings e.g. not performing their duties properly, inordinate delay in sanctioning adequate working capital, not restructuring, rehabilitating or reviving sickness in time etc.:- 

 

Are large compensation payouts for medical negligence good?

31 Aug, 2014, 04.30AM IST

http://economictimes.indiatimes.com/industry/healthcare/biotech/healthcare/are-large-compensation-payouts-for-medical-negligence-good/articleshow/41280942.cms

YES. Large payouts awarded by the courts may be the only way to instil accountability for wayward doctors and to save lives

Dr Kunal Saha

 

The limitless financial compensation and punitive damages often imposed for medical errors in developed countries may have some inherent flaws. In India, however, healthcare is supposed to be regulated by a quasi-judicial medical council that has failed to protect against widespread negligent and irrational treatment. Large payouts awarded by the courts of law may therefore be the only way to instil accountability for wayward doctors and to save lives.

Compensation became a hot topic in India after the Supreme Court awarded more than Rs 11 crore in damages (including interest) against several doctors and a private hospital in Kolkata for the wrongful death of a patient. This was by far the biggest payout in Indian medicolegal history. Until now, Indian courts have generally awarded meagre compensation for death from medical negligence, rarely exceeding Rs 3,00,000-6,00,000, and often less, which has failed to have any deterrent on affluent doctors and hospitals

Unfounded Fears

For the legal right to compensation (tort liability) to be useful in curbing medical negligence, it should serve at least two purposes. Firstly, it must provide adequate financial support for the victim's family (compensation) to fill the irreparable vacuum created by the wrongful death as best as possible. Secondly, and perhaps more importantly, the award must act as a deterrent against future negligent behaviour by other doctors and hospitals.

Reaction to the record compensation in India is sharply divided. Although most ordinary citizens and victims of medical negligence hailed the verdict, members of the medical community predicted a doomsday scenario for the future of Indian healthcare. Even though the Indian Medical Association was not involved in the lawsuit, it took the unusual step of filing a petition seeking a review of the Supreme Court's decision. Indian medical leaders have suggested that the large compensation will promote "defensive medicine", ultimately leading to greater costs for patients. Defensive medicine is often raised by proponents of tort reforms in the US.

The real effect of malpractice litigation on defensive medicine remains controversial. Although many US physicians claim that they practise defensive medicine to avoid litigation risk, policy analysts argue that this is nothing but an exaggerated response that results from "misattribution of casual responsibility" by doctors. A comprehensive study found that defensive medicine may contribute only 1-2% of the cost of US healthcare.

Unlike in the US, ordinary patients in India have no meaningful insurance to cover healthcare expenses. Most have to pay the medical bill on their own, and an increase in defensive medicine may affect these patients economically. But it is also true that in the absence of any insurance oversight, and without any government regulation, hospital expenses are skyrocketing in India. The apprehension that large compensation may increase defensive medicine is misplaced given the current total lack of  regulation and rampant corruption in the Indian healthcare system. Indian medicos have also claimed that large compensation should not be awarded in medical negligence cases because even the US has a limit in such cases. Although some US states have imposed a cap on "non-economic damages" (for pain and suffering), there is no cap on "economic damages" (direct loss of income) anywhere in the US. More than 95% of the large compensation awarded by India's Supreme Court in the recent case was for the the loss of income from the untimely death of a patient, who was a child psychologist in the US. Putting a limit on non-economic damages would have made no difference.

Deterrence will be Beneficial

The primary purpose of large compensation payouts must aim to deter medical negligence and unethical practice of medicine. Despite the criticism that excessive malpractice litigations are crippling the healthcare system in the US, a study by the Institute of Medicine found that between 44,000 and 98,000 US residents die each year from preventable medical errors. This high number of deaths might be used to argue that liability lawsuits have no deterrent effect on medical negligence. But this would  be improvident without any knowledge of how much worse US healthcare would have been without the medical liability system. In fact, malpractice liability pressure has been correlated with a modest decline in mortality, indicating a positive role. In contrast, preventable medical complications increased after the cap on damages was adopted.

Malpractice liability may have a moderate degree of deterrent effect in countries with an effective regulatory system through medical council or board that routinely uses disciplinary action to curb negligence and unethical behaviour by doctors. Unfortunately, medical councils in India have been riddled with incompetence and deep rooted corruption. Disciplinary action against negligent or unethical doctors by medical councils, which comprise only doctors, is almost non-existent in India.
A recent report comparing data on medical negligence cases in the US, the UK, Australia, Canada and India found no record of any doctor being disciplined for medical errors by Indian medical councils. In the absence of any effective non-judicial forum to protect vulnerable patients, large compensation by court of law may be the only way to prevent medical negligence and improve the quality of healthcare in India.

The writer is a private consultant and founding president of People for Better Treatment. Saha received the Supreme Court's highest compensation award for the death of his wife

(2) RBI Guidelines are statutory and mandatory for the Bank & FIs 

There are several SC rulings upholding that the RBI Guidelines are statutory and mandatory for the banks and FIs. The most appropriate SC Ruling is M/s Transcore vs Union of India decided on 29.11.06 vide citation AIR 2007 SC 712 wherein it is laid down that Classification of an account as non-performing asset has to be done by the bank of FI in terms of the guidelines issued by RBI.”

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DRT Solutions Weekly Mail – 329th Issue dated 29th August ’14

All Weekly mails right from 1st Issue to latest, click links on top of this page

 

(1) National Lawyers’ Association Campaign for Judicial Transparency & Reforms – Press Release in Mumbai – Latest Development

The latest development is contained in the Press Release by the said Association under the leadership and guidance of Mr Mathews, Advocate, Mumbai given below at the end of this mail at Item No 4 which is self explanatory. All the borrowers, guarantors and their advocates should support this movement. The contact details are M- 98205 35428, E-mail - aminrohini@gmail.com,   and mathewsjnedumpara@gmail.com and Office Address - 304, Hari Chambers, 3rd Floor, 54/68 SBS Marg, Near Lion Gate, Fort Mumbai- 400 023

 

(2) Rs 1.44 Lac Crores stuck as Cases Pile Up in DRTs

 

The following news item is self explanatory:-

 

FIRST PUBLISHED: FRI, AUG 22 2014. 12 31 AM ISTHOME»  INDUSTRY

 

Rs1.44 trillion stuck as cases pile up at debt tribunals With bad loans rising sharply and bankers turning tough on company founders, the number of cases being taken to debt tribunals is likely to rise 

http://www.livemint.com/Industry/NZuA2lGw14976GioZpjKwK/Rs144-trillion-stuck-as-cases-pile-up-at-debt-tribunals.html

 

Mumbai: In 2009, discount retailer Subhiksha Trading Services Ltd went bust as India’s economic growth slowed in the face of the global financial crisis. The once celebrated retail venture, promoted by R. Subramanian, owed banks Rs.750 crore. With the company unable to repay the money and little hope of a revival in its business, creditors approached a debt recovery tribunal (DRT)—the last refuge of banks seeking to recover funds from defaulters. In 2010, 10 lenders, namely Development Credit Bank, Bank of India, Federal Bank Ltd, HSBC Holdings Plc.’s India unit, HDFC Bank Ltd, Bank of Baroda, Kotak Mahindra Bank Ltd, IndusInd Bank Ltd, Royal Bank of Scotland Plc.’s local arm and Yes Bank Ltd all filed cases with the Chennai DRT. In the same year, another high-profile case, involving entertainment firm Pyramid Saimira Theatre Ltd, went to the Chennai DRT. In 2009, the Securities and Exchange Board of India (Sebi) found it guilty of inflating profits, forging documents and stock-price manipulation. Once again, lenders were left with no option but to approach the DRT, and IndusInd Bank and UCO Bank filed cases against Pyramid Saimira. The exact amount Pyramid Saimira owed creditors could not be ascertained. Four years later, not a rupee has been recovered by lenders of either company. “We have written off the loan and we do not expect much in terms of recovery,” said a lender to Subhiksha, who declined to be identified. The two cases are among the 42,819 cases pending before the 33 DRTs in the country as of 31 March 2013—the latest data available in the public domain. The amount stuck is Rs.1.44 trillion and could rise further when more recent data is made available. With bad loans rising sharply across the banking system over the last couple of years and bankers turning tough on company founders, the number of cases being taken to DRTs is likely to rise. As of 30 June, gross non-performing assets (NPAs) of 40 listed banks stood at Rs.2.52 trillion, up 21% from Rs.2.08 trillion a year ago. But the track record of existing DRTs and the infrastructure provided to them has been anything but encouraging, as is evident from the number of cases still pending before them. DRTs were first set up under the Recovery Of Debts Due to Banks and Financial Institutions Act, 1993, also known as the DRT Act. The DRT functions as a quasi-judicial body intended specifically for facilitating debt recoveries by banks. Under the existing norms, a DRT is supposed to dispose of a matter referred to it within 180 days of the receipt of an application. But this rarely happens, said bankers and lawyers that Mint spoke to. “There are a lot of problems with the DRTs. First, we need additional benches of DRTs to cope with the rising number of cases. Second, the DRT procedures need to be streamlined to prevent delays in disposing of a case”, said Supreme Court advocate and corporate lawyer H.P. Ranina. Bankers say one of the biggest problems facing DRTs is the lack of sufficient staff. According to a finance ministry letter dated 18 December 2013, addressed to the registrar generals of all the high courts of India, vacancies for a presiding officer exist at DRTs in Chandigarh, Delhi, Jabalpur, Nagpur and Patna. The letter, written by Rajeev Sharma, under secretary in the department of financial services, advised the registrars to set up a panel for any unforeseen vacancies that may come up by 30 September at a number of other centres including Ahmedabad, Bangalore, Chennai, Ernakulam, Hyderabad and Mumbai. A copy of the letter has been reviewed by Mint. “How are cases supposed to be heard if there is no presiding officer at the DRT?” asked an official at a public sector bank on condition of anonymity. The presiding officer hears the cases at DRTs, while all the other officials of the tribunals discharge their functions under the oversight of the presiding officer, according to the DRT Act. Along with the lack of adequate staff, the heavy backlog of cases means these tribunals find it difficult to dispose of cases within the stipulated 180 days. The three tribunals in Mumbai, for instance, had 3,632 cases pending as of 31 March 2013, involving loans worth Rs.43,400 crore. Kolkata’s three tribunals had a backlog of 11,212 cases with loans worth more than Rs.20,600 crore pending at the end of FY13. K.K. Ganguly, a Kolkata-based lawyer who has represented several banks and borrowers at the DRT, said: “The tribunal here is overburdened with cases. Cases have been pending since 2001.” Allahabad Bank’s case against Purbachal Traders, United Bank of India’s case against Emco Rubber Industries and ANZ Grindlays Bank’s case against Allied Engineers, all filed in 2001, are still being heard at the Kolkata DRT, information available on the tribunal’s website showed. Ganguly said he has been fighting a case since 2001 involving a claim of Rs.31 lakh made by a public sector bank against a Kolkata-based company. “The case is still pending in the DRT. I won’t give you the name of the bank involved. It will open a can of worms,” he said. “Borrowers eventually come to us for a one-time settlement after the case drags on for years. Often the settlement is much lower than the loans due to us. So the recovery which eventually happens is not because of the swift action of the tribunals, but because people get tired of waiting,” said a senior official at a Mumbai-based public sector bank on condition of anonymity. Recognizing the need to strengthen the debt recovery process, the government has announced the setting up on more DRTs and is also working in strengthening debt recovery laws. In his budget speech on 10 July, finance minister Arun Jaitley announced that six new DRTs would be set up in Chandigarh, Bangalore, Ernakulum, Dehradun, Siliguri and Hyderabad. The finance ministry is also working on improving debt recovery laws such as the Securities and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, so as to give more powers to lenders in dealing with defaults. A new bankruptcy law may also be in the works. In a speech earlier this month, Reserve Bank of India governor Raghuram Rajan said India needs better laws to deal with companies that have gone bankrupt. “We need a bankruptcy code. We need equity to be seen as equity and debt to be seen as debt. Today there’s a lot of confusion... We need that confusion to be changed,” Rajan said. 
 

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DRT Solutions Weekly Mail – 328th Issue dated 22nd August ’14

All Weekly mails right from 1st Issue to latest, click links on top of this page

 

(1) National Lawyers’ Association Campaign for Judicial Transparency & Reforms requires Your Active Support – Mumbai Press Conference

 

The said Association under the leadership and guidance of Mr Mathews, Advocate, Mumbai

(M-09820535428; 09818248048 and L-02224036161) is doing pioneering work. The legal community as well as the borrowers and guarantors must actively support this movement as well as Mr Mathews whole heartedly. The Press Note for the proposed Press Conference in Mumbai on 22.08.14 is reproduced at item no (4) below. Further details details of the campaign and the group photo of the campaign may be seen vide link http://www.drtsolutions.com/Transform-India-Modi.htm

Incidentally this is just for your information that Mr Mathews delivered a lalk in the last All India DRT Conference held at Indore in 2011. Complete video record of the said talk is available in one of the DVDs of the said Conference.

 

(2) Govt to Amend SARFAESI and DRT Acts

 

The following news item is self explanatory:-

Government to amend SARFAESI and DRT Acts to help banks recover money

By ET Bureau | 21 Aug, 2014, 03.44AM IST

http://economictimes.indiatimes.com/news/economy/policy/government-to-amend-sarfaesi-and-drt-acts-to-help-banks-recover-money/articleshow/40524229.cms

MUMBAI: The finance ministry will back lenders in changing management of companies that wilfully default, tweak the rules of appointment of public sector bank chiefs, and make sure that bankers are not victimised. "A bona fide decision can also go wrong...we can't penalise a person for that. He has to be protected. Otherwise, no one will take decisions. 

So, we will protect the person where there is no collusion," GS Sandhu, secretary, financial services, said here on Wednesday. His comments come at a time decision-making at state-owned banks has slowed down amid fears that officers who sanction loans could be pulled up by the Central Vigilance Commission (CVC) if an account turns bad. 

In a separate development, Oriental Bank of Commerce and Dena Bank have initiated a forensic audit after it surfaced that Rs 436 crore has been misappropriated from fixed deposits of customers. Soon after Syndicate Bank CMD SK Jain was arrested over allegations of bribe against loan, the Central Bureau of Investigation (CBI) had raised concerns over the high quantum of bad loans in the banking system, indicating collusion between lenders and promoters. 

Speaking to newspersons at the annual general meeting of Indian Banks' Association (IBA), Sandhu said the government is also working towards amending the Debt Recovery Tribunal (DRT) and Securitisation & Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act to arrest the surge in sticky loans. 

A change of management is very difficult in India, he said. "The tendency on the part of promoters is to stick to the unit. No matter what happens...even if they can't provide additional funding, or run it. But they will not move out. So we have to provide legal provision to force them to move out and bring in someone else who can bring additional capital, additional equity and run the unit and pay the money back to banks," he said speaking at the annual general meeting of IBA. 

He added that change of management will be applicable "wherever the borrower is not repaying deliberately... wilful defaulter. In those cases by legal force change of management can be done." On the appointment of PSU bank chiefs, Sandhu said the government is thinking of appointing CMDs for five years with a caveat that they will have to step down after three years for nonperformance. 

He was categorical that the government will not endlessly infuse capital to keep weak banks afloat. "Whether it is a private or public sector bank, it has to manage its affairs by generating revenues. The government can not endlessly keep on providing capital," he said. 

The Reserve Bank of India has estimated that private and public sector banks will require Rs 4.75-5 lakh crore by 2018 to adhere to Basel III norms — the global regulatory standard on bank capital adequacy ratio.

                                          Yours sincerely,

         (Mathews J Nedumpara)

President

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DRT Solutions Weekly Mail – 327th Issue dated 15th August ’14

All Weekly mails right from 1st Issue to latest, click links on top of this page

 

(1) National Lawyers’ Campaign for Judicial Transparency & Reforms under Joint Leadership of Mr Mathews, Advocate, Mumbai; Mr Sohal, Industrialist, Mumbai and Office Bearers

 

The details of the campaign and the group photo of the campaign may be seen vide link http://www.drtsolutions.com/Transform-India-Modi.htm

Further details may be seen in the The Press Note and Thanks letter to Mr R.M. Lodha, Chief Justice, Supreme Court of India reproduced below at the item no 4 of this weekly mail.

(2) National Judicial Appointments Commission Bill : Curse is worse than the Disease

 

The following news item is self explanatory:-

 

National Judicial Appointments Commission Bill: The cure is worse than the disease

 

By – Suhas Chakma, Director, Asian Centre for Human Rights

Embargoed for: 13 August 2014

 

http://www.achrweb.org/Review/2014/242-14.html

The Government of India has passed the Constitution (One Hundred and Twenty-First Amendment) Bill, 2014[1] seeking amendments to Articles 124, 127, 128, 217, 222, 224 and 231 of the Constitution of India and the National Judicial Appointments Commission Bill (NJACB)[2] , 2014 in the Lok Sabha today i.e. 13 August 2014. The Bills, if adopted by the Rajya Sabha, will replace the existing system of appointment and transfer of High Court and Supreme Court judges. The Supreme Court of India in the Three Judges Cases[3] laid down the guidelines for appointment and transfer of judges of the High Courts and the Supreme Court since 1993 through collegium system of the judiciary headed by the Chief Justice of India.

There is no doubt the collegium system has developed serious flaws. In direct reference to these flaws, the NJACB, 2014 is littered with words such as “ability” and merit”. The appointment and rejection of judges through the collegium system had been marred by personal preferences and rivalries of those selecting/appointing the judges. Justice Markandey Katju, current Chairperson of the Press Council of India, recently highlighted elevation of alleged corrupt judge Justice S. Ashok Kumar as a Madras High Court judge under the pressure of the Dravida Munnettra Kazhagam, a Tamil political party and an alliance partner of the previous United Progressive Alliance (UPA) government at the Centre. 

However, the cure being suggested for the ills of the collegium system is worse than the disease. The Constitution (One Hundred and Twenty-First Amendment) Bill, 2014 and the NJACB, 2014 only establish the supremacy of the Executive over the judiciary in matters of appointment and transfer, for which India shall have to pay a heavy price. 

If certain Chief Justices had failed to stand up to pressure of then UPA Government, which itself was under pressure from the DMK, for the elevation of Justice S. Ashok Kumar, it is unlikely that in future, members of the National Judicial Appointments Commission shall be able to stand up to any government. Justice Katju failed to highlight that even under the collegium system many a judges were appointed because of the proximity to the Law Minister rather than ability and merit. 

In the final analysis, selection or rejection of a judge under the collegium system may not meet the litmus test of choosing the best judge because of “personal preferences” or “differences” of those who are selecting/appointing the judges but damage in such cases is limited to personal “preferences” or “differences”. However, when the Government through the Law Minister appoints or rejects judges because of political or ideological “preferences” or “differences”, the appointment and rejection of judges has the potential to impact the entire nation.

Unqualified “eminent persons” for the National Judicial Appointments Commission?

In order to address the problems with “ability and merit” in the collegium system, the Constitution (One Hundred and Twenty-First Amendment) Bill, 2014 proposes establishment of the National Judicial Appointments Commission. Apart from the Chief Justice of India serving as ex-officio chairperson, two other senior Judges of the Supreme Court next to the Chief Justice of India and the Union Minister in charge of Law and Justice, Section 3 of the proposed Bill inter alia provides that “(d) two eminent persons to be nominated by the committee consisting of the Prime Minister, the Chief Justice of India and the Leader of Opposition in the House of the People or where there is no such Leader of Opposition, then, the Leader of single largest Opposition Party in the House of the People”. 

However, the selection of the “eminent persons” in the National Judicial Appointment Commission itself does not meet the test of objectivity on various grounds.

First, the Constitution (One Hundred and Twenty-First Amendment) Bill, 2014 fails to address the lack of confidence in the existing track record of the Government of India for selection of members of various National Commissions through a procedure as provided in the Constitution (One Hundred and Twenty-First Amendment) Bill, 2014.

In 2010, the Government of India appointed Mr P J Thomas as Chairman of the Central Vigilance Commission despite opposition from then leader of the opposition in the Lok Sabha, Ms Sushma Swaraj on the ground that Mr Thomas was chargesheeted in the Palmolein old case. Thereafter, on 3 March 2011, the Supreme Court of India in the case of
  Centre for PIL & Anr. ... versus Union of India & Anr. (Writ Petition (C) No. 348 of 2010)[4] declared appointment of Mr Thomas as “non-est in law” and quashed his appointment. 

However, the Government of India failed to learn any lesson.  It appointed Justice Cyriac Joseph on 27.05.2013 and Mr Sarat Chandra Sinha on 08.04.2013 as members of the National Human Rights Commission despite then leaders of Opposition, Sushma Swaraj in the Lok Sabha and Arun Jaitley in Rajya Sabha, recording their dissent against their appointments. [5] 

Second, the Constitution (One Hundred and Twenty-First Amendment) Bill, 2014 fails to specify the criteria including educational qualifcation of the “eminent persons” except that one of them shall be a person “belonging to the Scheduled Castes, the Scheduled Tribes, Other Backward Classes, Minorities or Women”. That can never be the only criterion for selection of the eminent persons.

Third, the Constitution (One Hundred and Twenty-First Amendment) Bill, 2014 fails to lay down procedure for selection of the members of the National Judicial Appointments Commission. While the National Judicial Appointments Commission Bill, 2014 emphatically states that “
the Commission shall not recommend a person for appointment if any two members of the Commission do not agree for such recommendation”, there is no such provision to bar appointment of members of the National Judicial Appointments Commission in case any appointing committee member opposes. This is despite the judgement of the Supreme Court inCentre for PIL & Anr. ... versus Union of India & Anr. (Writ Petition (C) No. 348 of 2010) with respect to quashing of appointment of Mr P J Thomas as the Central Vigilance Commissioner.

Fourth, the Constitution (One Hundred and Twenty-First Amendment) Bill, 2014 creates conflict of interest for the Chief Justice of India in his/her capacity as the ex-officio Chairman of the National Judicial Appointments Commission. Section 5 of the NJACB, 2014 provides that “a member of the Commission whose name is being considered for recommendation shall not participate in the meeting”. However, if such a person is appointed as Chief Justice of India, s/he may be required to adjudicate on the validity of the appointment of the “eminent persons” with whom he/she will be taking decisions on appointment and transfers of the judges.

The intention of the Government of India is suspect. The Bills are nothing but an attempt to wrest the appointment and transfer of judges from the judiciary and establish supremacy of the executive over the judiciary. 

It was none other than Justice P N Bhagwati, the most quoted Indian judge, who not only upheld in the 
ADM Jabalpur v. Shivkant Shukla case[6] that during emergency the right to habeas corpus can be suspended but also wrote a flattering letter to then Prime Minister Mrs Indira Gandhi as sitting judge of the Supreme Court describing her comeback following 1980 elections as "the reddish glow of a golden sunrise".[7] The history of Indian judges shows that Justice H R Khanna, the only judge who opposed the suspension of the right to habeas corpus during emergency in the ADM Jabalpur case, has been the exception while Justice Bhagwatis have been the rule.  

Insulating judiciary from political processes is indispensable for ensuring independence of judiciary. The Constitution (One Hundred and Twenty-First Amendment) Bill, 2014 and the National Judicial Appointments Commission Bill (NJACB), 2014 exactly seek to do the opposite. The problems with the collegium system must be addressed by making the collegium system more transparent and accountable, and not by wresting the control for appointment and transfer of judges from the judiciary. 

The Constitution (One Hundred and Twenty-First Amendment) Bill, 2014 and the National Judicial Appointments Commission Bill (NJACB), 2014 should be opposed unless the supremacy of judiciary is restored and the judiciary is fully insulated from the political processes. The Bills should be referred to a Parliamentary Select Committee and wider consultation must be held with all the stakeholders.

Independence of judiciary is too sacrosanct to be compromised in any country claiming to be democratic and governed by the supremacy of the rule of law.

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1 . The Bill is available at http://www.prsindia.org/uploads/media/constitution%20121st/121st%20%28A%29%20Bill,%202014.pdf

2 .  The Bill is available at http://www.prsindia.org/uploads/media/national%20judicial/National%20Judicial%20Appointment%20comm%20bill,%202014.pdf

3 . The cases are S. P. Gupta v. Union of India - 1981 (also known as the Judges' Transfer case) and Supreme Court Advocates-on Record Association vs Union of India – 1993 and Special Reference 1 of 1998

4 . The judgement is available at http://indiankanoon.org/doc/310431/?type=print

5 . As cited in Two NHRC appointments in 2013 violated SC norms. The Times of India, 26 July, 2014.Available at http://timesofindia.indiatimes.com/india/Two-NHRC-appointments-in-2013-violated-SC-norms/articleshow/39016055.cms

6 . The judgement is available at http://indiankanoon.org/doc/1735815/

7 . Age of activism, 15 August 1985, India Today, available at  http://indiatoday.intoday.in/story/justice-p.n.-bhagwatis-appointment-as-chief-justice-of-india-widely-welcomed/1/354365.html

                                                                              Yours sincerely,

         Mathews J Nedumpara.

 

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DRT Solutions Weekly Mail – 326th Issue dated 8th August ’14

All Weekly mails right from 1st Issue to latest, click links on top of this page

 

(1) National Peoples’ Campaign for Judicial Transparency & Reforms under Joint Leadership of Mr Mathews, Advocate, Mumbai; Mr Sohal, Industrialist, Mumbai and Office Bearers

 

(a)   (1) Mr Mathews,J. Nedumpara, Advocate Mumbai, President of The National Lawyers’ Association for Judicial Transparency and Reforms

                      and

                 (2) Mr J. S. Sohal, Industrialist, Mumbai, DRT Borrowers Association, Mumbai 

forged an alliance and created a joint action plan for National Peoples’ Campaign for Judicial Transparency & Reforms during 6th to 8th August ’14 stay in Delhi by a group of advocates and borrowers by holding Road Shows and meaningful dialogues with the Law Minister, Union of India; Mr Markandey Katju; the Chief Justice, Supreme Court of India and eminent Jurists and Advocate as well as Press Conference at the end. 

(b)   A picture of the Road Show of the Campaigners camping in Delhi under the leadership of Mr Mathews, Advocate, Mumbai; and Mr Sohal, Industrialist, Mumbai and Office Bearers be seen on our web page vide link http://www.drtsolutions.com/Transform-India-Modi.htm  

(c)   The Spirited Campaigners called on the Law Minister and had a brainstorming session. 

(d)   The Electronic Media like TV Channels ‘Headlines Today’ covered their campaign. 

(e)   Their Press Conference will be held at Press Club of India at 4 PM on 8th instt. 

(f)    The campaigners during the above dialogues and interactions pressed for the following simple and effective measures for Judicial Transparency and Reforms:- 

(i)    Video-recording and simultaneous telecast of proceedings of all Courts and Tribunals in the country and in particular of the Supreme Court and High Courts.

(ii)   Open selection and appointment of Judges of the Supreme Court and High Courts by open advertisement.

(iii) A Judicial Ombudsman for effective dealing with complaints of corruption, misbehaviour, incompetence etc., against Judges of the higher judiciary

(iv)  Restoration of freedom of speech by repealing the Contempt of Courts Act, 1971;

(v)   Transfer of Judges of the High Courts, re-introduction of the system where at least 1/3rd of the Judges of a High Court are from outside the State

(vi)  Bringing an end to the uncle Judges syndrome; make it mandatory that a Judge, who has his son or daughter or immediate relative practising in the High Court where he functions, is liable to be transferred to another High Court;

(vii)Repeal the concept of absolute impunity to Judges, and even for lawyers, and the impunity be confined to where they act bona fide;

(viii)               Enact a law to make it expressly clear that Judges like other citizens are liable for prosecution and that a First Information Report is liable to be registered when Judges commit a cognizable offence which has nothing to do with discharge of their judicial function,

(ix)  Abolition of Tribunals and revitalizing and strengthening the institution of Civil Courts;

(x)   A common dress code for all lawyers and abolition of the concept of designation of lawyers as Senior Advocates;

(xi)  Declaration of assets by Judges of the Supreme Court and High Courts;

(xii)Enactment of law regulating PILs. 

(g)   The Delhi based Advocates and Borrowers may contact Mr Mathews (M-9820535428) and Mr Sohal (M-9322857060) to support above vitally important campaign for Judicial Reforms which should have been the first among all Reforms for our Democracy but totally ignored so far during past 64 years after creation and adoption of our constitution.

(2) Slow Moving Wheels of Indian Judiciary

 

The following news item is self explanatory:-

The slow moving wheels of Indian judiciary

An overburdened judicial system is taking longer to dispose cases

FIRST PUBLISHED: TUE, AUG 05 2014. 02 42 PM

http://www.livemint.com/Opinion/VlqmTLJ1UzNtmKd7BuRVbM/The-slow-moving-wheels-of-Indian-judiciary.html

The time taken for cases to come to trial in Indian courts is getting longer. The average percentage of cases pending trial in state high courts and lower courts has increased to 84.81% in 2013 compared with 82.8% a decade earlier. That is not only a function of increasing number of cases that are being filed but also because the judiciary has become slower in disposing off cases. The completion rate for cases has fallen to 13.19% in 2013 from 14.61% in 2003. If the percentage point increase doesn’t seem significant, note that the outstanding number of criminal cases before the judiciary was 9.71 million in 2013. These are just cases filed under the Indian penal code. A similar number of cases has been filed under special and local laws of states.

According to experts, an increase in certain crimes such as crimes against women and increase in the reporting of criminal activities, have both contributed to rise in the workload of the judiciary. At the same time, judicial infrastructure and the number of judges is inadequate to meet this rise. India has only 15 judges per million people, then Chief Justice of India Altamas Kabir said in 2013. That is a far cry from the 50 judges per million population recommended by the Law Commission in 2008 in its 120th report. It also pales in comparison to per capita judge availability in developed countries.

To be sure, there is a wide disparity in the percentage of cases pending trial in different states. For instance, in Tamil Nadu, only 65 out of 100 cases are pending for trial compared with West Bengal’s pendency rate of 96.4%. That is not only owing to unequal levels of judicial strength and infrastructure, but factors such as costs as well. “In Chennai, the court fees are huge, while in Gujarat it is lower so people can afford to litigate. Hence right from the beginning the Madras High Court has had a higher disposal rate,” said Arvind Datar, a Supreme Court lawyer.

Surprisingly, the proportion of cases that are stuck pending police investigations has little bearing in the ability of the courts to speedily finish trials. For instance, in Gujarat, where 92 out of every 100 cases are pending before the court, only 11.5% are waiting for police investigations to be completed. On the other hand, in Assam where 80 out of 100 cases are waiting to be picked up the court, about 59% of cases are awaiting police investigations. That said, inadequate strength of the police force has also played its part in the pile up of cases before the courts. Nineteen of the 24 states for which data is available recorded an increase in the proportion of cases awaitng police investigation over the past decade. The Law Commission report said that speedy investigation by the police has not been achieved due to reasons ranging from corruption within the system to the apathetic attitude of the officers in taking the case earnestly.

 In cases involving public figures or powerful personalities, trials and investigations are especially slow. Earlier this year, the Supreme Court had ordered timely completion of trials against MPs and MLAs facing corruption or other serious criminal charges. As per the directive, all such cases would have to completed within one year of framing the charges. But for the majority of cases in the country, the wait for disposal continues to be long. There is a need for alternate dispute resolution mechanisms to dispose cases speedily while strenghtening the prosecution mechanism and judicial infrastructure. After all, justice delayed is justice denied.

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DRT Solutions Weekly Mail – 325th Issue dated 1st August ’14

All Weekly mails right from 1st Issue to latest, click links on top of this page

 

(1) Transform India with Modi

 

‘Transform India with Modi’ an Online Citizen Community was formed by the BJP in May ’14 on the format of ‘Local Circles’. to enable the citizens of India to provide inputs to Narendra Modi and his leadership teamon what they should focus on in the next 100 days and one year. All citizen inputs would be collated, consolidated and submitted to the office of Mr Modi at regular intervals.

In a short span, this community has been joined by over 1,00,000 Indian citizens across India and overseas including people from various backgrounds. A large number of posts and comments have been received from the citizens.

In respect of ‘Legal and Judicial Reforms’, we have also posted 6 comments on the following topics:-

(1)   Judges highly overloaded.

(2)   Learn from USA and UK

(3)   Cadre for Advocates

(4)   Video Recording of the Court Proceedings

(5)   Control Govt Litigations

(6)   No Retirement Age for the Judges

The details of the above topics may be seen on our web site exclusive page by clicking the linkhttp://www.drtsolutions.com/Transform-India-Modi.htm    

Apart from the details of our posts, on the said web page, we have also reproduced the Issues identified, root causes identified as well as the solutions identified.

(2) Finace Ministry sets up Panel to give More Teeth to DRT Recovery Laws in order to make Debt Recovery More Effective

 

The following news item is self explanatory:-

 

Finance ministry sets up panel to give more teeth to debt recovery laws Panel to suggest changes in the existing laws to make debt recovery more effective

FIRST PUBLISHED: WED, JUL 30 2014. 08 56 PM Hndustan Times



http://webcache.googleusercontent.com/search?q=cache:http://www.livemint.com/Politics/fMBl9FO7jNgtWAi28xQNyL/Finance-ministry-sets-up-panel-to-give-more-teeth-to-debt-re.html?utm_source=ref_article

 

New Delhi: The finance ministry has constituted a panel to give more teeth to the debt recovery laws to effectively deal with wilful defaulters and check bad loans which have soared to Rs.2.40 trillion. A panel has been constituted by Department of Financial Services for suggesting changes in the existing laws to make debt recovery more effective, sources said.

 

The members of the panel entrusted to revisit existing debt recovery laws include Anurag Jain, joint secretary Department of Financial Services, former law secretary V.K. Bhasin, representatives of Debts Recovery Tribunal (DRT), Reserve Bank of India (RBI), Indian Banks’ Association (IBA) and bar associations, sources added. Besides, panel has been also assigned to draft a new statute with harsh penal provisions for wilful defaulters. The panel was set up to plug the loopholes in the current legal framework for debt recovery.

 

According to sources, there has been instances of promoters getting rich and companies becoming bankrupt and defaulting on bank loan repayment. The committee constituted would suggest amendments in Sarfaesi Act (Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act) and RDDB Act (Recovery of Debts Due to Banks and Financial Institutions). Among other things, the panel would also recommend making penal provisions more stringent in case of wilful defaulters. Noting that the rising non performing assets (NPAs) of public sector banks is a matter of concern for the government, finance minister Arun Jaitley in the budget speech had announced setting up of six new Debt Recovery Tribunals at Chandigarh, Bengaluru, Ernakulum, Dehradun, Siliguri and Hyderabad. “Government will work out effective means for revival of other stressed assets,” he had said.

 

There are over 40,000 cases worth Rs.1.73 trillion pending before various courts and Debt Recovery Tribunals. In March 2014, the gross non-performing assets (GNPAs) in banking system gone up 4.4% from 3.8% of the total assets in the previous fiscal. The gross NPA of public sector banks jumped by a 39% to Rs.2.16 trillion at the end of March 2014 from Rs.1.55 trillion in the previous fiscal. However, gross NPA in case of private sector bank rose to a 13.76% to Rs.22,744 crore as compared to Rs.19,992 crore at the end of March 2013. During 2013-14, public sector banks recovered Rs.33,486 crore against the written-off amount of Rs.34,620 crore. PTI


 

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DRT Solutions Weekly Mail – 324th Issue dated 25th July ’14

All Weekly mails right from 1st Issue to latest, click links below:-

 

Weekly Mails - 1-10  11-20  21-30  31-40  41-50  51-60  61-70  71-80 81-90 91-100 101-110 111-120 121-130 131-140 141-150 151-160 161-170 171-180 181-190 191-200 201-210 211-220 221-230 231-240 241-250 251-260  261-270  271-280 281-290 291-300 301-310 311-320 321-Latest

 

(1) Important Preliminary Issues in SA

 

We have found the following two important Preliminary Issues which must be pleaded in the SAs:-


 

Preliminary issues to be taken up by Hon’ble Tribunal:-

(1)  Borrower and Guarantors do not have liquid funds to provide any deposit for Stay or Appeal, if any

The Respondent No.1 Bank had issued a notice dated - - -  - u/s 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereafter called ‘the SARFAESI ACT’), stating that the loan account has been classified as Non Performing Assets (‘NPA’) in accordance with the prescribed norms issued by the Reserve Bank and the Bank has to recover total Rs. - - - - -  as on - - - - -within 60 days from the date of the notice, failing which the Bank would exercise all or any of the rights u/s 13(4) of the Securitisation Act.

     

The Applicant Borrower and the Guarantors do neither have any liquid funds to pay deposit, if any, nor any resources to raise or obtain such deposit due to following reasons:-

(a)       Had any funds available with the Borrower and Guarantors, the Account would have not become NPA and the Respondent Bank would have not issued any notice dated - - -u/s 13(2).

(b)      All the assets of the Applicant Borrower’s Company are allegedly mortgaged with the Respondent Bank and hence the Borrower Company cannot raise any funds from any other source.

(c)       The Respondent Bank has allegedly created security interest on the immoveable property of the Borrower Company and hence it cannot raise any funds based on the said property.

(d)      The Respondent Bank has allegedly taken the personal guarantees of the Borrower and the Guarantors and hence they cannot raise any fund from any other source based on personal guarantees.

(e)      The business virtually has come to a standstill on account of lack of funds.

(f)        Further the adverse publicity created by the bank viz. news paper publication of notice u/s 13(4) has ultimately sealed the fate of getting any external funds for survival, litigation etc leave alone for any deposit.

(g)       The bank is bent upon to close all other avenues by even declaring the applicants as willful defaulter.

(h)      In view of above, it is not possible for the applicants to obtain any deposit from any source. It is now only the applicant bank which may consider to provide any deposit, if any.

(i)         In view of above, the Bank and the Bank alone has created such conditions that the Borrower and the Guarantors should not be able to obtain any funds even for survival, litigation etc leave alone for deposit, if any, for obtaining Stay or Appeal. This material fact about non-availability of deposit is well known and well understood by the Bank and its Officials. 

(j)        Therefore, this Hon’ble Tribunal is requested to take up this matter as the preliminary issue. It is only after a final decision on this issue, the Hon’ble Court may lay down any pre-condition regarding deposit for granting injunction, if any. 

(2)  On account of non-availability of deposit,if any; the Applicants will not have the Remedy of Appeal in DRAT, this SA needs to be tried fully and completely

(a)    As pleaded in the first Preliminary Issue above, the Applicants are not having resources to provide any deposit.

(b)   As per Sec 18 of the SARFAESI Act, minimum deposit of 25% of the debt as claimed by the secured creditors or determined by this Hon’ble Tribunal whichever is less, is required before the Appeal, if any is to be entertained by the DRAT. Hence if there is any debt due, the Applicants will be deprived of any right to Appeal to the DRAT.

(c)    Since the Applicants have pleaded counter-claim in this SA and since the said counter-claim is much more than the claim of the Bank, there will be ‘No Debt Due’. On account of this it is imperative for the Applicants to have their SA to be tried fully and completely. The  Applicants are confident to win their ‘No Debt Due’ situation only when their SA is tried fully and completely as a civil suit. This need of the Applicants is an upmost need and is also in conformity with the law declared by the Supreme Court in the matter of Mardia Chemical which laid down that the SA in SARFAESI Act is to be treated to be akin to a civil suit. 

(d)   On account of reasons mentioned above, since due to not having any deposit, the Applicants will not be having any right to Appeal to DRAT, the trial of this SA by this Hon’ble Tribunal will be the only and last opportunity and hence there is no scope for the Applicants to have any deficiency and or shortcoming in the said trial by this Hon’ble Tribunal.

(e)   A positive and supporting verdict by this Hon’ble Tribunal on this Preliminary Issue will be in conformity with the Justice, Equity and Good Conscience.

(2)  Choosing an Advocate for DRT Cases

Many of our clients seek our guidance and advice about appointing their  DRT advocate, Our suggestions are as under:-

(a)   Visit DRT and watch the performance and conduct of the advocates. Is he fighting for the interests of the borrowers and guarantors? He should not be just a yesman to the Judges. This will be possible only when he has mastery of fundamentals of law and judicial process.

(b)   Short list such advocates who are defending and fighting for the interests of the borrowers and guarantors.

(c)   Visit their offices and residences. Meet their clients and ascertain their experience.

(d)   Discuss your case with the advocate. Ascertain whether he will spare sufficient time for discussions and case preparation. Does he have innovative solutions? How does he manage his office, juniors and court room activities when several cases are going on together?

(e)   Since the present system was established by the British to rule the country and the judiciary was intended to help the bureaucracy and govt, the law, procedures, Judges and the Advocates were acting accordingly. The hangover of British days still continues. Few advocates are able to come out of the same. Your success will depend as to how you chose an advocate who is totally free of the said hangover.

(f)    Based on above when you have chosen the advocate, go to court and office for few days with the chosen advocate so that you may draw the final conclusion. 

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Weekly Mails and DVDs are DRT Legal Guide and gold mine of practical information for the borrowers and guarantors - The mail recipient particularly Borrowers and Guarantors will be immensely benefited by our weekly mails and DVDs, all previous issues of weekly mails from 1st one till the last one may be viewed by clicking the links given at the top. Separate web pages have been created to contain these mails in batches of 10 so that pages open up fast. These mails are gold mine of information on current topics giving lot of practical suggestions and comments. Any new recipient to these mails must go through all the weekly mails right from the issue no 1 to the latest. If possible please spread the reference of our web site and the weekly mail among the persons, borrowers and guarantors who are the bank victims. If anyone desires to get these mails regularly, he may write to us for inclusion of his e-mail ID in the regular mailing list. The weekly mail is issued on every Friday. The particular issue of the weekly mail is first published on the web site and then mailed to borrowers, guarantors and their advocates in the country. This service is free in the best interest of society in general and litigant borrowers and guarantors in particular. We are getting huge no of mails appreciating our weekly mails.  We welcome suggestions.

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DRT Solutions Weekly Mail – 323rd Issue dated 18th July ’14

All Weekly mails right from 1st Issue to latest, click links on top of this page

 

(1) The Chief Justice Supreme Court of India Mr M. R. Lodha says that Indian Judiciary is under Great Pressure and the Disposal has become Uncontrollable

 

On 11.07.14, daily news paper Patrika, Indore reported that the Supreme Court of India openly admitted that there is a great pressure of work on the Judiciary and the disposal of the cases have become uncontrollable. The 5 Judges bench headed by the Chief Justice Mr M. R. Lodha in the proceedings held on 10.07.14 openly admitted that the work load on the Judiciary has become uncontrollable and is beyond its capacity.

Mr Lodha said that he had discussions with Chief Justices of Supreme Courts of 12 countries and they informed that in a year they dispose about 150 cases. They were surprised that the Indian Supreme Court was handling 800 to 900 cases per week.

We have now more than 3 crore cases pending. Some time back, Mr Rao, a sitting judge of Andhra High Court has said that it will take more than 320 years to clear the pendency.

There are 73 countries whose judicial systems are better than Indian Judicial System.

At page 129 of his book ‘Law, Lawyers and Justice’ published in 1988, the famous Justice V.R. Krishna Iyer wrote:-

“We have a fossil court pyramid, an Anglo-Indian hybrid. Americans, with an obsolete adversarial English model, struggled to modernize and the American Bar Association played/plays a constructive part in that project’ Roscoe Pound pounded the defective judicature in his historic 1906 address at the National Conference on ‘Causes of Popular Dissatisfaction with the Administration of Justice, and reforms began. - - -

So, the Bar must, thro’ the Council, change the chemistry of the mummified Victorian vintage process of Justice. - - - “

In context of Indian Judiciary, at page 130, he writes – “Modern technology. a boon, if wisely used, is to the allergic judiciary a novelty of Space Age distance. - - . At page 133, he writes that we are 200 years behind the developed countries” 

We have been voicing use of technology and management in Indian Courts since 2001 through our web site. We covered these topics in our All India DRT Conferences in 2008 and 2011, video records of which are available in our DVDs.

We developed the technology of ‘Video Arguments’ in 2007 and demonstrated the same before the District Judge, Indore. We sent the DVDs to the High Court and the Supreme Court but none seem to be interested.

The silver lining is that recently Mr R.P. Gupta of BJP Communication Cell shared a new resource in “Transform India with Narendra Modi’ Based on such sharing, he proposed “Legal and Judicial System Issues – Input required on Root Causes.’ More than 9000 citizens have responded with their suggestions and proposals. We have also submitted 4 posts which have been liked by others. We have downloaded 341 comments and based on same, we are preparing an article which will appear on our web site.

It appears that due to change in political will combined with use of modern technology, the public i.e. the ultimate end user (not the advocate and judges who have their vested interests) will evolve and implement suitable model for the functioning of the Indian Judiciary as has been done in developed countries.

 

(2) Punjab & Haryana High Court First to Deliver Justice Via VPN (i.e. Virtual Private Network)

 

The Economic Times, Mumbai in its 16.07.14 edition at Page 4 that the Punjab & Haryana High Court has obtained a secured network called VPN (i.e. Virtual Private Network) setup by the NIC (i.e. National Informatics Centre. The said network can only be accessed by Judges who have been given individual IDs an unique passwords.

In association with a private firm, the High Court has already scanned and prepared soft copies of over 10 crore pages, 15 lakh cases (decided). A little over 2.5 lakh cases are hanging fire in the said HC, a majority of which have already been scanned and available in soft copies for easy and quick access of the Judges.

With above arrangement, the Judge need not have the files and related records. On his laptop only regardless of his physical location,  he can swiftly jog through voluminous record of a case and prepare footnotes and prepare his judgment.

Further touch screens will be installed in court rooms to enable the judges to access the files. Thus the said HC will be the first paperless HC in the country.
 

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DRT Solutions Weekly Mail – 322nd Issue dated 11th July ’14

All Weekly mails right from 1st Issue to latest, click links on top of this page

 


 

(1) Magistrate Court – Problems faced by the Borrowers u/s 14 of the SARFAESI Act

 

Many of our clients are facing problems from the Magistrate Courts u/s 14 of the SARFAESI Act. Some of these problems and their solutions are as under:-

(1)   Problem:- Magistrate is not hearing the Borrower.

(2)   Solution:- In this connection we should cite the judgment delivered by the Supreme Court of India on 03.04.14 in the matter of Harshad Govardhan Sondagar vs International Assets Reconstruction Co according to which the Magistrate has to hear the tenant or lease holder in whose possession the secured assets are prior to date of mortgage. The extract from the said judgment is given below:- 

 

Reportable

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

 

CRIMINAL APPEAL No. 736 OF 2014

(Arising out of S.L.P. (Crl.) No.1666 of 2012)

Harshad Govardhan Sondagar …… Appellant

Versus

International Assets Reconstruction Co.

Ltd. & Ors. ….. Respondents

 

- - - - - - - - - - - - -

 

Orders and directions of this Court in the facts of the cases before the Court:-

 

28. Having expressed our opinion on the different questions of law raised in these appeals, we may now pass orders and directions considering the broad facts of the three different categories of the case before us:

(i) In Criminal Appeals arising out of Special Leave Petition (Criminal) Nos.9426 of 2012, - - - - and 4618 of 2012, the appellants claim that they are in possession of the secured asset under a lease made prior to the mortgage but the Chief Metropolitan Magistrate, Mumbai, has passed orders under Section 14 of the SARFAESI Act for delivery of possession of the secured asset to the respective secured creditors. These orders passed by the Chief Metropolitan Magistrate, Mumbai, are set aside and the matters are remitted to the Chief Metropolitan Magistrate to pass fresh orders in accordance with this judgment and any other law that may be relevant after giving an opportunity of hearing to the appellants and the secured creditors.

 

(ii) In Criminal Appeals arising out of Special Leave Petition (Criminal) Nos.4064 of 2012, - - - and 4125 of 2012 when the appellants filed the Special Leave Petitions under

Article 136 of the Constitution of India, the applications of the secured creditors under Section 14 of the SARFAESI Act were pending. In case the applications are still pending, the Chief Metropolitan Magistrate or the District Magistrate, as the case may be, will consider the claims of the appellants that they were in possession of the secured asset under a lease made prior to the creation of the mortgage and decide the applications under Section 14 in accordance with this judgment and any other law that may be relevant. In case, during the pendency of these appeals, orders have been passed by the Chief Metropolitan Magistrate or the District Magistrate under Section 14 of the SARFAESI Act, the orders so passed will stand quashed and the Chief Metropolitan Magistrate or the District Magistrate will pass fresh orders in accordance with this judgment and any other law that may be relevant after giving an opportunity of hearing to the appellants and the secured creditors.

 

(iii) In the Criminal Appeals arising out of Special Leave Petition (Criminal) Nos.4619 of 2012, and 4120 of 2012, when the Special Leave Petitions were filed under Article 136 of the Constitution of India, no application under Section 14 of the SARFAESI Act had been filed by the secured creditors. In case such application under Section 14 of the SARFAESI Act has been filed in the meanwhile or is filed in future, the Chief Metropolitan Magistrate or the District Magistrate, as the case may be, will decide the applications in accordance with this judgment and any other law that may be relevant after giving opportunity of hearing to the appellants and the secured creditors.

 

(iv) In all these appeals, the Chief Metropolitan Magistrate or the District Magistrate, as the case may be, will pass final orders under Section 14 of the SARFAESI Act within four months from the date of filing of certified copy of this judgment by either the lessee/tenant or the secured creditor.

 

(v) With the aforesaid directions and orders, the appeals are allowed. The parties shall  bear their own costs.

.……………………….J.

(A. K. Patnaik)

………………………..J.

(V. Gopala Gowda)

New Delhi, 

April 03, 2014.

(3)   Problem:- Magistrate is not entertaining Caveat from the Borrower.

(4)   Solution:-

(a)   In this connection, we should cite the above judgment of the Supreme Court by which the Magistrate has to hear the tenant/lease holder in whose possession is the secured assets prior to the date of the Mortgage. Hence the caveat filed by such party has to be entertained.

(b)   In this connection, we should produce copy of the ‘The Enforcement of Security Interest and Recovery of Debt Laws (Amendment) Act. 2012 dated 03.01.13 according to which the Authorised Officer of the Bank is required to file an affidavit on 9 specific points. Many of these points can only be validated after hearing the borrower. Hence the caveat filed by the borrower has to be entertained.

(c)   Further we have to point out that in the said Amendment of 03.01.13, a new section 18-C on caveat has been proposed, extract of which is given below:-

      “ 18-C – Right to lodge a caveat - - -“

      A detailed procedure has been prescribed for the secured creditor.

Thus when provision of caveat is given for the bank, the borrower also gets an     opportunity to file caveat before the Magistrate for the simple reason that the entire SARFAESI Act is based on Principles of Natural Justice according to the Judges and Magistrate are duty bound to hear the other party. This was also laid down by the Supreme Court of India quite long back in 1978 vide citation Maneka vs Union of India, AIR 1978 SC 597 (Para 56)

(d)   Thus in view of the latest judgment of the Supreme Court of 03.04.14 mentioned above as well as the old judgment of 1978 combined with the said Amendment of 03.01.13, there is more than enough justification for the Magistrate to entertain the caveat as well as to hear the Borrower in the proceedings u/s 14 of the SARFAESI Act   

(2) Borrowers to be Careful & Vigilant about the Services & Professional Charges of the Advocates

 

One of our clients described an incident which happened with his friend. An eminent Seniour Advocate who is the President of the Bar Association in his city proposed to obtain stay order from DRT against sale of his property in the proceedings of SARFAESI Act. He had to pay 25% of the deposit against the bank claim of Rs 5 crores. The said stay was for a limited period. For such matter, the said advocate charged a fee of Rs 12 lacs. It was highly excessive and virtually amounts to day light robbery and white collar loot. This shows that the person concerned was highly ignorant about the various services and related professional charges. That is why we empower our clients to go through the bare Acts, legal process and court procedures, extent of court decisions and future expectations etc. We ask them to go through our web site and the weekly mails. Further we ask them to attend all the dates and go through the court proceedings and orders. They have to plan a week in advance and discuss repercussions with their advocate. They should go through various court judgments. All such knowledge equips them to interact properly with the advocates and incident as above will not happen and they will not be fleeced or misled. This alone will ultimately protect their interests in the litigation immediately as well as in long run.
 

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DRT Solutions Weekly Mail – 321st Issue dated 3rd July ’14

All Weekly mails right from 1st Issue to latest, click links on top of this page


 

(1) Important SC Judgments on Sec 14 relating to Magistrate’s Duty to Adjudicate in SARFAESI Act

 

The following news item referred to by Mr. Rajesh Jain, one of our clients from Ludhiana mentions few important SC Judgments which will be helpful to the borrowers:-

 

Impediments in recovery of non-performing assets

2 Jul, 2014, 06.07AM IST

http://economictimes.indiatimes.com/opinion/guest-writer/impediments-in-recovery-of-non-performing-assets/articleshow/37607935.cms

 

Recently, there have been some judicial pronouncements by the apex court determining the scope of powers of enforcement of securities without the intervention of the courts, by the banks and FIs under the SARFAESI Act. The apex court has reiterated the need to protect the interest of borrowers, and emphasized that the exercise of extraordinary powers of recovery, by banks and FIs must be in compliance with the provisions of the SARFAESI Act. 

In the case of Harshad G Sondagal vs IARC, the SC has held that borrower/mortgagor can lease the property over which security interest is created and in such cases, the lessee is entitled to remain in possession of the property for the period of the lease which is registered and such lessee cannot be dispossessed by the district magistrate or chief metropolitan magistrate under Section 14 of SARFAESI Act.

Inspite of earlier judgments of the SC that the procedure under Section 14 of the SARFAESI Act before the DM/CMM for getting possession of secured assets is administrative proceeding, the apex court held that rights of lessee of mortgaged properties will be decided by the DM/CMM. Banks are already facing a problem of inordinate delays in the office of DMs/CMMs in the matter of repossessing secured assets and the SC judgment will result in delays in recovery or defaulted loans, on account of DM//CMM being required to conduct quasi-judicial proceedings for deciding rights of tenants and lessees of mortgaged properties.

In terms of rule 8 & 9 of the Security Interest (Enforcement) Rules, 2002, before selling a mortgaged property a public notice of 30 days has to be given. In the case of Vasu P Shetty v. Hotel Vandana Palace, the SC considered whether a public auction with notice of less than 30 days is valid, in view of earlier failed auction for which adequate notice of 30 days was given as also failed OTS proposal given by the borrower.

The SC held that delaying tactics adopted by the borrower would not amount to a waiver of requirement of notice of 30 days as well as other requirements of settling terms of sale by private treaty between the parties, notice of sale to be published in a vernacular language newspaper and obtaining fresh valuation prior to conducting the sale. The effect of this judgment is that even in cases where repeated auctions are required to be held on account of delaying tactics adopted by the defaulters, the requirements of minimum notice of 30 days and other formalities have to be complied with by banks/FIs.

In the case of J Rajiv Subramaniyan v. M/s Pandiyas, the SC considered the validity of sale of secured assets by private treaty without the consent of the borrower and in violation of rules 8(5) (valuation of property), 8(6) (notice of 30 days) and held that such sale is unconstitutional. The apex court pointed out that the provision contained in Section 13(8) of the SARFAESI Act, 2002 is specifically for the protection of the borrowers in as much as, ownership of the secured assets is a constitutional right vested in the borrowers and protected under Article 300A of the Constitution of India.

Therefore, the secured creditor as a trustee of the secured assets can not deal with the same in any manner it likes and such an asset can be disposed of only in the manner prescribed in the SARFAESI Act, 2002. It is clear that compliance with directions issued by the apex court will result in delays in recovery actions and the finance ministry, therefore, needs to consider following amendments to the SARFAESI Act and the Rules, to facilitate speedy recovery of NPAs:

> Amend Section 17 of the Act empowering DRTs to decide rights of lessees or tenants or any other person claiming rights in the mortgaged properties and pass orders to protect their rights. The SARFAESI Act also needs to be amended to declare that notwithstanding anything contained in any other law, the borrower cannot sell, lease or deal with any property over which security interest is created without the consent of the secured creditor, except sale of its products or services.

> In cases of sale by private treaty a notice shall be given to the borrower to obtain a better offer within the time specified failing which the secured creditor can proceed to sell the property.

> In cases where the borrower has been given notice of 30 days for public auction of secured assets and such auction fails any subsequent auction can be held with shorter notice of 15 days instead of 30 days.


 

(2) Stringent Guidelines for Wilful Defaulters Expected

 

Mr Himanshu Mehta, one of our clients from Mumbai has sent the following news item which is self explanatory:-

Stringent guidelines for wilful defaulters on the cards

http://www.business-standard.com/article/finance/stringent-guidelines-for-wilful-defaulters-on-the-cards-114062700711_1.html

The Union finance ministry is planning to make rules regarding wilful defaulters more stringent, so that criminal charges can be pressed against such entities. The move follows a rise in bad loans, particularly among public sector banks (PSBs).

A senior official of a PSB who discussed the issue with officials of the department of financial services said, “Whenever there is a clear diversion of funds to create personal wealth, the borrower will tagged as a wilful defaulter and criminal charges will be pressed.”

The ministry has proposed that a promoter or board member classified as a wilful defaulter be barred from becoming a director in any other company. It had also been proposed passports of wilful defaulters be impounded, bankers said.

According to the Reserve Bank of India (RBI) norms, a wilful default is when an entity defaults in its payment obligations tolenders even if it has the capacity to pay and doesn’t use the funds for which the loan was availed of, or diverts those. If the borrower uses short-term working capital funds for long-term purposes not in conformity with the terms of the sanction or deploys the borrowed funds for creation of assets other than those for which the loan was sanctioned, it is construed as diversion or siphoning of funds.

The move to revisit wilful defaults comes at a time when non-performing assets (NPAs) in the banking system have seen a steep rise. According to RBI data, as of March 31 this year, gross NPAs in the banking system accounted for four per cent of gross advances, while net NPAs accounted for 2.2 per cent.

Earlier, the ministry had mandated banks not to provide any additional facilities to defaulting companies and bar their promoters for five years from availing of institutional financing for floating new ventures.

The ministry has also prepared a list of the top 50 defaulters and asked banks to hasten recovery measures.

Recently, Kolkata-based United Bank of India had issued a wilful defaulter notice to Vijay Mallya, chief of UB Group and the grounded Kingfisher Airlines. On Saturday, Mallya has to defend his himself before the lender’s internal committee, headed an executive director of the bank.

The bank has an exposure to Rs 350 crore to Kingfisher Airlines.

A consortium of lenders, led by State Bank of India, had extended loans of about Rs 6,500 crore to the airline. The loans, overdue with all the banks, have been classified as NPAs.


 

    

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