Debt recovery tribunals (DRTs), an important mechanism for loan recovery by banks, are foundering amid charges of lack of professionalism and shortage of staff as bad loans are crippling banks. The disposal of cases has been falling as a few members have to handle enormous amount of claims and the delaying tactics employed by defaulters by going in appeal against every order are defeating the purpose.
In fact, bankers at a recent meeting with the finance ministry officials have charged that unjustified orders are being passed by some DRT officials in connivance with promoters who want to protect their assets. "We had complained about the unilateral stays that the registrars of the debt recovery tribunals are granting to the borrowers without giving banks a proper hearing,'' said a bank chairman, who did not want to be identified.
"The issue was raised by us at a DRT forum where finance ministry officials were also present."
There are at least 33 DRTs and five appellate bodies to deal with cases. Although the mechanism was brought in with a noble aim to decide on the cases within 6 months, the lack of adequate staff and timely replacements have hit their operations. With corruption spreading, some say, even DRTs are not immune to it. "Borrowers are taking advantage of the debt recovery appellate tribunal and appealing against the order issued by the DRTs,'' said advocate Ravi Goenka of Goenka Law Associates, who represents financial institutions like asset reconstruction firm Arcil and OBC.
"According to the law, DRTs have to dispose off cases in six months, but it's taking almost two to three years.'' In 2011-12, of the total amount recovered through the Sarfaesi Act, DRTs and Lok Adalats registered a decline of 8.2% at 14,400 crore, from 15,700 crore a year earlier despite a surge in bad loans.
There is only one member looking after the Western region comprising entire Maharashtra, Gujarat and Goa. For a long time, the post of presiding officer was vacant and presiding officer of the Kolkata bench was looking after the Western region appellate tribunal as additional portfolio. Mumbai-based banks had to go to Kolkata to file a case in most of the cases, said a lawyer representing a bank.
The long duration taken by DRTs to decide on the cases is reflected in the fact that the Oriental Bank of CommerceBSE -1.01 % and Bank of India are still fighting a case to recover dues from former stock broker Ketan Parekh in a case relating to the 2001 securities scandal. He was barred from trading at the Indian stock exchanges till 2017.
During June to December 2012, some important cases involving companies like Som Developers (owing 390 crore to SBI UBI and other banks), Sterling Biotech ( 322 crore debt towards a subsidiary of LIC) and Aeroflex ( 181 crore towards SBI) were admitted. "The DRTs were to finish cases in six month. However, they are not able to adhere to the timeline as they have become like a civil court,'' said the legal head of a private sector bank.
http://economictimes.indiatimes.com/news/economy/finance/staff-crunch-forces-debt-recovery-tribunals-to-put-off-cases/articleshow/17551652.cms
10 DEC, 2012, 05.28AM IST, ET BUREAU
Change in PF rules will hurt workers and may not stand legal scrutiny
The Employees' Provident Fund Organisation has erred in changing the rules regarding workers' contributions to their provident fund, putting the onus on the workers to prove that their employers deducted statutory dues while paying them salaries and setting a seven-year limit for probing cases of PF default by companies.
In its defence, the EPFO can claim that this only recognises the reality, in which the majority of workers have little control over how much money goes into their PF accounts and how much they can retrieve from it. The point is to change the reality, not put the official stamp of approval on this sordid state of affairs. The provident fund commissioner is said to have issued orders the day he demitted office.
Shouldn't there have been wider consultations with the Central Board of Trustees before such an important decision was taken? After all, it impacts over six crore workers. More fundamentally, it also shows up the inherent structural flaws in the EPFO design. Its archaic records hinder seamless portability. As a result, a whole lot of workers never get to claim their dues when they switch from one job to another because the procedural requirement is mind-boggling.
So, the number of inoperative accounts and unclaimed funds keep mounting at the EPFO. These unclaimed funds are later on used by the EPF to enhance the measly returns it manages to generate by deploying the corpus of workers' savings. This is unacceptable.
There should be a savings scheme that is the exclusive preserve of the worker that remains even when she switches jobs. And, for that, the National Pension System (NPS) that manages pension of civil servants who joined service in January 2004 or after and also of voluntary subscribers, already exists. The NPS offers seamless portability, and manages retirement savings more efficiently to give superior returns to workers.
The government must make NPS the preferred vehicle to receive and invest workers' savings. Tracking deductions will become easy once they have a permanent savings account that they can access from anywhere.
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