DRT orders: While Nirav Modis, Mehul Choksis escape net, people like Nirmala Prakash stand to lose their homes

New Delhi: Nirmala Prakash, a widow and resident of Delhi, doesn’t know of India’s infamous loot-and-scoot fraudsters like Nirav Modi, Mehul Choksi, Vijay Mallya, Sabhya Seth, Chetan Sandesara, Jatin Mehta. Neither can she link their ‘contribution’ to the humongous amount of non performing assets (NPAs) in the country’s banking sector that has cheated the economy. The widow of former government employee Dharam Prakash was surviving on a family pension and taking care of four children when the IDBI bank decided to forcibly take possession of her house - the only property she owns in Delhi. The bank decided to take action after declaring the Rs 15 lakh house loan as an NPA.

On 29 May, the bank will put Prakash’s house for auction and with it will go all her hopes from the Debt Recovery Tribunal. The quasi-judicial body set up under the provisions of the Recovery of Debts to Banks and Financial Institutions Act of 1993 with the specific objective of providing expeditious adjudication, is not willing to offer a window to vulnerable cases like Nirmala’s or muscle out serious offenders.

“The DRT cannot help common people like Nirmala who have already paid more than the principal amount to the bank as interest. On the other hand, there are number of cases in the DRT where big loan sharks get away by paying just 10-15 percent of the loans in connivance with bank officials. The idea of equality is absolutely illogical, at least in the current system where we are used to parasites sucking our blood”, said Vivek Kumar Singh, President of DRT Bar Association.

The IDBI was recently fined by the Reserve Bank of India (RBI) for under-reporting big NPAs and the Central Bureau of Investigation (CBI) has recently filed a case against top IDBI officials and former promoter of Aircel in the Rs 600 crore loan fraud case. Unlike economic fugitives, Nirmala is carrying a demand draft of Rs 5 lakh in favour of IDBI that was issued by the State Bank of India on 5 April, 2018. Prakash has been requesting bank officers to accept the money and is willing to pay the rest of the amount in monthly instalments.

“I am on the street. This is the only house I have but they are taking it away from me and my children. I have two minor children to look after. I was shocked when bank officers informed me that I need to pay Rs 23 lakh. This is injustice,” Prakash told Firstpost.

Despite repeated attempts, IDBI Managing Director Mahesh Kumar Jain could not be reached for comment.

Post-Nirav Modi scam, the DRT is flooded with cases for adjudication and recovery by banks but a senior officer said on the condition of anonymity that the majority of big cases involving huge sums of money are being settled as per the whims and fancies of bank officials and big borrowers. A top officer on the condition of anonymity said, in April 2018 he had resolved more than 200 cases with over Rs 16 crore in dues. In March, the number was even higher with over 225 cases, but said he felt helpless in cases like the one Prakash is battling against the state-owned bank.

“We need massive reforms and must be given power to pass strictures in cases like Nirmala’s. We have no power to punish bank officials who are hand in glove with big borrowers and make the whole recovery process a charade. At the same time, we cannot help people like her who are not fleeing the country and genuinely want to pay back money and are seeking some relaxations. Sometimes, I really feel helpless,” he said.

Another officer requesting anonymity said he has stopped issuing warrants against poor borrowers in several cases because he found banks were not keen on taking strict action against big defaulters.

“Although we are not an investigative agency and neither have the power to order a probe, we have witnessed bank officials making a complete U-turn in several big cases by just informing us that they have decided to settle the case. We then became just mute spectators in these cases.

“A recovery officer needs to have deterrent measures with power to send big defaulters to jail. DRT officers also need power to do forensic audit of the defaulter company in suspicious cases where we are fully aware that the loan amount was diverted by floating shell companies. Loan sharks have erected a cocoon of glass and the DRT can see them enjoying the loot but cannot do much in the existing set-up,” the officer told Firstpost.

An officer posted with DRT Delhi argued in favour of rules that could differentiate between a Nirav Modi and a Nirmala Prakash. The Nirav Modi case did not come to the DRT but Nirmala can vaguely recall television debates on some of the recent banking heists in the country. When asked to comment on the Nirav Modi case, Nirmala said justice is meant only for the rich.

An officer also cautioned against the nexus of bank officials and big borrowers saying interference from top echelons is an usual affair. “We need more judicial officers in DRT and fill the existing vacancies of recovery officers to ensure that regular work does not suffer. In Delhi we did not have a presiding officer for at least one and half years. There are also deliberations that DRT should be moved out of the supervision of the Finance Ministry and be placed under the Law Ministry,” he said.

Singh, of the DRT Bar Association, said he has been fighting for DRT reforms for the last several years because he has seen so many Nirmala Prakashs suffering due to lack to power given to the quasi-judicial body. “I feel scared and have no courage to look into the eyes of poor borrowers seeking justice. I don’t know how to console them, ensure that justice is done to them. I have seen many cases involving thousands of crores getting settled for merely a few crore of rupees. On the other hand, we have people who are honest but are denied justice,” Singh said.

In another case pending with the DRT, the bank is forcing a government-aided school in South Delhi to shut down so that it can sell the land on which the school stands. The school authorities have requested the bank to take over the management and continue to operate it for the welfare of kids but the offer has been rejected.

An officer with DRT Delhi said banks are not keen to invoke the rules that allow taking over of management of a running institution which it could provide and add more value to the economy and even help employees working in that particular institution.

As per Section 13 (4B) of Securitisation & Reconstruction of Financial Asset and Enforcement of Security Interest Act, 2002, in case the borrower fails to discharge his liability in full within the specified period, the secured creditor may “take over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset provided that the right to transfer by way of lease, assignment or sale shall be exercised only where the substantial part of the business of the borrower is held as security for debt.”

A DRT officer said, “DRT is also scared of issuing stay orders in many cases fearing the defaulter may flee the country. In one such case, a house was sealed by the bank for defaulting just a couple of EMIs. The defaulter cannot appeal against the DRT order simply because he/she needs to deposit half the amount due to the bank with the Appellate Tribunal in advance.”

Recently, the Supreme Court had also observed that the structure of DRT could be revisited while hearing a Special Leave Petition. The bench of Justice Adarsh Kumar Goel, Justice Rohinton Fali Nariman and Justice Navin Sinha observed that structure of the tribunals may need a revisit taking into account the suggestion for permanent cadre, autonomous selection procedure, autonomous accountability and disciplinary mechanism, finality subject only to jurisdiction of Constitutional Courts, to uphold the rule of law.

The observation was made following submission of senior counsel Arvind P Datar, who was appointed amicus curiae. Datar had given a concept note dealing with the issue of appointment process, qualifications for members, removal procedure, efficiency, timely filling up of vacancies and uniformity of service conditions. Apart from the concept note, he had also put forward certain suggestions.

Datar’s main suggestion was that instead of having short-term appointments of retired persons, there should be a regular cadre to man the tribunals. Even serving judicial officers could be appointed to the tribunals by making appropriate temporary or permanent increase to the cadre of district judiciary. Selection should be done through a national competition, which may be conducted by an autonomous body, consistent with the requirements of independence of the judiciary. Cadre control, including disciplinary mechanism, should be either with the High Courts or with an autonomous body which again should be as per the concept of independence of judiciary. It was also suggested that orders of the tribunal/appellate tribunal should be final, subject only to constitutional remedies. No statutory appeal should be provided against the orders of the tribunals to avoid multiple layers of litigation which delay finalisation of proceedings.