As per case facts, a significant number of recovery cases from public sector banks and financial institutions were pending even after the establishment of Debt Recovery Tribunals (DRTs) and Appellate ...
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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL ORIGINAL JURISDICTION
WRIT PETITION (CIVIL) NO. 573 OF 2003
CENTRE FOR PUBLIC INTEREST .....PETITIONER
LITIGATION
VERSUS
HOUSING & URBAN DEVELOPMENT .....RESPONDENTS
CORPORATION LTD & ORS
J U D G M E N T
Dr D Y CHANDRACHUD, J
Prior to the establishment of Debt Recovery Tribunals, as on 30
September 1990, more than fifteen lakh cases filed by public sector banks
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and about three hundred and four cases filed by financial institutions were
pending before various courts. The amounts involved were to the extent of
Rs. 5,622 crores in dues of public sector banks and Rs. 391 crores of
financial institutions. Following the Reports of the Narasimhan Committee
and the Tiwari Committee, Parliament enacted the Recovery of Debts Due to
Banks and Financial Institutions Act, 1993 for providing for the establishment
of tribunals and appellate tribunals for expeditious adjudication and recovery
of dues due to banks and financial institutions.
2 At present, thirty four Debt Recovery Tribunals and five Appellate
Tribunals are functioning in the country. In financial year 2015-16 these
Tribunals disposed of about 16,000 original applications involving a total
amount of Rs. 34,000 crores. Since their inception until 31 October 2015,
the Tribunals had disposed of 1,34,433 original applications leading to the
recovery of an amount of Rs. 70,725 crores. The Tribunals are also vested
with the jurisdiction to entertain securitization applications under the
Securitisation and Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002.
3 This Court has been apprised, in the submissions filed by the Union
government, that more than 70,000 cases involving an amount of Rs.5 lakh
crores approximately are pending before the Debt Recovery Tribunals, of
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which many are pending for more than ten years. Though the Act of 1993
provides for the disposal of recovery applications within one hundred and
eighty days, cases have remained pending for years together. In order to
deal with the large pendency of cases, the Enforcement of Security Interest
and Recovery of Debt Laws and Miscellaneous Provisions (Amendment)
Bill, 2016 was introduced in the Lok Sabha on 11 May 2016. The Bill was
referred to a Joint Committee of both Houses of Parliament. The Committee
presented its Report to the Lok Sabha on 22 July 2016. Eventually, a law
has been enacted by both the Houses of Parliament and published in the
E-gazette on 16 August 2016.
4 Legislative changes to provide for expeditious disposal of
proceedings before the Debt Recovery Tribunals may not by themselves
achieve the intended object so long as the infrastructure provided to the
Tribunals is not commensurate with the burden of the work and nature of
judicial duties. Recently, the Chairperson of the Debts Recovery Appellate
Tribunal at Allahabad addressed a letter on 9 December 2016 to the Chief
Justice of India recording that he was constrained to tender his resignation
from the post of Chairperson since, in the absence of infrastructure and
facilities, the functioning of the adjudicating body over which he presided
had become impossible. This is symptomatic of a trend whereby the Debt
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Recovery Tribunals and Appellate Tribunals suffer from a lack of adequate
infrastructure, manpower and resources. Having due regard to the important
adjudicatory function which is entrusted to these Tribunals, the efficacy of
parliamentary legislation will depend in a large measure on the efficiency
with which the Tribunals discharge their duties.
5 We accordingly direct the Union Government to file an affidavit
specifically dealing with the following issues :
(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;
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(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.
6 The affidavit shall be filed within a period of four weeks from today.
We clarify that this direction for the filing of a further affidavit shall not in any
manner affect the functioning of the Committee which has already been
constituted by the Union government and whose report is awaited.
………......................... CJI
[T.S. THAKUR]
..........................................J
[A.M. KHANWILKAR]
..........................................J
[Dr DY CHANDRACHUD]
New Delhi;
January 03, 2017.
In a significant ruling, the Supreme Court of India, through its judgment in Writ Petition (Civil) No. 573 of 2003, brought to light critical challenges surrounding Debt Recovery Tribunals (DRTs) efficiency and the broader goal of expeditious debt recovery. This landmark decision, now available for comprehensive analysis on CaseOn, underscores the judiciary's proactive stance on ensuring the effective functioning of specialized tribunals.
The core issue before the Supreme Court was the alarming backlog of cases pending before Debt Recovery Tribunals (DRTs) and Debt Recovery Appellate Tribunals (DRATs). Despite the legislative intent to provide speedy resolution for financial institutions, a significant number of cases continued to languish for years, raising concerns about the efficacy of the existing framework and the actual implementation of justice.
The journey towards specialized debt recovery mechanisms began in response to a massive accumulation of non-performing assets. By September 1990, public sector banks alone had over fifteen lakh (1.5 million) cases pending, involving a staggering Rs. 5,622 crores. Financial institutions faced similar challenges with hundreds of cases and hundreds of crores at stake. To address this, following recommendations from the Narasimhan and Tiwari Committees, Parliament enacted the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDBFI Act). This Act mandated the establishment of DRTs and DRATs specifically for the expeditious adjudication and recovery of dues.
Currently, the country operates with thirty-four DRTs and five DRATs. These tribunals have been instrumental in clearing a substantial number of cases. For instance, in the financial year 2015-16, approximately 16,000 original applications, totaling Rs. 34,000 crores, were disposed of. Since their inception until October 2015, a cumulative 1,34,433 original applications, involving recoveries of Rs. 70,725 crores, have been resolved. Beyond the RDDBFI Act, DRTs also handle securitization applications under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).
Despite these efforts, the problem of pendency persists. The Union Government informed the Court that over 70,000 cases, involving approximately Rs. 5 lakh crores, were still awaiting resolution before various DRTs. Alarmingly, many of these cases have been pending for more than a decade, directly contravening the RDDBFI Act’s provision for disposal within one hundred and eighty days.
Recognizing the urgency, Parliament introduced the Enforcement of Security Interest and Recovery of Debt Laws and Miscellaneous Provisions (Amendment) Bill, 2016, which became law in August 2016. This amendment aimed to further streamline processes and provide for even more expeditious disposal of proceedings.
The Supreme Court critically analyzed the situation, concluding that legislative amendments alone, however well-intentioned, are insufficient to achieve the desired object of timely debt recovery. The Court emphasized that the actual efficacy of these changes hinges on the infrastructure provided to these tribunals being commensurate with their significant workload and the complex nature of their judicial duties.
A stark illustration of this systemic gap was brought to the Court’s attention: the Chairperson of the Debts Recovery Appellate Tribunal at Allahabad had tendered his resignation in December 2016. His reason? The complete lack of adequate infrastructure and facilities rendered the functioning of the adjudicating body impossible. This incident, as highlighted by the Court, was symptomatic of a broader trend affecting DRTs and DRATs nationwide, where a deficit in adequate infrastructure, manpower, and resources hinders their critical adjudicatory function.
For legal professionals and students seeking to delve deeper into the nuances of such rulings, CaseOn.in's 2-minute audio briefs offer an invaluable resource, providing concise and clear summaries that highlight the core legal arguments and implications of judgments like this.
To address these critical shortcomings, the Supreme Court issued a series of directives to the Union Government, requiring them to file a comprehensive affidavit within four weeks. The affidavit was to specifically address the following:
The Court clarified that these directions were independent of any ongoing work by existing government committees, emphasizing the urgency and importance of the matter.
This Supreme Court judgment reflects a deep concern over the persistent backlog and operational inefficiencies plaguing India's Debt Recovery Tribunals and Appellate Tribunals. Despite their crucial role in the financial ecosystem and past legislative attempts to streamline debt recovery, the Court observed that infrastructural and human resource deficiencies significantly undermine their ability to deliver timely justice. The ruling, sparked by concerns including a DRAT Chairperson's resignation due to inadequate facilities, demands concrete action from the Union Government, compelling them to detail their strategy for enhancing the tribunals' capacity to effectively manage and resolve the substantial volume of pending debt recovery cases.
For legal professionals, this judgment highlights the systemic challenges faced by specialized tribunals and provides a roadmap for potential improvements in the debt recovery framework. Understanding these issues is crucial for strategizing litigation, advising clients, and even for future legislative advocacy. For law students, it serves as an excellent case study on judicial activism, the practical implementation challenges of legal reforms, and the interplay between legislative intent and administrative capacity. It underscores how the judiciary acts as a watchdog, ensuring that the spirit of the law is upheld through effective enforcement mechanisms, beyond mere statutory amendments. This case is also vital for anyone interested in the financial health of public sector banks and financial institutions, as it directly impacts the recovery of vast sums of public money.
All information provided in this blog post is for informational purposes only and does not constitute legal advice. While efforts have been made to ensure accuracy, readers should consult with a qualified legal professional for advice pertaining to their specific circumstances.
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