The Center plans to pursue only high-value cases – where banks’ claims exceed According to two people with knowledge of the development, Rs 100 crore is pending in tribunals. Such cases will be aggressively pursued to obtain expeditious orders from the tribunals.
As for low-value cases, they will be closed or withdrawn, said the first person quoted above. These are cases that are pending for a long time, where the default amount is low, and where the transaction cost of pursuing them exceeds the recovery.
Some low-value cases may also be taken to Lok Adalats or other structures set up by banks with interested borrowers, the people cited above added on condition of anonymity.
Indeed, government data shows that more than 75% of the cases pending in DRTs are low-value, with claim amounts ranging between Rs.20 lakh (jurisdiction value for referral of cases to DRT) and 1 crore. Withdrawal of such cases from the tribunal structure will significantly reduce the burden on the DRT.
As part of the scheme, the Union finance ministry asked state-run banks to prepare two lists of debtor entities to separate high-value cases from low-value cases, according to the first person quoted above. Is.
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The first person said the banks will also set up a monitoring and inspection mechanism for efficient management of these high-value pending cases in the DRT, while the tribunal has been asked to make the process more effective and less time-consuming.
Queries sent to the Finance Ministry and the Department of Financial Services remained unanswered till press time.
oversized problem
More than 200,000 cases involving total value of claim amount are awaiting adjudication in various DRTs According to Finance Ministry data, 18 trillion.
Claim amount involved in around 50,000-60,000 new cases 4 trillion cases are added every year while DRTs have been able to close only 30,000 cases on an average per year for the last five years.
“There is a need to adopt a solution-based approach to resolve big cases and not just focus on maximizing recovery,” said Divyanshu Pandey, partner, law firm JSA Advocates & Solicitors. What’s more, efficient resources and strategies are being deployed by public sector banks to deal with such matters.
Indeed, government data shows that more than 75% of the cases pending in DRTs are low-value, with claim amounts ranging between Rs.20 lakh (jurisdiction value for referral of cases to DRT) and 1 crore.
“This needs to be complemented by improving the infrastructure in the DRT, strengthening the DRT benches and legal teams of banks,” Pandey said.
At present, there are 39 DRTs and five DRATs (Debt Recovery Appellate Tribunals), each of which has been addressing about 900 cases annually for the last five years, while more than 1,500 new cases are being added to them every year.
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Government data shows recovery through DRT 12,879 crore in FY22, 7,669 crore more in FY23 11,117 crore in FY24.
Mukesh Chand, senior advocate at law firm Economic Laws Practice, said banks often file cases in DRT where there is no possibility of recovery, especially in situations where there is no security or the security has been disposed of through decree. There is very little left to implement. As a result, these cases remain unresolved, increasing the backlog.
“Furthermore, while banks write off cases prudently, actual write offs are not made and these accounts also remain in the books (though not accounted for). Unless banks have a clear policy on actual write-offs, such cases will remain pending in the DRT without recovery.”
Prudential or technical write off is the amount of non-performing assets (NPAs) or loans which are outstanding in the books of branches but have been written off at the head office level.
NCLT-IBC angle
Another issue that keeps the DRT busy with cases running endlessly in tribunals is the shift of banks’ attention to NCLT for cases involving large companies and complex resolutions under the Insolvency and Bankruptcy Code (IBC). DRTs now mostly handle routine filings to protect the limitation period or cases that are not eligible for IBC. Lack of focus on matters involving DRT is often responsible for delay in receiving orders on payment default.
In the eight years since 2016, 31,394 corporate debtors worth Rs 13.9 trillion has been settled under IBC till March 2024. Comparatively, in the last five financial years, Rs 72,708 crore has been recovered through DRT from about 150,000 cases by scheduled commercial banks.
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“The reduction in cases pending in DRT will have a direct impact on the balance sheets of banks,” said Abhishek Swaroop, partner, Saraf & Partners. He said banks will be able to improve recovery rates, liquidity and financial health and lend more effectively. ,
“Importantly, a speedy resolution will also reduce the legal and administrative costs associated with lengthy litigation,” he said. To get the best results.”
