From Lehman to Demonetization by Tamal Bandyopadhyay

Author:Tamal Bandyopadhyay
Language: eng
Format: epub
ISBN: 9789387326392
Publisher: Penguin Group
Published: 2017-11-06T05:00:00+00:00

Legal Hurdles

There were some 72,500 pending cases in the debt recovery tribunals, or DRTs, in December 2015 involving close to Rs 4 trillion, a little less than the heap of bad assets of listed banks at that time. A quasi-judicial forum to facilitate debt recovery by banks, a DRT is expected to dispose of a case that banks refer to it within 180 days, but each of the thirty-three DRTs operating in India are struggling with 2200 pending cases on average every year.

The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, a 2002 law, empowers banks to attach assets of defaulters, but it is easier said than done as the DRTs are not equipped to handle so many cases even as the defaulters move from such tribunals to high courts and even the Supreme Court to buy time.

In the Mallya case, the banks had moved the DRTs in 2012. There have been at least twenty cases pending and hundreds of hearings and adjournments at different DRTs, high courts and the Supreme Court. The efforts to recover money have been on for four years, but everybody has woken up only now, after Mallya left the country.

And here is how the cases referred to the DRTs swelled in the past five years in tandem with the rise in banks’ bad debt. In 2011, the tribunals disposed of 12,122 cases involving Rs 211.55 billion, but there were 54,061 cases pending and the amount involved was to the tune of Rs 1.46 trillion. In 2012, the number of pending cases dropped to 41,205 and the amount involved to Rs 1.31 trillion, but in 2013, the number of cases rose to 47,933 and the money involved increased to Rs 1.79 trillion. In 2014, there were 59,645 cases involving Rs 3.75 trillion. Going by its past record, even if the banks do not move the tribunals with a single fresh case, it will take at least six years to clear the pending cases.

The proposed bankruptcy code will not be able to change the scenario overnight. It is too aggressive even by the standards of the developed markets and it will not be easy to implement unless the government puts in place the right logistics.

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.