Unnecessary Litigations/Tactics By Borrowers Must Be Precluded

It is pertinent to mention that the reluctance of borrower in payment of their debts to banks and other financial institutions has given rise to various economical problems. It is not only immensely damaging the development of public and private sectors banks and other financial institutions but also leading to demoralize the Indian economy which is already on a down track.

In early nineties of 20th century it was found that the existing procedure for recovery of debts due to the banks and financial institutions has blocked a significant portion of their funds in unproductive assets, the value of which deteriorates with the passage of time. To cope up with this problem their followed the recommendations of several committees viz. Narasimham Committee and Andhyarujina Committee, appointed by the Central Government, which were solely constituted to examine reforms in banking sector and to consider the need of change in the legal system for recovery of their outstanding dues.

This followed the enactment of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 then The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, to expedite the recovery of outstanding dues of banks and other financial institutions from the defaulting borrowers.

These enactments have led to great significant changes in the recovery of dues from the borrowers but still huge amount of public money is locked in litigation which is preventing its proper utilization and re-cycling of the funds for the proper development of the country.

The litigations for recovery of dues must be concluded expeditiously so that Non Performing Assets (NPAs) could be well utilized for other purposes, but this idea of several legislations in this context has been continuously frustrated by the way borrowers are defending the litigations against them and bring litigations against the creditors, to avoid repayment of the loan.

Leaving the general procedure adopted by the borrower in avoiding repayment of the loan and its interest, it is in general practice of the borrower to file litigation against the creditors to fetch some more time to sustain. Or whenever a suit for recovery of outstanding dues is brought against a defaulting borrower, it is in practice to intricate the matter and to prolong the judicial proceedings by filing many miscellaneous cases/applications, petitions for adjournment, petitions on several occasions by invoking elusive points etc.

I am of the view that this practice by the borrower should be precluded immediately by way of legislation/rules/orders, which is expedient now and which must comprise of the ways to preclude unnecessary litigations/tactics by the borrowers, but this must also safeguard his inherent interest and right to sue and defend.

Legislation/rules/orders which keeps a check on unnecessary petitions for adjournment, unnecessary supplementary applications, cross suits on the creditors, unnecessary stay orders etc.

The judicial system which seems to be very liberal towards the defaulting borrower must come out with some harsh rulings to press the defaulting borrowers to repay the loan.

In Mahmad Manzoor Alam V. State of Bihar & Others {PLJR 2003(2), 148} the Hon'ble High Court of Patna has dismissed the petition with costs on the ground that the petitioner who defaulted in repayment of loan, resorted to legal engineering to avoid the liability of repayment. The court observed that the debts, if not pad, contribute to the deficit financing of the nation's planned economy and affects the persons also who have nothing to do with these loans and who get lined up unconsciously for making up these bad debts by paying taxes, direct or indirect.

There is a need to revive the thinking of the defaulting borrowers, who have made their habit by litigations and other legal engineering to avoid repayment of loan, which can only be done by strict legislation/rules/orders.

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