Page 36 - Banking Finance May 2019 N

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be sent to MSME defaulter under certain circumstances such financial report on the borrower/ the guarantor is obtained,
as the borrower being a wilful defaulter, bank liability being and a list of witnesses is prepared. The branch manager
significantly uncovered, death of the borrower, dissolution should first exercise the right to set-off/appropriation, if
of a partnership firm, siphoning of funds, the borrower available. The plaint prepared by the advocate should be
refusing to renew the credit limit, etc. The exercise of checked thoroughly as to the correctness of facts and
recalling of advances is one of the recovery strategies which figures. All parties and guarantors should be sued. Names,
has been found to be effective in respect of genuine MSME addresses and securities should be stated properly and, suit
borrowers who would like to avoid to face legal action should be filed in the court of the specified jurisdiction.
through the courts.
In particular, the branch manager should contact the
(B) Legal Measures: advocate time and again to impress upon him to complete
Legal Services Authorities Act, 1987 was passed providing court formalities relating to submission of statement,
legal basis for Lokadalats, Peoples' Court, and legal authority hearing, etc. After the decree is awarded, the details of
to the compromise arrived at between the bank and the the same should be read carefully. Execution of decree shall
borrower through such Lokadalats. These are generally be in different forms such as delivery of property, appointing
presided over by two or three senior persons including a receiver or in such other manner as the nature of relief
retired senior civil servants, defence personnel and judicial granted, attachment and sale, or by arresting of Judgement
officers. They take-up cases which are suitable for Debtor (JD).
settlement of debt for certain consideration. Parties are
given hearing while they explain their legal position. The same should be executed as per the Law of Limitation.
Though it is experienced that the time consumed in the
They are then advised to reach to some settlement due to entire process is very long, banks have to depend on courts
social pressure of senior bureaucrats, judicial officers or for recovery of from MSME borrowers whose loan amount
social workers. If the compromise is arrived at, the parties outstanding is less than Rs 10 lakhs. But with proper follow
to the litigation sign a statement in presence of Lokadalats up of court cases, recovery through judicial process would
which are expected to be filed in the court to obtain a certainly go up.
consent decree.. Bank-suits involving claims up to Rs.20 lakh
may be brought before the Lokadalats .Hence, micro In respect of bank loan amount being overdue more than
enterprises being defaulters shall avail of the facility created Rs 10 lakhs, we have to approach Debt Recovery Tribunals
at Lokadalats. If not possible to recover through Lokadalats, (DRTs) which are set up under Recovery of Debts Due to
the next step is to approach Civil Courts when the loan Banks and Financial Institutions Act, 1993. Under the Act,
amount outstanding is up to Rs. 10 lakhs. two Tribunals are set-up, i.e. Debt Recovery Tribunal (DRT)
and Debt Recovery Appellate Tribunal (DRAT). The order
Before taking a decision to file a suit, the bank shall ensure passed by the DRT shall be appealable to the Appellate
that there are sufficient securities available in the account Tribunal but no appeal shall be entertained by the DART
and the borrowers and/ or guarantors are having adequate
attachable personal assets to satisfy the decree against
them. Enough care has to be taken at all stages of recovery
through the court which in chronological order include
serving summons, submission of a written statement
recording the evidences, arguments, framing of issues,
decision and court order. Firstly, the branch has to seek
permission from the controlling office to file suit thereafter,
the approved advocate should be contacted by the branch
manager to file suit.

Before filing the suit, we should ensure that the documents
are live, securities are properly charged to the bank, fresh

36 | 2019 | MAY | BANKING FINANCE