A three-judge bench, headed by the CJI, issued a notice to the Centre. The next hearing is yet to be scheduled
NEW DELHI :
The Supreme Court on Friday agreed to hear Kotak Mahindra Bank’s plea seeking directions to the Centre to set up systems and determine modalities for urgent hearings in all debt recovery tribunals (DRTs) and debt recovery appellate tribunals (DRATs) through video conferencing, during, as well as after the covid-induced lockdown is lifted.
The private lender sought the directions to ensure that all type of cases can be heard and disposed, as the functioning of DRTs and DRATs is essential to the banking sector and for overall economic stability.
“The adjudication conducted by the DRTs is critical for the stability of banking and financial institutions and, by extension, the economic health of the country. Banks and financial institutions are a key component of the financial system, as their credit facilities and lending activities enable economic expansion and growth," contended the petition by the bank.
The role played by the DRT and DRAT, as special tribunals for adjudicating matters related to the recovery of debts owed to banks and financial institutions, is central in preserving the fiscal strength of these banking institutions and their ability to perform their core functions, the petition said.
“Therefore, in case lending institutions are not able to smoothly perform their core functions, a ripple effect would be caused, damaging the banking sector and affecting the financial health of the economy," it added.
“Further, the driving force behind monetary stability for banks is the recovery of amounts lent by those institutions. In other words, without DRTs, there would be a standstill, insofar as disputes pertaining to recovery of debts in the banking sector are concerned. This would put a heavy strain on the fiscal strength of the economy and the ability of banks to conduct their core operations, " the petition further added.
Kotak said delays in recoveries adds to liquidity issues and reduces the bank’s lending capacity. “(Besides), markets like real estate don’t remain conducive for disposal of securities and collaterals."
A three-judge bench, headed by the chief justice of India (CJI) S.A. Bobde, issued a notice to the Centre. The next hearing is yet to be scheduled.