SC Asks Centre To Strengthen Debt Recovery Mechanism [Read Judgment]

Two months after asking the RBI why names of 57 borrowers who have defaulted on bank loans worth a whopping Rs 85,000 should not be made public, the Supreme Court today sought data from the centre on recovery cases filed by banks and financial institutions which are pending for the last one decade.

Passing orders in the PIL filed by Centre for Public Interest Litigation Vs Housing and Urban Development Corporation & others filed by advocate Prashant Bhushan, the bench headed by Chief Justice T S Thakur who is retiring today raised several pointed questions on the central government’s debt recovery mechanism and how it planned to strengthen infrastructure to speed up retrieval of loans.

The SC also asked government to conduct a study of securitisation law and debt recovery mechanism and strengthen it.

THE BACKGROUND

The Supreme Court had on October 23 asked the RBI why names of 57 borrowers who have defaulted on bank loans worth a whopping Rs 85,000 crore should not be made public. “Who are these people who have borrowed money and are not paying back? Why this fact that the person has borrowed money and not paying back be not known to public”, asked a bench headed Chief Justice T S Thakur. The bench said if the bar was lowered below Rs 500 crore, then the default amount would cross over Rs one lakh crore.

Observing that if people file an RTI query, they must know who the defaulters are, it asked the Reserve Bank of India (RBI) why the information on defaulters should be withheld. “People should know how much money a person has borrowed and how much money he needs to pay back. The amount payable should be known to public. Why should you withhold the information”, the bench said.

On April 12, the apex court had suggested making public the total outstanding amount without disclosing defaulters’ names, but RBI had resisted the proposal citing confidentiality clause.

The petition, which was filed in 2003 by the Centre for Public Interest Litigation (CPIL), had originally raised the issue of loans advanced to some companies by state-owned Housing and Urban Development Corporation (HUDCO).

The plea had said that about Rs 40,000 crore of corporate debt was written off in 2015. The Supreme Court had then directed the RBI to provide a list of companies which had defaulted bank loans of over Rs 500 crore while expressing serious concern over the growth in bad loans. Counsel appearing for RBI opposed the suggestion and said that not all defaulters were wilful.

The central bank says it is working in the interest of banks and names of defaulters cannot be made public as per the statute, he said. To this, the bench said, You (RBI) must work in the interest of the country, not just in the interest of banks. Advocate Prashant Bhushan, appearing for NGO Centre for Public Interest Litigation (CPIL), favoured disclosure of the outstanding loan amount and cited an apex court verdict of December 2015 to claim that RBI has to provide all information. The bench said it will hear on October 28 the matter on the aspect of disclosure of names of defaulters. The apex court had earlier expressed concern over the growing amount of loans not being returned and said people are taking thousands of crores and running away by declaring their companies insolvent, but poor farmers who take small amounts of Rs 20,000 or Rs 15,000 suffer.

THE ORIGINAL CASE

CPIL V. Housing and Urban Development Corporation &ors, CWP No. 573 of 2003, was originally filed by CPIL to bring to the notice of Supreme Court the action of the Officials of HUDCO in arbitrarily granting loans for political and extraneous considerations without going in to the merit of each case and even ignoring prescribed / established procedures, appraisal norms and financial prudence including the advice of Board members.  The Court had referred the matter to the CVC for investigation and the CVC had submitted detailed report.

Read the Judgment here.

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