The most important thing about the issue of recovery by the Bank is that they are allowed to proceed against the borrower for default in any of the facilities availed by him when a borrower avails multiple credit facilities. Banks are asked to initiate recovery proceedings ‘Borrower-Wise’ and not ‘Facility-Wise’ and it is very clear in the RBI guideline 4.2.7. It is difficult to envisage a situation when only one facility to a borrower/one investment in any of the securities issued by the borrower becomes a problem credit/investment and not others. Therefore, all the facilities granted by a bank to a borrower and investment in all the securities issued by the borrower will have to be treated as NPA/NPI and not the particular facility/investment or part thereof which has become irregular.
Even-though Banks can consider the proposal for restructuring of a loan account upon certain conditions and re-negotiating the terms, Banks do exercise great discretion in this regard.
On certain issues, RBI guidelines are very clear as to when an account should be treated as NPA. But, with regard to providing relaxation or understanding the temporary difficulties of the borrower while considering upgradation of loan account or regularizing the loan account, Banks do exercise lot of discretion. If at all the borrower feels that the Secured Creditor or the Banks are unfair in dealing with his loan account or loan accounts, he can do nothing except approaching superior officers, approaching Banking ombudsmen or approaching High Court under Article 226 of Constitution of India. Though, even the DRT (Debt Recovery Tribunal) can consider all objections raised by the borrower while entertaining an Appeal under section 17 of SARFAESI Act, 2002, DRT may not have power to analyze a particular case in the light of RBI guidelines in its entirety though DRT can certainly look into the guideline dealing with the criteria for classifying a particular loan account or accounts as ‘Non-performing Assets’.
Now, if the Bank takes a decision to classify an account as NPA and rejects the objections or the request by the borrower, then, apart from writ remedy, the remedy available to the borrower is to file an appeal under section 17 of the SARFAESI Act, 2002. Based on the merits of the case, the DRT will grant interim relief and finally, only when it is established that there is a procedural irregularity. If the Bank proceeds with the proceedings even during the pendency of the Appeal under section 17, then, it becomes further more complicated to the borrower and it is very often heard that the borrower is asked to file another appeal literally instead of looking into all developments in the pending Appeal itself by way of entertaining affidavits or petitions in the pending Appeal. Filing an Appeal against the order of the DRT to the DRAT under section 18 is another big process and many normally get discouraged to do this in-view of pre-deposit condition. Admittedly, on the issues of reduction of interest, acceptance of OTS etc., Banks will have their own internal systems and DRT may have little role in this regard.
If the Bank is to be asked to do something as per law, where can the borrower go?. The borrower can give a representation to the Bank officials, can write to the superior authorities and may approach the High Court under Article 226 of Constitution of India seeking direction. However, even the High Court may direct the Banks to consider the representation and with all the might and luxury, the Bank can make the borrower to run from pillar to post. This happens in many cases though the factor of habitual litigants can not be ignored.