FM fixes fee for appeal against loan recovery

MUMBAI: The income of debt recovery tribunals (DRT) could double in a year thanks to a recent finance ministry notification that a borrower will have to pay a fee of between Rs 12,000 and Rs 1.5 lakh if he wants to appeal against the lending bank’s move to sell his pledged assets attached under the security enforcement law.
Bankers say that if the finmin move was aimed at discouraging companies from appealing to DRTs, it would not work with several borrowers already approaching the DRTs to stop banks from attaching their properties.
The defaulting companies have been encouraged by the Supreme Court judgement on ICICI Bank versus Mardia Chemical case which said that borrowers will not have to deposit any amount with the court in order to make an appeal. In the ruling, the apex court struck down the earlier rule which said that a defaulter will have to deposit up to 75% of the outstanding dues in order to make an appeal at DRT.
As per the ministry notification, the fee is Rs 12,000 for a default of Rs 10 lakh and Rs 1,000 for every additional Rs 1 lakh. However, the maximum amount is capped at Rs 1.5 lakh. The amount is paid to the court and there is no refund even if the company wins the case.

Banks have to pay the same kind of fees to DRTs if the case is outside the purview of Securitisation and Reconstruction of Finance Assets and Enforcement of Securities Interest (Srafesi) Act.
As per the apex court ruling, if a borrower fails to get a stay on sale of property from DRT it can approach the appellate DRT, and having failed there it can move the high court. And, if it loses there, he can move the Supreme Court. At every stage, the company would require to pay the court fee. Legal experts feel this could be a deterrent for the very small companies who plan to approach the DRT for reprieve.
Banks had issued notices to several companies under the Srafesi Act, but were awaiting the Supreme Court ruling on the Mardia case before taking any action.