A Common Platform For Online Auctioning Of Defaulters’ Property In Making

The government has advised banks to start a common platform for auctioning defaulters' seized properties to attract competitive bids and increase recoveries from sale of such assets.

Public sector banks, along with the Indian Banks' Association, are steering the initiative to launch an e-auction website or platform which will have standardised details of all auctionable properties of banks, Financial Services Secretary Rajiv Kumar told reporters. The platform, he said, may be ready in two-three months.

“In the absence of adoption of modern techniques, positive results accruing from property auctions were limited and potential buyers were not fully informed of all details like those available in e-auction marketplace,” according to a statement by the Department of Financial Services. Banks display auction information on their own websites and it's inconvenient for bidders to access information on multiple websites. This leads to a smaller pool of potential bidders, cartelisation as well as involves costs for conducting repeated auctions, the statement said. The common platform, it said, will enlarge the bidder base and will have visible auction information on all public sector banks' websites.

De-Clogging Debt Recovery Tribunals

The threshold for filing a case before debt recovery tribunals has been increased to Rs 20 lakh from Rs 10 lakh, Kumar said, adding this has been done based on the demand of judicial members of the tribunals.

The cases between Rs 10 lakh and Rs 20 lakh account for 38 percent of the total applications and are only 4 percent in terms of value, Kumar said. As on June 30, there were 38,376 cases that fell in the bracket, he said, without disclosing the amounts involved in these matters.

The revision of the minimum limit will help debt recovery tribunals to focus on high-value matters which will lead to quicker recoveries, according to the Department of Financial Services statement. About 80-85 percent of non-performing asset cases between Rs 10 lakh and Rs 20 lakh are fully secured, it said.

The remedy for such cases lies under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Kumar said.

District magistrates are required to pass orders on seizure of secured assets against defaulted loans given by banks within 60 days, the statement said. The SARFAESI Act, it said, empowers banks to take possession of securitised assets of defaulters and sell them.

Ajay Shaw, a bankruptcy partner at DSK Legal, called it a halfhearted measure. “Whilst this may unclog the DRTs, the key is to make the process time bound, which provides creditors with a visibility of obtaining the order in a timely manner and assist in debt recovery.” If the tribunal functions in a roubst manner, he said, then the NCLTs will be relieved from simpliciter recovery cases.

The government also asked chief secretaries of all states to monitor passing of orders by district magistrates within the prescribed time limit.

Over 10,000 applications of public sector banks are pending, Kumar said, adding the value of properties from these cases is around Rs 40,000 crore.

Digitising Debt Recovery Tribunals

The government is also working towards digitising the debt recovery tribunals. Record of cases being handled in all 39 debt recovery tribunals and five debt recovery appellate tribunals are being computerised, Kumar said.

“The platform will be similar to those used by other courts and will include e-filing, e-payment of fees, uploading orders, viewing case status and cause list generation, among others,” according to the department's statement. “Personal guarantor's details will also be present on the platform, if the borrower is a company.”

A pilot run of the software has been done, Kumar said, adding the process of feeding in data in the new system will start from Oct. 1.