|
US Indo Legal Services
Phones- Off (USA)- 718-850-1952,
718-668-1258, 212-859-3538 E-mails- ramkishan@drtsolutions.com or anandesq@hotmail.com Web- www.usindolegal.com Tuesday 22nd November 2005 (last modified)
|
|
- |
Debt Recovery Tribunals : There’s a way out for Defence of GuarantorsRAM KISHAN The expeditious summary proceedings in various Debt Recovery Tribunals (DRTs) in the country have rendered the guarantors an extremely worried lot. In decreed cases, the personal assets of some of the guarantors are being disposed off quickly, mercilessly and in many cases at throw-away prices. A new machinery has come up solely for this purpose. The guarantors and their lawyers are frantically searching for a suitable legal defence. The suggested approach in this article is based on fundamentals and principles of Law of Contract combined with Law of Torts with due regard to justice, equity, and good conscience. The solutions to the problems and the agony faced by the guarantors are in-built in the progressive attitude of the apex court of the country. In the words of Chief Justice Bhagwati “ We have to evolve new principles and lay down new norms which will adequately deal with new problems which arise in a highly industrialized economy. We can not allow our judicial thinking to be constricted by reference to the law as it prevails in England or for the matter of that in any foreign country. We are certainly prepared to receive light from whatever source it comes but we have to build our own jurisprudence. “ – M.C. Mehta vs Union of India, AIR 1987 SC 1086. Advocates, therefore, may have to carry out legal analysis based on the suggestions given here so that proper case is made out before the judiciary. As stated by Lord Scarman : “The function of the court is to decide the case before it, even though the decision may require the extension or adaptation of a principle or in some cases the creation of a new law to meet the justice of the case. But whatever the court decides to do, it starts from a base-line of existing principle and seeks a solution consistent with or analogous to a principle or principles recognized. “ – Macloughin vs O’Brian, (1982) 2 All ER 298 (310) (HL) Let us examine and analyze the process by which the nationalized Banks and All India Financial Institutions (FIs) obtain the guarantee and then evolve suitable legal defence for the guarantors. Normally, the creditors enter into contract of guarantee with the guarantors. The terms and conditions of such contract in our country are governed by the Indian Contract Act 1872 secs. 126 to 147. In this article, we have used the terminology specified in sec. 126 of the said Contract Act. Here by creditors,we mean the lending Banks and FIs. The contractual relation is based on bonafide relation between the creditor and the guarantor The contracting parties, however, are not authorized to vary those terms and conditions later on without mutual consent. In other words any one-sided variation in reasonable contractual relationship results into breach of contract of guarantee. Further the said relation creates well defined duty of care on the part of the creditor. Any violation of such duty creates great variation in the original contractual relationship. Breach of contract of guarantee or such illegal variations caused by the creditors result in discharge of the guarantors. The secs. 133, 139, 142 and 143 of the said Contract Act are relevant in respect of discharge of the guarantors. It is needless to mention that when the guarantor is discharged, his property, if any, mortgaged is also released accordingly. Let us now examine the scenario in the specific context of nationalized banks and financial institutions as creditors. The said banks and institutions being government owned are totally and statutorily governed by government policies and Reserve Bank of India (RBI) Guidelines. Hence the guarantee agreements are founded upon as well as governed by the said statutory policies and guidelines at the time of execution of the guarantee agreements as well as during their existence. The framework of the law enshrined in the said policies and guidelines aims at quickly detecting warning signals for incipient sickness, quick remedial action to cure the said incipient sickness, to take care of the various needs of the borrowers, to provide and extend adequate and timely working capital limits, to be a friend, philosopher and guide during difficult period to expel the notion that banks are only fair weather friends, to ensure proper duty of care, not to be negligent at any time etc. Thus the conduct of the creditor and guarantor are also governed by the provisions of the Law of Torts apart from legally valid contractual terms and conditions of the guarantee at any point of time. Such extensive, wide and all pervasive grip of law creates enormous legal rights of the guarantors and corresponding legal duties on part of the said Banks and FIs. Any breach of such duties amounts to infringement of the said rights of the guarantor resulting into his automatic discharge as guarantor. Apart from his discharge, if there is any injury, he can claim adequate damages and compensation. It is well known that the present beauracracy as well as its thinking in Banks and FIs particularly after nationalization have been modelled on the pattern of government departments. Hence in practice, operating staff at the branch level in Banks and FIs commit numerous violations rendering their guarantors discharged without any obligations. In most of the cases, they are said to have indulged in malicious abuse of process of law as well as malicious civil proceedings. Under such realities, the guarantors need not worry at all. When called upon by the court of law, they must point out the above violations and hence seek their automatic discharge from the point of time of the said violation. If there is slight injury, they must claim adequate compensation. It is pertinent to note that many of the terms and conditions of the deeds of the guarantee are one sided and hence such deeds are prima-facie illegal. The said Banks and FIs commit willful legal default and hence breach of statutory duties when they present such illegal documents before the guarantors. They commit further default and breach of law when they obtain their signatures. The highest level of default and hence breach of law is committed when they present such illegal documents before the court of law. The injured guarantors must review all the above aspects and if there is any illegal attachment or illegal disposal of their properties, they must file injunction and damage suits based on the Law of Contract as well as Law of Torts to claim return of their properties along with adequate damages and compensation. This kind of vigilance and alertness on part of guarantors will usher in a new era in banking and finance. In that eventuality bankers will be forced to pay attention to the real primary security i.e. production, productivity and profit. The project appraisal will be carried out with greater responsibilities. Day-to-day banking will also improve considerably. As a result the incipient as well as chronic sickness will also come down. . The worries of the guarantors can also be virtually eliminated. The writer i.e. Mr. Ram Kishan of Ram Kishan Associates has personal experience of contesting cases pertaining to borrowers and guarantors based on the Law of Torts. He can be contacted at : ramkishan@drtsolutions.com |
|
US Indo Legal Services
Phones- Off (USA) -718-850-1952,
718-668-1258, 212-859-3538 E-mails- ramkishan@drtsolutions.com or anandesq@hotmail.com Web- www.usindolegal.com In most of the search engines results like that of www.google.com, www.yahoo.com, www.lawcrawler.com, www.altavista.com, www.msn.com, www.indiatimes.com, www.rediff.com, www.hotbot.com, www.AllTheWeb.com, www.askjeeves.com, www.lycos.com, www.teama.com, www.aol.com, www.inktomi.com, www.looksmart.com, www.dmortz.com, www.overture.com, www.netscape.com, www.wisenut.com our site has started appearing in the categories of law, legal, antidumping, immigration, exports, imports, technology transfer, legal BPO, offshore BPO, outsourcing, Business Process Outsourcing, BPO legal, legal BPO Cases, legal BPO matters, Anand Ahuja, Ram Kishan, drt, debt recovery tribunal, debt recovery solutions, borrowers, guarantors etc. In the category of Anand Ahuja in google, among 8950 entries on 17.03.04, this site is ranked as No 1. Our focused areas are BPO, legal BPO i.e. legal Business Process Outsourcing, insurance, banking, finance, transcription etc. Our range of legal activities comprise legal research, various aspects of legal matters, legal advice, answers to legal questions, legal solutions, legal collaborations, advice for proper legal actions, legal activities, legal reactions, legal arguments, legal process, legal repercussions, legal impacts, analysis of legal forces, study of legal bodies, legal organizations, legal circumstances, legal clues, legal consequences, legal coverage etc. The BPO activities include study of BPO jobs, BPO assignments, BPO enterprises, BPO cost centers, BPO projects, BPO accounts, BPO players, BPO assignees, BPO firms, BPO companies, BPO organizations, BPO in India and USA, Indian BPO, insurance, banking, finance, trascription etc. Useful sites for our new visitors are www.lawsource.com, www.intellevate.com, www.onesource.com, www.gartner.com, www.pointcom.com, www.oneyma.com, www.law.com, www.onebpo.com, Our associate site for Indian operations is www.drtsolutions.com. Our IT wing has microsoft certified software engineers who are up to date with latest contents of www.microsoft.com Send mail to with questions or
comments about this web site to :-
ramkishan@drtsolutions.com or
anandesq@hotmail.com
|
Note