The Future Group companies on Tuesday moved the Delhi High Court against a debt recovery tribunal’s July 31 order that restrained them from alienating their assets in recovery proceedings initiated by lenders.
A bench led by Chief Justice Satish Chandra Sharma, while seeking response from the government, Future Group founder Kishore Biyani, Rattan India Finance, RBL Bank, Yes Bank and others refused to stay the DRT order. The matter will be next heard on October 18.
Challenging the validity of various provisions of the Recovery of Debt and Bankruptcy Act 1993, Future Corporate Resources and Future Brands said the provisions do not provide an opportunity of being heard before adverse orders are passed by the tribunal in respect of the assets and properties of debt-laden firms.
The provisions allow the tribunal to mechanically pass orders restraining the borrowers from dealing with or disposing of their assets and properties without applying mind to certain conditions like whether such orders are required to secure the amounts claimed by the lenders and whether the value of such assets is proportionate to the claim amount.
These provisions are ultra vires the Act as they operate to obstruct/delay the recovery of loans by banks and other financial institutions and also “confer drastic and extraordinary powers” upon the tribunal to pass interim exparte order without prima facie satisfying that the conditions required for such restraint orders are met, the petition filed through counsel Pallavi Pratap stated.
Such “wide-sweeping orders” of the tribunal have the effect of incapacitating the borrower from discharging the debt by liquidating its unsecured assets, thereby obstructing the recovery of debt and thus act contrary to the very purpose of the Act, the petitions stated.
