Sc Upholds Constitution Of Debt Recovery Tribunals

Setting aside the earlier high court judgements, the Supreme Court has upheld the constitution of debt recovery tribunals.

The Delhi High Court Bar Association was one of the first to get the related law invalidated by the high court in 1995. In the judgment, the court had stated the constitution of debt recovery tribunals had lowered the authority of high courts. It also felt that the setting up of tribunals would erode the independence of judiciary. The Gauhati and Karnataka High Courts had also held that the tribunals were unconstitutional for different reasons.

Reversing all these judgments, the Bench comprising Justice B N Kirpal, Justice Y K Sabharwal and Justice K G Balakrishnan allowed the appeals of the banks and the central government and rejected the arguments of the Bar Association. It stated the tribunals were set up as procedures in civil courts were cumbersome. Therefore, setting up of tribunals was necessary.

The judgment said loopholes pointed out by high courts in the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, have been plugged by amendments to the law. Therefore, the law, as it existed today, was valid.

The Supreme Court also held that Parliament had the power to set up tribunals as banking was a central subject under the Constitution and recovery of debts was part of the banking business.