only about a fourth of the cases pending at the beginning of the year are disposed off during the year – suggesting a four year wait even if the tribunals focus only on old cases. however, in 2013 – 14, the number of new cases filed during the year was about one and a half times the cases disposed off during the year. thus backlogs and delays are growing, not coming down. why is this happening? the judgments of the drts can be appealed to debt recovery appellate tribunals, and while there are 33 of the former, there are only five of the latter. and even though section 18 of the rddbfi act is intended to prevent higher constitutional courts from intervening routinely in drt and drat judgments, the honourable supreme court recently lamented that bis central bankers ’ speeches “ it is a matter of serious concern that despite the pronouncements of this court, the high courts continue to ignore the availability of statutory remedies under the rddbfi act and sarfaesi act and exercise jurisdiction under article 226 for passing orders which have serious adverse impact on the right of banks and other financial institutions to recover their dues. ” 1 the consequences of the delays in obtaining judgements because of repeated protracted appeals implies that when recovery actually takes place, the enterprise has usually been stripped clean of value. the present value of what the bank can hope to recover is a pittance. this skews bargaining power towards the borrower who can command the finest legal brains to work for him in repeated appeals, or the borrower who has the influence to obtain stays from local courts – typically the large borrower. faced with this asymmetry of power, banks are tempted to cave in and take the unfair deal the borrower offers. the bank ’ s debt becomes junior debt and the promoter ’ s equity becomes super equity. the promoter enjoys riskless capitalism – even in these times of very slow growth, how many large promoters have lost their homes or have had to curb their lifestyles despite offering personal guarantees to lenders? the public believes the large promoter makes merry because of sweet deals between him and the banker. while these views have gained currency because of recent revelations of possible corruption in banks, my sense is that occam ’ s razor suggests a more relevant explanation – the system renders the banker helpless vis - a - vis the large and influential promoter. while we should not slow our efforts to bring better governance and more transparency to banking, we

the promoter retains all the upside, forgetting the help he got from the government or the banks – after all, banks should be happy they got some of their money back! no wonder government ministers worry about a country where we have many sick companies but no “ sick ” promoters. let me emphasize that i do not intend in any way to cast aspersions on the majority of indian businesspeople who treat creditors fairly. i also don ’ t want to argue against risk taking in business. if business does not take risks, we will not get architectural marvels like our new international airports, the “ developed - for - india ” low cost business model in the telecom sector, or our world class refineries. risk taking inevitably means the possibility of default. an economy where there is no default is an economy where promoters and banks are taking too little risk. what i am warning against is the uneven sharing of risk and returns in enterprise, against all contractual norms established the world over – where promoters have a class of “ super ” equity which retains all the upside in good times and very little of the downside in bad times, while creditors, typically public sector banks, hold “ junior ” debt and get none of the fat returns in good times while absorbing much of the losses in bad times. why does it happen? why do we have this state of affairs? the most obvious reason is that the system protects the large borrower and his divine right to stay in control. this is not for want of laws. the debts recovery tribunals ( drts ) were set up under the recovery of debts due to banks and financial institutions ( rddbfi ) act, 1993 to help banks and financial institutions recover their dues speedily without being subject to the lengthy procedures of usual civil courts. the securitization and reconstruction of financial assets and enforcement of security interests ( sarfaesi ) act, 2002 went a step further by enabling banks and some financial institutions to enforce their security interest and recover dues even without approaching the drts. yet the amount banks recover from defaulted debt is both meagre and long delayed. the amount recovered from cases decided in 2013 – 14 under drts was rs. 30590 crore while the outstanding value of debt sought to be recovered was a huge rs. 2, 36, 600 crore. thus recovery was only 13 % of the amount at stake. worse, even though the law indicates that cases before the drt should be disposed off in 6 months,