Law Relating to Debt Recovery - I

Law relating to debt recovery has gained more significance in the recent past.  When lenders were not able to recover the dues from its borrowers, they found lot of difficulties in take recourse from complicated litigations piled up before the Civil Court.

In order to ensure speedy recovery of debts due to these banks and financial institutions, the specific enactment called the Recovery of debts Due to banks and financial institutions Act, 1993 (Debt Recovery Act) was passed.

ESTABLISHMENT OF DRT AND DRAT:

The act provides for establishment of special Tribunals called “Debt Recovery Tribunals” (DRT) and the “Debt Recovery Appellate Tribunals”(DRAT) exclusively for the speedy disposal of complaints under this enactment.

Debt Recovery Tribunals are established all over the country based on the volume of cases registered in a particular state. For instance a state may have more than one DRTs and on the other hand two states may have a same DRT. In India there are totally 33 Debt Recovery Tribunals and 6 Debt Recovery Appellate Tribunals.

COMPOSITION OF DRTS AND DRATS:

Every Debt Recovery Tribunal shall have a presiding officer who is or is qualified to be a Dirstrict Judge. The Presiding officer shall have such other officers as he may require for his assistance. Also the Presiding officer shall appoint Recovery officers who will discharge their duties assigned to them under this Act.

Similarly every Debt Recovery Appellate Tribunal Appellate shall have a Chairperson who is or is   qualified to be a Judge of High court. The Chairperson shall have such other officers as he may require for his assistance.

JURISDICTION AND LIMITATION:

Section 17 of the Act confers Jurisdiction on the DRTs and DRATs to entertain cases filed by the banks and the financial institutions. Further Section 18 of the Act Bars Jurisdiction of other Courts in hearing matters falling under Section 17 (except the Supreme Court, and a High Court exercising jurisdiction under Articles 226 and 227 of the Constitution)  

According to section 24, the provisions of the Limitation Act, 1963, (36 of l963) shall, as far as may be, apply to an application made to a Tribunal.

PROCEDURE:

Section 19 of the Act provides for the procedure pertaining to the Tribunals. Section 19 of the Act provides the following stages with respect to the proceedings before the Tribunal:

a)      Filing of Application before DRT - Bank / Financial Institution has to make an Application in prescribed form along with prescribed fee (based on the claim amount) to the Tribunal having competent Jurisdiction.

b)      Two or more banks against one Borrower : When a Bank / Financial Institution files an Application against a same person against whom an Application has already been filed by another bank, then the later bank may join the Applicant bank at any stage of the proceedings before the final order is passed.

c)      Issue of Summons : Summons will be issued upon filing of the Application requiring the Defendants to show cause within 30 days , as to why such prayers shall not be granted against the Defendants

d)     Filing of Written Statement : The Defendants inturn will have to file a Written Statement within the time prescribed by the Tribunal

e)      Set off : When the Defendant claims to set off any sum legally recoverable by him from the Applicant, against the Applicant’s claim, then the Defendant may file a Written statement containing particulars of set off. Such particulars of Set off cannot be filed after Written Statement. Such Written statement shall have the same effect as a plaint in a cross suit so as to enable the Tribunal to pass Orders in respect of both the claims.

f)       Counter Claim: The Defendant in addition to his right of pleading set off, may set Counter Claim against the Claim of the Applicant, any right or a claim of a cause of action accruing either before or after filing of the Application but not after filing of the Defence by the Defendant. Such Written statement shall have the same effect as a plaint in a cross suit so as to enable the Tribunal to pass Orders in respect of both the claims. The Applicant may file a Written statement to the Counter Claim within the time stipulated by the Tribunal

g)      Attachment of the property : At any stage of the proceeding, the Tribunal may Order for attachment of the whole or such portion of the properties claimed by the applicant as the properties secured in his favor or otherwise owned by the borrower to the extent that satisfies the recovery of debt, if the Tribunal is satisfied that the Defendant with intent to obstruct or delay or frustrate the execution of any order for the recovery of debt that may be passed against him, is about to dispose of, remove the property from the Jurisdiction of the tribunal or if he is likely to cause any damage or mischief to the property or affect its value by misuse or creating third party interest. The Defendant will be given an opurtunity of being heard before passing any such Order.

h)      Orders passed by the Tribunal :

a) Appointment of a receiver

(b) remove any person from the possession or custody of the property;

(c) commit the same to the possession, custody or management of the receiver;

(d) confer upon the receiver all such powers, as to bringing and defending suits in the courts or filing and defending applications before the Tribunal and for the realization, management, protection, preservation and improvement of the property, the collection of the rents and profits thereof, the application and disposal of such rents and profits, and the execution of documents as the owner himself has, or such of those powers as the Tribunal thinks fit; and

(e) appoint a Commissioner for preparation of an inventory of the properties of the defendant or for the sale thereof.

APPEAL:

Any person aggrieved by the Order of the Tribunal may prefer an appeal to an Appellate Tribunal having jurisdiction in the matter, in such form and manner as may be prescribed. Such Appeal has to be filed within forty-five days from the date on which a copy of the order made, or deemed to have been made, by the Tribunal is received by him

The Tribunal may entertain an appeal after the expiry of the said period of forty five days if it is satisfied that there was sufficient cause for not filing it, within that period. No appeal shall lie to the Appellate Tribunal from an order made by a Tribunal with the consent of the parties.

The Appellate Tribunal may, after hearing the parties, pass such orders confirming, modifying or setting aside the order appealed against.

It is pertinent to note that, the Act prescribes time limit of 6 months for the Appellate Tribunal and it shall try and dispose of the Appeal within such time.

Section 21 of the Act mandates that an Appeal under Section 20 shall not be entertained by the Appellate Tribunal unless such person has deposited with the Appellate Tribunal seventy-five per cent of the amount of debt so due from him as determined by the Tribunal under section 19.

Provided that the Appellate Tribunal may, for reasons to be recorded in writing, waive or reduce the amount to be deposited under this section.

MODE OF RECOVERY OF DEBTS:

The Recovery officer shall proceed to recover the amount of debt specified in the certificate of recovery by one or more of the following modes, namely,- 

(a) Attachment and sale of the movable or immovable property of the defendant; 

(b) Arrest of the defendant and his detention in prison; 

(c) Appointing a receiver for the management of the movable or immovable properties of the defendant.