Recovery Of Money Under The Recovery Of Debts Due To Banks And Financial

Institution Act, 1993  

Origin of RDDBFI Act – An Introduction

Banks and financial institutions duly registered with Reserve Bank of India (RBI)
provide loan facility to legal entities and individuals (borrowers).
In the event where the borrower fails to repay loan amount or any part thereof
which also includes unpaid interests and other charges and/or debt becomes Non-
Performing Asset (NPA), banks and financial institutions can recover the debt by
approaching appropriate judicial forums.

CONT
Before, the enactment of the RDDBFI Act, banks, and financial institutions were
facing huge challenges in recovering debts from the borrowers as the courts were
overburdened with large numbers of regular cases due to which courts could not
accord priority to recovery matters of the banks and financial institutions.
The Government of India in 1981 constituted a committee headed by Mr T. Tiwari,
this committee suggested a quasi-judicial setup exclusively for banks and financial
institutions which by adopting a summary procedure can quickly dispose-off the
recovery cases filed by the banks and financial institutions against the borrowers.

CONT……

Again in 1991, a committee was set up under Mr Narashmam, which endorsed the
view of the Mr T. Tiwari Committee and recommended the establishment of quasi-
judicial for the speedy recovery of debts.
Pursuant to which Government of India enacted the RDDBFI Act. Through, the
RDDBFI Act quasi-judicial authorities were constituted, and the procedure was
specified for the speedy recovery of debt.
Authorities under RDDBFI Act

Debt Recovery Tribunal

Section 3, provides for the establishment of Debt Recovery Tribunal (DRT), by

notification to be issued by the Central Government, for exercising, jurisdiction,
powers, and authority conferred on such tribunal under the RDDBFI Act.
First DRT was established in Kolkata in the year 1994. Presently 33 DRTs are
functioning at various places in India, and 6 more DRTs are also being established.
As per section 4, DRT consists of sole member only, known as Presiding Officer.
Section 5, provides that a person who has been or is qualified to become District
Judge can be appointed as Presiding Office of DRT.
Section 6 provides that the terms of the Presiding Office shall end after the expiry
of the period of 5 years from the date he enters the office and he will be eligible for
reappointment provided he has not attained the age of 65 years.
Debt Recovery Appellate Tribunal

Sections 8 -11 deals with the establishment, qualification, and term of the Chair
Person of the Debt Recovery Appellate Tribunal (DRAT).
DRAT is established to exercise control and powers conferred under the RDDBFI
Act. DRAT consist of sole member to be known as Chair Person.
A person is eligible to become a Chair Person, if he has been an or qualified to
become a High Court Judge, or has been a member of the Indian Legal Services
and held a Grade 1 post as such member for the minimum period of three years or
has held office of Presiding Officer of Tribunal for period of at least three years.
The Chair Person of DRAT can hold his office for the period of five years and is
also eligible for reappointment, provided, that he has not attained the age of
seventy years.
Presently there are 5 DRATs in India in Delhi, Chennai, Mumbai, Allahabad, and
Kolkata.
DRAT has appellate and supervisory jurisdiction over DRTs.
Who can recover money from DRT under RDDBFI Act

As per section 1(4), the provisions of RDDBFI Act does not apply where the
amount of debt due to the bank or financial institution or the consortium of banks
and financial institutions is less than Rupees Ten Lakh or any other amount not
below Rupees One Lakh, cases where the central government may by notification
specify.
Thus, in essence, minimum debt which is to be recovered from DRT should not be
less than Rupees Ten Lakh.
In the case of SARFESAI Act, if the asset has been declared as Non-Preforming
Asset (NPA), eligible banks and financial institutions after enforcing security can
recover remaining amount under RDDBFI Act which is in excess, of Rupees One
Lakh.
What type of debt can be recovered under the RDDBFI Act ?

As per section 2 (g) debt is any liability inclusive of interest, which is claimed to
due from any person by any bank or financial institution or consortium thereof.
Such liability may be secured or unsecured or assigned, whether payable under the
order of court or arbitration award or under the mortgage.
Such a liability shall be subsisting and validly recoverable on the date of
application.
Jurisdiction, Powers, and Authority of DRT and DRAT

As per section 17 of RDDBFI Act, vests jurisdiction, power and authority on DRT
to entertain and decide application from banks and financial institutions to recover
a debt due to such banks and financial institutions.
Further, section 17A confers on DRAT power of general superintendence and
control and confers appellate jurisdiction on DRAT. DRAT is also empowered to
transfer a case from one DRT to another DRT.
DRAT is also empowered to call for information from DRT, about cases pending
and disposed of them.
DRAT is also empowered to convene the meeting of Presiding Officers. It also
empowered to conduct an inquiry of Presiding Officer and recommend suitable
action to the Central Government.
Section 18 bars the jurisdiction of any civil court or authority for recovery of debt,
except High Court and Supreme Court in the exercise of their writ jurisdiction
under Article 226 and 227 of the Constitution of India.
Thus in essence order of DRAT can be challenged in writ jurisdiction of High
Court or Supreme Court

Types of pleadings/applications generally filed before DRT

Following are the pleadings which are filed in DRT by the parties
Original Application (O.A) refers to the claim filed by the bank or financial
institution for recovery of debt from the borrower.
Interlocutory Application (I.A) refers to the applications filed during the pendency
of the case. Miscellaneous Interlocutory Application (Misc. I.A) refers to
applications filed under clause e,g or h of section 22(2) of the RDDBFI Act.
Written Statement/ reply refers to defense of the borrower

Interim Order by DRT

In cases where the applicant apprehends that the borrower may take steps which
may frustrate attempt of execution may make an application to DRT along with
details of property to be attached and value thereof, and on such application may
pass an interim order directing respondent/defendant, directing him to deposit
before it amount equivalent to property value or amount which may be sufficient to
recover the debt or as and when required by DRT to place before it disposal the
property.
Wherever DRT finds it fit, it may also pass following orders
appoint a receiver of the property, before or after the grant of Recovery Certificate
(RC);
remove any persons from possession or custody of any property;
commit the same to custody, management of the receiver;
confer power on the receiver to file/defend the suit on behalf of property, or to act
in any manner for the improvement of the property;
appoint a commissioner for collecting details of defendant/respondent’s property or
sale thereof.

Judgment and Recovery Certificate by DRT

DRT after giving both the parties opportunity of hearing and hearing their
submissions will within 30 days of the conclusion of such hearing pass its interim
or final order.
Within 15 days of the passing of the order, DRT will issue RC and forward the
same to Recovery Officer.
RC will contain the details of the amount to be paid by recovered by the borrower
debtor. RC shall have the same effect as the decree of the civil court.
Appeal

An appeal by any aggrieved party against the order of DRT can be filed within the
period of 30 days from the date of receipt of the order. No appeal can be filed
against any order which has been filed with the consent of the parties. DRAT shall
endeavour to dispose-off appeal finally within the period of six months.
Amount to be deposited for filing an appeal – Where the appeal is being preferred
by the debtor, who as per the order of DRT is liable to pay money to bank or
financial institution at the time of filing appeal is required to deposit before DRAT
50% of the amount he is required to pay as per the order of the DRT.
However with the permission of DRAT, this amount can be reduced by DRAT, but
reduced amount should not below 25% of the debt amount which Borrower is
required to pay as per DRT order.

Recovery of debt by Recovery Officer

After receipt of RC from DRT, Recovery Office will initiate recovery by one or
more of following modes:
Attachment and sale of movable or immovable property of defendants/debtors;
Taking possession of property over which security interest was created or any other
property of defendant/debtor and appointing receiver for the management of the
same;
Arrest of defendant/debtor and his detention in prison;
Appointment of receiver for management of movable or immovable property of
defendant/debtor;
Any other mode as may be prescribed by the central government.
Apart from above modes Recovery Officer may also, direct any person who is
liable to pay any amount to defendant/borrower, deduct from such amount the
recovery amount, and transfer to the credit of Recovery Officer the amount so
deducted. However, Recovery Officer will not deduct any such amount which is
exempt from attachment under Code of Civil Procedure, 1908.