INSTITUTE OF MANAGMENT STUDIES, DAVV, INDORE

FINANCE AND ADMINISTRATION – SEMESTER IV

CREDIT MANAGEMENT AND RETAIL BANKING

DEBT RECOVERY TRIBUNAL

 Major cause of concern for Banks and Financial institutions (FI) was huge back log of pending court
cases.
 Recovery of Debts due to Banks and Financial institutions acat 1993 – DRT act on 24th June 1993 for
speedy recovery.
 Act is applicable in whole of India except J&K.
 It is applicable to all banks except Co-operative banks
 Supreme court has opinion that parliament alone can enact such laws for banking business including
recovery.
 The act is applicable for cases above Rs. 10 lacs.

DEFINITIONS AS PER ACT

 Bank – All banking companies, nationalized banks, SBI group and RRB excluding Cooperative banks.
 Application – application made to tribunal
 Debt means –
- Liability inclusive of interest secured and unsecured.
- Liability payable under decree
- Liability payable under mortgage
 In case of SBI v/s SS Engineering Corporation – money overdrawn from bank account without any
overdraft facility is also a debt recoverable under the act.
 However, if employee commits fraud and misappropriates money the amount recoverable is not debt.
 Presiding officer - of DRT
 Recovery officer – of DRT appointed by Central govt..
 Appellate Tribunal – any person aggrieved by order passed by DRT can file an appeal to the authority
called appellate tribunal (as per DRT act).
 Chairperson – person appointed as appellate authority.

.ESTABLISHMENTS OF TRIBUNAL

 Tribunal is made up of only one person called presiding officer appointed by Central Govt.
 He should be qualified to be a appointed as District Judge.
 Central govt. is also empowered to appoint appellate tribunal.
 Appellate tribunal also consists of only one person called chairperson
 He should be qualified to be a appointed as High Court Judge, or member of Indian legal service and
has held post in grade I for last 3 years or presiding officer of tribunal for at least 3 years.
 Holds office for a term of 5 years or attaining age of 65 years.
 Presiding officer or chairperson can resign from office after giving 3 months written notice, but they
cannot be removed without order of central govt.
JURISDICTION

 From the date of establishing the tribunal i.e the appointed day, no court of other authority shall have
any jurisdiction, power of authority to deal in recovery cases above Rs.10 lacs. Civil courts will loose
there jurisdiction however, this is not applicable to high court and supreme court.

APPLICATION TO TRIBUNAL

 Bank is required to make an application to tribunal for recovery of any debt from any person or entity.
 If another bank has to recover dues from the same person he can joint the applicant bank before the
final order.
 Civil suit already filed will be transferred to tribunal and no fees is required to be paid again.
 On receipt of application, tribunal will issue summons to defendant requiring him to show cause in 30
days.
 When applicant wants to attach properties of defendant, he is required to specify the property. Tribunal
may give attachment order.
 Tribunal may do following –
- Appoint a receiver of any property,
- Give possession, custody or management of property to receiver.
- Appoint commissioner for preparation of inventory of properties of defendant for sale.
 If recovery certificate is against company, sale proceeds will be distributed among secured creditors as
per companies act.
 Tribunal on giving opportunity to both the sides passes interim or final order for payment including
interest.
 Presiding officer has to issue a certificate under his signature to recovery officer for recovery of debt.
 Supreme court has held that evidence can be taken by way of affidavit.

APPEAL TO THE APPELLATE TRIBUNAL

 Person aggrieved by order passed by tribunal may prefer an appeal to an Appellate tribunal.
 Appeal to be filed within 45 days. At the time of filing the appeal 50% of amount order is required to be
deposited.
 Appeal shall be dealt and disposed within 6 months

PROCEDURES AND POWERS

 Tribunal and Appellate tribunal are bound by procedure laid down by civil procedure code 1908 and will
be guided by principles of natural justice and shall also have powers to regulate their own procedure.
 They will have same powers as are vested in civil courts under Code of Civil Procedure, 1908.
 Tribunal and Appellate tribunal are deemed to be a civil court for all purposes and will be deemed to be
judicial proceedings.

RECOVERY OF DEBTS

 On receipt of copy of recovery certificate, the recovery officer has to proceed to recover the amount by
–
- Attachment and sale of movable and immovable property of defendant
- arrest of defendant and detention in prison
- appointment of receiver for management of movable and immovable properties
  Recovery Officer can sell any of the property owned by defendant.
 Defendant is debarred from raising any dispute before Recovery officer about correctness of amount.
 Presiding officer who has issued recovery certificate is authorized to withdraw the certificate or correct
the mistake in certificate.
 Rules says that when any party want to have a review of order passed by tribunal on grounds of error
he can make application for review within 60 days of passing of order.
 Even though Recovery certificate is issued Presiding officer may grant time for payment.

OTHER MODES OF RECOVERY OF DEBTS

 In addition to modes above, recovery officer may exercise power of Tax Recovery officer under section
226 of Income Tax Act 1961. Orders are also similar to garnishee order in respect of debts, shares and
other properties.
 If any amount is due from any person, recovery officer may ask such person to pay directly to recovery
officer.
 When a notice is issued in relation to any property any claim made against that property subsequent to
notice is void.
 In joint holding - equal share of joint holder are presumed unless contrary is proved.
 If person after receipt of notice fails to pay Recovery officer he is deemed to be in default.
 Recovery officer has also powers to sale the movable property by distraint in the manner laid down in
Income Tax act. As far as possible debts due under the act are treated at par with recovery under
Income Tax.
 Any person aggrieved by the order of Recovery Officer may appeal within 30 days to the tribunal.

OTHER IMPORTANT POINTS

 All the suits pending before civil courts where the tribunal has jurisdiction will stand transferred to
tribunal.
 If decree or order passed by any court is not yet executed will be applied to DRT for recovery
certificate.
 Chairperson, Presiding officer, Recovery officer and other officers are deemed public servant within
meaning of section 21 of Indian Penal Code.
 When anything is done in good faith no suit or other proceeding shall lie against officers. Protection is
given so that actions can be taken without fear.
 The provisions of act have overriding effect on other laws.
 Supreme court have given judgment that simultaneous action can be taken under DRT act and
SARFAESI act.

Prepared by:
Arvind Paranjape, M.Sc. CAIIB
paranjape.arvind@yahoo.com
9425067026