UNIVERSITY INSTITUTE OF LEGAL STUDIES

PANJAB UNIVERSITY. CHANDIGARH

A project report submitted to University Institute of Legal Studies as a

part of curriculum of subject BUSINESS LAWS-II Paper VI
Semester 8th B. Com LLB

Recovery of Debts and

Bankruptcy Act, 1993
(RDB Act)

SUBMITTED TO SUBMITTED BY
Ms. Neha Dewan Bani Arora -200/20
UILS, PU Chirag Sehdev -205/20
Chandigarh B.Com. LLB (4th year)
Section- D
 ACKNOWLEDGEMENT

Primarily, I would like to thank God for being able to complete this project with success.
Then I would like to thank my professor ‘Ms. Neha Dewan’ whose valuable guidance has
been the ones that helped me patch this project and her suggestions and instructions has
served as the major contributor towards the completion of the project on the topic- ‘Recovery
of Debts and Bankruptcy Act, 1993’.

Then I would like to thank my parents and friends who helped me with their valuable
suggestions and guidance which has been helpful in various phases of the completion of this
project.

Last but not the least I would like to thank my classmates who helped me a lot.

Bani Arora

Chirag Sehdev
 TABLE OF CONTENTS

S.NO. PARTICULARS PAGE NO.

1. Introduction 1
2. Background and object of the Act 2
3. Meaning of bank, debt and financial institution under the 3-4
Act
4. Tribunals for default and recovery 4-5
5. Powers and Jurisdiction of the Tribunal 6
6. Procedure to be followed by the tribunal 6- 13
7. Appeal to Appellate authority 14
8. Powers of the tribunal 15
9. Digitalisation of the tribunal 16
10. Enforcement process 17-20
11. Landmark Judgements 21
12. Conclusion 22
13. Bibliography 23
INTRODUCTION

Banks and financial institutions are experiencing a significant Collection difficulties and
foreclosures of securities of them. Debt collection procedures at banks and financing
companies resulted in blocking of a significant portion of funds. Financial Systems
Committee considering appointment on special courts endowed with special powers to try
such cases and fast recovery as essential elements for a successful implementation reforms of
the financial sector. It was therefore urgent to develop specific mechanism through which
loans to banks and financial institutions factories could be completed.

In 1981 the Commission examined the legal issues and other difficulties that banks and
financial institutions encounter and that are proposed countermeasures, including legislative
changes. This committee also proposed Creation of special courts for the collection of bank
loans e financial institutions using a simplified procedure. The recommendations of the above
commission resulted in the introduction of the Recovery of Debts due to Bank and Financial
Institutions Bill, 1993 which later was passed and came as the Recovery of Debts due to
Bank and Financial Institutions Act, 1993 and then changed to the Recovery of Debts and
Bankruptcy Act, 1993. It contains VI Chapters and 37 Sections.

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BACKGROUND

The Financial Systems Committee, chaired by Shri M. Narasimham plans to set up special
courts, special powers to decide cases and speedy recovery essential for the successful
implementation of financial sector reforms. Therefore, there was an urgent need to develop a
suitable mechanism, thanks to which it was possible to pay off the debts of banks and
financial companies immediately. In 1981, a committee chaired by Shri T. Tiwari examined
the legal and other difficulties faced by the banks financial institutions and proposed
solutions, including changes correct. The Tiwari Committee has also proposed the
establishment of a special committee Courts for the recovery of loans from banks and
financial institutions pursuant to Act using a simplified procedure. Creation of Special Courts
will only fill a long-standing need, but it will also be a milestone for the implementation of
the report of the Narasimham Committee. While on 30th Sept. 1990 more than 15,000 cases
has been filed by the public sector. There were bank cases and about 304 financial institutions
in progress different dishes, debt collection with more than Rs.5622 crores bounty public
sector banks and around Rs 391 million in financial loans establishments. Many public funds
are frozen litigation prevents proper use and money laundering for the development of
countries. The bill aims to create a court and Courts of Appeal for expeditious sentencing and
recovery of unpaid debts to banks and financial companies.

OBJECT OF THE ACT

The aim of the Act was to establish Tribunals for speedy adjudication and to recover debts as
soon as possible due to various banks and financial institutions.

2|Page
MEANING OF BANK, DEBTS AND FINANCIAL INSTITUTION
UNDER THE ACT

1. BANK

It is defined under section 2(d) of the RDDBFI Act. It means any:

 Banking company,
 Similar new bank,
 State Bank of India,
 Subsidiary bank, or
 Regional Rural Bank
 Multi-State-co-operative bank.1

2. DEBTS

It is defined under section 2(g) of the Act and it means:

 any liability claimed as a due (inclusive of interest)

 from any person
 by a bank or a financial institution
 or by a group of banks or financial institutions
 in the course of any business activity
 it can be secured or unsecured or assigned
 payable under a decree or order of any civil court or as any award of arbitration
 and which is legally recoverable.2

1
Ins. By Act 1 of 2013
2
S.2(g), The Recovery of Debts and Bankcruptcy Act, 1993

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 3. FINANCIAL INSTITUTIONS

It is defined under 2(h) of the Act. It means:

 A public financial institution defined under section 4A of the Companies Act, 1956,
 the securitization company or reconstruction company under section 3(4) of the
Securitisation and Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002 which has obtained a certificate of registration.
 A trustee debenture which is registered with the Board and is appointed for secured
debt securities3,
 Other institutions as notified by the Central Government in this behalf.

TRIBUNALS FOR DEFAULT AND RECOVERY

Chapter II of the Act provides for the establishment of Tribunal and Appellate Tribunal. It
consists of following features:

TRIBUNAL

 A Debt Recovery Tribunal can be established by the Central Government under a

notification to recover the debts. There is as such no limit regarding the number of
such Tribunal to be established.4
 Such Tribunal shall be consisted of one member i.e., the Presiding Officer who is to
be appointed by the Central Government.5
 For being appointed as a Presiding Officer of such Tribunal, the person should be
qualified as a District Judge.6
 Term of such officer shall be 5 years or 65 years, whichever will be earlier.7
 Staff of such Tribunal will include Recovery Officers and other officers and
employees.8

3
Ins. by Act 44 of 2016
4
S.3 of this Act
5
S.4 of this Act
6
S.5 of this Act
7
S.6 of this Act
8
S.7 of this Act

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  All terms and conditions regarding salaries and allowances shall be as prescribed by
the Central Government.9
 The Presiding Officer can anytime give a notice and resign from the office or he can
be anytime removed by the Central Government after inquiry on the basis of proved
misbehavior or incapacity.10

APPELLATE TRIBUNAL

 It is established by the Central Government and is known as Debt Recovery Appellate

Tribunal.11
 It consists of one Chairperson only who shall be appointed by the Central
Government.12 Conditions for qualifying as a Chairperson of such Appellate Tribunal
are:
(i) that he is qualified as a Judge of a High Court; or
(ii) that he was at a post in Grade I of the Indian Legal Service for at least 3
years.; or
(iii) that for 3 years he was at the post of the Presiding Officer of the Tribunal.13
 The term of the office of the Chairperson shall be 5 years or 70 years , whichever will
be earlier.14
 All terms and conditions regarding salaries and allowances shall be as prescribed by
the Central Government.15
 The Chairperson can anytime give a notice and resign from the office or he can be
anytime removed by the Central Government after inquiry on the basis of proved
misbehavior or incapacity.16

9
S.13 of this Act
10
S.15 of this Act
11
S.8 of this Act
12
S.9 of this Act
13
S.10 of this Act
14
S.11 of this Act
15
S.13 of this
16
S.15, The Recovery of Debts and Bankruptcy Act, 1993

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POWERS AND JURISDICTION OF THE TRIBUNAL WITH REGARD
TO DEFAULT AND RECOVERY

Chapter III of the Act provides for the jurisdiction and powers exercised by the Tribunals. It
contains following features:

 The Tribunal and the Appellate Tribunal shall have power to exercise all the power
and authority in order to decide the applications for recovery of debts from the banks
and financial institutions.17
 The power of superintendence and control shall be exercised by the Chairperson of
the Appellate Tribunal over the Tribunals. If he feels that the Presiding Officer of the
Tribunal is guilty of proved misbehaviour or incapacity, he has the authority to submit
report to the Central Government for the initiation of an inquiry.18
 The Chairperson also has the power to transfer a case from one Tribunal to another
for disposal.

PROCEDURE TO BE FOLLOWED BY THE TRIBUNALS

Chapter III of the Act provides for the procedure to be followed by the Tribunals. It contains:

JURISDICTION19

Where a bank or a financial institution has to recover any debt from any person, it may make an
application to the Tribunal within the local limits of whose jurisdiction—
(a) the branch or any other office of the bank or financial institution is maintaining an account in
which debt claimed is outstanding, for the time being; or
(aa)] the defendant, or each of the defendants where there are more than one, at the time of
making the application, actually and voluntarily resides, or carries on business, or personally
works for gain; or

17
S.17 of this Act
18
S.17-A of this Act
19
S.19(1) of this Act

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(b) any of the defendants, where there are more than one, at the time of making the application,
actually and voluntarily resides, or carries on business, or personally works for gain; or
(c) the cause of action, wholly or in part, arises:
[Provided that the bank or financial institution may, with the permission of the Debts Recovery
Tribunal, on an application made by it, withdraw the application, whether made before or after
the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2004 (30 of
2004) for the purpose of taking action under the Securitisation and Reconstruction of Financial
Assets and Enforcement of Security Interest Act, 2002 (54 of 2002), if no such action had been
taken earlier under that Act:

Provided further that any application made under the first proviso for seeking permission from
the Debts Recovery Tribunal to withdraw the application made under sub-section (1) shall be
dealt with by it as expeditiously as possible and disposed of within thirty days from the date of
such application:

Provided also that in case the Debts Recovery Tribunal refuses to grant permission for
withdrawal of the application filed under this sub-section, it shall pass such orders after recording
the reasons therefor.

CONTENTS OF THE APPLICATION20

Every application under sub-section (1) or sub-section (2) shall be in such form, and shall be
accompanied with true copies of all documents relied on in support of the claim along with such
fee, as may be prescribed:] Provided that the fee may be prescribed having regard to the amount
of debt to be recovered: Provided further that nothing contained in this sub-section relating to fee
shall apply to cases transferred to the Tribunal under sub-section (1) of section 31.
Every applicant in the application filed under sub-section (1) or sub-section (2) for recovery of
debt, shall—

(a) state particulars of the debt secured by security interest over properties or assets belonging to
any of the defendants and the estimated value of such securities;
(b) if the estimated value of securities is not sufficient to satisfy the debt claimed, state particulars
of any other properties or assets owned by any of the defendants, if any; and

20
S.19(3) and 19(3A) of this Act

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(c) if the estimated value of such other assets is not sufficient to recover the debt, seek an order
directing the defendant to disclose to the Tribunal particulars of other properties or assets owned
by the defendants.

SERVICE OF SUMMONS21

On receipt of application under sub-section (1) or sub-section (2), the Tribunal shall issue
summons with following directions to the defendant—
(i) to show cause within thirty days of the service of summons as to why relief prayed for should
not be granted;
(ii) direct the defendant to disclose particulars of properties or assets other than properties and
assets specified by the applicant under clauses (a) and (b) of sub-section (3A); and
(iii) to restrain the defendant from dealing with or disposing of such assets and properties
disclosed under clause (c) of sub-section (3A) pending the hearing and disposal of the application
for attachment of properties.

EFFECT OF SERVICE OF SUMMONS-the defendant, on service of summons, shall not

transfer by way of sale, lease or otherwise except in the ordinary course of his business any of the
assets over which security interest is created and other properties and assets specified or disclosed
under sub-section (3A), without the prior approval of the Tribunal: Provided that the Tribunal
shall not grant such approval without giving notice to the applicant bank or financial institution to
show cause as to why approval prayed for should not be granted: Provided further that defendant
shall be liable to account for the sale proceeds realised by sale of secured assets in the ordinary
course of business and deposit such sale proceeds in the account maintained with the bank or
financial institution holding security interest over such assets.

FILING OF WRITTEN STATEMENT22

the defendant shall within a period of thirty days from the date of service of summons, present a
written statement of his defence including claim for set-off under sub-section (6) or a counter-
claim under sub-section (8), if any, and such written statement shall be accompanied with original

21
S.19(4) of this Act
22
S.19(5) of this Act

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documents or true copies thereof with the leave of the Tribunal, relied on by the defendant in his
defence:
Provided that where the defendant fails to file the written statement within the said period of
thirty days, the Presiding Officer may, in exceptional cases and in special circumstances to be
recorded in writing, extend the said period by such further period not exceeding fifteen days to
file the written statement of his defence; (ii) where the defendant makes a disclosure of any
property or asset pursuant to orders passed by the Tribunal, the provisions of sub-section (4A) of
this section shall apply to such property or asset; (iii) in case of non-compliance of any order
made under clause (ii) of sub-section (4), the Presiding Officer may, by an order, direct that the
person or officer who is in default, be detained in civil prison for a term not exceeding three
months unless in the meantime the Presiding Officer directs his release: Provided that the
Presiding Officer shall not pass an order under this clause without giving an opportunity of being
heard to such person or officer.

SET-OFF-Where the defendant claims to set-off against the applicant’s demand any ascertained
sum of money legally recoverable by him from such applicant, the defendant may, at the first
hearing of the application, but not afterwards unless permitted by the Tribunal, present a written
statement containing the particulars of the debt 2[the debt sought to be set-off along with original
documents and other evidence relied on in support of claim of set-off in relation to any
ascertained sum of money, against the applicant]. The written statement shall have the same
effect as a plaint in a cross-suit so as to enable the Tribunal to pass a final order in respect both of
the original claim and of the set-off.

COUNTERCLAIM-A defendant in an application may, in addition to his right of pleading a set-

off under sub-section (6), set up, by way of counter-claim against the claim of the applicant, any
right or claim in respect of a cause of action accruing to the defendant against the applicant either
before or after the filing of the application but before the defendant has delivered his defence or
before the time limited for delivering his defence has expired, whether such counter-claim is in
the nature of a claim for damages or not. A counter-claim under sub-section (8) shall have the
same effect as a cross-suit so as to enable the Tribunal to pass a final order on the same
application, both on the original claim and on the counter-claim. The applicant shall be at liberty
to file a written statement in answer to the counter-claim of the defendant within such period as
may be prescribed.

9|Page
FILING OF AFFIDAVIT23

Every application under sub-section (3) or written statement of defendant under sub-section (5) or
claim of set-off under sub-section (6) or a counter-claim under sub-section (8) by the defendant,
or written statement by the applicant in reply to the counter-claim, under sub-section (10) or any
other pleading whatsoever, shall be supported by an affidavit sworn in by the applicant or
defendant verifying all the facts and pleadings, the statements pleading documents and other
documentary evidence annexed to the application or written statement or reply to set-off or
counter-claim, as the case may be:
Provided that if there is any evidence of witnesses to be led by any party, the affidavits of such
witnesses shall be filed simultaneously by the party with the application or written statement or
replies filed under sub-section (10A). If any of the facts or pleadings in the application or written
statement are not verified in the manner provided under sub-section (10A), a party to the
proceedings shall not be allowed to rely on such facts or pleadings as evidence or any of the
matters set out therein.

WHEN ATTACHMENT MAY BE DONE?24

Where, at any stage of the proceedings, the Tribunal on an application made by the applicant
along with particulars of property to be attached and estimated value thereof, or otherwise 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,—
(i) is about to dispose of the whole or any part of his property; or
(ii) is about to remove the whole or any part of his property from the local limits of the
jurisdiction of the Tribunal; or
(iii) is likely to cause any damage or mischief to the property or affect its value by misuse or
creating third party interest,
the Tribunal may direct the defendant, within a time to be fixed by it, either to furnish security, in
such sum as may be specified in the order, to produce and place at the disposal of the Tribunal,
when required, the said property or the value of the same, or such portion thereof as may be
sufficient to satisfy the certificate for the recovery of the debt, or to appear and show cause why
he should not furnish security. (B) Where the defendant fails to show cause why he should not

23
S.19(10A) and 19(10B) of this Act
24
S.19(13), 19(15), 19(16) AND 19(17) of this Act

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furnish security, or fails to furnish the security required, within the time fixed by the Tribunal, the
Tribunal may order the attachment of the whole or such portion of the properties claimed by the
applicant as the properties secured in his favour or otherwise owned by the defendant as appears
sufficient to satisfy any certificate for the recovery of debt.
The Tribunal may also in the order direct the conditional attachment of the whole or any portion
of the property specified under 5[sub-section (13)]. If an order of attachment is made without
complying with the provisions of sub-section (13), such attachment shall be void. In the case of
disobedience of an order made by the Tribunal under sub-sections (12), (13) and (18) or breach of
any of the terms on which the order was made, the Tribunal may order the properties of the
person guilty of such disobedience or breach to be attached and may also order such person to be
detained in the civil prison for a term not exceeding three months, unless in the meantime the
Tribunal directs his release.

APPOINTMENT OF RECEIVER25

Where it appears to the Tribunal to be just and convenient, the Tribunal may, by order—
(a) appoint a receiver of any property, whether before or after grant of certificate for recovery of
debt;
(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 realisation, 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.

25
S.19(18) of this Act

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ONE TIME SETTLEMENT

Where it is proved to the satisfaction of the Tribunal that the claim of the applicant has been
adjusted wholly or in part by any lawful agreement or compromise in writing and signed by the
parties or where the defendant has repaid or agreed to repay the claim of the applicant, the
Tribunal shall pass orders recording such agreement, compromise or satisfaction of the claim.

FINAL ORDER AND CERTIFICATE OF RECOVERY

The Tribunal may, after giving the applicant and the defendant, an opportunity of being heard, in
respect of all claims, set-off or counter-claim, if any, and interest on such claims, within thirty
days from the date of conclusion of the hearings, pass interim or final order as it deems fit which
may include order for payment of interest from the date on which payment of the amount is found
due up to the date of realisation or actual payment.
The Tribunal shall send a copy of its final order and the recovery certificate, to the applicant and
defendant. The applicant and the defendant may obtain copy of any order passed by the Tribunal
on payment on such fee as may be prescribed. The Presiding Officer shall issue a certificate of
recovery along with the final order, under sub-section (20), for payment of debt with interest
under his signature to the Recovery Officer for recovery of the amount of debt specified in the
certificate.

While passing the final order under sub-section (20), the Tribunal shall clearly specify the assets
of the borrower which security interest is created in favour of any bank or financial institution
and direct the Recovery Officers to distribute the sale proceeds of such assets as provided in sub-
section (20AB). Notwithstanding anything to the contrary contained in any law for the time being
in force, the proceeds from sale of secured assets shall be distributed in the following orders of
priority, namely: — (i) the costs incurred for preservation and protection of secured assets, the
costs of valuation, public notice for possession and auction and other expenses for sale of assets
shall be paid in full; (ii) debts owed to the bank or financial institution.

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TIME LIMIT TO DISPOSE OF THE APPLICATION26

The application made to the Tribunal under sub-section (1) or sub-section (2) shall be dealt with
by it as expeditiously as possible and 1[every effort shall be made by it to complete the
proceedings in two hearings, and] to dispose of the application finally within one hundred and
eighty days from the date of receipt of the application.

INHERENT POWERS OF THE DEBT RECOVERY TRIBUNAL27

The Tribunal may made such orders and give such directions as may be necessary or expedient to
give effect to its orders or to prevent abuse of its process or to secure the ends of justice.

26
S.19(24) of this Act
27
S.19(25) of this Act

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APPEAL TO THE APPELLATE AUTHORITY

PRECONDITION- DEPOSIT OF AMOUNT28

Where an appeal is preferred by any person from whom the amount of debt is due to a bank or a
financial institution or a consortium of banks or financial institutions, such appeal shall not be
entertained by the Appellate Tribunal unless such person has deposited with the Appellate
Tribunal fifty 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,
[reduce the amount to be deposited by such amount which shall not be less than twenty-five per
cent. of the amount of such debt so due] to be deposited under this section.

PROCEDURE29

Any person aggrieved by an order made, or deemed to have been made, by a Tribunal under this Act,
may prefer an appeal to an Appellate Tribunal having jurisdiction in the matter. No appeal shall lie to
the Appellate Tribunal from an order made by a Tribunal with the consent of the parties. Every appeal
under sub-section (1) shall be filed within a period of thirty 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 and it shall be in such
form and be accompanied by such fee as may be prescribed: Provided that the Appellate Tribunal may
entertain an appeal after the expiry of the said period of thirty days if it is satisfied that there was
sufficient cause for not filing it within that period. (4) On receipt of an appeal under sub-section (1),
the Appellate Tribunal may, after giving the parties to the appeal, an opportunity of being heard, pass
such orders thereon as it thinks fit, confirming, modifying or setting aside the order appealed against.
The Appellate Tribunal shall send a copy of every order made by it to the parties to the appeal and to
the concerned Tribunal.

TIME LIMIT FOR DECIDING APPEAL

The appeal filed before the Appellate Tribunal under sub-section (1) shall be dealt with by it as
expeditiously as possible and endeavour shall be made by it to dispose of the appeal finally within six
months from the date of receipt of the appeal.

28
S.21 of this Act
29
S.20 of this Act

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POWERS OF THE TRIBUNAL30

The Tribunal and the Appellate Tribunal shall not be bound the procedure laid down by the
Code of Civil Procedure, 1908 (5 of 1908), but shall be guided by the principles of natural
justice and, subject to the other provisions of this Act and of any rules, the Tribunal and the
Appellate Tribunal shall have powers to regulate their own procedure.
The Tribunal and the Appellate Tribunal shall have, for the purposes of discharging their
functions under this Act, the same powers as are vested in a civil court, while trying a suit, in
respect of the following matters, namely:—
(a) summoning and enforcing the attendance of any person and examining him on oath;
(b) requiring the discovery and production of documents;
(c) receiving evidence on affidavits;
(d) issuing commissions for the examination of witnesses or documents;
(e) reviewing its decisions;
(f) dismissing an application for default or deciding it ex parte;
(g) setting aside any order of dismissal of any application for default or any order passed by it
ex parte;
(h) any other matter which may be prescribed

REPRESENTATION BEFORE THE TRIBUNAL31

A bank or a financial institution making an application to a Tribunal or an appeal to an

Appellate Tribunal may authorise one or more legal practitioners or any of its officers to act
as Presenting Officers and every person so authorised by it may present its case before the
Tribunal or the Appellate Tribunal. The defendant may either appear in person or authorise
one or more legal practitioners or any of his or its officers to present his or its case before the
Tribunal or the Appellate Tribunal.

30
S.22 of this Act
31
S.23 of this Act

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DIGITALIZATION OF TRIBUNAL32

The Central Government may by rules provide that from such date and before such Tribunal and
Appellate Tribunal, as may be notified,—
(a) application or written statement or any other pleadings and the documents to be annexed
thereto required to be filed shall be submitted in the electronic form and authenticated with digital
signature of the applicant, defendant or any other petitioner in such form and manner as may be
prescribed; (b) any summons, notice or communication or intimation as may be required to be
served or delivered under this Act, may be served or delivered by transmission of pleadings and
documents by electronic form and authenticated in such manner as may be prescribed.
(2) Any interim or final order passed by the Tribunal or Appellate Tribunal displayed on the
website of such Tribunal or Appellate Tribunal shall be deemed to be a public notice of such
order and transmission of such order by electronic mail to the registered address of the parties to
the proceeding shall be deemed to be served on such party.
(3) The Central Government may by rules provide that the electronic form for the purpose
specified in this section shall be exclusive, or in the alternative or in addition to the physical form,
therefor.
(4) The Tribunal or the Appellate Tribunal notified under sub-section (1), for the purpose of
adopting electronic filing, shall maintain its own website or common website with other
Tribunals and Appellate Tribunal or such other universally accessible repositories of electronic
information and ensure that all orders or directions issued by the Tribunal or Appellate Tribunal
are displayed on the website of the Tribunal or Appellate Tribunal, in such manner as may be
prescribed.

32
S.19A of this Act

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 ENFORCEMENT PROCESS

MODES OF RECOVERING DEBT AVAILABLE TO THE RECOVERY

OFFICER

 UNDER SECTION 25

The Recovery Officer shall, on receipt of the copy of the certificate proceed to recover the
amount of debt specified in the certificate by one or more of the following modes, namely:—
(a) attachment and sale of the movable or immovable property of the defendant;
(aa) taking possession of property over which security interest is created or any other property of
the defendant and appointing receiver for such property and to sell the same;
(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;
(d) any other mode of recovery as may be prescribed by the Central Government.

 UNDER SECTION 28

(e) If any amount is due from any person to the defendant, the Recovery Officer may require such
person to deduct from the said amount, the amount of debt due from the defendant under this Act
and such person shall comply with any such requisition and shall pay the sum so deducted to the
credit of the Recovery Officer.
(f) The Recovery Officer may, at any time or from time to time, by notice in writing, require any
person from whom money is due or may become due to the defendant or to any person who holds
or may subsequently hold money for or on account of the defendant, to pay to the Recovery
Officer either forthwith upon the money becoming due or being held or within the time specified
in the notice (not being before the money becomes due or is held so much of the money as is
sufficient to pay the amount of debt due from the defendant or the whole of the money when it is
equal to or less than that amount.
A notice under this sub-section may be issued to any person who holds or may subsequently hold
any money for or on account of the defendant jointly with any other person and for the purposes
of this sub-section, the shares of the joint holders in such amount shall be presumed, until the

17 | P a g e
contrary is proved, to be equal. A copy of the notice shall be forwarded to the defendant at his
last address known to the Recovery Officer and in the case of a joint account to all the joint
holders at their last addresses known to the Recovery Officer.
every person to whom a notice is issued under this sub-section shall be bound to comply with
such notice, and, in particular, where any such notice is issued to a post office, bank, financial
institution, or an insurer, it shall not be necessary for any pass book, deposit receipt, policy or
any other document to be produced for the purpose of any entry, endorsement or the like to
be made before the payment is made notwithstanding any rule, practice or requirement to the
contrary. Any claim respecting any property in relation to which a notice under this sub-
section has been issued arising after the date of the notice shall be void as against any
demand contained in the notice.

FALSE STATEMENT BY THE PERSON TO WHOM NOTICE IS ISSUED-Where a

person to whom a notice under this sub-section is sent objects to it by a statement on oath that
the sum demanded or the part thereof is not due to the defendant or that he does not hold any
money for or on account of the defendant, then, nothing contained in this sub-section shall be
deemed to require such person to pay any such sum or part thereof, as the case may be, but if
it is discovered that such statement was false in any material particular, such person shall be
personally liable to the Recovery Officer to the extent of his own liability to the defendant on
the date of the notice, or to the extent of the defendant’s liability for any sum due under this
Act, whichever is less. The Recovery Officer may amend or revoke any notice under this sub-
section or extend the time for making any payment in pursuance of such notice.

PAYMENT TO RECOVERY OFFICER IS DEEMED TO BE PAYMENT TO

DEFENDANT-The Recovery Officer shall grant a receipt for any amount paid in
compliance with a notice issued under this sub-section, and the person so paying shall be
fully discharged from his liability to the defendant to the extent of the amount so paid. Any
person discharging any liability to the defendant after the receipt of a notice under this sub-
section shall be personally liable to the Recovery Officer to the extent of his own liability to
the defendant so discharged or to the extent of the defendant’s liability for any debt due under
this Act, whichever is less. If the person to whom a notice under this sub-section is sent fails
to make payment in pursuance thereof to the Recovery Officer, he shall be deemed to be a
defendant in default in respect of the amount specified in the notice and further proceedings
may be taken against him for the realisation of the amount as if it were a debt due from him,

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in the manner provided in sections 25, 26 and 27 and the notice shall have the same effect as
an attachment of a debt by the Recovery Officer in exercise of his powers under section 25.
(g) The Recovery Officer may apply to the court in whose custody there is money belonging
to the defendant for payment to him of the entire amount of such money, or if it is more than
the amount of debt due, an amount sufficient to discharge the amount of debt so due.
(h) The Recovery Officer may at any stage of the execution of the certificate of recovery,
require any person, and in case of a company, any of its officers against whom or which the
certificate of recovery is issued, to declare on affidavit the particulars of his or its assets.
(i) The Recovery Officer may recover any amount of debt due from the defendant by distraint
and sale of his movable property in the manner laid down in the Third Schedule to the
Income-tax Act, 1961.

APPEAL AGAINST ORDER OF RECOVERY OFFICER33

Any person aggrieved by an order of the Recovery Officer made under this Act may, within
thirty days from the date on which a copy of the order is issued to him, prefer an appeal to the
Tribunal. On receipt of an appeal under sub-section (1), the Tribunal may, after giving an
opportunity to the appellant to be heard, and after making such inquiry as it deems fit,
confirm, modify or set aside the order made by the Recovery Officer in exercise of his
powers under sections 25 to 28 (both inclusive). Where an appeal is preferred against any
order of the Recovery Officer, under section 30, by any person from whom the amount of
debt is due to a bank or financial institution or consortium of banks or financial institutions,
such appeal shall not be entertained by the Tribunal unless such person has deposited with the
Tribunal fifty per cent. of the amount of debt due as determined by the Tribunal.

VALIDITY AND AMENDMENT OF THE CERTIFICATE34

It shall not be open to the defendant to dispute before the Recovery Officer the correctness of
the amount specified in the certificate, and no objection to the certificate on any other ground
shall also be entertained by the Recovery Officer. The Presiding Officer shall have power to
withdraw the certificate or correct any clerical or arithmetical mistake in the certificate by
sending intimation to the Recovery Officer. The Presiding Officer shall intimate to the Recovery

33
S.30 and 30A of this Act
34
S.26 of this Act

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Officer any order withdrawing or cancelling a certificate or any correction made by him under
sub-section (2).

WITHDRAWAL AND STAY OF THE CERTIFICATE35

The Presiding Officer, may by an order, grant time for payment of the amount, provided the
defendant makes a down payment of not less than twenty-five per cent of the amount specified in
the recovery certificate and gives an unconditional undertaking to pay the balance within a
reasonable time, which is acceptable to the applicant bank or financial institution holding
recovery certificate. The Recovery Officer shall, after receipt of the order passed under sub-
section (1), stay the proceedings until the expiry of the time so granted. Where defendant agrees
to pay the amount specified in the Recovery Certificate and proceeding are stayed by the
Recovery Officer, the defendant shall forfeit right to file appeal against the orders of the Tribunal.
Where the defendant commits any default in payment of the amount under sub-section (1), the
stay of recovery proceedings shall stand withdrawn and the Recovery Officer shall take steps for
recovery of remaining amount of debt due and payable.

Where a certificate for the recovery of amount has been issued, the Presiding Officer shall keep
the Recovery Officer informed of any amount paid or time granted for payment, subsequent to
the issue of such certificate to the Recovery Officer. Where the order giving rise to a demand of
amount for recovery of debt has been modified in appeal, and, as a consequence thereof the
demand is reduced, the Presiding Officer shall stay the recovery of such part of the amount of the
certificate as pertains to the said reduction for the period for which the appeal remains pending.
Where a certificate for the recovery of debt has been received by the Recovery Officer and
subsequently the amount of the outstanding demands is reduced [or enhanced] as a result of an
appeal, the Presiding Officer shall, when the order which was the subject matter of such appeal
has become final and conclusive, amend the certificate or withdraw it, as the case may be.

35
S.27 of this Act

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LANDMARK JUDGEMENTS

 Union of India v. Delhi Court Bar Association36

The court held that the prominent purpose behind establishing the Debt Recovery Tribunal is
to recover debts which are due to the banks and financial institutions.

 Central Bank of India v. State of Kerela37

The hon’ble court in this case held that the aim of the pertinent Act is to provide for a special
kind of machinery which would be helpful in speedy recovery of debts which are due from
the banks and financial institutions.

 Greater Bombay Coop. Bank Ltd. United Yarn Tex (P) Ltd.38

The court observed that the cooperative banks (as mentioned under the definition of banks)
which are instituted under the State Cooperative Societies Acts or the Multi- State
Cooperative Societies Act, 2002 would not fits under the 1993 Act.

 Gottumukkala Venkata Krishamraju v. Union of India39

It was held that earlier the term of office of the Presiding Officer was 5 years or 62 years of
age but now it was amended to 5 years or 65 years of the age and thus the petitioner shall be
covered under the later provision.

 Sandeep Singh Sandhu v. Debt Recovery Tribunal40

The court observed that the remedy provided under this Act is to file an appeal to the
Appellate Tribunal within a period of 30 days. A revision petition under Article 227 of the
Constitution of India cannot be filed.

36
2002(2) Supreme 435
37
(2009) 4 SCC 94
38
(2007) 6 SCC 236
39
(2019) 17 SCC 590
40
(1999) 2 BC 556(P&H)

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  Kotak Mahindra Bank (P) Ltd. v. Ambuj A. Kasliwal41

In this case it was held that the limit of pre-deposit amount provided under section 21 of the
Act can in no case shall be reduced to 25%, it is the lower limit and it shoul be deposited to
the Tribunal while applying for appeal to the Appellate Tribunal.

 Pravin Gada v. Central Bank of India42

The court observed that a Debt Recovery Tribunal under section 25 of the Act has to give a
notice to sell the property and only after hearing official liquidator who is appointed by the
court, the property can be sold.

41
(2013) 3 SCC 549
42
(2013) 2 SCC 101

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CONCLUSION

Therefore, the prominent object of the Act is to recover the debts from the banks and
financial institutions. The Act has been amended several times to upgrade the provisions
mentioned therein and providing for the new methods of recoveries of the due debts. The
rising NPAs and debt issues are hurting the banking industry and the economy as a whole.

The RDB Act is one of the first creditor-friendly mechanisms put in place where banks can
resort to confiscating secured assets via DRTs.

Despite its many shortcomings, DRTs must be strengthened because failure in debt
management will negatively impact the banking, investment, and future economic
development of the country.

Measures like establishing more DRTs, specifying strict timelines for various stages of
adjudication, and equipping them to deal with complicated cases will go a long way in
clearing the pending cases.

Further, the RBI also needs to develop policy measures to address NPA issues.

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BIBLIOGRAPHY

Websites :
 https://legalvidhiya.com/default-and-recovery-recovery-of-debts-and-bankruptcy-act-
1993/
 https://blog.ipleaders.in/debt-recovery-tribunals-structure-and-processes/
 www.casemine.com
 drt.gov.in

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