Securitization and debt recovery
To give better legal system than the prevailing
system of Code of Civil Procedure, to enforce
the speedy adjudication of the matters relating
to recovery of debts due to banks and financial
A new Act was promulgated
• The Recovery of Debts Due to Banks and
Financial Institutions Act, 1993 was passed to
facilitate for the speedy adjudication of
matters relating to recovery of debts due to
banks and financial institutions.
• It provides a procedure which is different from
the existing code of civil procedure.
Establishment of Tribunal
• The Act provides that the Central Government
shall by notification, establish one or more
tribunals, to be known as the Debts Recovery
Tribunal (DRT), to exercise the jurisdiction,
power and authority conferred on such
Tribunal by or under the Act.
• The setting up of a Debt Recovery Tribunal is
mainly dependent upon the number of cases.
CRITERIA FOR SETTING UP OF DRTs
• Higher the volume/number of cases within a
territorial, more the Debt Recovery Tribunals
would be set up.
• With a view to help banks & FIs recover their
bad debts quickly and efficiently, the
Government of India has constituted thirty
three DRTs and five Debt Recovery Appellate
Tribunals all over the country.
Composition of Tribunal
• Each DRT is presided by a Presiding Officer. The
Presiding Officer is generally a judge of the rank
of District and Sessions Judge.
• A Presiding Officer is assisted by one or more
Recovery Officers and other officers and
employees as the Government may deem proper.
• These officers & employees of a Tribunal shall
discharge their functions under the general
superintendence of the Presiding Officer.
Establishment of Appellate Tribunal
• The Central Government has constituted five
Debt Recovery Appellate Tribunals in country. An
Appellate Tribunal is headed by the Presiding
• Any person, who is, or has been, or qualified to
be, a judge of High Court, or has been a member
of the Indian Legal Service A grade with at-least
three years service or has held office as Presiding
Officer of a Tribunal for at-least three years, shall
be qualified for appointment as Presiding Officer
of an Appellate Tribunal.
Procedure of TRIBUNALS
• Section 19 of the Act provides that where a
Bank or a FI has to recover any debt from any
person, it may make an application to the
Tribunal within the local limits of whose
jurisdiction the defendant, or each of
defendants where there are more than one, at
the time of making the application, actually
and voluntary resides or carries on business or
personally works for gain.
Procedure of Tribunals
• When a Bank or a FI, which has to recover its
debt from any person, has filed an application
to the Tribunal and against the same person
an another bank or FI also has a claim to
recover its debt, then, the later bank or FI may
join the applicant bank or FI at any stage of
the proceedings, before the final order is
passed by making an application to the
Procedure of filing application
• Every application has to be made in such form
and be accompanied by requisite documents
or the evidence along-with prescribed fee.
• On receipt of application, the Tribunal shall
issue summons requiring the defendant to
show cause within thirty days of the service of
summons as to why the relief prayed for
should not be granted.
Procedure to be followed by
defendant during claimed filed by B/FI
• The defendants shall, at before the first hearing
or within such time as the Tribunal may
permit, present a written statement of his
defence. 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 comprising/containing the
particulars of the debt sought to be set-off.
• Tribunal may, after giving the applicant and
the defendant an opportunity of being heard,
pass such orders on the application as it
deems fit to meet the ends of justice.
• A counter-claim 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 counterclaim.
• 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 fixed by
• The Tribunal may make an interim order against
the defendant to debar him from transferring,
alienating or otherwise dealing with, or disposing
of, any property & assets belonging to him
without the prior permission of the Tribunal.
• Tribunal can pass orders of wide variety, but
they are slow and cautious while passing such
orders, considering the judgements of the
Supreme Court and the High Court which have
laid down conditions which must be followed
by DRT. Therefore, they generally would first
listen to the defendants before the orders are
• Where at any stage of the proceedings, the
Tribunal is satisfied by affidavit or otherwise, that
the defendant, with intent to obstruct or delay or
frustrate the execution of any order for recovery
of the debt that may be passed against him.
• The tribunal may direct the defendant, within a
time fixed by the tribunal, either to furnish
security, in such sum as may be specified in the
order or to appear and show cause why he
should not furnish security.
• Where it appears to the Tribunal to be just
and convenient, it may by order:
• Appoint a receiver any property, whether
before or after the grant of certificate for
recovery of debt;
• Remove any person from the possession,
custody of the property;
• Commit the same property to the possession,
custody or management of the receiver;
• 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, preserva
tion and improvement of the property and
disposal of such rents and profits, and the
execution of the documents as the owner
himself has, or such of those powers as the
Tribunal thinks fit, and
• Appoint a Commissioner for preparation of an
inventory of the properties of the defendant
or for the sale thereof.
• Finally the Tribunal may make such orders and
give such directions as may be necessary or
expedient to give effect to its process or to
secure the ends of justice.
Appeal to the Appellate Tribunal
• Section 20 of the provides that any person
aggrieved by an order made, or deemed to
have been made, by a Tribunal under this
Act, may prefer an appeal to DRAT having
jurisdiction in the matter.
• No appeal shall lie to the DRAT from an order
made by a Tribunal with the consent of parties
• Appeal should be filed within 45 days from the
date on which a copy of order made.
• On receipt of an appeal, 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.
Deposit of amount of debt due, on
• Where an appeal is preferred by any person
from whom the amount of debt is due to a
Bank or a FI, such appeal shall not be entertainted by the Appellate Tribunal unless such
person has deposited 75% of the amount of
debt due from him as determined by Tribunal.
• Provided that the Appellate Tribunal may, for
reasons to be recorded in writing, waive or
reduce the amount to be deposited.
VITAL POINTS OF THE RECOVERY OF DEBTS DUE TO BANKS AND FINANACIAL
INSTITUTION ACT, 1993
The Act was passed to provide for the speedy adjudication of matters relating to
recovery debts due to banks and financial institutions,
As of now, there are twenty nine Debts Recovery Tribunals and five Debt Recovery
Appellate Tribunals across the country constituted by the Government of
Section 19 of the Act deals with the procedure for making application to the Debt
Section 20 of the Act deals with provisions for an appeal to an Appellate Tribunal
having jurisdiction in the matter.
The Tribunal and the Appellate Tribunal have the same powers as are vested in a
civil court under the Code of Civil Procedure,1908.
The Recovery Officer may proceed to recover the amount of debt by any of the
specified modes under Section 25 of the Act.
Any person who is aggrieved by an order of Recovery Officer may prefer an appeal
to the Tribunal.