FAQ About Recovery of Debts and Bankruptcy Act, 1993
Whether decree against a dead person is a nullity?
Answer:
Yes. Decree against a dead person is a nullity. Sarla Dublish –Versus- SBI (2010)1 Bank. Journal 119 (DRAT Allahabad)
Whether decree against a dead person is a nullity?
Answer:
Yes. Decree against a dead person is a nullity. Sarla Dublish –Versus- SBI (2010)1 Bank. Journal 119 (DRAT Allahabad)
What order may be passed by Debts Recovery Tribunals after the hearing of the recovery application filed by Banks and Financial Institution?
Answer:
The Debts Recovery 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, 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.
(See Section 19(20) of RDB Act, 1993)
If the Debts Recovery Tribunals is satisfied about the claim of the Bank or Financial Institution in whole or in part, what should be done?
Answer:
After passing the final order, the Presiding Officer of the Debts Recovery Tribunal has to issue a certificate of recovery for payment of the debt with interest under his signature to Recovery Officer of the Debts Recovery Tribunal for recovery of the amount of debt specified in the recovery certificate.
(See Section 19(22) of RDB Act, 1993)
What is the effect of the recovery certificate issued by the Presiding Officer of the Debts Recovery Tribunals to the Recovery Officer of the Debts Recovery Tribunals?
Answer:
Any recovery certificate issued by the Presiding Officer of the Debts Recovery Tribunal to the Recovery Officer of the Debts Recovery Tribunal shall be deemed to be decree or order of the Court for the purposes of initiation of winding up proceedings against a company registered under the Companies Act, 2013 or Limited Liability Partnership registered under the Limited Liability Partnership Act, 2008 or insolvency proceedings against any individual or partnership firm under any law for the time being in force, as the case may be.
(See Section 19(22A) of RDB Act, 1993)
Whether Debts Recovery Tribunal have inherent power to pass order and directions?
Answer:
The Debts Recovery Tribunal may make 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.
(See Section 19(25) of RDB Act, 1993)
If the defendants make an admission of the claim of the Banks or Financial Institutions, what should the Debts Recovery Tribunals do?
Answer:
Where a defendant makes an admission of the full or part of the amount of debt due to a bank or financial institution, the Debts Recovery Tribunal shall order such defendant to pay the amount, to the extent of the admission within a period of thirty days from the date of such order failing which the Tribunal may issue a recovery certificate for the recovery of the admitted amount.
(See Section 19(5B) of RDB Act, 1993)
Whether any appeal lies against an order passed by Debts Recovery Tribunal?
Answer:
Any person aggrieved by an order made by a Debts Recovery Tribunal may prefer an appeal to the a Debts Recovery Appellate Tribunal.
(See Section 20(1) of RDB Act, 1993)
What is the time limit for filing an appeal to the Debts Recovery Appellate Tribunal against an order of a Debts Recovery Tribunal?
Answer:
According to Section 20(3) of RDB Act, 1993, an appeal to the Debts Recovery Appellate Tribunal is to be filed within a period of thirty days from the date on which a copy of the order made by the Debts Recovery Tribunal is received by the appellant. However, for all practical purposes, the period of thirty days is counted from the date of the order excluding the time taken for obtaining certified copy of the order.
Whether Debts Recovery Appellate Tribunal has the power to condone the delay in filling an appeal against the order of a Debts Recovery Tribunal?
Answer:
Debts Recovery Appellate Tribunal has the power to entertain an appeal against an order of a Debts Recovery Tribunal after the expiry of the period of thirty days, if the Debts Recovery Appellate Tribunal is satisfied that there was sufficient cause for not filing the appeal within the period of thirty days.
(See Section 20(3 Proviso) of RDB Act, 1993)
Whether the defaulter borrower can be arrested and detained in civil prison?
Answer:
Under Rule 73(1) of the Second Schedule to the Income Tax Act, 1961, which has been made applicable to sale by the Recovery Officer of Debts Recovery Tribunal, no order for the arrest and detention in civil prison of a defaulter shall be made unless the Recovery Officer has issued and served a notice upon the defaulter calling upon him to appear before him on the date specified in the notice and to show cause why he should not be committed to the civil prison. Further, the Recovery Officer cannot pass an order for arrest and detention in civil prison of a defaulter, unless the Recovery Officer, for reasons recorded in writing, is satisfied-
1. that the defaulter, with the object or effect of obstructing the execution of the certificate, has after the drawing up of the certificate by the Recovery Officer dishonestly transferred, concealed, or removed any part of his property, or
2. that the defaulter has, or has had since the drawing up of the certificate by the Tax Recovery Officer the means to pay the arrears or some substantial part thereof and refuses or neglects or has refused or neglected to pay the same.
Whether an appeal can be filed before the Presiding Officer of Debts Recovery Tribunal against an order of the recovery officer?
Answer:
An aggrieved person may file an appeal before the Presiding Officer of Debts Recovery Tribunal against an order of the recovery officer.
(See Section 30(1) of RDB Act, 1993)
Whether there is any period of limitation for filing an appeal before the Presiding Officer of Debts Recovery Tribunal against an order of the recovery officer?
Answer:
An appeal before the Presiding Officer of Debts Recovery Tribunal against an order of the recovery officer, has to be filed within thirty days from the date on which a copy of the order passed by the recovery officer is issued to the appellant.
(See Section 30(1) of RDB Act, 1993)
Whether any pre-deposit is to be made for filing an appeal before the Presiding Officer of Debts Recovery Tribunal against an order of the recovery officer?
Answer:
If an appeal is preferred before the Presiding Officer against an order of the recovery officer and if the appellant is a 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 Presiding Officer unless such person has deposited with the Tribunal fifty per cent of the amount of debt due as determined by the Tribunal.
(See Section 30A of RDB Act, 1993)
Who can file Recovery Applications in Debts Recovery Tribunals under RDB Act, 1993?
Answer:
Banks and Financial Institutions can file Recovery Applications in Debts Recovery Tribunals under RDB Act, 1993.
1A. Whether a borrower or guarantor can file Recovery Applications in Debts Recovery Tribunals under RDB Act, 1993?
Answer:
A borrower or guarantor can not file Recovery Applications in Debts Recovery Tribunals under RDB Act, 1993.
What is the meaning of the expression “Bank” for the purpose of filling Recovery Applications in Debts Recovery Tribunals under RDB Act, 1993?
Answer:
Bank means –
A Banking company which transacts the business of banking in India, as defined under Clause (c) of Section 5 of the Banking Regulation Act, 1949
A corresponding new Bank constituted under Section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act 1970 or under Section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act 1980
State Bank of India
A subsidiary Bank
A regional rural Bank.
(See Section 2(d) of RDB Act, 1993)
What is the meaning of the expression “Financial Institution” for the purpose of filling Recovery Applications in Debts Recovery Tribunals under RDB Act, 1993?
Answer:
Financial Institutions means:-
A Public Financial Institution within the meaning of Section 4A of the companies Act, 1956, that is,
Industrial Credit And Investment Corporation of India Limited
Industrial Finance Corporation of India
Industrial Development Bank of India
Unit Trust of India
Any other Institution specified by the Central Government by notification in the Official Gazette
Securitisation Company or Reconstruction Company
A Debenture Trustee
Such other institution as the Central Government may specify by notification
(See Section 2(h) of RDB Act, 1993)
Whether Co-operative Banks doing business of Banking are Banking Companies?
Answer:
Supreme Court of India in the case of Greater Bombay Co-operative Bank Limited Versus United Yarn Textile Pvt. Ltd AIR 2007 Supreme Court 1584 held that Co-operative Banks doing business of Banking are not Banking Companies.
Whether Debts Recovery Tribunals have exclusive jurisdiction to entertain recovery application from banks and financial institutions?
Answer:
Under Section 17(1) of RDB Act, 1993, the Debts Recovery Tribunals have the jurisdiction, powers and authority to entertain and decide applications from bank and financial institution for recovery of debts due to such banks and financial institutions. According to Section 18 of RDB Act, 1993 no Court or other authority shall have or be entitled to exercise any jurisdiction power or authority in relation to recovery applications filed by banks and financial institutions. However, Section 18 of RDB Act, 1993 does not affect the jurisdiction, power and authority of Supreme Court of India and of the High Courts under Articles 226 and 227 of the Constitution of India.
In which Debts Recovery Tribunal, Banks and Financial Institution have to file a recovery application under Section 19 of the RDB Act, 1993?
Answer:
A bank or a financial institution has to file the recovery application under Section 19 of the RDB Act, 1993 in the Debts Recovery Tribunal within the local limits of whose jurisdiction –
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
(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:
(See Section 19(1) of RDB Act, 1993)
What is the meaning of the expression “Cause of Action” for the purpose of filing a recovery application under Section 19 of the RDB Act, 1993?
Answer:
A cause of action means every fact, which if traversed, it would be necessary for the plaintiff to prove in order to support his right to a judgment of the court. In other words, it is a bundle of facts which taken with the law applicable to them gives the plaintiff a right to relief against the defendant.
What should be stated by Banks and Financial Institutions in a recovery application filed in Debts Recovery Tribunals under Section 19 of the RDB Act, 1993?
Answer:
Banks and Financial Institutions in a recovery application filed in Debts Recovery Tribunals under Section 19 of the RDB Act, 1993 should mention –
Particulars of the debts
Whether the debt is secured or unsecured
If the debt is secured debt, the estimated value of the securities
If the estimated value of the securities is not sufficient to satisfy the debt claimed in the recovery application, particulars of any other properties or assets owned by any of the defendants should be stated along with their estimated value.
If the estimated value of such other asset is not sufficient to recover the debts, and order should be sought directing the defendants to disclose to the Debts Recovery Tribunal particulars of other properties or assets owned by the defendants.
(See Section 19(3A) of RDB Act, 1993)
Whether for the purpose of filing an appeal to Debts Recovery Appellate Tribunal, the borrower has to make any pre-deposit?
Answer:
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.
(See Section 21 of RDB Act, 1993)
Whether Debts Recovery Appellate Tribunal has the power to reduce the amount of pre-deposit to be made for the purpose of filing an appeal to the Debts Recovery Appellate Tribunal?
Answer:
Debts Recovery Appellate Tribunal has the power to reduce the amount of pre-deposit to be made for the purpose of filing an appeal to the Debts Recovery Appellate Tribunal from fifty per cent to an amount which shall not be less than twenty five per cent of the amount of debt due.
(See Section 21 Proviso of RDB Act, 1993)
Whether any pre-deposit is to be made by a person who is a mere guarantor but has not taken loan himself?
Answer:
The pre-deposit has also to be made by a person who is a mere guarantor but has not taken loan himself.
Whether any pre-deposit is to be made by a person who is a mere mortgagor but has not taken loan himself?
Answer:
The pre-deposit has also to be made by a person who is a mere mortgagor but has not taken loan himself.
Whether any pre-deposit is to be made by a person who is neither a borrower nor a guarantor nor a mortgagor?
Answer:
The pre-deposit is not required to be made by a person who is neither a borrower nor a guarantor nor a mortgagor, inasmuch as such a person is not liable to repay any debt to be bank and financial institution.
Whether any pre-deposit is required to be made for preferring an appeal to the Debts Recovery Appellate Tribunal by a tenant or lessee?
Answer:
A tenant or lessee is not required to make any pre-deposit for preferring an appeal to the Debts Recovery Appellate Tribunal.
Whether any pre-deposit is required to be made for preferring an appeal to the Debts Recovery Appellate Tribunal by a purchaser or intending purchaser of a property?
Answer:
A purchaser or intending purchaser of a property is not required to make any pre-deposit for preferring an appeal to the Debts Recovery Appellate Tribunal.
Whether any pre-deposit is required to be made for preferring an appeal to the Debts Recovery Appellate Tribunal by a Bank or Financial Institution?
Answer:
A Bank or Financial Institution is not required to make any pre-deposit for preferring an appeal to the Debts Recovery Appellate Tribunal.
Whether any pre-deposit is required to be made for preferring an appeal to the Debts Recovery Appellate Tribunal against an interim or interlocutory order passed by Debts Recovery Tribunal?
Answer:
Pre-deposit is not required to be made for preferring an appeal to the Debts Recovery Appellate Tribunal against an interim or interlocutory order passed by Debts Recovery Tribunal. According to Section 21 of the RDB Act, 1993 pre-deposit has to be made of fifty per cent, which may be reduced to twenty five per cent, of the amount of debts due from the Appellant, as determined by the Debts Recovery Tribunal under Section 19 of the RDB Act, 1993. In view of the fact that at the stage of passing an interim or interlocutory order by Debts Recovery Tribunal, the debt due from the appellant is not determined by the Debts Recovery Tribunal, the question of making any pre-deposit for preferring an appeal to the Debts Recovery Appellate Tribunal against an interim or interlocutory order passed by Debts Recovery Tribunal, does not arise.
If a property is sold in execution proceedings before the recovery officer of Debts Recovery Tribunal, what right, title and interest does the purchaser get?
Answer:
According to Rule 6(1) of the Second Schedule to the Income Tax Act, 1961, where property is sold in execution of a certificate, there shall vest in the purchaser merely the right, title and interest of the defaulter at the time of the sale, even though the property itself be specified.
Whether the purchaser of a property gets title to the property from the date of the sale or from the date when the sale becomes absolute?
Answer:
According to Rule 6(2) of the Second Schedule to the Income Tax Act, 1961, where immovable property is sold in execution of a certificate, and sale has become absolute, the purchaser’s right, title and interest shall be deemed to have vested in him from the time when the property is sold, and not from the time when the sale becomes absolute.
What is the procedure for sale of movable property by the recovery officer of the Debts Recovery Tribunal?
Answer:
The procedure for sale of movable property by the recovery officer of the Debts Recovery Tribunal is contained in Rules 37 to 45 of the Second Schedule to the Income Tax Act, 1961, as modified with reference to Debts Recovery Tribunal. The recovery officer has to issue a proclamation specifying the time and place of sale. The sale is to be by auction and sale should take place after the expiry of at least fifteen days calculated from the date on which a copy of the sale proclamation is affixed in the office of the recovery officer.
What is the procedure for sale of immovable property by the recovery officer of the Debts Recovery Tribunal?
Answer:
The procedure for sale of immovable property by the recovery officer of the Debts Recovery Tribunal is contained in Rules 52 to 57 of the Second Schedule to the Income Tax Act, 1961, as modified with reference to Debts Recovery Tribunal. The recovery officer has to issue a proclamation specifying the time and place of sale. The sale is to be by auction and sale should take place after the expiry of at least fifteen days calculated from the date on which a copy of the sale proclamation is affixed in the office of the recovery officer.
Whether the borrower can make an application to set aside sale of immovable property on deposit of the claim of the bank?
Answer:
Under Rule 60(1) of the Second Schedule to the Income Tax Act, 1961, which has been made applicable to sale by the Recovery Officer of Debts Recovery Tribunal, where immovable property has been sold in execution of a certificate, the defaulter, or any person whose interests are affected by the sale, may, at any time within thirty days from the date of the sale, apply to the Recovery Officer of Debts Recovery Tribunal to set aside the sale, on his depositing the amount specified in the proclamation of sale as that for the recovery of which the sale was ordered with interest thereon at the rate of fifteen per cent per annum, calculated from the date of the proclamation of sale to the date when the deposit is made; and for payment to the purchaser, as penalty, a sum equal to five per cent of the purchase money but not less than one rupee.
Whether the borrower can make an application to set aside sale of immovable property on ground of non-service of notice or irregularity?
Answer:
Under Rule 61 of the Second Schedule to the Income Tax Act, 1961, which has been made applicable to sale by the Recovery Officer of Debts Recovery Tribunal, where immovable property has been sold in execution of a certificate by the Recovery Officer of Debts Recovery Tribunal, the defaulter, or any person whose interests are affected by the sale, may, at any time, within thirty days from the date of the sale, apply to the Recovery Officer to set aside the sale of the immovable property on the ground that notice was not served on the defaulter to pay the arrears as required by this Schedule or on the ground of a material irregularity in publishing or conducting the sale.
Whether sale can be set aside merely on the ground of non-service or irregularity?
Answer:
Under the proviso to Rule 61 of the Second Schedule to the Income Tax Act, 1961, which has been made applicable to sale by the Recovery Officer of Debts Recovery Tribunal, a sale cannot be set aside merely on the ground of non-service or irregularity unless the Recovery Officer is satisfied that the applicant has sustained substantial injury by reason of the non-service or irregularity.
When the sale held by the Recovery Officer of Debts Recovery Tribunal is confirmed?
Answer:
Under Rule 63(1) of the Second Schedule to the Income Tax Act, 1961, which has been made applicable to sale by the Recovery Officer of Debts Recovery Tribunal, where no application is made for setting aside the sale or where such an application is made and disallowed by the Recovery Officer, the Recovery Officer shall (if the full amount of the purchase money has been paid) make an order confirming the sale, and thereupon, the sale shall become absolute.
When the sale certificate is issued?
Answer:
Under Rule 65 of the Second Schedule to the Income Tax Act, 1961, which has been made applicable to sale by the Recovery Officer of Debts Recovery Tribunal, where a sale of immovable property has become absolute, the Recovery Officer shall grant a certificate specifying the property sold, and the name of the person who at the time of sale is declared to be the purchaser. Such certificate shall state the date on which the sale became absolute.
Whether Original Application filed by the bank can be stayed on the basis of previously instituted suit by borrower?
Answer:
Original Application filed by the bank cannot be stayed on the basis of previously instituted suit by borrower. Gagan Khosla –Versus- IFCI (2004)1 DRTC 176 (DRAT Delhi).
Whether a suit filed by the borrower in a Civil Court can be transferred to the Debts Recovery Tribunal?
Answer:
It has been held by the Supreme Court of India in the case of Bank of Rajasthan – Versus – V. C. K. Shares & Stock Broking Services Ltd. reported in (2023)1 Supreme Court Cases Page 1 that a defendant in Original Application has the choice of filing counter claim or a separate suit. However, Original Application cannot be stayed till the disposal of the Separate suit. A separate suit cannot be transferred to Debts Recovery Tribunal.
Explain the meaning of the expression “Debt” for the purpose of 1993?
Answer:
The expression “debt” has to be given the widest amplitude to mean any liability which is alleged as due from any person by bank or financial institution or by a consortium of banks or financial institution during the course of any business activity undertaken by them whether secured or unsecured or assigned whether payable under a decree or order of any Court or otherwise and legally recoverable on the date of the recovery application filed in Debts Recovery Tribunals by banks and financial institutions under Section 19 of RDB Act, 1993.
(See Section 2(g) of RDB Act, 1993)
Whether Presiding Officer has the power to correct any clerical or arithmetical mistake in the recovery certificate?
Answer:
The Presiding Officer has the power to correct any clerical or arithmetical mistake in the recovery certificate even after certificate has been issued to the recovery officer.
(See Section 26(2) of RDB Act, 1993)
Whether Presiding Officer of Debts Recovery Tribunal has the power to grant time for payment of the certificate amount after certificate has been issued to the recovery officer?
Answer:
The Presiding Officer of Debts Recovery Tribunal, subject to certain conditions, has the power to grant time for payment of the certificate amount after certificate has been issued to the recovery officer. However, he can grant time for payment of the certificate 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.
(See Section 27(1) of RDB Act, 1993)
What are the duties of the Recovery Officer of Debts Recovery Tribunals on receipt of a recovery certificate from the Presiding Officer of the Debts Recovery Tribunals?
Answer:
The Recovery Officer of the Debts Recovery Tribunals, on receipt of a recovery certificate from the Presiding Officer of the Debts Recovery Tribunals, has to take steps to recover the amount of debt specified in the certificate by one or more of the modes mentioned in Section 25 of RDB Act, 1993.
Whether recovery officer of Debts Recovery Tribunals have the power to recover the debt mentioned in the recovery certificate by attachment and sale of the movable or immovable property of the defendants?
Answer:
The recovery officer of Debts Recovery Tribunals have the power to recover the debt mentioned in the recovery certificate by attachment and sale of the movable or immovable property of the defendants.
(See Section 25A of RDB Act, 1993)
Whether recovery officer of Debts Recovery Tribunals have the power to recover the debt mentioned in the recovery certificate by taking possession of property of the defendant and appointing receiver for such property and to sell the same?
Answer:
The recovery officer of Debts Recovery Tribunals have the power to recover the debt mentioned in the recovery certificate by taking possession of property of the defendant and appointing receiver for such property and to sell the same.
(See Section 25A of RDB Act, 1993)
Whether recovery officer of Debts Recovery Tribunals have the power to recover the debt mentioned in the recovery certificate by arrest of the defendants and his detention in prison?
Answer:
The recovery officer of Debts Recovery Tribunals have the power to recover the debt mentioned in the recovery certificate by arrest of the defendants and his detention in prison.
(See Section 25A of RDB Act, 1993)
Whether recovery officer of Debts Recovery Tribunals have the power to recover the debt mentioned in the recovery certificate by appointing a receiver for the management of the movable or immovable properties of the defendant?
Answer:
The recovery officer of Debts Recovery Tribunals have the power to recover the debt mentioned in the recovery certificate by appointing a receiver for the management of the movable or immovable properties of the defendant.
(See Section 25A of RDB Act, 1993)
Whether recovery certificate can be challenged before the recovery officer of the Debts Recovery Tribunal?
Answer:
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.
(See Section 26(1) of RDB Act, 1993)
Whether provisions of Income Tax Act apply to recovery of debts under RDB Act, 1993?
Answer:
The provisions of the Second and Third Schedules to the Income-tax Act, 1961 and the Income-tax (Certificate Proceedings) Rules, 1962 apply to recovery of debts under RDB Act, 1993.
(See Section 29 of RDB Act, 1993)
Whether any property is exempt from attachment in execution proceedings before the recovery officer of Debts Recovery Tribunal?
Answer:
According to Rule 10 of the Second Schedule to the Income Tax Act, 1961, all such property as is by the Code of Civil Procedure, 1908 (5 of 1908), exempt from attachment and sale in execution of a decree of a Civil Court shall be exempt from attachment and sale under this Schedule.
What properties are exempt from attachment and sale in execution of a decree of a Civil Court under the Code of Civil Procedure?
Answer:
Section 60 of the Code of Civil Procedure gives a list of properties which are not liable for attachment and sale. Some of the exempt properties are mentioned below:
“(c) houses and other buildings (with the materials and the sites thereof and the land immediately appurtenant thereto and necessary for their enjoyment) belonging to an agriculturist or a labourer or a domestic servant and occupied by him”
“(i) salary to the extent of the first one thousand rupees) and two-thirds of the remainder in execution of any decree other than a decree for maintenance”
“(kb) all moneys payable under a policy of insurance on the life of the judgment-debtor”
“(kc) the interest of a lessee of a residential building to which the provisions of law for the time being in force relating to control of rents and accommodation apply”
Whether Recovery Officer has any power to investigate the claim preferred to or any objection made to the attachment and sale of any property in execution of a certificate?
Answer:
According to Rule 11(1) of the Second Schedule to the Income Tax Act, 1961, where any claim is preferred to, or any objection is made to the attachment or sale of, any property in execution of a certificate, on the ground that such property is not liable to such attachment or sale, the Tax Recovery Officer shall proceed to investigate the claim or objection.
Whether Debts Recovery Tribunals and Debts Recovery Appellate Tribunals are bound by the procedure laid down by the Code of Civil Procedure, 1908?
Answer:
The Debts Recovery Tribunals and Debts Recovery Appellate Tribunals are not bound by the procedure laid down by the Code of Civil Procedure, 1908.
(See Section 22(1) of RDB Act, 1993)
Whether Debts Recovery Tribunals and Debts Recovery Appellate Tribunals are to be guided by the principles of natural justice?
Answer:
The Debts Recovery Tribunals and Debts Recovery Appellate Tribunals shall be guided by the principles of natural justice.
(See Section 22(1) of RDB Act, 1993)
Whether Debts Recovery Tribunals and Debts Recovery Appellate Tribunals can go beyond the Code of Civil Procedure, 1908?
Answer:
It has been held by the Supreme Court of India that though Debts Recovery Tribunals and Debts Recovery Appellate Tribunals are not bound by the procedure laid down by the Code of Civil Procedure, 1908, they can go even beyond the Code of Civil Procedure, 1908 because they are guided by the principles of natural justice and they have the power to regulate their own procedure. ICICI –Versus- Graphco Industries reported in (1994)4 Supreme Court Cases 710.
Whether Debts Recovery Tribunals and Debts Recovery Appellate Tribunals have the power of summoning and enforcing the attendance of any person and examining him on oath?
Answer:
The Debts Recovery Tribunals and Debts Recovery Appellate Tribunals have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908, while trying a suit, in respect of summoning and enforcing the attendance of any person and examining him on oath.
(See Section 22(2)(a) of RDB Act, 1993)
Whether Debts Recovery Tribunals and Debts Recovery Appellate Tribunals have the power of requiring the discovery and production of documents?
Answer:
The Debts Recovery Tribunals and Debts Recovery Appellate Tribunals have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908, while trying a suit, in respect of requiring the discovery and production of documents.
(See Section 22(2)(b) of RDB Act, 1993)
Whether Debts Recovery Tribunals and Debts Recovery Appellate Tribunals have the power of receiving evidence on affidavits?
Answer:
The Debts Recovery Tribunals and Debts Recovery Appellate Tribunals have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908, while trying a suit, in respect of receiving evidence on affidavits.
(See Section 22(2)(c) of RDB Act, 1993)
Whether Debts Recovery Tribunals and Debts Recovery Appellate Tribunals have the power of issuing commissions for the examination of witnesses or documents?
Answer:
The Debts Recovery Tribunals and Debts Recovery Appellate Tribunals have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908, while trying a suit, in respect of issuing commissions for the examination of witnesses or documents.
(See Section 22(2)(d) of RDB Act, 1993).
Whether Debts Recovery Tribunals and Debts Recovery Appellate Tribunals have the power of reviewing their decisions?
Answer:
The Debts Recovery Tribunals and Debts Recovery Appellate Tribunals have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908, while trying a suit, in respect of reviewing their decisions.
(See Section 22(2)(e) of RDB Act, 1993).
What is the procedure for filing a review application in Debts Recovery Tribunals?
Answer:
Any party considering itself aggrieved by an order made by a Debts Recovery Tribunal on account of some mistake or error apparent on the face of the record desires to obtain a review of the order made against him, may apply for a review of the order to the Tribunal which had made the order. No application for review shall be made after the expiry of a period of thirty days from the date of the order and no such application shall be entertained unless it is accompanied by an affidavit verifying the application. Where it appears to the Tribunal that there is no sufficient ground for a review, it shall reject the application but where the Tribunal is of opinion that the application for review should be granted, shall grant the same.
(See Rule 5A of the DRT (Procedure) Rules, 1993)
What is the procedure for filing a review application in Debts Recovery Appellate Tribunals?
Answer:
Any party aggrieved by an order passed by the Debts Recovery Appellate Tribunal, on account of some mistake or error apparent on the face of the record, desires to obtain a review of such order, may apply for a review to the Appellate Tribunal which passed the order. No application for review shall be made after the expiry of a period of thirty days from the date of the order and no such application shall be entertained unless it is accompanied by an affidavit verifying the application. Where it appears to the Appellate Tribunal that sufficient ground for a review does not exist, it shall reject the application, and if it is satisfied with the grounds raised in the application for such review, it shall allow the application for review of the order.
(See Rule 6A of the DRAT (Procedure) Rules, 1994)
Whether Debts Recovery Tribunals and Debts Recovery Appellate Tribunals have the power of dismissing an application for default or deciding it ex parte?
Answer:
The Debts Recovery Tribunals and Debts Recovery Appellate Tribunals have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908, while trying a suit, in respect of dismissing an application for default or deciding it ex parte.
(See Section 22(2)(f) of RDB Act, 1993).
Whether Debts Recovery Tribunals and Debts Recovery Appellate Tribunals have the power of setting aside any order of dismissal of any application for default or any order passed by it ex parte?
Answer:
The Debts Recovery Tribunals and Debts Recovery Appellate Tribunals have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908, while trying a suit, in respect of setting aside any order of dismissal of any application for default or any order passed by it ex parte.
(See Section 22(2)(g) of RDB Act, 1993).
Whether provisions of Limitation Act, 1963 applies to an application made to Debts Recovery Tribunals?
Answer:
The provisions of the Limitation Act, 1963, shall, as far as may be, apply to an application made to Debts Recovery Tribunals.
(See Section 24 of RDB Act, 1993).
Whether the borrower can challenge the agreed rate of interest?
Answer:
It has been held by the Supreme Court of India in the case of Indian Bank –Versus- Blue Jaggers Estates Ltd. reported in (2010)8 Supreme Court Cases Page 129 that a borrower cannot challenge the agreed rate of interest.
Whether the borrower is liable to repay the loan covered by ECGC guarantee?
Answer:
It has been held by the Supreme Court of India in the case of State Bank of Bikaner & Jaipur –Versus- Ballav Das and Company reported in (1999)7 Supreme Court Cases Page 539 that the borrower’s liability as principal debtor still remains, even if a loan is covered by ECGC guarantee.
Whether Debts Recovery Tribunals have the power to punish for contempt?
Answer:
In the case of disobedience of an order made by the Tribunal 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.
(See Section 19(17) of RDB Act, 1993)
Whether Presiding Officer has the power to correct any clerical or arithmetical mistake in the recovery certificate?
Answer:
The Presiding Officer has the power to correct any clerical or arithmetical mistake in the recovery certificate even after certificate has been issued to the recovery officer.
(See Section 26(2) of RDB Act, 1993)
Whether the dues of Secured Creditors have any priority over other debts including Government dues?
Answer:
The rights of secured creditors to realise secured debts due and payable to them by sale of assets over which security interest is created, shall have priority and shall be paid in priority over all other debts and Government dues including revenues, taxes, cesses and rates due to the Central Government, State Government or local authority.
(See Section 31B of RDB Act, 1993)
What are the powers of Debts Recovery Tribunals about passing of interim orders?
Answer:
In year 2016, major changes in the powers of Debts Recovery Tribunals about passing interim orders, were introduced by an Amendment Act. A very important change was the omission of Section 19(12) of RDB Act, 1993. Before its omission, Section 19(12) read as follows:
19(12) “The Tribunal may make an interim order (whether by way of injunction or stay or attachment) against the defendant to debar him from transferring, alienating or otherwise dealing with, or disposing or any property and assets belonging to him without the prior permission of the Tribunal”
After the omission of Section 19(12) of RDB Act, 1993, Debts Recovery Tribunals do not have general power of passing interim orders. However, by the amendment of Sub-Sections 4, 4A and 5 of Section 19 of RDB Act, 1993, provisions have been introduced for issue of summons with automatic injunction orders. Sub-Section 13 of Section 19 of RDB Act, 1993 contains provision regarding attachment of property. Sub-Section 18 of Section 19 contains provisions regarding receiver and commissioner.
Whether ex-parte interim order can be passed by Debts Recovery Tribunal?
Answer:
It has been held by the Supreme Court of India in the case of ICICI –Versus- Graphco Industries reported in (1994)4 Supreme Court Cases 710 that Debts Recovery Tribunal can pass ex-parte interim order but the interim order should be reasoned and for short period. If interim order causes harm to the defendant, the defendant must be compensated.
At the time of issuing summons to the defendants, what directions can be given by the Debts Recovery Tribunals?
Answer:
The Debts Recovery Tribunals have to issue summons to the defendants with the following directions to the defendants –
1. to show cause within thirty days of the service of summons as to why relief prayed for should not be granted;
2. direct the defendant to disclose particulars of properties or assets other than secured assets and unsecured assets, the details of which have been mentioned in the recovery application filed by banks and financial institution.
3. to restrain the defendants from dealing with or disposing of secured assets and unsecured assets, the details of which have been mentioned in the recovery application filed by banks and financial institution.
(See Section 19(4) of RDB Act, 1993)
What is the effect of ex parte injunction order passed by Debts Recovery Tribunals at the time of issuing summons to the defendants?
Answer:
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 unsecured assets, the details of which have been mentioned in the recovery application filed by banks and financial institution, without the prior approval of the Tribunal
(See Section 19(4A) of RDB Act, 1993)
If the defendants make disclosure of any property or asset pursuant to orders passed by the Debts Recovery Tribunal, whether such asset will also be covered by the order of injunction?
Answer:
Section 19(4A) of RDB Act, 1993 deals with injunction order only as regards the assets over which security interest is created and other unsecured assets, the details of which have been mentioned in the recovery application filed by banks and financial institution. However, Section 19(5) (ii) of RDB Act, 1993 provides that where the defendant makes a disclosure of any property or asset pursuant to orders passed by the Tribunal, the provisions of Section 19(4A) of RDB Act, 1993 shall apply to such property or asset.
(See Section 19(5)(ii) of RDB Act, 1993)
If the defendants do not comply with the order passed by the Debts Recovery Tribunal directing the defendants to disclose particulars of their properties and assets, what can be done by the Debts Recovery Tribunals?
Answer:
If the defendants do not comply with the order passed by the Debts Recovery Tribunal directing the defendants to disclose particulars of their properties and assets, the Presiding Officer of Debts Recovery Tribunal 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.
(See Section 19(5)(iii) of RDB Act, 1993)
Whether Debts Recovery Tribunals have the power to pass an order for attachment of the properties of the defendants?
Answer:
Debts Recovery Tribunals have the power to pass an order for attachment of the properties of the defendants, but subject to various pre-conditions, as detailed below:
If on an application or otherwise, Debts Recovery 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,
1. is about to dispose of the whole or any part of his property; or
2. is about to remove the whole or any part of his property from the local limits of the jurisdiction of the Tribunal; or
3. is likely to cause any damage or mischief to the property or affect its value by misuse or creating third party interest,
the Debts Recovery 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.
Where the defendant fails to show cause why he should not 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.
(See Section 19(13A) of RDB Act, 1993)
If the Debts Recovery Tribunals pass an order for attachment of property without complying with the pre-conditions mentioned in Section 19(13) of RDB Act, 1993, will it be a valid order?
Answer:
If an order of attachment is made without complying with the pre-conditions mentioned in Section 19(13) of RDB Act, 1993, such attachment shall be void.
(See Section 19(16) of RDB Act, 1993)
Whether Debts Recovery Tribunals have the power to appoint a receiver of any property?
Answer:
Debts Recovery Tribunals have the power to appoint a receiver of any property. Where it appears to the Tribunal to be just and convenient, the Tribunal may, by order-
1. appoint a receiver of any property, whether before or after grant of certificate for recovery of debt;
2. remove any person from the possession or custody of the property;
3. commit the same to the possession, custody or management of the receiver;
4. 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.
(See Section 19(18) of RDB Act, 1993)
Whether Debts Recovery Tribunals have the power to appoint a commissioner?
Answer:
Debts Recovery Tribunals have the power to appoint a commissioner for preparation of an inventory of the properties of the defendants or for the sale thereof, if it appears to the Tribunal to be just and convenient.
(See Section 19(18)(e) of RDB Act, 1993)
What should be done by Debts Recovery Tribunals on receiving a recovery application under Section 19 of RDB Act, 1993 from Banks and Financial Institutions?
Answer:
On receiving a recovery application under Section 19 of RDB Act, 1993 from Banks and Financial Institutions, the Debts Recovery Tribunals have to issue summons to the defendants with some directions (mentioned in the next question).
(See Section 19(4) of RDB Act, 1993)
What should be done by the defendants on receiving summons from the Debts Recovery Tribunals about filing of a recovery application by banks and financial institutions?
Answer:
The defendants have to file a written statement of their defence including claim for set-off or counter-claim.
(See Section 19(5) of RDB Act, 1993)
Whether there is a time limit for filing the written statement by the defendants?
Answer:
The defendants have to file their written statement within a period of 30 days from the date of service of summons or, which can be extended by the Presiding Officers of Debts Recovery Tribunals by a further period not exceeding 15 days.
(See Section 19(5)(i) of RDB Act, 1993)
What is the meaning of the expression “Set-off”, which can be claimed by the defendants along with the written statement of defence?
Answer:
If the defendants claim that they are legally entitled to recover any ascertained sum of money from the Applicant bank or financial institution, the defendants may present a written statement containing the particulars of the debt sought to be set-off along with original documents and other evidence relied on in support of the claim of set-off.
(See Section 19(6) of RDB Act, 1993)
If the defendants present a written statement along with a claim of set-off, what is its effect?
Answer:
The written statement filed by the defendants along with a claim of set-off, will have the same effect as a plaint in a cross-suit so as to enable the Debts Recovery Tribunal to pass a final order in respect of both original claim and the set-off.
(See Section 19(7) of RDB Act, 1993)
What is the meaning of the expression “Counter-claim”, which can be set up by the defendants along with the written statement of defence?
Answer:
The defendants may set up by way of counter-claim against the claim of the applicant bank or financial institution, any right or claim in respect of a cause of action accruing to the defendants against the applicant bank or financial institution either before or after filing of the recovery application but before the defendants has delivered his defence or before the time limited for delivering his defence has expired.
(See Section 19(8) of RDB Act, 1993)
If the defendants set up a counter-claim, what is its effect?
Answer:
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 both on the original claim and on the counter-claim.