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The Government of Infia enacted “The Recovery of Debt due to Banks and Financial

Institutions Act, 1993” for setting up Debt Recovert Tribunals for expedious
adjudication and recovery of debts due to banks. The Debts Recovery Tribunal have
been constituted under Section 3 of the Act, 19931. The tribunal deals with two
different Acts, namely the Recovery of Debt due to Banks and Financial Institutions
as well as the Securitisation and Reconstruction of Financial Assets and Enforcement
of Secutity Interests Act. This tribunal is the result of the Tiwari Committee,
constituted in 1981. The Committee observed that the civil courts are burdened with
diverse types of cases. Recovery of dues due to bank and financial institutions is not
given any priority by the civil courts. The banks and financial institutions like any
other litigant have to go through a process of pursuing the cases for recovery through
civil courts for unduly long periods. Thus, the committee suggested the establishment
of a tribunal solely for the purpose of recovery of debts due to banks and financial
instituion. The Tiwari Committee report was endorsed by the Narasimhan Committee
in 1991. Confirming to the recommendations of Narasimhan Committee, the
Government of India in 1993 enacted a legislation of Recovery of Debts due to Banks
and Financial Institutions Act. The object of the Act is to provide for the
establishment of Tribunals for expeditious adjudication and recovery of debts due to
banks and financial institutions and for matters connected therewith or incidental
The constitutional validity of the tribunals was challenged in Union of India v. Delhi
High Court Bar Association and Anr3. The supreme court upheld the validity of the
tribunals and observed that enactemet of laws regarding banking tribunal is withing
the legislative competence of parliament under Entry 45 of List I. The Hon’ble court
further observed that even though the tribunals can regulate its own procedure, the Act
requires that any procedure laid down by it must be guided by the principles of natural
The Debts Recovery Tribuanl enforced provisions of the Recovery of Debts due to
Bank and Financial Institutions Act, 1993 and also Securitisation and Reconstruction
3 2002 (4) SCC 275

Section 3 of the 1993 act provides for the establishment of the tribunals. The Bank or the Financial Institution may make an application to recover debt from any person to the Tribunal within the local limits of whose jurisction the defednant actually and voluntarily resides or carries on business or personaly works for gain. or is qualified to be. arises. powers and authority to entertain and decide applications from the banks and financial institutions for recovery of debts due to such banks and financial institutions. under the 2002 Act borrowers. The act also provides for the bar of jurisdiction of normal courts of law except the Supreme Court and High Court exercising jurisdiction under article 226 and 227 of the Constitution in relation to the jurisdiction of the Tribunals. a District Judge and he holds office for a term of 5 years or until he attains the age of sixty two years.of Financial Assets and Enforcement of Security Interests Act. Presently there are 33 Debt Recovery Tribunals and 5 Debt Recovery Appellate Tribunals. a judge of a High Court. On receiving the application the Tribunal issues summons requiring the defendant to show cause withing thirty days of . The act also provides for the appointment of Recovery Officers as the staff of the Tribunal. banks approach the Debts Recovery Tribunal whereas. The tribunal consists of only one person knows as Presiding Officer who is appointed by the Central Government The Presiding officer must be. whichever is earlier. or has held office as the Presiding officer of a Tribunal for at least three years. or has been been. or have been. The Debt Recovery Appellate Tribunal is presisded by the chairperson who is. wholly or on party. whichever is earlier. or is qualified to be. The Chairperson of the Appellate Tribunal shall exercise general power of superintendence and control over the Tribunals under his Jurisdiction including the powert of appraising the work and recording the annual confedential reports of the presiding officer. guarantors and other person aggrieved by ant action of the Bank approach the Debts Recovery Tribunal. or the cause of action. or has been a member of the Indian Legal Services and has held a post in Grade I of that service for at least three years. they are to be appointed by the Central Government and are to discharge their functions under the general superintendence of the Presiding Officer. 2002 Under the 1993 Act. The Chairperson hold office for a term of five years or until he attains the age of 65. The Debt Recovery Tribunal exercises the jurisdiction.

The Tribunal has power to make an interim order against the defendant to debar him from transferring. remove any person from the possession or custody of the property. any property and assets belonging to him without the prior permission of the Tribunal. and appoint a Commissioner for preparation of an inventory of the properties of the defendant or for the sale thereof. alienating or otherwise dealing with. or such of those powers as the Tribunal thinks fit. at the first hearing of the application. the Tribunal may order attachement of the properties claimes by the applicant as the properties secured in his favour sufficient to satisfy any certificate for the recovery of debt. the application and disposal of such rents and profits. The defendant also has the right to raise a counter claim against the applicant. custody or management of the reciever. protection. confer upon the reciever all such power. the Tribunal may order such person to be detained in the civil prison for a maximun tern of three months. The Presiding Officer shall isssue a certificate under his signature on the basis of the order of the Tribunal to the Recovery Officer for recovery of the amount of debt specified in the certificate. the collection of the rents and profits thereof. as to bringing and defending suits in the courts or filing and defending application before the Tribunal and realization. or disposing of. but not afterwards unless permitted by the Tribunal. with intent to obstruct or delay or frustate the execution of any order tor the recovery of the debt that may be passed against him is likely to dispose. The defendant is entitled to clain set off against the applicant.the service of summons as to why the relief prayed for should not be granted. commit the same to the possession. the Tribunal may direct the defendant to furnish security or to appear and show cause why he should not furnish security. In case of the defendant does not comply with the above. on the application as it thinks fit to meet the ends of justice. managemnt. When the Tribunal is satisfied that the defendant. preservation and improvement of the property. Any person aggrieved by the order made by the Tribunal may appeal to the Debt Recovery Appellate Tribunal within 45 days from the date on . and the execution of documents as the owner himself has. When the defendant fails to furnish security within the time fixed by the Tribunal or fails to show cause. harm or move out of local jurisction of the Tribunal whole or any part of his property. The Tribunal has the power to appoint a reviever. The Tribunal after hearing both the parties passes an order for payment of interest from the date on or before which payment of the amount is found due up to the date of realizaton or actual payment.

it may require restoration of the . arrest of the defedant and his detention in prison.13(4). In 2002. 1963 apply to an appication made to a Tribunal. proceed to recover the amount of debt specified by attachemnt and sale of the movable and immpvable property of the defendant. He may by a notice in writing require any person from whom money is due or may become due to the defendant. Before the 2002. the banks to recover debt had to make an application to the Debt Recovery Tribunal. to pay to the Recovery Officer either forthwith upon the money becoming due or being held or withing the time specified in the notice so much of the money as is sufficient to pay the amount of bedt due from the defendnat or the whole of the money. 1908 does not apply to the Tribunals and they have the power to regulate their own procedures.which a copy of the order made has been received by him.19(7). appoint a reciever for the managemnt of the properties of the defendant. the provisions of the Limitation Act. The procedure laid down by the Code of Civil Procedure. However. The Recovery Officer shall. The Defendant cannot dispute the correctness of the amount specifies in the certificate before the Recovery Officer. The Debt Recovery Tribunal is to consider whether any of the measures taken by the bank for enforcement of the security interest are in accordance with the provisions of this act. The Seciritization and Reconstruction of Financial Assets and Enforcement of Security Interest Act was passed that gavepower to the bank to recover its debt by simply giving a notice to the borrower under Section 13 sub-clause 4 of the Act. Howver Section 17 of the Act provides for an appeal to the borrower aggrieved by any measure taken by the bank under s. Id the Debts Recovery Tribunal comes to the conclusion that the measures taken by the Bank are not in accordance with the Act. the amount of debt due from the defendant. within thirty days from the date of reciept of the order prefer an appeal to the Tribunal. on reciept of the copy of the cerificate of recovery. When the appeal is by any person from whom the amount of debt is due to a Bank or financial institution. A person aggrieved by an order of the Recovery Officer may. he may direct any person from whom any amount is due to the defendant to deduct the said amount. When the Recovery Officer receives a certificate issued under S. the person must deposit seventy five percent of the mount of debt due from him as determined by the Tribunal. making sure debt recovery tribunals work better. they are not goint to give you loans at a cheaper price. Recovery was only thirteen percent of the amount at stake.600 crore. This small number of Tribunals are not able to dispose off the cases in a timely of the business to the borrower or restoration of possession of the secured assets to the borrower.lawyersclubindia.asp 5 http://www. making sure that you don't have excess number of stays. there are many problems with the functioning of the Debts Recovery Tribunal.html . So. 4 However. 2.26. The Tribunals are also not able to dispose off the applications within the time period specified by law leading to grave delay. Reserve Bank of India governor Raghuram Rajan observed that “ If bankers cannot get their money back. An application made to the Debt Recovery Tribunal shall be disposed within sixty days from the date of such application and shall not exceed four months from the date of making such application.950 crore.5 There are only 33 Debts Recovery Tribunals and only 5 Debt Recovery Appellate Tribunals in the country. In 2013-14 the amount recovered was only Rs. 30. excess number of appeals – that is what we need to focus on” 4 http://www. while the outstanding value of debt sought to be recovered was