DEBT RECOVERYBY BANKS

Eligible Institutions:

• • Scheduled commercial banks
• • State Financial Corporations
• • State Industrial Development Corporations
• • Housing Finance Companies (NHB registered)
• • Non-Banking Financial Companies (RBI registered)
• • Asset Reconstruction Companies

Threshold Requirements:

• • Minimum outstanding: ₹1 lakh (originally ₹1 crore)
• • Account classified as NPA
• • Secured by tangible security
• • Security interest properly created
• • Valid security documents
• • Borrower in default

Enforcement Powers:

• • Take possession of secured assets
• • Sell or lease secured assets
• • Manage secured assets
• • Appoint managers for assets
• • Realize security interest
• • Take over management of business

Procedural Safeguards:

• • 60-day demand notice mandatory
• • 30-day representation period
• • Public notice for sale
• • Reserve price requirement
• • Surplus return to borrower
• • Appeal rights to DRT

Excluded Assets:

• • Agricultural land (except in specific states)
• • Pledge of movables in possession
• • Hypothecation of stocks/inventory
• • Assignment of receivables
• • Personal guarantees
• • Unsecured loans

Procedural Limitations:

• • Cannot use force for possession
• • Must follow prescribed procedures
• • Subject to DRT appeal
• • Borrower representation rights
• • Public auction requirements
• • Valuation compliance needed

Section 13(2) Notice:

• ☐ Demand notice to borrower/guarantor
• ☐ Outstanding amount specification
• ☐ 60-day payment deadline
• ☐ Consequences of non-payment
• ☐ Security interest details
• ☐ Proper service of notice

Notice Requirements:

• ☐ Registered post/courier
• ☐ Personal service option
• ☐ Publication in newspapers
• ☐ Affixing at prominent place
• ☐ Email/electronic service
• ☐ Acknowledgment collection

Borrower Rights:

• ☐ Submit representation within 30 days
• ☐ Challenge notice validity
• ☐ Dispute outstanding amount
• ☐ Question security interest
• ☐ Propose settlement terms
• ☐ Request additional time

Bank Obligations:

• ☐ Consider representation fairly
• ☐ Provide reasoned response
• ☐ Allow inspection of documents
• ☐ Verify outstanding calculations
• ☐ Review security documentation
• ☐ Communicate decision in writing

Taking Possession:

• ☐ Section 13(4) possession notice
• ☐ Physical possession taking
• ☐ Inventory preparation
• ☐ Asset preservation measures
• ☐ Security arrangements
• ☐ Possession report filing

Sale Process:

• ☐ Asset valuation by approved valuers
• ☐ Reserve price determination
• ☐ Public auction notice (30 days)
• ☐ Newspaper advertisements
• ☐ Online portal listing
• ☐ Sale completion & documentation

Sale Completion:

• ☐ Sale certificate issuance
• ☐ Title transfer to purchaser
• ☐ Registration formalities
• ☐ Possession delivery
• ☐ Sale proceeds realization
• ☐ Account settlement

Financial Settlement:

• ☐ Debt adjustment against proceeds
• ☐ Expense deduction
• ☐ Surplus calculation
• ☐ Surplus return to borrower
• ☐ Deficiency claim (if any)
• ☐ Final account statement

DRT Structure:

• • 39 DRTs across India
• • 5 Debt Recovery Appellate Tribunals (DRATs)
• • Presiding Officer (retired High Court Judge)
• • Recovery Officer for execution
• • Administrative support staff
• • Specialized debt recovery jurisdiction

Jurisdiction Criteria:

• • Minimum debt: ₹20 lakhs
• • Banks & Financial Institutions
• • Secured & unsecured debts
• • Territorial jurisdiction
• • Exclusive jurisdiction for recovery
• • Appeal lies to DRAT

Tribunal Powers:

• • Adjudicate debt recovery applications
• • Issue recovery certificates
• • Attach and sell assets
• • Arrest and detention orders
• • Receiver appointment
• • Interim relief measures

Procedural Features:

• • Summary proceedings
• • 180-day disposal target
• • Limited adjournments
• • Simplified evidence rules
• • Cost-effective procedures
• • Electronic filing facility

Required Documents:

• ☐ Original Application (OA)
• ☐ Statement of claim
• ☐ List of documents
• ☐ Loan agreements & securities
• ☐ Demand notices
• ☐ Account statements
• ☐ Board resolution
• ☐ Valuation reports

Filing Requirements:

• ☐ Court fee payment
• ☐ Proper verification
• ☐ Authorized signatory
• ☐ Service of notice
• ☐ Territorial jurisdiction
• ☐ Limitation compliance
• ☐ Electronic filing (where available)
• ☐ Acknowledgment receipt

Hearing Stages:

• ☐ Admission hearing
• ☐ Notice to defendant
• ☐ Written statement filing
• ☐ Issues framing
• ☐ Evidence recording
• ☐ Arguments hearing
• ☐ Judgment delivery
• ☐ Recovery certificate issuance

Timeline & Procedures:

• ☐ 30 days for written statement
• ☐ 180 days disposal target
• ☐ Limited adjournments
• ☐ Summary proceedings
• ☐ Expedited hearings
• ☐ Electronic case management
• ☐ Regular monitoring
• ☐ Status updates

Recovery Methods:

• ☐ Asset attachment & sale
• ☐ Bank account freezing
• ☐ Salary/income attachment
• ☐ Property seizure
• ☐ Business closure
• ☐ Arrest & detention
• ☐ Receiver appointment
• ☐ Third-party proceedings

Execution Procedures:

• ☐ Recovery certificate execution
• ☐ Asset identification & valuation
• ☐ Public auction notice
• ☐ Sale proceedings
• ☐ Proceeds distribution
• ☐ Surplus return
• ☐ Deficiency recovery
• ☐ Completion report

Procedural Rights:

• • 60-day notice period
• • Right to make representation
• • Inspection of bank records
• • Challenge notice validity
• • Dispute outstanding amount
• • Propose settlement terms
• • Seek additional time
• • Legal representation

Appeal Rights:

• • Appeal to DRT within 45 days
• • Stay of enforcement proceedings
• • Deposit 50% of claimed amount
• • Challenge possession taking
• • Question sale procedures
• • Claim surplus amounts
• • Seek damages for wrongful action
• • Constitutional remedies

Defense Rights:

• • File written statement
• • Cross-examine witnesses
• • Present evidence
• • Legal representation
• • Challenge jurisdiction
• • Raise limitation defense
• • Counter-claim filing
• • Set-off claims

Appellate Rights:

• • Appeal to DRAT within 45 days
• • Stay of execution
• • Deposit requirement waiver
• • Further appeal to High Court
• • Supreme Court appeal (SLP)
• • Constitutional challenges
• • Interim relief applications
• • Review petitions

Settlement Mechanisms:

• • One-time settlement (OTS)
• • Lok Adalat proceedings
• • Mediation & conciliation
• • Restructuring proposals
• • Asset reconstruction schemes
• • Corporate debt restructuring
• • Strategic debt restructuring
• • Insolvency resolution

Rehabilitation Rights:

• • Business revival opportunities
• • Asset retention options
• • Gradual repayment plans
• • Interest rate negotiations
• • Tenure extension requests
• • Partial release of securities
• • Fresh funding considerations
• • Professional assistance