Procedure of Debt recovery Tribunal

The complete procedure of trial before Debt Recovery Tribunal is described in Sec 19 Of Recovery of Dues and Bankruptcy Act 1994(Formerly known as RDDB Act). This procedure applies to the application filed by debtor under Sec 17 of the SARFSAESI Act 2004

Making Application

Where

• Any bank or financial institution
• Has to recover any debt
• From any person
• May make an application before the tribunal having territorial jurisdiction

Jurisdiction of Tribunal

• Local jurisdiction shall be decided by location of branch or office of bank of financial institution maintaining the account of the debtor
• Where each or any of the defendant resides or carry out business of works for gain
• Cause of action wholly or in part arises

The Bombay High Court in WP no 73 of 2014( decided in December 2015) GSL India v/s Asset Reconstruction company (india) has held that situs of property is not determinative of the territorial jurisdiction of the DRT. The jurisdiction is to be decided in accordance with the provision of SEC 19.

Withdrawal of application by bank

• Bank or financial institution may withdraw application for the purpose of taking action under Sarfaesi Act 2004
• The application so moved shall be decided by tribunal within 30 days of moving application and if the application is refused, the Tribunal shall record the reason of refusal in writing.

However Supreme Court in Transcore Case has decided that there is no dichotomy between SAEFAESI Act and RDB Act and proceeding in both the acts may go together.

Joint Application by banks

• Where a bank and financial institution has filed application to recover dues from any person
• And the other bank too has a claim to recover against that person
• That bank too may file an application and may join the application already filed
• At any stage of proceeding but before the final order is passed.

Sec 19 (2) does not make it clear whether the bank joining the application at a later stage must be co financer of the same project for which the previous bank has initiated the recovery process or the new bank which is involved in a different project and have no claim on the mortgaged property of the debtor involved in the pending application too may join the application pending before DRT. nor it explain as to how the sale proceeds of mortgaged property will be distributed between such banks.

Form of Application

• Application to be filed before DRT shall be to the extent possible on the format of application provided in DRT rule 4
• Form 1 Application by bank
• Form 2 For transfer of decree passed by civil Court To DRT
• Form 3 For transfer of suits pending before civil court before introduction of RDB Act

Fee

The fee payable by the bank is to be provided in rule 7 of DRT tribunal rules. No application may be accepted by DRT unless proper fee is paid.

Application contents

• Every application shall state
  • Particulars of Debt
  • Particulars of security interest
  • Estimated value of security
  • If estimated value is less than the amount due then details of other assets owned by debtor
  • Application to DRT seeking an order to disclose the other properties owned by debtor.
  • The application must be accompanies by true copies all documents relied upon to substantiate claim.
  • Document s include statement of account or entry duly certified under Bankers Book of Evidence Act

Banker book means and include ledger daybook cash book account book and all other record used in the ordinary course of business of bank. If the books of account of bank produced before Tribunal are duly verified as per the provision of this Act no further evidence is required.

Settlement of loan

If any settlement is arrived with the borrower before final order is passed a refund of application fee may be applied by bank .However in the matter of Shanti Jaisawal Vs SBI(2015) the Jharkhand High Court has laid down that settlement has to be in tune with the guidelines laid down by RBI and any settlement arrived at less than the certified amount is not proper and may not be accepted by Tribunal.

Procedure of Trial

• Issue of summons- summons shall be issued to defendant

• To show cause within 30 days of service of notice
• To direct defendant to disclose particulars of properties other than those mortgaged to bank
• To restrain the defendant from transferring of dealing with the properties mentioned by bank in application

The defendant on issue of summons shall not transfer by way sale or lease except in ordinary course of business of without prior approval of tribunal

• Any property over which security interest is created
• Other properties which are mentioned by bank in application
• Which are disclosed by borrower in pursuance of orders of tribunal
• If any application seeking permission of transfer of asset is moved by defendant, tribunal shall serve a notice on bank ,will hear the bank and then shall decide the application.

Filing of Written Statement

The defendant should file written statement within 30days of service of notice on him.

The written statement should include

• Claim of set off against bank
• Counter claim of the borrower against bank

The written statement shall contain all documents on which defendant want to rely for his defense.

The written statement should be supported by an affidavit

In case borrower fails to submit written statement within 30days the Tribunal may at its discretion may extend time by further 15 days.

Supreme has decided that the tribunal is bound by the schedule given in he statue and may not condone delay.

Admission and Denial of Document /Amount

On expiry of the period of filing of w.s. or on filing of w.s. by the borrower the tribunal shall

• Fix up a date for admission and denial of document s produced by parties.
• For continuation or vacation of stay order

Where defendant admits due amount in full or in part he will have to deposit the admitted amount within 30 days of admission

Failing the tribunal may issue the recovery certificate for that amount.

Set Off Defendant Dues

Where defendant claims any set off against bank demand the application of set off should be moved along with W.S. The set off should be

• Of any ascertained sum
• Legally recoverable from bank bank
• Written statement containing particular of debt recoverable from bank be made on first date of hearing
• Original documents and other evidences must be produced along with written statement
• Such written statement shall have the effect of across suit and the tribunal shall decide the claim

Counter Claim

The defendant in a written statement may in addition to his right to pleadings and set off may set up counter claim

• Of any right or
• Any claim in respect of any cause of action occurring to defendant
• But before the defendant has delivered his defense or the time limit for filing for defense has expired
• The counter claim may be in the nature of damages or for any other reason

The counter claim shall be in the form of a cross suit. The defendant will have to pay applicable court fee and the Tribunal shall pass an order on the claim and counter claim.

The bank bank may file a written statement to answer counter claim

Where the defendant set up a counter claim and the bank contends that the claim raised by defendant ought to be decided by an independent action and not by way of counter claim the Tribunal shall decide this issue along with claim of bank for recovery.

Pleadings

Every application for set off and counter claim will be supported by an affidavit duly sworn by bank and defendant verifying all pleadings, facts and documentary evidence annexed to the application or written statement

Oral Evidence

If any party wants to rely on oral evidence of witness an affidavit of such witness shall be filed simultaneously with application or the written statement as the case may be.

Attachment before judgment

Where at any stage of proceedings, the bank moves an application before Tribunal

• Giving details of property to be attached along with value thereof
• Or the Tribunal is otherwise satisfied

1. That the borrower is about to dispose off whole or in part the property
2. Is about to remove the whole or in part the property out of the local jurisdiction limit of the tribunal
3. Is about to create third party interest in the property or to cause damage to the property

The Tribunal may direct the borrower to furnish a security with Tribunal of the amount decided by Tribunal within given time frame and shall also issue a show cause notice o borrower as to why the borrower should not submit security.

Where the borrower fails to reply show cause notice or fails to furnish security as ordered by Tribunal , the tribunal may order the attachment of the

- Properties claimed to be claimed to be mortgaged to bank
- Otherwise owned by borrower

The tribunal may order a complete or conditional attachment of the above mentioned properties. But any order of attachment made without hearing the borrower will be void.

Appointment of Receiver

Where it appears to the borrower just and convenient the Tribunal may order appointment of a receiver for any or all of the properties of borrower before or after the certificate for recovery and may remove any person from the possession of the property and commit the possession or custody or management of the property to receiver . The receiver shall have a right to file any suit or proceedings or to defend any suit or proceedings on behalf of company. The receiver shall prepare an inventory of the asets of he company for the purpose of sale.

Judgment

The Tribunal after hearing both the parties shall pass an order within 30 days of conclusion of arguments by both the parties. The order will include an order for the payment of full amount due to the bank upto the date of full realization of dues. If no pymet is made by borrower then the Tribunal may issue a recovery certificate to recovery officer stating the details of the assets by the sale whereof the recovery of bank dues is to be made . The Tribunal shall send a copy of its order to the applicant and defendant.