Key points
- The Recovery of Debts and Bankruptcy Act, 1993 gives the DRT exclusive jurisdiction over bank claims of 20 lakh rupees or more.
- A guarantor is liable jointly with the borrower and can be sued without the bank first exhausting remedies against the borrower.
- Once a recovery certificate issues, the recovery officer can attach and sell property and arrest the defendant in limited circumstances.
The original application
The bank files an OA setting out the loan, the security and the amount due, with the loan documents and statements of account. The tribunal issues summons; the defendant must file a written statement within 30 days, extendable to 45. Defences typically concern the correctness of the account, unauthorised charges, wrongful classification, discharge of the guarantor by variation of the contract, or that the claim is time-barred.
Interim orders
The DRT can restrain the defendant from transferring property, appoint a receiver and direct disclosure of assets. Because the bank usually also has SARFAESI remedies, the two proceedings often run in parallel, with the bank obliged to disclose recoveries made under one in the other.
Recovery certificate
If the claim is allowed, the Presiding Officer issues a recovery certificate to the Recovery Officer, who executes it by attachment and sale of movable and immovable property, appointment of a receiver, or, where the defendant is found to be dishonestly withholding payment, arrest and detention in civil prison. Objections to execution lie under Section 30.
Appeals
An appeal to the Debt Recovery Appellate Tribunal must be filed within 30 days with a deposit of 50% of the amount due, which the DRAT can reduce to 25%. A writ to the High Court against the DRAT order is available on limited grounds.
Delhi
Delhi has three Debt Recovery Tribunals and a DRAT, all located in the capital, and cases are e-filed.
Frequently asked questions
Can I settle after a recovery certificate is issued?
Yes. Banks continue to accept one-time settlements at the execution stage, and the certificate is recorded as satisfied on payment.
Am I liable as a guarantor if the borrower has gone into insolvency?
Yes. The moratorium under the IBC protects the corporate debtor, not the guarantor, and the bank can proceed against you in the DRT or under the personal guarantor provisions of the IBC.
Related practice area: Debt Recovery
This article is for general information and does not constitute legal advice. Laws, rules and limitation periods change and depend on the facts; please take advice on your own situation before acting. Reading this article does not create a lawyer-client relationship with Akhtars Legalitarian.