How do debt recovery tribunals work?
How do debt recovery tribunals work? Can a lay-person who is not a financial institution or a bank use the Debt Recovery Tribunal to recover debts owed to him/her? Is there any related case law?
It shall be better if I start with your second question, the answer to which is in the negative. No, a layperson cannot use a Debt Recovery Tribunal to recover their debts.
The Debts Recovery Tribunals were constituted under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 to receive claim applications from Banks and Financial Institutions against their defaulting borrowers.
In fact the Debts Recovery Tribunals were instrumental in helping the Banks and Financial Institutions recover substantially large parts of their non performing assets, or their bad debts as they are commonly known, but their progress it proved to in ineffective when it came to large and powerful borrowers.
That’s when the SRFAESI Act came into the picture. It empowered the lenders to take into their possession the secured assets of their borrowers just by giving notices, and without the need to go through the rigors of a Court procedure.
The Debts Recovery Tribunals now deal with two different Acts, namely the Recovery of Debts Due to Banks and Financial Institutions Act as well as the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests Act. While the aim of the both the Acts is one and the same, but their route is different.
The application is to be filed by the Applicant with the Registrar within whose jurisdiction the Applicant is functioning as a bank or financial institution as the case may be, for the time being. Every Application filed under Rule 4 of the DRT (Procedure) Rules, 1993, shall set forth concisely under distinct heads, the grounds for such application and such grounds shall be numbered consecutively and shall be typed in double space on one side of the paper.
The provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 shall not apply where the amount of debt is less than ten lakhs rupees or such other amount, being not less than one lakh rupees, as the Central Government may, by notification, specify.
The original aim of the Debts Recovery Tribunal was to receive claim applications from Banks and Financial Institutions against their defaulting borrowers. For this the Debts Recovery Tribunal (Procedure) Rules 1993 were also drafted. While initially the Debts Recovery Tribunals did perform well and helped the Banks and Financial Institutions recover substantially large parts of their non performing assets, or their bad debts as they are commonly known, but their progress was stunted when it came to large and powerful borrowers. These borrowers were able to stall the progress in the Debts Recovery Tribunals on various grounds, primarily on the ground that their claims against the lenders were pending in the civil courts, and if the Debts Recovery Tribunal were adjudicate the matter and auction off their properties irreparable damage would occur to them. No a lay-person who is not a financial institution or a bank cannot use the Debt Recovery Tribunal to recover debts owed to him/her . The eligible Lending agencies for filing the case are as follows:•All commercial banks•Agricultural Development Bank•Nepal Industrial Development Corporation•Other financial institutions as specified by Nepal Rastra Bank from time to time.The above agencies can file the petition if the principal recoverable is N.Rs 500,000 or more. Also they must fulfill the following conditions to file the petition: (a)Ample discussions and activities were held and carried out with the borrower to settle, or cause to be settled, the debt, (b)The bank and financial institution took adequate action on the recovery of debt but the debt could not be recovered.You may take the help of an expert to assist you with the whole matter.You can call me at 09555 507 507 or send me a mail at email@example.com
Book a phone consultation with a top-rated lawyer on Lawfarm.