About the Bank - Recovery of Finance THE FINANCIAL INSTITUTIONS (RECOVERY OF FINANCES) ORDINANCE, 2001 to repeal, and, with

certain modifications, re-enact, the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997.

WHEREAS it is expedient to repeal and with certain modifications, re-enact the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997, for the purposes hereinafter appearing;

AND WHEREAS the President is satisfied that circumstances exist which render it necessary to take immediate action;

NOW, THEREFORE, in pursuance of the Proclamation of Emergency of the fourteenth day of October, 1999 and Provisional Constitution Order No. 1 of 1999, read with the Provisional Constitution (Amendment) Order No. 9 of 1999, and in exercise of all powers enabling him in that behalf, the President of the Islamic Republic of Pakistan is pleased to make and promulgate the following Ordinance:-

Short title, extent and commencement.- (1) This Ordinance may be called the Financial Institutions (Recovery of Finances) Ordinance, 2001. (2) (3) It extends to the whole of Pakistan. It shall come into force at once.

2. Definitions.- In this Ordinance, unless there is anything repugnant in the subject or context

a) "financial institution" means and includes

(i) any company whether incorporated within or outside Pakistan which transacts the business of banking or any associated or ancillary business in Pakistan through its branches within or outside Pakistan and includes a government savings bank, but excludes the State Bank of Pakistan; (ii) a modaraba or modaraba management company, leasing company, investment bank, venture capital company, financing company, unit trust or mutual fund of any kind and credit or investment institution, corporation or company; and (iii) any company authorised by law to carry on any similar business, as the Federal Government may by notification in the official Gazette, specify;

b) "Banking Court" means (i) in respect of a case in which the claim does not exceed fifty million rupees or for the trial of offences under this Ordinance, the Court established under section 5; and (ii) in respect of any other case, the High Court.

(c) "customer" means a person to whom finance has been extended by a financial institution and includes a person on whose behalf a guarantee or letter of credit has been issued by a financial institution as well as a surety or an indemnifier;

(d) "finance" includes (i) an accommodation or facility provided on the basis of participation in profit and loss, mark-up or mark-down in price, hire-purchase, equity support, lease, rent-sharing, licensing charge or fee of any kind, purchase and sale of any property including commodities, patents, designs, trade marks and copy-rights, bills of exchange, promissory notes or other instruments with or without buy-back arrangement by a seller, participation term certificate, musharika, morabaha, musawama, istisnah or modaraba certificate, term finance certificate; (ii) facility of credit or charge cards;

(iii) facility of guarantees, indemnities, letters of credit or any other financial engagement which a financial institution may give, issue or undertake on behalf of a customer, with a corresponding obligation by the customer to the financial institution; (iv) a loan, advance, cash credit, overdraft, packing credit, a bill discounted and purchased or any other financial accommodation provided by a financial institution to a customer;

(v) a benami loan or facility that is, a loan or facility the real beneficiary or recipient whereof is a person other than the person in whose name the loan or facility is advanced or granted; (vi) any amount due from a customer to a financial institution under a decree passed by a Civil Court or an award given by an arbitrator; (vii) any amount due from a customer to a financial institution which is the subject matter of any pending suit, appeal or revision before any Court; (viii) (e) any other facility availed by a customer from a financial institution. obligation includes

(i) any agreement for the repayment or extension of time in repayment of a finance or for its restructuring or renewal or for payment or extension of time in payment of any other amounts relating to a finance or liquidated damages; and (ii) any and all representations, warranties and covenants made by or on behalf of the customer to a financial institution at any stage, including representations, warranties and covenants with regard to the ownership, mortgage, pledge, hypothecation or assignment of, or other charge on, assets or properties or repayment of a finance or payment of any other amounts relating to a finance or performance of an undertaking or fulfillment of a promise; and (iii) all duties imposed on the customer under this Ordinance; and

(f) "rules" means rules made under this Ordinance.

3. Duty of a customer.(1) It shall be the duty of a customer to fulfil his obligations to the financial institution. (2) Where the customer defaults in the discharge of his obligation, he shall be liable to pay, for the period from the date of his default till realization of the cost of funds of the financial institution as certified by the State Bank of Pakistan from time to time, apart from such other civil and criminal liabilities that he may incur under the contract or rules or any other law for the time being in force. (3) For purposes of this section a judgment against a customer under this Ordinance shall mean that he is in default of his duty under sub-section (1), and the ensuing decree shall provide for payment of the cost of funds as determined under sub-section (2).

4. Ordinance to override other laws.- The provisions of this Ordinance shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force.

5.

Establishment of Banking Court.-

(1) The Federal Government may, by notification in the Official Gazette, establish as many Banking Courts as it considers necessary to exercise jurisdiction under this Ordinance and appoint a Judge for each of such Courts and where it establishes more Banking Courts than one, it shall specify in the notification the territorial limits within which each of the Banking Courts shall exercise its jurisdiction. (2) Where more Banking Courts than one have been established to exercise jurisdiction in the same territorial limits, the Federal Government shall define the territorial limits of each such Court. (3) Where more Banking Courts than one have been established in the same or different territorial limits, the High Court may, if it considers it expedient to do so in the interest of justice or for the convenience of the parties or of the witnesses, transfer any case from one Banking Court to another. (4) A Judge of a Banking Court shall be appointed by the Federal Government after consultation with the Chief Justice of the High Court of the Province in which the Banking Court is established and no person shall be appointed a Judge of a Banking Court unless he has been a Judge of a High Court or is or has been a District Judge. (5) A Banking Court shall hold its sitting at such places within its territorial jurisdiction as may be determined by the Federal Government. (6) A Judge of a Banking Court, not being a District Judge, shall be appointed for a term of three years from the date on which he enters upon his office. (7) The salary, allowances and other terms and conditions of service of a person appointed as a Judge of a Banking Court shall be such as the Federal Government may determinej (8) The Banking Court may, if it so requires, be assisted in technical aspects of banking transactions involved in any case by an amicus curiae who has at least ten years experience of banking at a senior management level in a financial institution of repute or the State Bank of Pakistan and has the following qualifications, namely:(i) a degree in Commerce and Account or in Economics; or

(ii) a degree in Business Administration; or (iii) has completed a course in banking from the Institute of Bankers, Pakistan. (9) Remuneration of the amicus curiae, and the party or parties by whom it will be payable, will be determined by the Banking Court, keeping in view the circumstances of each case.

6.

Resignation and removal of Judges.-

(1) A person, not being a District Judge, appointed as a Judge of a Banking Court under section 5 may, by notice in writing under his hand addressed to the Federal Government, resign from his office. (2) A person appointed as a Judge of a Banking Court under section 5 may be removed from office in consultation with the Chief Justice of the High Court.

7.

Powers of Banking Courts.-

(1) Subject to the provisions of this Ordinance, a Banking Court shall (a) in the exercise of its civil jurisdiction have all the powers vested in a civil Court under the Code of Civil Procedure, 1908 (Act V of 1908); (b) in the exercise of its criminal jurisdiction, try offences punishable under this Ordinance and shall, for this purpose have the same powers as are vested in a Court of Sessions under the Code of Criminal Procedure, 1898 (Act V of 1898):

Provided that a Banking Court shall not take cognizance of any offence punishable under this Ordinance except upon a complaint in writing made by a person authorized in this behalf by the financial institution in respect of which the offence was committed.

(2) A Banking Court shall in all matters with respect to which the procedure has not been provided for in this Ordinance, follow the procedure laid down in the Code of Civil Procedure, 1908 (Act V of 1908), and the Code of Criminal Procedure, 1898 (Act V of 1898). (3) All proceedings before a Banking Court shall be deemed to be judicial proceedings within the meaning or sections 193 and 228 of the Pakistan Penal Code (Act XLV of 1860), and a Banking Court shall be deemed to be a Court for purposes of the Code of Criminal Procedure, 1898 (Act V of 1898). (4) Subject to sub-section (5), no Court other than a Banking Court shall have or exercise any jurisdiction with respect to any matter to which the jurisdiction of a Banking Court extends under this Ordinance, including a decision as to the existence or otherwise of a finance and the execution of a decree passed by a Banking Court. (5) Nothing in sub-section (4) shall be deemed to affect

(a) the right of a financial institution to seek any remedy before any Court or otherwise that may be available to it under the law by which the financial institution may have been established; or (b) the powers of the financial institution, or jurisdiction of any Court such as is referred to in clause (a); or

require the transfer to a Banking Court of any proceedings pending before any financial institution or such Court immediately before the coming into force of this Ordinance. (6) All proceedings pending in any Banking Court constituted under the Banking Companies (Recovery of Loans, Advances, Credits or Finances) Act, 1997 (XV of 1997), including suits for recovery of loans as defined under that Act shall stand transferred to, or be deemed to be transferred to, and heard and disposed of by, the Banking Court having jurisdiction under this Ordinance. On transfer of proceedings under this sub-section, the parties shall appear before the Banking Court concerned on the date previously fixed. (7) In respect of proceedings transferred to a Banking Court under subsection (6), the Banking Court shall proceed from the stage which the proceedings had reached immediately prior to the transfer and shall not be bound to recall and re-hear any witness and may act on the evidence already recorded or produced before the Court from which the proceedings were transferred.

8.

Suit for recovery of written off finances, etc.-

(1) Subject to sub-section (2), and notwithstanding anything contained in the Limitation Act, 1908 (IX of 1908) or any other law, a financial institution may, within three years from the date of coming into force of this Ordinance, file a suit for the recovery of any amount written off, released or adjusted under any agreement, contract, or consent, including a compromise or withdrawal of any suit or legal proceedings or adjustment of a decree between a financial institution and a customer on any day on or after the first day of January, 1990 and before the coming into force of this Ordinance, if it can establish that the amount was written off, released or adjusted for political reasons or considerations other than bona fide business considerations. (2) No suit under sub section (1) shall be filed unless its filing has been approved by (a) the Board of Directors, in the case of a financial institution incorporated within Pakistan, (b) or the chief executive (by whatever name called or designated) of the financial institution in Pakistan, in the case of a financial institution incorporated outside Pakistan.

9. Procedure of Banking Courts.(1) Where a customer or a financial institution commits a default in fulfillment of any obligation with regard to any finance, the financial institution or, as the case may be, the customer, may institute a suit in the Banking Court by presenting a plaint which shall be verified on oath, in the case of a financial institution by the Branch Manager or such other officer of the financial institution as may be duly authorized in this behalf by power of attorney or otherwise.

(2) The plaint shall be supported by a statement of account which in the case of a financial institution shall be duly certified under the Bankers Books Evidence Act, 1891 (XVII of 1891), and all other relevant documents relating to the grant of finance. Copies of the plaint, statement of account and other relevant documents shall be filed with the Banking Court in sufficient numbers so that there is one set of copies for each defendant and one extra copy. (3) The plaint, in the case of a suit for recovery instituted by a financial institution, shall specifically state (a) the amount of finance availed by the defendant from the financial institution; (b) the amounts paid by the defendant to the financial institution and the dates of payment; and (c) the amount of finance and other amounts relating to the finance payable by the defendant to the financial institution upto the date of institution of the suit. (4) The provisions of section 10 of the Code of Civil Procedure, 1908 (Act V of 1908), shall have no application for and in relation to suits filed hereunder. (5) On a plaint being presented to the Banking Court, a summons in Form No. 4 in Appendix 'B' to the Code of Civil Procedure, 1908 (Act V of 1908) or in such other form as may, from time to time, be prescribed by rules, shall be served on the defendant through the bailiff or process-server of the Banking Court, by registered post acknowledgement due, by courier and by publication in one English language and one Urdu language daily newspaper, and service duly effected in any one of the aforesaid modes shall be deemed to be valid service for purposes of this Ordinance. In the case of service of the summons through the bailiff or process-server, a copy of the plaint shall be attached therewith and in all other cases the defendant shall be entitled to obtain a copy of the plaint from the office of the Banking Court without making a written application but against due acknowledgement. The Banking Court shall ensure that the publication of summons takes place in newspapers with a wide circulation within its territorial limits.

10. Leave to defend.(1) In any case in which the summons has been served on the defendant as provided for in sub-section (5) of section 9, the defendant shall not be entitled to defend the suit unless he obtains leave from the Banking Court as hereinafter provided to defend the same; and, in default of his doing so, the allegations of fact in the plaint shall be deemed to be admitted and the Banking Court may pass a decree in favour of the plaintiff on the basis thereof or such other material as the Banking Court may require in the interests of justice. (2) The defendant shall file the application for leave to defend within thirty days of the date of first service by any one of the modes laid down in sub-section (5) of section 9:-

Provided that where service has been validly effected only through publication in the newspapers, the Banking Court may extend the time for filing an application for leave to defend if satisfied that the defendant did not have knowledge thereof. (3) The application for leave to defend shall be in the form of a written statement, and shall contain a summary of the substantial questions of law as well as fact in respect of which, in the opinion of the defendant, evidence needs to be recorded. (4) In the case of a suit for recovery instituted by a financial institution the application for leave to defend shall also specifically state the following (a) the amount of finance availed by the defendant from the financial institution; the amounts paid by the defendant to the financial institution and the dates of payments; (b) the amount of finance and other amounts relating to the finance payable by the defendant to the financial institution upto the date of institution of the suit; (c) the amount if any which the defendant disputes as payable to the financial institution and facts in support thereof:

Explanation.- For the purposes of clause (b) any payment made to a financial institution by a customer in respect of a finance shall be appropriated first against other amounts relating to the finance and the balance, if any, against the principal amount of the finance. (5) The application for leave to defend shall be accompanied by all the documents which, in the opinion of the defendant, support the substantial questions of law or fact raised by him. (6) An application for leave to defend which does not comply with the requirements of sub-sections (3), (4) where applicable and (5) shall be rejected, unless the defendant discloses therein sufficient cause for his inability to comply with any such requirement. (7) The plaintiff shall be given an opportunity of filing a reply to the application for leave to defend, in the form of a replication. (8) Subject to section 11, the Banking Court shall grant the defendant leave to defend the suit if on consideration of the contents of the plaint, the application for leave to defend and the reply thereto it is of the view that substantial questions of law or fact have been raised in respect of which evidence needs to be recorded. (9) In granting leave under sub-section (8), the Banking Court may impose such conditions as it may deem appropriate in the circumstances of the case, including conditions as to deposit of cash or furnishing of security.

(10) Where the application for leave to defend is accepted, the Banking Court shall treat the application as a written statement, and in its order granting leave shall frame issues relating to the substantial questions of law or fact, and, subject to fulfillment of any conditions attached to grant of leave, fix a date for recording of evidence thereon and disposal of the suit. (11) Where the application for leave to defend is rejected or where a defendant fails to fulfill the conditions attached to the grant of leave to defend, the Banking Court shall forthwith proceed to pass judgment and decree in favour of the plaintiff against the defendant. (12) Where an application for leave to defend has been filed before the coming into force of this Ordinance, the defendant shall be allowed a period of twenty-one days from the date of coming into force of this Ordinance, or from the date of first hearing thereafter, whichever is later, for filing an amended application for leave to defend in accordance with the provisions of this Ordinance.

11. Interim Decree.(1) If the Banking Court on a consideration of the contents of the plaint, the application for leave to defend of the defendant and the reply thereto, is of the opinion that the dispute between the parties does not extend to the whole of the claim, or that part of the claim is either undisputed, or is clearly due, or that the dispute is mainly limited to a part of the principal amount of the finance or to any other amounts relating to the finance, it shall, while granting leave and framing issues with respect to the disputed amounts, pass an interim decree in respect of that part of the claim which relates to the principal amount and which appears to be payable by the defendant to the plaintiff. (2) The interim decree passed under sub-section (1) shall, for all purposes including appeal and execution, be deemed to be a decree passed under this Ordinance, and any amount covered thereby or recovered in execution thereof shall be adjusted at the time of the final decree:

Provided that it shall be open to the Banking Court notwithstanding the pendency of any appeal, to modify, in part or in whole, or reverse, the terms of the interim decree at the time of the final disposal of the suit and pass such order as it may deem just and proper: Provided further that neither the Banking Court nor the High Court acting under sub-section (3) of section 22 shall stay execution of an interim decree unless the judgment-debtor deposits in cash with the Banking Court the amount or amounts admitted by the judgment-debtor to be payable to the financial institution under clause (c) of sub-section (4) of section 10, and furnishes security for the balance decretal amount if any, inclusive, in the case of a suit filed by a financial institution, of cost of funds determined under section 3, and other costs.

12.Power to set aside decree.- In any case in which a decree is passed against a defendant under subsection (1) of section 10 he may, within twenty-one days of the date of the decree, or where the summons was not duly served when he has knowledge of the decree, apply to the Banking Court for an order to set it aside; and if he satisfies the Banking Court that he was prevented by sufficient cause from making an application under section 10, or that the summons was not duly served, the Court shall make an order setting aside the decree against him upon such terms as to costs, deposit in cash or furnishing of security or otherwise as it thinks fit and allow him to make the application within ten days of the order.

13. Disposal of suit.- (1) A suit in which leave to defend has been granted to the defendant shall be disposed of within ninety days from the day on which leave was granted, and in case proceedings continue beyond the said period the defendant may be required to furnish security in such amount as the Banking Court deems fit, and on the failure of the defendant to furnish such security, the Banking Court shall pass an interim or final decree in such amount as it may deem appropriate. (2) The requirement of furnishing security under sub-section (1) shall be dispensed with if, in the opinion of the Banking Court, the delay is not attributable to the conduct of the defendant. (3) Suits before a Banking Court shall come up for regular hearing as expeditiously as possible and except in extraordinary circumstances and for reasons to be recorded, a Banking Court shall not allow adjournments for more than seven days. (4) Where leave to defend is granted and evidence is to be recorded, the parties may file affidavits in respect of the examination-in-chief of any witness who is not to be summoned through the Banking Court, and where such affidavits are filed, the Banking Court shall give notice thereof to the other contesting parties and on the date fixed for recording evidence, shall, subject to such modification as may be required for purposes of production and exhibiting of documents, or otherwise in accordance with law, treat the affidavit as examination-in-chief and allow the contesting parties an opportunity for cross-examination on the basis thereof.

14.Decree in suits relating to mortgages.- Where the suit filed by a financial institution before the Banking Court is for the enforcement of a mortgage of immovable property the Banking Court will not be required to pass a preliminary decree as provided in Order XXXIV of the First Schedule to the Code of Civil Procedure, 1908 (Act V of 1908), but shall directly pass an interim or final decree for foreclosure or sale.

15. Sale of mortgaged property.- (1) In this section, unless there is anything repugnant in the subject or context

(a) mortgage means the transfer of an interest in specific immovable property for the purpose of securing the payment of the mortgage money or the performance of an obligation which may give rise to a pecuniary liability; (b) mortgage money means any finance or other amounts relating to a finance, penalties, damages, charges or pecuniary liabilities, payment of which is secured for the time being by the document by which the mortgage is effected or evidenced, including any mortgage deed or memorandum of deposit of title deeds; and (c) mortgaged property means immovable property mortgaged to a financial institution.

(2) In case of default in payment by a customer, the financial institution may send a notice on the mortgagor demanding payment of the mortgage money outstanding within fourteen days from service of the notice, and failing payment of the amount within due date, it shall send a second notice of demand for payment of the amount within fourteen days. In case the customer on the due date given in the second notice sent, continues to default in payment, financial institution shall serve a final notice on the mortgager demanding the payment of the mortgage money outstanding within thirty days from service of the final notice on the customer. (3) When a financial institution serves a notice of demand, all the powers of the mortgagor in regard to recovery of rents and profits from the final mortgaged property shall stand transferred to the financial institution until such notice is withdrawn and it shall be the duty of the mortgagor to pay all rents and profits from the mortgaged property to the financial institution. Provided that where the mortgaged property is in the possession of any tenant or occupier other than the mortgagor, it shall be the duty of such tenant or occupier, on receipt of notice in this behalf from the financial institution, to pay the rent or lease money or other consideration agreed with the mortgagor to the financial institution. (4) Where a mortgagor fails to pay the amount as demanded within the period prescribed under subsection (2), and after the due date given in the final notice has expired, the financial institution may, without the intervention of any Court, sell the mortgaged property or any part thereof by public auction and appropriate the proceeds thereof towards total or partial satisfaction of the outstanding mortgage money:

Provided that before exercise of its powers under this sub-section, the financial institution shall cause to be published a notice in one reputable English daily newspaper with wide circulation and one Urdu daily newspaper in the Province in which the mortgaged property is situated, specifying particulars of the mortgaged property, including name and address of the mortgagor, details of the mortgaged property, amount of outstanding mortgage money, and indicating the intention of the financial institution to sell the mortgaged property. The financial institution shall also send such notices to all persons who, to the knowledge of the financial institution, have an interest in the mortgaged property as mortgagees.

(5) The financial institution shall be entitled, in its discretion, to participate in the public auction, and to purchase the mortgaged property at the highest bid obtained in the public auction. (6) Where the mortgagor or his agent or servant or any person put in possession by the mortgagor or on account of the mortgagor does not voluntarily give possession of the mortgaged property sought to be sold or sought to be purchased or purchased by the financial institution, a Banking Court on application of the financial institution or purchaser shall put the financial institution or purchaser, as the case may be, in possession of the mortgaged property in any manner deemed fit by it:

Provided that the Banking Court may not order eviction of a person who is in occupation of the mortgaged property or any part thereof under a bona fide lease, except on expiry of the period of the lease, or on payment of such compensation as may be agreed between the parties or as may be determined to be reasonable by the Banking Court.

Explanation.- (1) Where the lease is created after the date of the mortgage and it appears to the Banking Court that the lease was created so as to adversely affect the value of the mortgaged property or to prejudice the rights and remedies of the financial institution, it shall be presumed that the lease is not bona fide, unless proved otherwise.

(7) For purposes of execution and registration of the sale deed in respect of the mortgaged property, the financial institution shall be deemed to be the duly authorized attorney of the mortgagor and a sale deed executed and presented for registration by duly authorized attorneys of the financial institution shall be accepted for such purposes by the Registrar and Sub-Registrar under the Registration Act, 1908 (XVI of 1908). (8) Upon execution and registration of the sale deed of the mortgaged property in favor of the purchaser all rights in such mortgaged property shall vest in the purchaser free from all encumbrances and the mortgagor shall be divested of any right, title and interest in the mortgaged property. (9) Net sale proceeds of the mortgaged property, after deducting all expenses of sale or expenses incurred in any attempted sale, shall be distributed ratably amongst all mortgagees in accordance with their respective rights and priorities in the mortgaged property. Any surplus left, after paying in full all the dues of mortgagees, shall be paid to the mortgagor. (10) A financial institution which has sold mortgaged property in exercise of powers conferred herein shall file proper accounts of the sale proceeds in a Banking Court within thirty days of the sale.

(11) All disputes relating to the sale of the mortgaged property under this section including disputes amongst mortgagees in respect of distribution of the sale proceeds, shall be decided by the Banking Court. (12) Neither the Banking Court nor the High Court shall grant an injunction restraining the sale or proposed sale of mortgaged property unless (a) it is satisfied that no mortgage in respect of the immovable property has been created; or (b) all moneys secured by mortgage of the mortgaged property have been paid; or (c) the mortgagor or objector deposits in the Banking Court in cash the outstanding mortgage money. (13) The rights and remedies provided under this section are in addition to, and not in lieu of, any other rights or remedies a financial institution may have under this Ordinance. (14) The provisions contained in this section shall have effect notwithstanding anything contained in this Ordinance.

16. Attachment before judgment, injunction and appointment of Receivers.(1) Where the suit filed by a financial institution is for the recovery of any amount through the sale of any property which is mortgaged, pledged, hypothecated, assigned, or otherwise charged or which is the subject of any obligation in favour of the financial institution as security for finance or for or in relation to a finance lease, the Banking Court may, on application by the financial institution, with a view to preventing such property from being transferred, alienated, encumbered, wasted or otherwise dealt with in a manner which is likely to impair or prejudice the security in favour of the financial institution, or otherwise in the interest of justice (a) restrain the customer and any other concerned person from transferring, alienating, parting with possession or otherwise encumbering, charging, disposing or dealing with the property in any manner; (b) attach such property; (c) transfer possession of such property to the financial institution; or (d) appoint one or more Receivers of such property on such terms and conditions as it may deem fit. (2) An order under sub-section (1) may also be passed by the Banking Court in respect of any property held benami in the name of an ostensible owner whether acquired before or after the grant of finance by the financial institution. (3) In cases where a customer has obtained property or financing through a finance lease, or has executed an agreement in connection with a mortgage, charge or pledge in terms whereof the financial

institution is authorized to recover or take over possession of the property without filing a suit, the financial institution may, at its option: (a) directly recover the same if the property is movable; or

(b) file a suit hereunder and the Banking Court may pass an order at any time, either authorising the financial institution to recover the property directly or with the assistance of the Court: Provided that in the event the financial institution wrongly or unjustifiably exercises the direct power of recovery hereunder it shall be liable to pay such compensation to the customer as may be adjudged by the Banking Court in summary proceedings to be initiated on the application of the customer and concluded in thirty days. (4) Nothing in sub-sections (1) to (3) shall affect the powers of the Banking Court under Order XXXVIII Rules 5 and 6 of the Code of Civil Procedure, 1908 (Act V of 1908) to attach before judgment any property other than property mentioned in sub-section (1).

17. Final Decree.- (1) The final decree passed by a Banking Court shall provide for payment from the date of default of the amounts found to be payable on account of the default in fulfillment of the obligation, and for costs including, in the case of a suit filed by a financial institution cost of funds determined under section 3. (2) The Banking Court may, at the time of passing a final decree, also pass an order of the nature contemplated by sub-section (1) of section 16 to the extent of the decretal amount.

18. Banking Documents.-(1) No financial institution shall obtain the signature of a customer on banking document which contains blanks in respect of important particulars including the date, the amount, the property or the period of time in question; (2) Finance agreements executed by or on behalf of a financial institution and a customer shall be duly attested in the manner laid down in Article 17 of the Qanun-e-Shahadat Order, 1984 (P.O. 10 of 1984); (3) Nothing contained in sub-section (1) and (2) shall affect the validity of any document executed prior to the date of enforcement of this Ordinance; (4) Notwithstanding any thing contained in this section or any other law, the Banking Court shall not refuse to accept in evidence any document creating or purporting to create or indicating the creation of a mortgage, charge, pledge or hypothecation in relation to any property or assumption of any obligation by a customer, guarantor, mortgagor or otherwise merely because it is not duly stamped or is not registered as required by any law or is not attested or witnessed as required by Article 17 of the Qanune-Shahadat Ordinance, 1984 (P.O. 10 of 1984) and no such document shall be impoundable by the Banking Court or any other Court or authority:

Provided that nothing contained in this sub-section shall operate to defeat the legal rights of a bona fide purchaser for value without notice of a document which ought to have been registered.

19. Execution of decree and sale with or without intervention of Banking Court.(1) Upon pronouncement of judgment and decree by a Banking Court, the suit shall automatically stand converted into execution proceedings without the need to file a separate application and no fresh notice need be issued to the judgment-debtor in this regard. Particulars of the mortgaged, pledged or hypothecated property and other assets of the judgment-debtor shall be filed by the decree-holder for consideration of the Banking Court and the case will be heard by the Banking Court for execution of its decree on the expiry of 30 days from the date of pronouncement of judgment and decree: Provided that if the record of the suit is summoned at any stage by the High Court for purposes of hearing an appeal under section 22 or otherwise, copies of the decree and other property documents shall be retained by the Banking Court for purposes of continuing the execution proceedings. (2) The decree of the Banking Court shall be executed in accordance with the provisions of the Code of Civil Procedure, 1908 (Act V of 1908) or any other law for the time being in force or in such manner as the Banking Court may at the request of the decree-holder consider appropriate, including recovery as arrears of land revenue.

Explanation.- The term assets or properties in sub-section (2) shall include any assets and properties acquired benami in the name of an ostensible owner. (3) In cases of mortgaged, pledged or hypothecated property, the financial institution may sell or cause the same to be sold with or without the intervention of the Banking Court either by public auction or by inviting sealed tenders and appropriate the proceeds towards total or partial satisfaction of the decree. The decree passed by a Banking Court shall constitute and confer sufficient power and authority for the financial institution to sell or cause the sale of the mortgaged, pledged or hypothecated property together with transfer of marketable title and no further order of the Banking Court shall be required for this purpose. (4) Where a financial institution wishes to sell mortgaged, pledged or hypothecated property by inviting sealed tenders, it shall invite offers through advertisement in one English and one Urdu newspaper which are circulated widely in the city in which the sale is to take place giving not less than thirty days time for submitting offers. The sealed tenders shall be opened in the presence of the tenderers or their representatives or such of them as attend:

Provided that the financial institution shall be entitled in its discretion, to purchase the property at the highest bid received. (5) The provisions of sub-sections (5), (6), (7), (8), (9), (10), (11) and (12) of section 15 shall, mutatis mutandis, apply to sales of mortgaged, pledged or hypothecated property by a financial institution in exercise of its powers conferred by sub-section (3). (6) The Banking Court and the financial institution shall be entitled to seek the services and assistance of the police or security agency in the exercise of powers conferred by this section. (7) Notwithstanding anything contained in the Code of Civil Procedure 1908 (Act V of 1908), or any other law for the time being in force (a) the Banking Court shall follow the summary procedure for purposes of investigation of claims and objections in respect of attachment or sale of any property, whether or not mortgaged, pledged or hypothecated, and shall complete such investigation within 30 days of filing of the claims or objections; (b) if the claims or objections are found by the Banking Court to be malafide or filed merely to delay the sale of the property, it shall impose a penalty upto twenty percent of the sale price of the property. (c) the Banking Court may, in its discretion, proceed with the sale of the mortgaged, or pledged or hypothecated property if, in its opinion the interest of justice so require: Provided that the financial institution gives a written undertaking that in the event the objections are found to be valid, or are sustained, it shall in addition to compensating the aggrieved party by the payment of such amount as may be adjudged by the Banking Court also pay a penalty upto twenty percent of the sale proceeds and such amounts shall be recoverable from the financial institution in the same manner as in execution of decrees passed hereunder. 20. Provisions relating to certain offences.- (1) Whoever (a) dishonestly commits a breach of the terms of a letter of hypothecation, trust receipt or any other instrument or document executed by him whereby possession of the assets or properties offered as security for the re-payment of finance or fulfillment of any obligation are not with the financial institution but are retained by or entrusted to him for the purposes of dealing with the same in the ordinary course of business subject to the terms of the letter of hypothecation or trust receipt or other instrument or document or for the purpose of effecting their sale and depositing the sale proceeds with the financial institution; or (b) makes fraudulent mis-representation or commits a breach of an obligation or representation made to a financial institution on the basis of which the financial institution has granted a finance; or (c) subsequent to the creation of a mortgage in favour of a financial institution, dishonestly alienates or parts with the possession of the mortgaged property whether by creation of a lease or otherwise contrary to the terms thereof, without the written permission of the financial institution; or

(d) subsequent to the passing of a decree under section 10 or 11, sells, transfers or otherwise alienates, or parts with possession of his assets or properties acquired after the grant of finance by the financial institution, including assets or properties acquired benami in the name of an ostensible owner shall, without prejudice to any other action which may be taken against him under this Ordinance or any other law for the time being in force, be punishable with imprisonment of either description for a term which may extend to three years and shall also be liable to a fine which may extend to the value of the property or security as decreed or the market value whichever is higher and shall be ordered by the Banking Court trying the offence to deliver up or refund to the financial institution, within a time to be fixed by the Banking Court, the property or the value of the property or security.

Explanation - Dishonesty may be presumed where a customer has not deposited the sale proceeds of the property with the financial institution in violation of the terms of the agreement between the financial institution and the customer. (2) Whoever knowingly makes a statement which is false in material respects in an application for finance and obtains a finance on the basis thereof, or applies the amount of the finance towards a purpose other than that for which the finance was obtained by him, or furnishes a false statement of stocks in violation of the terms of the agreement with the financial institution or falsely denies his signatures on any banking document before the Banking Court, shall be guilty of an offence punishable with imprisonment of either description for a term which may extend to three years, or with fine, or with both. (3) Whoever resists or obstructs, either by himself or on behalf of the judgment debtor, through the use of force, the execution of a decree, shall be punishable with imprisonment, which may extend to one year, or with fine, or with both. (4) Whoever dishonestly issues a cheque towards re-payment of a finance or fulfillment of an obligation which is dishonoured on presentation, shall be punishable with imprisonment which may extend to one year, or with fine or with both, unless he can establish, for which the burden of proof shall rest on him, that he had made arrangements with his bank to ensure that the cheque would be honoured and that the bank was at fault in not honouring the cheque. (5) Where the person guilty of an offence under this Ordinance is a company or other body corporate, the chief executive by whatever name called, and any director or officer involved shall be deemed to be guilty of the offence and shall be liable to be prosecuted against and punished accordingly. (6) All offences under this Ordinance shall be bailable, non-cognizable and compoundable.

21. Application of fines and costs.- (1) A Banking Court may direct that the whole or part of any fine or costs imposed under this Ordinance shall be applied in or towards

(a) payment of costs of all or any proceedings under this Ordinance; and (b) payment of compensation to an aggrieved party. (2) An order under sub-section (1) shall be deemed to be a decree passed under this Ordinance for purposes of execution.

22. Appeal.- (1) Subject to sub-section (2), any person aggrieved by any judgment, decree, sentence, or final order passed by a Banking Court may, within thirty days of such judgment, decree, sentence or final order prefer an appeal to the High Court. (2) The appellant shall give notice of the filing of the appeal in accordance with the provisions of Order XLIII Rule 3 of the Code of Civil Procedure (Act V of 1908) to the respondent who may appear before the Banking Court to contest admission of the appeal on the date fixed for hearing. (3) The High Court shall at the stage of admission of the appeal, or at any time thereafter either suo motu or on the application of the decree holder, decide by means of a reasoned order whether the appeal is to be admitted in part or in whole depending on the facts and circumstances of the case, and as to the security to be furnished by the appellant: Provided that the admission of the appeal shall not per se operate as a stay, and nor shall any stay be granted therein unless the decree-holder has been given an opportunity of being heard and unless the appellant deposits in cash with the High Court an amount equivalent to the decretal amount inclusive of costs, or in the case of an appeal other than an appeal against an interim decree, at the discretion of the High Court furnishes security equal in value to such amount; and in the event of a stay being granted for a part of the decretal amount only, the requirement for a deposit in cash or furnishing of security shall stand reduced accordingly. (4) An appeal under sub-section (1) shall be heard by a bench of not less than two Judges of the High Court and, in case the appeal is admitted, it shall be decided within 90 days from the date of admission. (5) An appeal may be preferred under this section from a decree passed ex-parte. (6) No appeal, review or revision shall lie against an order accepting or rejecting an application for leave to defend, or any interlocutory order of the Banking Court which does not dispose of the entire case before the Banking Court other than an order passed under sub-section (11) of section 15 or sub-section (7) of section 19. (7) Any order of stay of execution of a decree passed under sub-section (2) shall automatically lapse on the expiry of six months from the date of the order whereupon the amount deposited in Court shall be paid over to the decree-holder or the decree-holder may enforce the security furnished by the judgment-debtor.

23. Restriction on transfer of assets & properties.(1) After publication of summons under sub-section (5) of section 9, no customer shall, without the prior written permission of the Banking Court transfer, alienate, encumber, remove or part with possession of any of his asset or property furnished to the financial institution as security by way of mortgage, pledge, hypothecation, charge, lien or otherwise pending final decision of the suit filed by the financial institution under this Ordinance, and any such transfer, alienation, encumbrance or other disposition by the customer in violation of this sub-section shall be void and of no legal effect: Provided that the customer may sell any such asset or property which has been retained by or entrusted to him for purposes of dealing with the same in the ordinary course of business subject to the terms of the letter of hypothecation or trust receipt or other instrument or document executed by him, or for purposes of effecting their sale and depositing the sale proceeds with the financial institution: Provided further that the customer before making the sale shall file in the Banking Court a statement supported by affidavit, containing full particulars of such asset or property, and within three days after the sale shall submit a full account thereof to the Banking Court and the financial institution. (2) After pronouncement of judgment and decree by the Banking Court, including an interim decree under section 11, no judgment-debtor shall without the prior written permission of the Banking Court transfer, alienate, encumber or part with possession of any assets or properties and any such transfer, alienation, encumbrance or other disposition by a judgment-debtor in violation of this sub-section shall be void and of no legal effect. (3) The provisions of sub-section (1) shall also apply to a person who has furnished any security on behalf of a customer to the financial institution on the basis of which finance was granted, provided such person is a defendant in the suit filed under section 9 or is added as a defendant thereafter.

24. Application of the Limitation Act, 1908 (Act IX of 1908).(1) Save as otherwise provided in this Ordinance, the provisions of the Limitation Act, 1908 (Act IX of 1908) shall apply to all cases instituted or filed in a Banking Court after the coming into force of this Ordinance. (2) A suit under section 9 may be entertained by a Banking Court after the period of limitation prescribed therefor, if the plaintiff satisfies the Banking Court that he had sufficient cause for not filing the suit within such period.

25. Power to make rules.-The Federal Government may, by notification in the Official Gazette, make rules for carrying out the purposes of this Ordinance.

26. Removal of difficulties.- If any difficulty arises in giving effect to any of the provisions of this Ordinance, the Federal Government may, by notification in the Official Gazette, make such provisions as it thinks fit for removing such difficulties.

27. Finality of order.- Subject to the provisions of section 22, no Court or other authority shall revise or review or call, or permit to be called, into question any proceeding, judgment, decree, sentence or order of a Banking Court or the legality or propriety of anything done or intended to be done by the Banking Court in exercise of jurisdiction under this Ordinance: Provided that the Banking Court may, on its own accord or on application of any party, and with notice to the other party or, as the case may be, to both the parties, correct any clerical or typographical mistake in any judgment, decree, sentence or order passed by it.

28. Indemnity.- No suit, prosecution or other legal proceeding shall lie against the Federal Government or a Banking Court or a financial institution or any person for anything which is in good faith done or intended to be done under this Ordinance or any rule made there under.

29. Repeal.-The Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997 (Act XV of 1997) is hereby repealed. (2) Notwithstanding the repeal of the (Recovery of Loans, Advances, Credits and Finances) Act, 1997 (Act XV of 1997) and the provisions of this Ordinance, decrees in cases relating to interest-bearing loans which have not been converted into finance shall be passed in accordance with the provisions of section 15 of the said Act. j Amended vide the Financial Institutions (Recovery of Finances) (Amendment) Ordinance, 2001 dated 30-09-2001

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DEBT RECOVERY APPELLATE TRIBUNAL, CHENNAI

THE RECOVERY OF DEBTS DUE TO BANKS AND FINANCIAL INSTITUTIONS ACT, 1993
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THE RECOVERY OF DEBTS DUE TO BANKS AND FINANCIAL INSTITUTIONS ACT, 1993
SECTIONS CONTENTS Introduction CHAPTER I PRELIMINARY 1. Short title, extent, commencement and application 2. Definitions CHAPTER II ESTABLISHMENT OF TRIBUNAL AND APPELLATE TRIBUNAL 3. Establishment of Tribunal 4. Composition of Tribunal 5. Qualifications for appointment as Presiding Officer 6. Term of Office 7. Staff of Tribunal 8. Establishment of Appellate Tribunal 9. Composition of Appellate Tribunal 10. Qualifications for appointment as Chairperson of the Appellate Tribunal . 11. Term of Office 12. Staff of the Appellate Tribunal 13. Salary and allowances and other terms and conditions of service of Presiding Officers 14. Filling up of vacancies 15. Resignation and removal

16. Orders constituting Tribunal or an Appellate Tribunal to be final and not to invalidate its proceedings CHAPTER III JURISDICTION, POWERS AND AUTHORITY OF TRIBUNALS 17. Jurisdiction, powers and authority of Tribunals. 17A. Power of Chairperson of Appellate Tribunal 18. Bar of Jurisdiction
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SECTIONS CONTENTS CHAPTER IV PROCEDURE OF TRIBUNALS 19. Application to the Tribunal 20. Appeal to the Appellate Tribunal 21. Deposit of amount of debt due, on filing appeal 22. Procedure and Powers of the Tribunal and the Appellate Tribunal 23. Right to legal representation and Presenting Officer 24. Limitation CHAPTER V RECOVERY OF DEBT DETERMINED BY TRIBUNAL 25. Modes of recovery of debts 26. Validity of certificate and amendment thereof 27. Stay of proceedings under certificate and amendment or withdrawal thereof 28. Other modes of recovery 29. Application of certain provisions of Income-tax Act 30. Appeal against the order of Recovery Officer CHAPTER VI MISCELLANEOUS 31. Transfer of pending cases 31A. Power of Tribunal to issue certificate of recovery in case of decree or order. 32. Chairperson, Presiding Officer and staff of Appellate Tribunal and Tribunal to be public servants 33. Protection of action taken in good faith 34. Act to have over-riding effect 35. Power to remove difficulties 36. Power to make rules 37. Repeal and saving
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THE DEBT RECOVERY APPELLATE TRIBUNAL (FINANCIAL AND ADMINISTRATIVE POWERS) RULES, 1997
RULES 1. Short title and commencement 2. Definitions 3. Powers of the Presiding Officer of the Appellate Tribunal

THE DEBT RECOVERY APPELLATE TRIBUNAL (PROCEDURE FOR APPOINTMENT AS CHAIRPERSON OF THE APPELLATE TRIBUNAL) RULES, 1998
RULES 1. Short title and commencement 2. Definitions 3. Method of appointment under section 9 of the Act . 4. Medical Fitness 5. Interpretation 6. Saving 7. Oaths of office and secrecy
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THE RECOVERY OF DEBTS DUE TO BANKS AND FINANCIAL INSTITUTIONS ACT, 1993
INTRODUCTION Banks and financial institutions have been experiencing considerable difficulties in recovering loans and enforcement of securities charge with them. The procedure for recovery of debts due to the banks and financial institutions, which is being followed, has resulted in a significant portion of the funds being blocked. The Committee on the Financial System has considered the setting up of the Special Tribunals with special powers for adjudication of such matters and speedy recovery as critical to the successful implementation of the financial sector reforms. An urgent need was, therefore, felt to work out a suitable mechanism through which the dues, to the banks and financial institutions could be realised. In 1981 a committee had examined the legal and other difficulties, faced by banks and financial institutions and suggested remedial measures including changes in law. This committee also suggested setting up of Special Tribunals for recovery of dues of the banks and financial institutions by following a summary procedure. Keeping in view the recommendations of the above Committees, the Recovery of Debts due to Bank and Financial Institutions Bill, 1993 was introduced in the

Parliament. STATEMENT OF OBJECTS AND REASONS Banks and financial institutions at present experience considerable difficulties in recovering loans and enforcement of securities charged with them. The existing procedure for recovery of debts due to the banks and financial institutions has blocked a significant portion of their funds in unproductive assets, the value of which deteriorates with the passage of time. The Committee on the Financial System headed by Shri M. Narasimham has considered the setting up of the Special Tribunals with special powers for adjudication of such matters and speedy recovery as critical to the successful implementation of the financial sector reforms. An urgent need was, therefore, felt to work out a suitable mechanism through which the dues to the banks and financial institutions could be realized without delay. In 1981, a Committee under the Chairmanship of Shri T.
6

Tiwari had examined the legal and other difficulties faced by banks and financial institutions and suggested remedial measures including changes in law. The Tiwari Committee had also suggested setting up of Special Tribunals for recovery of dues of the banks and financial institutions by following a summary procedure. The setting up of Special Tribunals will not only fulfill a long-felt need, but also will be an important step in the implementation of the Report of Narasimham Committee. Whereas on 30th September, 1990 more than fifteen lakhs of cases filed by the public sector banks and about 304 cases filed by the financial institutions were pending in various courts, recovery of debts involved more than Rs.5622 crores in dues of Public Sector Banks and about Rs.391 crores of dues of the financial institutions. The locking up of such huge amount of public money in litigation prevents proper utilisation and recycling of the funds for the development of the country. The Bill seeks to provide for the establishment of Tribunal and Appellate Tribunals for expeditious adjudication and recovery of debts due to banks and financial institutions. Notes on clauses explain in detail the provisions of the Bill. ACT 51 OF 1993 The Recovery of Debts Due to Banks and Financial Institutions Bill having been passed by both the Houses of Parliament received the assent of the President on 27th August 1993. It came on the Statute Book as THE RECOVERY OF DEBTS DUE TO BANKS AND FINANCIAL INSTITUTIONS ACT, 1993 (51 of 1993). LIST OF AMENDING ACTS

1. The Recovery of Debts Due to Banks and Financial Institutions (Amendment) Act, 1995 (28 of 1995). 2. The Recovery of Debts Due to Banks and Financial Institutions (Amendment) Act, 2000 (1 of 2000
7

THE RECOVERY OF DEBTS DUE TO BANKS AND FINANCIAL INSTITUTIONS ACT, 1993
(51 of 1993) [27th August, 1993] An Act 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 thereto. BE it enacted by Parliament in Forty-fourth Year of the Republic of India as follows:CHAPTER I PRELIMINARY 1. Short title, extent, commencement and application.(1) This Act may be called the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. (2) It extends to the whole of India except the State of Jammu and Kashmir. (3) It shall be deemed to come into force on the 24th day of June, 1993. (4) The provisions of this Act shall not apply where the amount of debt due to any bank or financial institution or to a consortium of banks or financial institutions is less then ten lakh rupees or such other amount, being not less than one lakh rupees, as the Central Government may, by notification, specify. 2. Definitions.In this Act, unless the context otherwise requires,-(a) Appellate Tribunal means an Appellate Tribunal established under sub-section (1) of Section 8;
8

(b) application means an application made to a Tribunal under Section.19; (c) appointed day, in relation to a Tribunal or an Appellate Tribunal, means the date on which such Tribunal is established under subsection (1) of Section 3 or, as the case may be, sub-section (1) of Section 8; (d) bank means (i) banking company;

(ii) a corresponding new bank; (iii) State Bank of India; (iv) a subsidiary bank; or (v) a Regional Rural Bank; (e) banking company shall have the meaning assigned to it in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949); 1[(ea) Chairperson means a Chairperson of an Appellate Tribunal appointed under section 9;] (f) corresponding new bank shall have the meaning assigned to it in clause (da) of section 5 of the Banking Regulation Act, 1949 (10 of 1949); 2[(g) debt means any liability (inclusive of interest) which is claimed as due from any person by a bank of a financial institution or by a consortium of banks or financial institutions during the course of any business activity undertaken by the bank or the financial institution or the consortium under any law for the time being in force, in cash or otherwise, whether secured or unsecured, or assigned, or whether payable under a decree or order of any civil court or any arbitration award or otherwise or under a mortgage and subsisting on, and legally recoverable on, the date of the application;] (h) financial institution means
1 Ins. 2 Subs.

by Act 1 of 2000, sec. 3 (w.r.e.f. 17.1.2000) by Act 1 of 2000, sec. 3, for clause (g) (w.r.e.f. 17.1.2000).

(i) a public financial institution within the meaning of Section 4A of the Companies Act, 1956 (1 of 1956); (ii) such other institution as the Central Government may, having regard to its business activity and the area of its operation in India by notification, specify; (i) notification means a notification published in the Official Gazette; (j) prescribed means prescribed by rules made under this Act; 1 [(ja) Presiding Officer means the Presiding Officer of the Debts Recovery Tribunal appointed under sub-section (1) of section 4;] (k) Recovery Officer means a Recovery Officer appointed by the Central Government for each Tribunal under sub-section (1) of section 7; (l) Regional Rural Bank means a Regional Rural Bank established under section 3 of the Regional Rural Bank Act, 1976 (21 of 1976);

(m) State Bank of India means the State Bank of India constituted under section 3 of the State Bank of India Act, 1955 (23 of 1955); (n) subsidiary bank shall have the meaning assigned to it in clause (k) of section 2 of the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959); (o) Tribunal means the Tribunal established under sub-section (1) of section 3.
COMMENTS (i) Clause (c) of section 5 of the Banking Regulation Act, 1949, defines the expression Banking Company as follows:-banking company means any company which transacts the business of banking in India. (ii) Clause (da) of section 5 of the Banking Regulation Act, 1949 defines the expression corresponding new bank as follows:-1 Ins. by Act 1 of 2000, sec. 3 (w.r.e.f. 17.1.2000) 10 corresponding new bank means a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (4of 1980). (iii) Section 4A of the Companies Act, 1956 (1 of 1956) states that each of the following financial institutions shall be regarded as a public financial institution, namely:-(i) the Industrial Credit and Investment Corporation of India Limited, a company formed and registered under the Indian Companies Act, 1913; (ii) the Industrial Finance Corporation of India, established under section 3 of the Industrial Financial Corporation Act, 1948; (iii) the Industrial Development Bank of India, established under section 3 of the Industrial Development Bank of India Act, 1964; (iv) the Life Insurance Corporation of India, established under section 3 of the Life Insurance Corporation Act, 1956; (v) the Unit Trust of India, established under section 3 of the Unit Trust of India Act, 1963. The Central Government may by notification in the Official Gazette specify such other institution as it may think fit to be a Public financial institution: Provided that no institution shall be so specified unless (i) it has been established or constituted by or under any Central Act; or (ii) not less than fifty-one per cent of the paid-up share capital of such institution is held or controlled by the Central Government.

CHAPTER II ESTABLISHMENT OF TRIBUNAL AND APPELLATE TRIBUNAL 3. Establishment of Tribunal.(1) The Central Government shall, by notification, establish one or more Tribunals, to be known as the Debts Recovery Tribunal, to exercise the jurisdiction, powers and authority

conferred on such Tribunal by or under this Act. (2) The Central Government shall also specify, in the notification referred to in sub-section (1), the areas within which the Tribunal may exercise jurisdiction for entertaining and deciding the applications filed before it.
COMMENTS In exercise of its legislative power, relating to banking, the Parliament can provide the mechanism by which monies due to the Bank and Financial Institutions can 11 be recovered. The Debt Recovery Tribunals have been set up in regard to the debts due to the bank; Union of India V. Delhi High Court Bar Association, 2002 (2) Supreme 435.

4. Composition of Tribunal.(1) A Tribunal shall consist of one person only (hereinafter referred to as the Presiding Officer) to be appointed by notification, by the Central Government. (2) Notwithstanding anything contained in sub-section (1), the Central Government may authorise the Presiding Officer of one Tribunal to discharge also the functions of the Presiding Officer of another Tribunal. 5. Qualifications for appointment as Presiding Officer.A person shall not be qualified for appointment as the Presiding Officer of a Tribunal unless he is, or has been, or is qualified to be, a District Judge. 6. Term of Office.The Presiding Officer of a Tribunal shall hold office for a term of five years from the date on which he enters upon his office or until he attains the age of 1[sixty-two years], whichever is earlier. 7. Staff of Tribunal.(1) The Central Government shall provide the Tribunal 2[with one or more Recovery Officers] and such other officers and employees as that Government may think fit. (2) 3[The Recovery Officers] and other officers and employees of a Tribunal shall discharge their functions under the general superintendence of the Presiding Officer. (3) The salaries and allowances and other conditions of service of the 4[Recovery Officers] and other officers and employees of a Tribunal shall be such as may be prescribed 8. Establishment of Appellate Tribunal.(1) The Central Government shall, by notification, establish one or more Appellate Tribunals, to be known as the Debts Recovery Appellate Tribunal, to exercise the jurisdiction, powers and authority conferred on such Tribunal by or under this Act.
1 Subs. 2 Subs.

by Act 28 of 1995, sec. 2, for sixty years (w.e.f. 9-8-1995). by Act 1 of 2000, sec. 4, for with a Recovery Officer (w.r.e.f. 17-1-2000). 3 Subs. by Act 1 of 2000, sec. 4, for The Recovery Officer (w.r.e.f. 17-1-2000). 4. Subs. by Act 1 of 2000, sec. 4, for Recovery Officer (w.r.e.f. 17 -1-2000)

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(2) The Central Government shall also specify in the notification, referred to in sub-section (1) the Tribunals in relation to which the Appellate Tribunal may exercise jurisdiction. 1[(3). Notwithstanding anything contained in sub-sections (1) and (2), the Central Government may authorise the Chairperson of one Appellate Tribunal to discharge also the functions of the Chairperson of other Appellate Tribunal.] 9. Composition of Appellate Tribunal.An Appellate Tribunal shall consist of one person only (hereinafter referred to as 2[the Chairperson of the Appellate Tribunal] to be appointed, by notification, by the Central Government. 10. Qualifications for appointment as 3[Chairperson of the Appellate Tribunal].A person shall not be qualified for appointment as 4[the Chairperson of an Appellate Tribunal] unless he (a) is, or has been, or is qualified to be, a Judge of a High Court; or (b) has been a member of the Indian Legal Service and has held a post in Grade I of that service for at least three years; or (c) has held office as the Presiding Officer of a Tribunal for at least three years. 11. Term of Office.5[The Chairperson of an Appellate Tribunal] shall hold office for a term of five years from the date on which he enters upon his office or until he attains the age of 6[sixty-five years], whichever is earlier.
1 Ins.

by Act 1 of 2000, sec. 5 (w.r.e.f. 17-1-2000). 2 Subs. by Act 1 of 2000, sec.2, for the Presiding Officer of the Appellate Tribunal (w.r.e.f. 17-1-2000). 3 Subs. by Act 1 of 2000, sec. 2, for Presiding Officer of the Appellate Tribunal (w.r.e.f. 17-1-2000). 4 Subs. by Act 1 of 2000, sec. 2, for Presiding Officer of the Appellate Tribunal (w.r.e.f. 17-1-2000). 5 Subs. by Act 1 of 2000, sec. 2, for the Presiding Officer of an Appellate Tribunal (w.r.e.f. 17-1-2000). 6 Subs. by Act 28 of 1995, sec. 3, for sixty-two years (w.e.f. 9-8-1995). 13

12. Staff of the Appellate Tribunal.The provisions of section 7 (except those relating to Recovery Officer) shall, so far as may be, apply to an Appellate Tribunal as they apply to a Tribunal and accordingly references in that section to Tribunal shall be construed as references to Appellate Tribunal and references to Recovery Officer shall be deemed to have been omitted.

13. Salary and allowances and other terms and conditions of service of Presiding Officers.The salary and allowances payable to and the other terms and conditions of service (including pension, gratuity and other retirement benefits) of, 1[the Presiding Officer of a Tribunal or the Chairperson of an Appellate Tribunal] shall be such as may be prescribed: Provided that neither the salary and allowances nor the other terms and conditions of service of 2[the Presiding Officer of a Tribunal or the Chairperson of an Appellate Tribunal shall be varied to his] disadvantage after appointment. 14. Filling up of vacancies.If, for any reason other than temporary absence, any vacancy occurs in the officer of 1[the Presiding Officer of a Tribunal or the Chairperson of an Appellate Tribunal], then the Central Government shall appoint another person in accordance with the provisions of this Act to fill the vacancy and the proceedings may be continued before the Tribunal or the Appellate Tribunal from the stage at which the vacancy is filled. 15. Resignation and removal.(1) 1[The Presiding Officer of a Tribunal or the Chairperson of an Appellate Tribunal] may, by notice in writing under his hand addressed to the Central Government, resign his office: Provided that 3[the Presiding Officer of a Tribunal or the Chairperson of an Appellate Tribunal] shall, unless he is permitted by the Central Government to relinquish his office sooner, continue to hold office until the expiry of three months from the date of receipt of such notice or until a
1 Subs.

by Act 1 of 2000, sec. 2, for the Presiding Officer of a Tribunal or an Appellate Tribujnal (w.r.e.f. 17-1-2000). 2 . Subs. by Act 1 of 2000, sec. 6, for the said Presiding Officers shall be varied to their (w.r.e.f. 17-1-2000). 3 Subs. by Act 1 of 2000, sec. 7, for the said Presiding Officer (w.r.e.f. 17 -1-2000). 14

person duly appointed as his successor enters upon his office or until the expiry of his term of officer, whichever is the earliest. (2) 1[The Presiding Officer of a Tribunal or the Chairperson of an Appellate Tribunal] shall not be removed from his office except by an order made by the Central Government on the ground of proved misbehaviour or incapacity after inquiry,-(a) in the case of the Presiding Officer of a Tribunal, made by a Judge of a High Court; (b) in the case of [the Chairperson of an Appellate Tribunal], made by a Judge of the Supreme Court, in which 2[the Presiding Officer of a Tribunal or the Chairperson of an Appellate Tribunal] has been

informed of the charges against him and given a reasonable opportunity of being heard in respect of these charges. (3) The Central Government may, by rules, regulate the procedure for the investigation of misbehaviour or incapacity of 3[the Presiding Officer of a Tribunal or the Chairperson of an Appellate Tribunal]. 16. Orders constituting Tribunal or an Appellate Tribunal to be final and not to invalidate its proceedings.No order of the Central Government appointing any person as 4[the Presiding Officer of a Tribunal or Chairperson of an Appellate Tribunal] shall be called in question in any manner, and no act or proceeding before a Tribunal or an Appellate Tribunal shall be called in question in any manner on the ground merely of any defect in the constitution of a Tribunal or an Appellate Tribunal.
1 Subs.

by Act 1 of 2000, sec. 2, for the Presiding Officer of a Tribunal or an Appellate Tribujnal (w.r.e.f. 17-1-2000) 2 Subs. by Act 1 of 2000, sec. 7, for the Presiding Officer concerned (w.r.e.f. 17-12000). 3 Subs. by Act 1 of 2000, sec. 7, for the Presiding Officer concerned (w.r.e.f. 17-12000). 4 Subs. by Act 1 of 2000, sec. 2, for the Presiding Officer of a Tribunal or an Appellate Tribunal (w.r.e.f. 17-1-2000). 15

CHAPTER III JURISDICTION, POWERS AND AUTHORITY OF TRIBUNALS 17. Jurisdiction, powers and authority of Tribunals.(1) A Tribunal shall exercise, on and from the appointed day, the jurisdiction, 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. (2) An Appellate Tribunal shall exercise, on and from the appointed day, the jurisdiction, powers and authority to entertain appeals against any order made, or deemed to have been made, by a Tribunal under this Act. 1[17A. Power of Chairperson of Appellate Tribunal.(1) The Chairperson of an Appellate Tribunal shall exercise general power of superintendence and control over the Tribunals under his jurisdiction including the power of appraising the work and recording the annual confidential reports of Presiding Officers. (2) The Chairperson of an Appellate Tribunal having jurisdiction over the Tribunals may, on the application of any of the parties or on his own motion after notice to the parties and after hearing them, transfer any case from one Tribunal for disposal to any other Tribunal.] 18. Bar of Jurisdiction.On and from the appointed day, no court or

other authority shall have, or be entitled to exercise, any jurisdiction, powers or authority (except the Supreme Court, and a High Court exercising jurisdiction under articles 226 and 227 of the Constitution) in relation to the matters specified in section 17. CHAPTER IV PROCEDURE OF TRIBUNALS 2[19. Application to the Tribunal.(1) Where a bank or a financial institution has to recover any debt from any person, it may make an application to the Tribunal within the local limits of whose jurisdiction
1 Ins.

by Act 1 of 2000, sec. 8 (w.r.e.f. 17-1-2000). 2 Subs. by Act 1 of 2000, sec. 9, for section 19 (w.r.e.f. 17-1-2000). 16

(a) the defendant, or each of the defendants where there are more than one, at the time of making the application, actually and voluntarily resides or carries on business or personally works for gain; or (b) any of the defendants, where there are more than one, at the time of making the application, actually and voluntarily resides or carries on business or personally works for gain; or (c) the cause of action, wholly or in party, arises. (2) Where a bank or a financial institution, which has to recover its debt from any person, has filed an application to the Tribunal under subsection (1) and against the same person another bank or financial institution also has claim to recover its debt, then, the later bank or financial institution may join the applicant bank or financial institution at any stage of the proceedings, before the final order is passed, by making an application to that Tribunal. (3) Every application under sub-section (1) or sub-section (2) shall be in such form and accompanied by such documents or other evidence and by such fee as may be prescribed: Provided that the fee may be prescribed having regard to the amount of debt to be recovered: Provided further that nothing contained in this sub-section relating to fee shall apply to cases transferred to the Tribunal under sub-section (1) of section 31. (4) On receipt of the application under sub-section (1) or sub-section (2), the Tribunal shall issue summons requiring the defendant to show cause within thirty days of the service of summons as to why the relief prayed for should not be granted. (5) The defendant shall, at or before the first hearing or within such

time as the Tribunal may permit, present a written statement of his defence. (6) Where the defendant claims to set-off against the applicants demand any ascertained sum of money legally recoverable by him from such applicant, the defendant may, at the first hearing of the application, but not
17

afterwards unless permitted by the Tribunal, present a written statement containing the particulars of the debt sought to be set-off. (7) The written statement shall have the same effect as a plaint in a cross-suit so as to enable the Tribunal to pass a final order in respect both of the original claim and of the set-off. (8) A defendant in an application may, in addition to his right of pleading a set-off under sub-section (6), set up, by way of counter-claim against the claim of the applicant, any right or claim in respect of a cause of action accruing to the defendant against the applicant either before or after the filing of the application but before the defendant has delivered his defence or before the time limited for delivering his defence has expired, whether such counter-claim is in the nature of a claim for damages or not. (9) A counter-claim under sub-section (8) shall have the same effect as a cross-suit so as to enable the Tribunal to pass a final order on the same application, both on the original claim and on the counter-claim. (10) The applicant shall be at liberty to file a written statement in answer to the counter-claim of the defendant within such period as may be fixed by the Tribunal. (11) Where a defendant sets up a counter-claim and the applicant contends that the claim thereby raised ought not be disposed of by way of counter-claim but in an independent action, the applicant may, at any time before issues are settled in relation to the counter-claim, apply to the Tribunal for an order that such counter-claim may be excluded, and the Tribunal may, on the hearing of such application, make such order as it thinks fit. (12) The Tribunal may make an interim order (whether by way of injunction or stay or attachment) against the defendant to debar him from transferring, alienating or otherwise dealing with, or disposing of, any property and assets belonging to him without the prior permission of the Tribunal. (13) (A) Where, at any stage of the proceedings, the Tribunal is satisfied, by affidavit or otherwise, that the defendant, with intent to obstruct
18

or delay or frustrate the execution of any order for the recovery of debt that may be passed against him,--

(i) is about to dispose of the whole or any part of his property; or (ii) is about to remove the whole or any part of his property from the local limits of the jurisdiction of the Tribunal; or (iii) is likely to cause any damage or mischief to the property or affect its value by misuse or creating third party interest, the Tribunal may direct the defendant, within a time to be fixed by it, either to furnish security, in such sum as may be specified in the order, to produce and place at the disposal of the Tribunal, when required, the said property or the value of the same, or such portion thereof as may be sufficient to satisfy the certificate for the recovery of the debt, or to appear and show cause why he should not furnish security. (B) Where the defendant fails to show cause why he should not furnish security, or fails to furnish the security required, within the time fixed by the Tribunal, the Tribunal may order the attachment of the whole or such portion of the properties claimed by the applicant as the properties secured in his favour or otherwise owned by the defendant as appears sufficient to satisfy any certificate for the recovery of debt. (14) The applicant shall, unless the Tribunal otherwise directs, specify the property required to be attached and the estimated value thereof. (15) The Tribunal may also in the order direct the conditional attachment of the whole or any portion of the property specified under subsection (14). (16) If an order of attachment is made without complying with the provisions of sub-section (13), such attachment shall be void. (17) In the case of disobedience of an order made by the Tribunal under sub-sections (12), (13) and (18) or breach of any of the terms on which the order was made, the Tribunal may order the properties of the person guilty of such disobedience or breach to be attached an may also order such person to be detained in the civil prison for a term not exceeding three months, unless in the meantime the Tribunal directs his release.
19

(18) Where it appears to the Tribunal to be just and convenient, the Tribunal may, by order (a) appoint a receiver of any property, whether before or after grant of certificate for recovery of debt; (b) remove any person from the possession or custody of the property; (c) commit the same to he possession, custody or management of the receiver; (d) confer upon the receiver all such powers, as to bringing and

defending suits in the courts or filing and defending application before the Tribunal and for the realization, management, protection, preservation and improvement of the property, the collection of the rents and profits thereof, the application and disposal of such rents and profits, and the execution of documents as the owner himself has, or such of those powers as the Tribunal thinks fit; and (e) appoint a Commissioner for preparation of an inventory of the properties of the defendant or for the sale thereof. (19) Where a certificate of recovery is issued against a company registered under the Companies Act, 1956 (1 of 1956) the Tribunal may order the sale proceeds of such company to be distributed among its secured creditors in accordance with the provisions of section 529A of the Companies Act, 1956 and to pay the surplus, if any, to the company. (20) The Tribunal may, after giving the applicant and the defendant an opportunity of being heard, pass such interim or final order, including the order for payment of interest from the date on or before which payment of the amount is found due up to the date of realization or actual payment, on the application as it thinks fit to meet the ends of justice. (21) The Tribunal shall send a copy of every order passed by it to the applicant and the defendant. (22) The Presiding Officer shall issue 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.
20

(23) Where the Tribunal, which has issued a certificate of recovery, is satisfied that the property is situated within the local limits of the jurisdiction of two or more Tribunals, it may send the copies of the certificate of recovery for execution to such other Tribunals where the property is situated: Provided that in a case where the Tribunal to which the certificate of recovery is sent for execution finds that it has no jurisdiction to comply with the certificate of recovery, it shall return the same to the Tribunal which has issued it. (24) The application made to the Tribunal under sub-section (1) or sub-section (2) shall be dealt with by it as expeditiously as possible and endeavour shall be made by it to dispose of the application finally within one hundred and eighty days from the date of receipt of the application. (25) The Tribunal may made such orders and give such directions as may be necessary or expedient to give effect to its orders or to prevent abuse

of its process or to secure the ends of justice.] 20. Appeal to the Appellate Tribunal.(1) Save as provided in subsection (2), any person aggrieved by an order made, or deemed to have been made, by a Tribunal under this Act, may prefer an appeal to an Appellate Tribunal having jurisdiction in the matter. (2) No appeal shall lie to the Appellate Tribunal from an order made by a Tribunal with the consent of the parties. (3) Every appeal under sub-section (1) shall be filed within a period of forty-five days from the date on which a copy of the order made, or deemed to have been made, by the Tribunal is received by him and it shall be in such form and be accompanied by such fee as may be prescribed: Provided that the Appellate Tribunal may entertain an appeal after the expiry of the said period of forty-five days if it is satisfied that there was sufficient cause for not filing it within that period. (4) On receipt of an appeal under sub-section (1), the Appellate Tribunal may, after giving the parties to the appeal, an opportunity of being
21

heard, pass such orders thereon as it thinks fit, confirming, modifying or setting aside the order appealed against. (5) The Appellate Tribunal shall send a copy of every order made by it to the parties to the appeal and to the concerned Tribunal. (6) The appeal filed before the Appellate Tribunal under sub-section (1) shall be dealt with by it as expeditiously as possible and endeavour shall be made by it to dispose of the appeal finally within six months from the date of receipt of the appeal.
COMMENTS An order which is made by the Tribunal with the consent of the parties, shall not be appealable. The period for filing an appeal is 45 days from the date on which a copy of the order is received by the appellant. However, the Tribunal may condone the delay in preferring an appeal beyond 45 days. The Appellate Tribunal may confirm, modify or set aside the order appealed against.

21. Deposit of amount of debt due, on filing appeal.Where an appeal is preferred by any person from whom the amount of debt is due to a bank or a financial institution or a consortium of banks or financial institutions, such appeal shall not be entertained by the Appellate Tribunal unless such person has deposited with the Appellate Tribunal seventy-five per cent of the amount of debt so due from him as determined by the Tribunal under section 19: Provided that the Appellate Tribunal may, for reasons to be recorded in writing, waive or reduce the amount to be deposited under this section.
COMMENTS

For preferring an appeal it is necessary to deposit with the Appellate Tribunal 75% of the amount of debt due from him as determined by the Tribunal under section 19.

22. Procedure and Powers of the Tribunal and the Appellate Tribunal. (1) The Tribunal and the Appellate Tribunal shall not be bound the procedure laid down by the Code of Civil Procedure, 1908 (5 of 1908), but shall be guided by the principles of natural justice and, subject to the other provisions of this Act and of any rules, the Tribunal and the Appellate Tribunal shall have powers to regulate their own procedure including the places at which they shall have their sittings.
22

(2) The Tribunal and the Appellate Tribunal shall have, for the purposes of discharging their functions under this Act, the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 (5 of 1908), while trying a suit, in respect of the following matters, namely:-(a) summoning and enforcing the attendance of any person and examining him on oath; (b) requiring the discovery and production of documents; (c) receiving evidence on affidavits; (d) issuing commissions for the examination of witnesses or documents; (e) reviewing its decisions; (f) dismissing an application for default or deciding it ex parte; (g) setting aside any order of dismissal of any application for default or any order passed by it ex parte; (h) any other matter which may be prescribed. (3) Any proceeding before the Tribunal or the Appellate Tribunal shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228, and for the purposes of section 196, of the Indian Penal Code (45 of 1860) and the Tribunal or the Appellate Tribunal shall be deemed to be a civil court for all the purposes of section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973 (2 of 1974). 23. Right to legal representation and Presenting Officer.(1) A bank or a financial institution making an application to a Tribunal or an appeal to an Appellate Tribunal may authorize one or more legal practitioners or any of its officers to act as Presenting Officers and every person so authorized by it may present its case before the Tribunal or the Appellate Tribunal. (2) The defendant may either appear in person or authorize one or more legal practitioners or any of his or its officers to present his or its case before the Tribunal or the Appellate Tribunal.

COMMENTS A bank or a financial institution may authorize (i) one or more legal practitioners, or (ii) any of its officers to act as Presenting Officer for presenting its case before the Tribunal or the Appellate Tribunal. On the other hand, the defendant may (i) appear in person, or (ii) authorize one or more legal practitioners, or (iii) authorize any of his or its officers, to present his or its case before the Tribunal or the Appellate Tribunal. 23

24. Limitation.The provisions of the Limitation Act, 1963 (36 of 1963), shall, as far as may be, apply to an application made to a Tribunal. CHAPTER V RECOVERY OF DEBT DETERMINED BY TRIBUNAL 25. Modes of recovery of debts.The Recovery Officer shall, on receipt of the copy of the certificate under sub-section (7) of section 19, proceed to recover the amount of debt specified in the certificate by one or more of the following modes, namely:-(a) attachment and sale of the movable or immovable property of the defendant; (b) arrest of the defendant and his detention in prison; (c) appointing a receiver for the management of the movable or immovable properties of the defendant. 26. Validity of certificate and amendment thereof.(1) It shall not be open to the defendant to dispute before the Recovery Officer the correctness of the amount specified in the certificate, and no objection to the certificate on any other ground shall also be entertained by the Recovery Officer. (2) Notwithstanding the issue of a certificate to a Recovery Officer, the Presiding Officer shall have power to withdraw the certificate or correct any clerical or arithmetical mistake in the certificate by sending intimation to the Recovery Officer. (3) The Presiding Officer shall intimate to the Recovery Officer any order withdrawing or canceling a certificate or any correction made by him under sub- section (2). 27. Stay of proceedings under certificate and amendment or withdrawal thereof.(1) Notwithstanding that a certificate has been issued to the Recovery Officer for the recovery of any amount, the Presiding Officer may grant time for the payment of the amount, and thereupon the
24

Recovery Officer shall stay the proceedings until the expiry of the time so granted. (2) Where a certificate for the recovery of amount has been issued, the Presiding Officer shall keep the Recovery Officer informed of any amount

paid or time granted for payment, subsequent to the issue of such certificate to the Recovery Officer. (3) Where the order giving rise to a demand of amount for recovery of debt has been modified in appeal, and, as a consequence thereof the demand is reduced, the Presiding Officer shall stay the recovery of such part of the amount of the certificate as pertains to the said reduction for the period for which the appeal remains pending. (4) Where a certificate for the recovery of debt has been received by the Recovery Officer and subsequently the amount of the outstanding demands is reduced 1[or enhanced] as a result of an appeal, the Presiding Officer shall, when the order which was the subject-matter of such appeal has become final and conclusive, amend the certificate or withdraw it, as the case may be. 28. Other modes of recovery.(1) Where a certificate has been issued to the Recovery Officer under sub-section (7) of section 19, the Recovery Officer may, without prejudice to the modes of recovery specified in section 25, recover the amount of debt by any one or more of the modes provided under this section. (2) If any amount is due from any person to the defendant, the Recovery Officer may require such person to deduct from the said amount, the amount of debt due from the defendant under this Act and such person shall comply with any such requisition and shall pay the sum so deducted to the credit of the Recovery Officer: Provided that nothing in this sub-section shall apply to any part of the amount exempt from attachment in execution of a decree of a civil court under section 60 of the Code of Civil Procedure, 1908 (5 of 1908).
1 Ins.

by Act 1 of 2000, sec. 10 (w.r.e.f. 17-1-2000).

25

(3) (i) The Recovery Officer may, at any time or from time to time, by notice in writing, require any person from whom money is due or may become due to the defendant or to any person who holds or may subsequently hold money for or on account of the defendant, to pay to the Recovery Officer either forthwith upon the money becoming due or being held or within the time specified in the notice (not being before the money becomes due or is held) so much of the money as is sufficient to pay the amount of debt due from the defendant or the whole of the money when it is equal to or less than that amount. (ii) A notice under this sub-section may be issued to any person who holds or may subsequently hold any money for or on account of the defendant jointly with any other person and for the purposes of this subsection,

the shares of the joint holders in such amount shall be presumed, until the contrary is proved, to be equal. (iii) A copy of the notice shall be forwarded to the defendant at his last address known to the Recovery Officer and in the case of a joint account to all the joint holders at their last addresses known to the Recovery Officer. (iv) Save as otherwise provided in this sub-section, every person to whom a notice is issued under the sub-section shall be bound to comply with such notice, and, in particular, where any such notice is issued to a post office, bank, financial institution, or an insurer, it shall not be necessary for any pass book, deposit receipt, policy or any other document to be produced for the purpose of any entry, endorsement or the like to be made before the payment is made notwithstanding any rule, practice or requirement to the contrary. (v) Any claim respecting any property in relation to which a notice under this sub-section has been issued arising after the date of the notice shall be void as against any demand contained in the notice. (vi) Where a person to whom a notice under this sub-section is sent objects to it by a statement on oath that the sum demanded or the part thereof is not due to the defendant or that he does not hold any money for or on account of the defendant, then, nothing contained in this sub-section shall be deemed to require such person to pay any such sum or part thereof, as the case may be, but if it is discovered that such statement was false in any material particular, such person shall be personally liable to the Recovery
26

Officer to the extent of his own liability to the defendant on the date of the notice, or to the extent of the defendants liability for any sum due under this Act, whichever is less. (vii) The Recovery Officer may, at any time or from time to time, amend or revoke any notice under this sub-section or extend the time for making any payment in pursuance of such notice. (viii) The Recovery Officer shall grant a receipt for any amount paid in compliance with a notice issued under this sub-section, and the person so paying shall be fully discharged from his liability to the defendant to the extent of the amount so paid. (ix)Any person discharging any liability to the defendant after the receipt of a notice under this sub-section shall be personally liable to the Recovery Officer to the extent of his own liability to the defendant so discharged or to the extent of the defendants liability for any debt due under this Act, whichever is less. (x) If the person to whom a notice under this sub-section is sent fails

to make payment in pursuance thereof to the Recovery Officer, he shall be deemed to be a defendant in default in respect of the amount specified in the notice and further proceedings may be taken against him for the realization of the amount as if it were a debt due from him, in the manner provided in sections 25, 26 and 27 and the notice shall have the same effect as an attachment of a debt by the Recovery Officer in exercise of his powers under section 25. (4) The Recovery Officer may apply to the court in whose custody there is money belonging to the defendant for payment to him of the entire amount of such money, or if it is more than the amount of debt due an amount sufficient to discharge the amount of debt so due. 1[(4A) The Recovery Officer may, by order, at any stage of the execution of the certificate of recovery, require any person, and in case of a company, any of its officers against whom or which the certificate of recovery is issued, to declare on affidavit the particulars of his or its assets.]
1 Ins.

by Act 1 of 2000, sec. 11 (w.r.e.f. 17-1-2000).

27

(5) The Recovery Officer may recover any amount of debt due from the defendant by distraint and sale of his movable property in the manner laid down in the Third Schedule to the Income-Tax Act, 1961 (43 of 1961). 29. Application of certain provisions of Income-tax Act.The provisions of the Second and Third Schedules to the Income-tax Act, 1961 and the Income-tax (Certificate Proceedings) Rules, 1962, as in force from time to time shall, as far as possible, apply with necessary modifications as if the said provisions and the rules referred to the amount of debt due under this Act instead of to the Income-tax: Provided that any reference under the said provisions and the rules to the assessee shall be construed as a reference to the defendant under this Act. 1[30. Appeal against the order of Recovery Officer.(1) Notwithstanding anything contained in section 29, any person aggrieved by an order of the Recovery Officer made under this Act may, within thirty days from the date on which a copy of the order is issued to him, prefer an appeal to the Tribunal. (2) On receipt of an appeal under sub-section (1), the Tribunal may, after giving an opportunity to the appellant to be heard, and after making such inquiry as it deems fit, confirm, modify or set aside the order made by the Recovery Officer in exercise of his powers under sections 25 to 28 (both inclusive).] CHAPTER VI

MISCELLANEOUS 31. Transfer of pending cases.(1) Every suit or other proceeding pending before any court immediately before the date of establishment of a Tribunal under this Act, being a suit or proceeding the cause of action whereon it is based is such that it would have been, if it had arisen after such establishment, within the jurisdiction of such Tribunal, shall stand transferred on that date to such Tribunal:
1 Subs.

by Act 1 of 2000, sec. 12, for section 30 (w.r.e.f. 17-1-2000).

28

Provided that nothing in this sub-section shall apply to any appeal pending as aforesaid before any court. (2) Where any suit or other proceeding stands transferred from any court to a Tribunal under sub-section (1),-(a) the court shall, as soon as may be after such transfer, forward the records of such suit or other proceeding to the Tribunal; and (b) the Tribunal may, on receipt of such records, proceed to deal with such suit or other proceeding, so far as may be, in the same manner as in the case of an application made under section 19 from the stage which was reached before such transfer or from any earlier stage 1[***] as the Tribunal may deed fit. 2[31A. Power of Tribunal to issue certificate of recovery in case of decree or order.(1) Where a decree or order was passed by any court before the commencement of the Recovery of Debts Due to Banks and Financial Institutions (Amendment) Act, 2000 and has not yet been executed, then, the decree-holder may apply to the Tribunal to pass an order for recovery of the amount. (2) On receipt of an application under sub-section (1), the Tribunal may issue a certificate for recovery to a Recovery Officer. (3) On receipt of a certificate under sub-section (2), the Recovery Officer shall proceed to recover the amount as if it was a certificate in respect of a debt recoverable under this Act.] 3[32. Chairperson, Presiding Officer and staff of Appellate Tribunal and Tribunal to be public servants.The Chairperson of an Appellate Tribunal, the Presiding Officer of a Tribunal, the Recovery Officer and other officers and employees of an Appellate Tribunal and a Tribunal shall be deemed to be public servants within the meaning of section 21 of the Indian Penal Code (45 of 1860).] 33. Protection of action taken in good faith.No suit, prosecution or other legal proceeding shall lie against the Central Government or against
1 The

words or de novo omitted by Act 1 of 2000, sec.13 (w.r.e.f. 17-1-2000).

2 Ins.

by Act 1 of 2000, sec. 14 (w.r.e.f. 17-1-2000). 3 Subs. by Act 1 of 2000, sec. 15, for section 32 (w.r.e.f. 17-1-2000). 29
1[the

Presiding Officer of a Tribunal or the Chairperson of an Appellate Tribunal] or against the Recovery Officer for anything which is in good faith done or intended to be done in pursuance of this Act or any rule or order made thereunder. 34. Act to have over-riding effect.(1) Save as provided under subsection (2), the provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act. (2) The provisions of this Act or the rules made thereunder shall be in addition to, and not in derogation of, the Industrial Finance Corporation Act, 1948 (15 of 1948), the State Financial Corporations Act, 1951 (63 of 1951), the Unit Trust of India Act, 1963 (52 of 1963), the Industrial Reconstruction Bank of India Act, 1984 (62 of 1984) 2[, the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) and the Small Industries Development Bank of India Act, 1989 (39 of 1989)]. 35. Power to remove difficulties.(1) If any difficulty arises in giving effect to the provisions of this Act, the Central Government may, by order published in the Official Gazette make such provisions, not inconsistent with the provisions of this Act, as appear to it to be necessary or expedient for removing the difficulty: Provided that no such order shall be made after the expiry of the period of three years from the date of commencement of this Act. (2) Every order made under this section shall, as soon as may be after it is made, be laid before each House of Parliament. 36. Power to make rules.(1) The Central Government may, by notification, make rules to carry out the provisions of this Act.
1 Subs.

by Act 1 of 2000, sec.2, for the Presiding Officer of a Tribunal or an Appellate Tribunal (w.r.e.f. 17-1-2000). 2 Subs. by Act 1 of 2000, sec. 16, for and the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) (w.r.e.f. 17-1-2000). 30

(2) Without prejudice to the generality of the foregoing powers, such rules may, provide for all or any of the following matters, namely:-(a) the salaries and allowances and other terms and conditions of service of 1[the Chairpersons, the Presiding Officers], Recovery Officers and other officers and employees of the Tribunal and the Appellate Tribunal under sections 7, 12 and 13;

(b) The procedure for the investigation of misbehaviour or incapacity of 2[the Chairpersons of Appellate Tribunals and the Presiding Officers of the Tribunals] under sub-section (3) of section 15; (c )The form in which an application may be made under section 19, the documents and other evidence by which such application shall be accompanied and the fees payable in respect of the filing of such application; (d)the form in which an appeal may be filed before the Appellate Tribunal under section 20 and the fees payable in respect of such appeal; (e) any other matter which is required to be, or may be, prescribed. 3[(3) Every notification issued under sub-section (4) of section 1, section 3 and section 8 and every rule made by the Central Government under this Act, shall be laid, as soon as may be after it is made, before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the notification or rule or both Houses agree that the notification or rule should not be issued or made, the notification or rule shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that notification or rule.]
1 Subs. 2 Subs.

by Act 1 of 2000, sec. 17, for the Presiding Officers (w.r.e.f. 17-1-2000). by Act 1 of 2000, sec. 17, for the Presiding Officer of the Tribunal and Appellate Tribunals (w.r.e.f. 17-1-2000). 3 Subs. by Act 1 of 2000, sec. 17, for sub-section (3) (w.r.e.f. 17-1-2000). 31

37. Repeal and saving.(1) The Recovery of Debts Due to Banks and Financial Institutions Ordinance, 1993 (Ord.25 of 1993) is hereby repealed. (2) Notwithstanding such repeal, anything done or any action taken under the said Ordinance, shall be deemed to have been done or taken under the corresponding provisions of this Act. *****
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THE DEBT RECOVERY APPELLATE TRIBUNAL (FINANCIAL AND ADMINISTRATIVE POWER) RULES,1997

G.S.R 337(E), dated 24th June, 19971 In exercise of the powers conferred by section 36 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993(51 of 1993), the Central Government hereby makes the following rules, namely:1. Short title and commencement.-(1)These rules may be called THE DEBTS RECOVERY TRIBUNAL (FINANCIAL AND ADMINSTRATIVE POWER) RULES, 1997. (2) They shall come into force on the date of their publication in the Official Gazatte. 2. Definitions.- In these rules, unless the context otherwise requires, (a) Act means the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993). (b) Appellate Tribunal means the Debts Recovery Appellate Tribunal established under sub-Section (1) of section 8 of the Act; (c) Presiding Officer means a person appointed as Presiding Officer of an Appellate Tribunal under section 9 of the Act; (d) all other words and expressions used and not defined in these rules but defined in the Act shall have the meanings respectively assigned to them in the Act. 3. Powers of the Presiding Officer of the Appellate Tribunal.- The Presiding Officer shall have the same powers as are conferred on a Head of Department in respect of the General Financial Rules, 1963, the Delegation of the Financial Powers Rules, 1978, the Fundamental Rules, the Supplementary Rules, the Central Civil Services (Leave)Rules, 1972, the Central Civil Services (Joining Time)Rules, 1979, the Civil Services (Pension) Rules, 1972, the Central Civil Services (Conduct) Rules, 1964, the Central Civil Services (Classification, Control and Appeal) Rules, 1965 and the General Provident Fund 9 (Central Services) Rules, 1960 as amended from time to time:
1 Published

in the Gazette of India. Ext., Pt. II Sec3 (i), dated 24 th June, 1997

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Provided that the exercise of powers by the Presiding Officer under these rules shall be subject to such instructions as may be issued from time to time by the Central Government. ----------34

THE DEBT RECOVERY APPELLATE TRIBUNAL (PROCEDURE FOR APPOINTMENT AS CHAIRPERSON OF THE APPELLATE TRIBUNAL) RULES, 1998
G..S.R. 31(E), DATED 19TH January, 19981

In exercise of the powers conferred by section 9 read with clause(e) of subsection (2) of section 36 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993), the Central Government hereby makes the following rules, namely:1. Short title and commencement.- 1.These rules may be called THE DEBT RECOVERY APPELLATE TRIBUNAL (PROCEDURE FOR APPOINTMENT AS (CHAIRPERSON) OF THE APPELLATE TRIBUNAL ) RULES, 1998. 2. They shall come into force from the date of their publication in the Official Gazette 2. Definitions.- In these rules, unless the context otherwise requires,(a) Act means the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) (b) Appellate Tribunal means the Debts Recovery Appellate Tribunal established under section 8 of the Act; (c) 2[Chairperson] means a person appointed as [Chairperson] of an Appellate Tribunal under section 9 of the Act (d) Reserve Bank means the Reserve Bank of India constituted under section 3 of the Reserve Bank of India Act, 1934(2) of 1934) (e) all other words and expressions used and not defined in these rules but defined in the Act shall have the meanings respectively assigned to them in the Act. 3. Method of appointment under section 9 of the Act. (1) For the purpose of appointment to the post of a (Chairperson), there shall be a Selection Committee consisting of1 Published
2 Substituted

in the Gazette of India, Ext., Pt. II, S. 3(i), dated 19 th January, 1998 by G.S.R.645(E), dated 2nd August 2000 (W.E.F. 2.8.2000)

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(i) The Chief Justice of India or a Judge of the Supreme Court of India as nominated by the Chief Justice of India; (ii) The Secretary to the Government of India in the Ministry of Finance (Department of Economic Affairs) (iii) The Secretary to the Government of India in the Ministry of Law and Justice; (iv) The Governor of the Reserve Bank or the Deputy Governor of the Reserve Bank nominated by the Governor of the Reserve Bank; (v) Special Additional Secretary to the Government of India in the Ministry of Finance, Department of Economic Affairs (Banking Division) or an officer not below the rank of Joint Secretary in

the Banking Division nominated by the Special Additional Secretary in the Banking Division. (2) The Chief Justice of India or the Judge of the Supreme Court shall be the Chairman of the Selection Committee. (3)Any three members of the Committee including the Chairman shall form a quorum for meeting of the Committee. (4)1The Selection Committee may devise its own procedure including interview for selection and appointment of Chairperson Provided that the procedure of interview shall not apply in case of a judge of a High Court nominated by the Chief Justice of such High Court. (5)The Selection Committee shall recommend persons for appointment of Chairperson,_ (i) from amongst the persons from the list of candidates prepared by the Ministry of Finance after inviting necessary applications; and (ii) from amongst the Judges of High Court nominated by the Chief Justice of such High Courts.) (6)The Central Government shall on the basis of the recommendations of the Selection Committee make a list of persons selected for appointment as (Chairperson) and the said list shall be valid for a period of two years. The appointment of a (Chairperson) shall be made from the list so prepared.
1 Substituted

for Presiding Officer by G.S.R.645(E), dated 2nd August 2000 (W.E.F. 2.8.2000)

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4. Medical fitness. - No person shall be appointed as a (Chairperson) unless he is declared medically fit by a Medical Board to be constituted by the Central Government for the purpose unless he has already been declared fit by an equivalent authority. 5. Interpretation. If any question arises relating to the interpretation of these rules the same shall be referred to the Central Government for its decision. 6. Saving. Nothing in these rules shall affect reservations, relaxation of age limit and other concessions required to be provided for the Scheduled Castes, Scheduled Tribes, other Backward Classes, ex-servicemen and other special categories of persons, in accordance with the orders issued by the Central Government from time to time in this regard. 7. Oaths of office and secrecy. Every person appointed to be (Chairperson) under section 9 of the Act shall before entering upon his office, make and subscribe an oath of office and secrecy in the Forms

annexed to these rules. ANNEXURE Form I (See rule7) Form of oath of office for 1[Chairperson] of the Debt Recovery Appellate Tribunal I, (Name of the [Chairperson]), having been appointed as [Chairperson] do solemnly affirm/do swear in the name of God that I will faithfully and conscientiously discharge my duties as [Chairperson] to the best of my ability, knowledge and judgement, without fear or favour, affection or ill will. NAME OF THE [CHAIRPERSON] DEBTS RECOVERY APPELLATE TRIBUNAL
1 Substituted

for Presiding Officer by G.S.R.645(E), dated 2 nd August 2000 (W.E.F. 2.8.2000)

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Form-II (See rule 7) Form of oath of secrecy for 1[Chairperson] of the Debt Recovery Appellate Tribunal I,(Name of the Chairperson), having been appointed as [Chairperson] do solemnly affirm/do swear in the name of God that I will not directly or indirectly communicate or reveal to any person or persons any matter which shall be brought under my consideration or shall become known to me as Chairperson of said Debts Recovery Appellate Tribunal except as may be required for the due discharge of my duties as the [Chairperson] NAME OF THE [CHAIRPERSON] DEBT RECOVERY APPELLATE TRIBUNAL

COMPARISON OF THE TWO: