The Recovery Of Debts And Bankruptcy Act, 1993
Introduction
The Recovery of Debts and Bankruptcy Act, 1993 was enacted to:
Provide a legal framework for the speedy recovery of debts due to banks and financial institutions.
Establish Debt Recovery Tribunals (DRTs) and Appellate Tribunals to handle cases related to default in repayment of loans.
Consolidate and amend laws relating to recovery of debts and matters connected with insolvency and bankruptcy.
Before this Act, banks had to approach civil courts for recovery, which was slow and cumbersome. The RDDB Act was introduced to provide speedy adjudication of debt recovery cases.
Objectives
Speedy recovery of debts due to banks and financial institutions.
Reduce the burden on civil courts.
Provide specialized tribunals for debt-related disputes.
Facilitate insolvency and bankruptcy resolution for individuals and companies.
Strengthen financial discipline in lending and borrowing.
Key Provisions of the Act
1. Debt Recovery Tribunals (DRTs)
DRTs have exclusive jurisdiction to recover debts of banks and financial institutions above a certain limit.
Tribunals are presided over by a Presiding Officer (usually a District Judge).
Appeals from DRTs lie to the Debt Recovery Appellate Tribunal (DRAT).
2. Recovery of Debts
Banks and financial institutions can file a claim directly with the DRT for recovery of:
Unpaid loans,
Interest dues,
Any other amount payable under loan agreements.
The DRT can pass orders for attachment, sale of assets, or repayment schedules.
3. Filing Limit
Initially, only debts exceeding Rs. 10 lakhs (now often higher, subject to amendment) are recoverable under DRTs.
Smaller debts continue to be recoverable in civil courts.
4. Appellate Tribunal
DRAT (Debt Recovery Appellate Tribunal) hears appeals against DRT decisions.
Further appeals can go to the Supreme Court.
5. Bankruptcy Provisions
The Act empowers recovery of debts through insolvency and bankruptcy proceedings for:
Companies,
Individuals (later integrated with Insolvency and Bankruptcy Code, 2016).
6. Penalties
Deliberate default or suppression of facts can attract penalties under civil and criminal provisions.
DRTs can order attachment of property, sale of secured assets, and repayment from third parties.
Important Case Laws
Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. (2018, SC)
Issue: Delay in filing a recovery claim under RDDB Act.
Supreme Court held that limitation periods must be strictly followed. Claims filed beyond limitation cannot be entertained by DRTs.
Swiss Ribbons Pvt. Ltd. & Anr. v. Union of India & Ors. (2019, SC)
Although primarily related to Insolvency and Bankruptcy Code, the Supreme Court clarified that RDDB Act and insolvency proceedings aim to balance debtor and creditor rights, and DRTs have exclusive jurisdiction for debt recovery.
IDBI Bank Ltd. v. Jaypee Infratech Ltd. (2015, Delhi HC)
Issue: Whether DRT can attach assets for recovery.
Court held that DRTs have wide powers to attach and sell assets of defaulters to recover dues.
State Bank of India v. Patel Engineering Ltd. (2003, SC)
Court held that debt recovery proceedings under RDDB Act are faster than civil courts, and tribunals are empowered to pass binding orders on debtors.
Significance of the Act
Speedy recovery: Provides a faster alternative to civil courts for banks and financial institutions.
Specialized tribunals: Experts handle debt disputes, ensuring efficient adjudication.
Financial discipline: Encourages borrowers to repay loans timely.
Legal clarity: Provides clear procedures, powers, and remedies for recovery of debts.
Integration with bankruptcy law: Ensures smooth handling of insolvency and default cases.
Conclusion
The Recovery of Debts and Bankruptcy Act, 1993 is a crucial law for protecting financial institutions’ interests while ensuring fair and speedy resolution of debt disputes. Courts have consistently upheld the exclusive jurisdiction and powers of DRTs and DRATs, emphasizing efficiency and timeliness over procedural delays in civil courts.
RELATED Blog
comments