Hello Kolkata Legal Desk

DEBTS RECOVERY LAWS IN INDIA 

 -Dr. Debasish Mukherjee, eminent Advocate   

Banks and Financial Institutions  in India at present experience considerable difficulties in recovering loans and enforcement of securities charged with them arising out of Non Performing Accounts (NPA). For expeditious recovery of debts due to banks and financial institutions, two acts have been enacted e.g. The Recovery of Debts and Bankruptcy Act 1993 and The Securities and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002. 

    The first one is an Act to provide for the establishment of Tribunals for expeditious adjudication and recovery of debts due to banks and financial institutions, insolvency resolution and bankruptcy of individuals and partnership firms and companies. The committee on the financial system headed by Mr 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. 

     The legality and validity of the Act was however considered valid piece of legislation by the Honble Supreme Court of India in the matter of Union of India---- vs --- Delhi High Court Bar Association. 

     The second Act was enacted to regulate securitisation and financial assets and enforcement of Security Interest and to provide for a central database of security interests created on property rights and for matters connected therewith or incidental thereto. The Act was enacted for empowering banks and financial institutions to take possession of securities given for financial assistance and sell or lease the same or take over management in the event of default i.e classification of the borrowers account as non performing assets in accordance with the directions given or under guidelines issued by the Reserve Bank of India from time to time.

      Under section 13 of the said Act banks and financial institutions can enforce security interest and can issue demand notice under section 13(2) of the Act. If the borrowers fail to discharge their liabilities within the stipulated period i.e 60 days from the date of receipt of the demand notice, the banks and financial institutions can take steps according to Section 13(4) of the Act. If any borrower or guarantor is not satisfied with the action taken by the banks and financial institutions under section 13(4) of the Act, can challenge the said action before the Tribunal having jurisdiction under section 17 of the Act. 

     Any application made under section 17 of the Act shall be dealt with by the Debts Recovery Tribunals as expeditiously as possible and disposed of within sixty days from the date of such application.
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