(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,—
(a) the branch or any other office of the bank or financial institution is maintaining an account in which debt claimed is outstanding, for the time being; or
(aa) 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 part, arises:
Provided that the bank or financial institution may, with the permission of the Debts Recovery Tribunal, on an application made by it, withdraw the application, whether made before or after the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2004 for the purpose of making an application under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002) to the Debts Recovery Tribunal under that Act:
Provided further that any application made under the first proviso for seeking permission from the Debts Recovery Tribunal to withdraw the application made under sub-section (1) shall be dealt with by it as expeditiously as possible and disposed of within thirty days from the date of such application:
Provided also that in case the Debts Recovery Tribunal refuses to grant permission for withdrawal of the application on an application made by the bank or financial institution, the Debts Recovery Tribunal shall pass such orders after recording the reasons therefor.
(1A) Every bank being, multi-State co-operative bank referred to in sub-clause (vi) of clause (d) of section 2, may, at its option, opt to initiate proceedings under the Multi-State Co-operative Societies Act, 2002 (39 of 2002) to recover debts, whether pending before any court or any other authority or not, by filing an application under this Act.
(1B) In case, a bank being, multi-State co-operative bank referred to in sub-clause (vi) of clause (d) of section 2 has filed an application under this Act, and simultaneously issues notice under sub-section (2) of section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002) to the borrower, it may make an application to the Tribunal to withdraw the application so filed on the ground that it has taken proceedings under that Act:
Provided that any application made under sub-section (1B) to withdraw the application filed under this Act shall be dealt with by the Tribunal as expeditiously as possible and disposed of within thirty days from the date of such application:
Provided further that in case the Tribunal refuses to grant permission for withdrawal of the application on an application made by the bank, the Tribunal shall pass such orders after recording the reasons therefor.
(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 sub-section (1) and against the same person another bank or financial institution also has a claim to recover its debt, then, the latter 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 shall be accompanied with true copies of all documents relied on in support of the claim along with such fee as may be prescribed:
Provided that the fee may be prescribed having regard to the amount of debt due:
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.
Explanation: For the purposes of this section, "documents" includes statement of account or any entry in such book of account and cross-collateralised securities.
(3A) Every applicant in the application filed under sub-section (1) or sub-section (2) for recovery of debt, shall—
(a) state particulars of the debt secured by security interest over properties or assets belonging to any giving mortgagor, or any other person, and estimated value of each such asset;
(b) if the estimated value of securities is not sufficient to satisfy the debt claimed, state particulars of any other properties or assets belonging to the defendant; and
(c) if the estimated value of other properties or assets is not sufficient to satisfy the debt claimed, state that the applicant is not aware of any other properties or assets belonging to the defendant.
(3B) If any application filed before the Tribunal for recovery of any debt is settled prior to the commencement of the hearing before that Tribunal or at any stage of the proceedings before the final order is passed, the applicant may be granted refund of the fees paid by him at such rates as may be prescribed.
(4) On receipt of application under sub-section (1) or sub-section (2), the Tribunal shall issue summons with following directions to the defendant—
(i) to show cause within thirty days of the service of summons as to why relief prayed for should not be granted;
(ii) to disclose particulars of properties or assets other than properties and assets specified by the applicant under clauses (a) and (b) of sub-section (3A); and
(iii) to restrain the defendant from dealing with or disposing of such assets and properties disclosed under clause (c) of sub-section (3A) pending the hearing and disposal of the application for attachment of properties.
(4A) Notwithstanding anything contained in section 65A of the Transfer of Property Act, 1882 (4 of 1882), the defendant, on service of summons, shall not transfer by way of sale, lease or otherwise except in the ordinary course of his business any of the assets over which security interest is created, or other properties and assets specified or disclosed under sub-section (3A), without the prior approval of the Tribunal:
Provided that the Tribunal shall not grant such approval without giving notice to the applicant bank or financial institution to show cause as to why approval requested for should not be granted:
Provided further that defendant shall deal with the proceeds of sale of any properties or assets specified in this section in such manner as may be directed by the Tribunal.
(5) (i) the defendant shall within a period of thirty days from the date of service of summons, present a written statement of his defence including claim for set-off under sub-section (6) or a counter-claim under sub-section (8), if any, and such written statement shall be accompanied with original documents or true copies thereof with the leave of the Tribunal, relied on by the defendant in his defence:
Provided that where the defendant fails to file the written statement within the said period of thirty days, the Presiding Officer may, in exceptional cases and in special circumstances to be recorded in writing, extend the said period by such further period not exceeding fifteen days to file the written statement of his defence;
(ii) where the defendant makes a disclosure of any property or asset pursuant to receipt of summons under sub-section (4A), the provisions of sub-section (4A) of this section shall apply to such property or asset;
(iii) in case of non-compliance of any order made under clause (ii) of sub-section (4), the Presiding Officer may, by an order, direct that the person or officer who is in default, be detained in civil prison for a term not exceeding three months, as provided in the Code of Civil Procedure, 1908 (5 of 1908).
Explanation: For the purposes of this sub-section, "officer who is in default" shall have the same meaning as assigned to it in clause (60) of section 2 of the Companies Act, 2013 (18 of 2013).
(5A) On receipt of the written statement of defendant or on expiry of time granted by the Tribunal to file the written statement, the Tribunal shall fix a date of hearing for admission or denial of documents produced by the parties to the proceedings and also for hearing of such application on issues in the manner as may be prescribed to by the Central Government.
(5B) Where a defendant makes an admission of the full or part of the amount of debt due to a bank or financial institution, the Tribunal shall order such defendant to pay the amount, to the extent of the admission, within a period of thirty days from the date of such order failing which the Tribunal may issue a certificate under sub-section (22) to the extent of the amount of debt due admitted by the defendant.
(6) Where the defendant claims to set-off against the applicant's 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 afterwards unless permitted by the Tribunal, present a written statement containing the particulars of the debt sought to be set-off along with original documents and other evidence relied on in support of claim of set-off in relation to any ascertained sum of money, in such manner as may be prescribed.
(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 prescribed.
(10A) Every application under sub-section (3) or written statement of defendant under sub-section (5) or claim of set-off under sub-section (6) or a counter-claim under sub-section (8) by the defendant, or written statement by the applicant in reply to the counter-claim, under sub-section (10) or any other pleading whatsoever, shall be supported by an affidavit sworn in by the applicant or defendant verifying all the facts and pleadings stated therein and specifying documents of title and other part of the assets or properties in respect of which doubt is raised by any of the parties, in the manner as may be prescribed.
(10B) If any of the facts or pleadings in the application or written statement are not verified in the manner provided under sub-section (10A), a party to the proceedings shall not be allowed to rely on such facts or pleadings as evidence or any of the matters set out therein.
(11) Where a defendant sets up a counter-claim in the written statement and in reply to such claim the applicant contends that the claim thereby raised ought not to be disposed of by way of counter-claim but in an independent action, the Tribunal shall decide such issue along with the claim of the applicant for recovery of the debt.
(12) [Omitted by the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016 (44 of 2016), s. 33 (w.e.f. 1-9-2016).]
(13) (A) Where, at any stage of the proceedings, the Tribunal on an application made by the applicant along with particulars of property to be attached and estimated value thereof, or otherwise is satisfied that the defendant, with intent to obstruct 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 the 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 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) [Omitted by the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016 (44 of 2016), s. 33 (w.e.f. 1-9-2016).]
(15) The Tribunal may also in the order direct the conditional attachment of the whole or any portion of the property specified under sub-section (13).
(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 and 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.
(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 the 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 applications 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 as defined under the Companies Act, 2013 (18 of 2013) and such company is under liquidation, the Tribunal may by order direct that the sale proceeds of secured assets of such company be distributed in the manner specified in section 326 of the Companies Act, 2013 or under the Insolvency and Bankruptcy Code, 2016.
(20) The Tribunal may, after giving the applicant and the defendant, an opportunity of being heard, in respect of all claims, set-off or counter-claim, if any, and interest on such claims, within thirty days from the date of conclusion of the hearings, pass interim or final order as it deems fit which may include order for payment of interest from the date on which payment of the amount is found due up to the date of realisation or actual payment.
(20A) Where it is proved to the satisfaction of the Tribunal that the claim of the applicant has been adjusted wholly or in part by any lawful agreement or compromise in writing and signed by the parties or where the defendant has repaid or agreed to repay the claim of the applicant, the Tribunal shall pass orders recording such agreement, compromise or satisfaction of the claim.
(20AA) While passing the final order under sub-section (20), the Tribunal shall clearly specify the assets of the borrower over which security interest is created in favour of any bank or financial institution and direct the Recovery Officers to distribute the sale proceeds of such assets as provided in sub-section (20AB).
(20AB) Notwithstanding anything to the contrary contained in any law for the time being in force, the proceeds from sale of secured assets shall be distributed in the following orders of priority, namely:—
(i) the costs incurred for preservation and protection of secured assets, the costs of valuation, public notice for possession and auction and other expenses for sale of assets shall be paid in full;
(ii) debts owed to the bank or financial institution.
Explanation: For the purposes of this sub-section, it is hereby clarified that on or after the commencement of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), in cases where insolvency or bankruptcy proceedings are pending in respect of secured assets of the borrower, priority to secured creditors in payment of debts shall be subject to the provisions of that Code.
(21) (i) The Tribunal shall send a copy of its final order and the recovery certificate, to the applicant and defendant.
(ii) The applicant and the defendant may on payment of prescribed fees obtain a copy of the final order and the recovery certificate or any part of the proceedings for their use.
(22) The Presiding Officer shall issue a certificate of recovery along with the final order, under sub-section (20), for payment of debt with interest under his signature to the Recovery Officer for recovery of the amount of debt specified in the certificate.
(22A) Any recovery certificate issued by the Presiding Officer under sub-section (22) shall be deemed to be decree or order of the Court for the purposes of initiation of winding up proceedings against a company, etc.
(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 another Tribunal, it may send a copy of the certificate of recovery to such other Tribunal for recovery of the amount against such property or person.
(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 every effort shall be made by it to complete the proceedings in two hearings, and to dispose of the application finally within a period of one hundred and eighty days from the date of receipt of the application.
(25) The Tribunal may make 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.
Legal Commentary & Landmark Judgments: Section 19
Section 19 establishes the complete procedural machinery for filing Original Applications (OA), issuing summons, filing written statements, interim attachments, and issuing Recovery Certificates.
Section 19 is the operational heart of the DRT regime. It combines summary trial procedures, sweeping interim attachment powers, and immediate conversion of orders into executable Recovery Certificates, circumventing regular execution suits.