RECOVERY OF LOANS | DRA EXAM LATEST NOTES 2023 | PART 2
This post is the 2nd instalment of notes on recovery of loans under different Acts/ compromises/suits/DRA for 2023.
Good day! Agents!
How have you been doing?
Hopefully well on your way to recovering a new debt collection & making money for yourself & your banks or FIs. And now that you are here to collect some free DRA notes, & study material information and understand what the Indian Institute of Banking and Finance / RBI has to say about the recovery of loans, I welcome you to get some insights on how different platforms available for the recovery of loans work.
In this article, we will discuss further the matter of recovery of loans through different platforms such as:
- Local recovery acts
- Compromise settlements
- Filing of Suits
- Debt recovery tribunals
- Guarantor etc. as per the given syllabus of Debt Recovery Agents prescribed by IIBF for 2023
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RECOVERY OF LOANS | DRA FREE NOTES & STUDY MATERIAL
We talked about the important aspects of recovery and how the loans can be covered under the SARFAESI Act & Lok Adalats in the first instalment of this series of notes on DRA’s module A: Basics of Banking. Now we will cover:
LOCAL RECOVERY ACTS:
Almost all these state governments have passed their own recovery acts on the recommendations of the Talwar committee in respect of the recovery of agricultural advances. There are quite similarities in all of those acts. When the recovery is done through government agencies, a Model Bill of Recovery is adopted and the following procedure is followed:
- Banks make an application, in prescribed forms, to the designated Authority under the act for the recovery of loans.
- Then notify the thought it will take action against the guarantor of the loan as well as against the borrower.
Therefore, while making an application, the full particulars of the guarantor such as his or her name and address along with the details of the property or a says that he or she owns etc. need to be mentioned.
Compromise settlements are done when banks want to minimize the loss as much as possible to optimise their recovery amount and gain as much as possible considering the uncharged interest which is only possible through negotiations.
Compromise settlements negotiate a settlement where-in the borrower offers to pay a particular amount and Bank agrees to accept the same in full and final settlement of its dues which might be less than the total amount due from the bank under the loan contract. This, in most the cases, is a sacrifice made by the bank as it will have to write off or waive off a portion of the dues of the borrower.
But it is suitable for cases where:
- The security that has been given by the borrower is questionable and recovery through the guarantor is remote.
- The suit in regard to the loan is pending in court and it might take a long. of time for a settlement
- The degree of the code will be awarded in the favour of the bank but there will be practical difficulties in enforcing the security because of different reasons.
- Court suit might not be maintainable because the documentation of the loan execution was improper.
FILING OF SUITS
This is something that is done as a last resort because:
- all the other options have closed down and the bank does not have anywhere else to go to.
- There are also times when the filing of Suits is necessary because the delay will result in a time bar or
- in cases where the bank believes that the borrower is attempting to alienate the securities against the interest of the bank.
- Even in cases where there is no specific security that has been charged to the bank under the loan, the finding of Suits becomes unavoidable.
For filing of Suits, plaints are prepared by the Advocate of the bank and then presented to the court under the territorial jurisdiction for the trial. It is required to be drafted properly and should have the full particulars of the case to decide the claim for the relief of principal, interest, and other relief. With the progress of the case, the bank and the Advocate remain in touch and they exchange the necessary information and evidence whenever required. When the order has been issued by the court, steps are taken to execute the same as quickly as possible.
Where the court order contains an onerous clause that is detrimental to the Bank’s interest, the bank should file an appeal against the judgment within the prescribed time limit.
In the following cases/suits:
- Bills of exchange, hundies, and promissory notes,
- Where the plaintiff only wants to recover the debt, with or without interest on a written contract or an enactment the sum that is south to be recovered is a fixed sum of money or on a guarantee
The suit can be filed under order 37 of the code of civil procedure.
DEBT RECOVERY TRIBUNALS
DRTs have been established for the speedy adjudication of matters which leads to the recovery of non-performing assets amounting to rupees 10 lahks and above
There are basically Quasi-judicial Institutions that have been set up to exclusively process legal suits filed by the banks against defaulting borrowers. The limitation act is also applicable to DRTs.
Proceedings under DRTs:
- An original application is filed with the documents containing evidentiary value and the required fee with the registrar
- After reviewing the application and checking for any flaws, the registrar accept or rejects the application
- The application file is then passed for further scrutiny
- Increase the application gets registered, the registrar issues a summons.
- In case the defendant does not appear, the case becomes ex-parte
- Otherwise, the defendant needs to file a written statement within 90 days of the summons
- The applicant also needs to file proof-affidavit
- Defendants can also file counter proof-affidavit
- The registrar sets a hearing date under the directions of the presiding officer
- Different may serve a stay petition
- The case will be done on the Final hearing made by the presiding officer
- Finally, a recovery certificate is passed to the recovery officer of the tribunal who will be responsible for recovering the amount and handing it over to the bank
As per section 128 of the Indian Contract Act 1872, the surety is liability is coextensive with that of the principal debtor unless otherwise provided by the contract. Therefore, in case the debtor makes defaults, the banker can proceed against their surety even without exhausting the remedies that are available to the banker. So in cases, we are banker makes a claim on the guarantor when a principal debtor makes a default, the guarantor is immediately liable.
So, these are all the remedies that are available to bankers or creditors against the person who failed to repay any amount lent. Depending on case to case, one can choose to go for different routes for different cases.
PASS DRA 2022-23 EXAMS IN 1 ATTEMPT
Find more of such free notes on our website on DRA Exams 2023. The classes of DRA are also available at the most reasonable prices on the above-mentioned platforms.
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