.

Presentation on
Legal Recovery Measures

PDR act
PDR provides for speedy and
summary disposal.
A service notice u/s 7 of the act also
attaches the property of the borrower
and makes it unavailable for any sale
or purchase .
Such provisions creates pressure on
the borrower to repay the debt.

Basic Requirements
Only Public Demand can be recovered.
Recovery of loans by PSBs specially under Priority
Sector and those under Govt Sponsored schemes are
covered under the act.
Demand must be made
Certificate Officer has to certify that Bank dues are
recoverable under PDR act.
Existence of credit facility and overdue in the account.
Documents are there to establish dues and are not
barred by limitation.
Address and whereabouts of the party and location of
the property.

Why PDR
Where stake is not very high
Normally where charged security is
not available
Where large number of cases to be
dealt ( Like P/S and Govt Sponsored
cases)
Immediate and early action needed

Documents to be submitted
Copy of demand Notice.
Requisition and claim to be filled and
signed by Br manager ( duplicate)
Notice to Certificate Debtor to be filled
on
behalf
of
the
Certificate
Officer( duplicate)
The Certificate to be issued by the
Certificate Officer (duplicate)
Ad-valorem Stamp duty to be paid in
Court fees.

Procedure
On being satisfied that dues are legally recoverable and also
under PDR act, the CO will serve notice under Sec 7 of the
act. The notice is having the following effect ;
Any private transfer or delivery of immovable property in
the district of filing the case shall be void against any claim
enforceable in execution of the certificate.
Amount due from time to time in respect of the certificate
shall be a charge upon the immovable property of the
certificate debtor ,anywhere, and to which every other
charge created after service of the said notice shall be
postponed.In effect, after service of notice, the Certificate
holder becomes mortgagee.
Under sec 9 of the act , the certificate debtor may within 30
days of notice, deny liability and CO will hear his case with
bank presenting documents and evidence for decision.

Attachment of Moveable property

If the CO is satisfied that the Certificate Debtor is
likely to conceal, remove or dispose of the whole
or part of moveable property as would be liable to
attachment in execution of a decree of a civil court
and
That the realization of the amount of certificate
would consequently be delayed or obstructed , he
may at any time , direct for the reasons to be
recorded in writing, an attachment of the whole or
a part of the moveable property of the certificate
debtor.

Execution of Certificates

1. By attachment and sale (in case of

immovable property) and by sale
even without previous attachment
( in case of moveable property)
2. Arresting the certificate debtor and
detaining him in civil prison.
3. By both of 1 and 2 above.

Cost and Charges

Interest @ 6% pa (simple) from the
date of signing the certificate to the
date of realization of debt.(no
interest ,if paid within 3 months from
the date of certificate)
All other charges and costs including
for serving of notice and proceedings
for realization of debt.

Death of Certificate debtor :

In case of death before issuing

certificate, a fresh certificate case to be
initiated against the legal heirs of the
certificate debtor.
In case of death after certificate,
Certificate officer will serve notice to
legal heirs and proceed to execute the
certificate against the legal heirs.

Appropriation of amount

Amount collected by CO will be

remitted to Br for appropriation.
Deposits accepted at the Br will be
marked as without prejudice and
immediately intimated to the CO.

Recovery proceedings under PDR Act mandates

Maintenance of 2 (two) Registers, one at Bank level
and the other with the Certificate Officer, which need
to be tallied and updated at regular interval. In West
Bengal these are termed as Register 9 and 10
respectively.

Constant persuasion by RO, LDMs are needed with

the District Administration and the matter of
enforcement of PDR Act needs to be discussed in the
DCC/DLRC Forum with a firm approach.

Lok Adalat
Lok Adalats are constituted under The Legal
Services Authorities Act, 1987
Lok Adalats have been constituted at various
places in the country for disposal of disputes in a
summary way and through the process of
arbitration and settlement.
Functioning of the Lok Adalat is entirely voluntary
and conciliatory.

ELIGIBILITY

NPAs, irrespective of whether suit

has been filed or not which are in
doubtful, loss and written off
category, with outstanding balance
upto Rs.20.00 lacs will be eligible for
settlement through the Lok Adalats.

Essential requirements for Lok Adalat

proceedings
Agreement between borrower and the
bank to settle the dues.
Application from the borrower to this
effect.
Banks acceptance.

Who can refer cases to Lok Adalat

( Section 20)
By consent of both parties
One of the parties making reference
Where court is satisfied to be taken up in Lok
Adalat
Compromise to be guided by principles of justice,
equity, fairplay and other legal principles.
If no compromise is reached, the matter will be
returned to court for disposal as per law.

Procedures for Lok Adalat

Regular liaison with the Legal services authorities is to
be maintained from time to time for holding successful
Lok Adalat.
List of eligible cases of the Bank be submitted to the
aforesaid authorities for referring the same to the Lok
Adalat for settlement.
The date, venue and time of the Lok Adalat has to be
finalized in consultation with the Legal Services
Authority.
Assistance to be provided to the Legal Services
Authority for preparation and issuance of notices under
the seal and signature of the Legal Services Authority.
In case of suit filed accounts, the concerned authorities
to be contacted for sending the files to the Lok Adalat.

Procedures for Lok Adalat

After the notices are prepared and signed by the Legal

Services Authority, the same to be collected and sent to
the concerned borrowers/guarantors for appearing before
the Lok Adalat on the date , time and venue fixed for the
purpose.
Borrowers/guarantors should be contacted personally by
the concerned
Branch for preparing the ground for
settlement before Lok Adalat .
MRA for each account referred to Lok Adalat has to be
calculated as per the extant Recovery Policy of the Bank.
After the order is passed by the Lok Adalat , all the settled
cases are to be placed before the competent authority, as
per Discretionary power for Banks sacrifice in terms of the
extant Recovery Policy of the Bank, for approval.

Lok Adalat Procedures

All the cases settled in Lok Adalat
are to be kept under close follow up
for recovery of the settled dues.
In case of default further steps are
to taken for recovery.

Status of award by Lok Adalat ( Section

21)

Every award of Lok Adalat shall be

deemed as decree of Civil Court
Every award of Lok Adalat shall be final
and binding on all parties to the dispute.
No appeal shall lie from the award of the
Lok Adalat.

Section 22
Every proceeding of Lok Adalat will be
deemed to be judicial proceedings for
the purpose of
Summoning of witness
Discovery of documents
Reception of evidence
Requisitioning of Public Records.

Advantages:
1) Its decisions have legal status and are binding.
2) No Court Fees is to be paid when fresh disputes are
referred to it.
3) Refund of 50% of the Court Fee amount paid by the
Bank if the case is settled in Lok Adalat in States
where applicable.
4) If no settlement is arrived at, the parties can
continue with Court Proceedings.
5) Decrees passed by the Lok Adalats being consent
decrees, no appeal lies.

PAYMENT

Settlement amount in the Lok Adalat should

preferably be paid in one stroke.
However, on case to case basis down payment of
25% (at least not less than 10%) and the balance
amount in 24 months by installments depending
upon the repayment capacity of the borrower,
value of security.
Interest will be charged as per the extant
guidelines in the Recovery Policy of the Bank.

DECREE
A decree will be obtained from Lok Adalat for the
settled amount and after full payment, a discharge/no
dues certificate will be issued by the Bank.
DEFAULT CLAUSE
In default of payment of any part of the settled
amount and/or amount of any of the installments
either in part or in full, or any breach of terms of
settlement the relief and concessions granted to the
borrower in the settlement shall stand withdrawn
automatically and the entire amount shall fall due and
the decree shall be put into execution against the
borrower.

DRT
DRTs are established as per recommendation of
Narasimham Committee on Reforms in Financial
System.
The Recovery of Debts to banks and financial
Institutions Act, 1993 came into force wef 24.06.1993.
Applicable throughout India except J&K
The GOI has constituted 33 Debt recovery Tribunals
and 5 Debt recovery Appellate Tribunal across the
Country. Some Cities like New Delhi and Mumbai have
3 DRTs; Kolkata and Chennai have 2 DRTs each.
The provision of this act is applicable only in respect
of debts due to any bank or financial institution for an
amount of Rs.10 lacks or above.

DRT
Documents required

Statement of Loan account

All documents relied upon
Application fee in the form of DD
Index of documents.

5DRT Procedures
When any loan account shows symptoms of
becoming NPA, the borrowers /guarantors are to be
contacted for regularizing the account including
reconstruction and rephasement wherever possible.
If the reconstruction / reschedulement is not
possible, SARFAESI action shall be initiated
expeditiously in the account after the same is
classified as NPA.
Even after issuance of SARFAESI notice, Borrowers
and guarantors are to be approached personally for
compromise settlement and for renewal of
documents.

DRT Procedure
If the entire SARFAESI action cannot be completed
within the limitation period and/or any amount
remain due after adjustment of the sale proceeds of
the securities , the suit be filed within limitation
period
after obtaining necessary permission
therefor from the competent authority and after
filing of the suit, the Sarfaesi action shall be
continued till its logical end.
For the purpose of filing suit after obtention of
permission, papers are to be handed over to an
empanelled Advocate for preparation of the Plaint /
application to be filed before the Court / DRT.
All liquid securities available in the account are to
be adjusted before filing of the suit.

DRT Procedure
Before filing of Recovery Application before the DRT for
recovery of dues, it should be ensured that all loaning
documents are complete in all respects and alive.
The correct details of the borrowers / guarantors
name, surname, father / husbands name, and latest
recorded and complete residential address / address of
the Unit be furnished with postal Pin Code.
After receipt of the draft plaint / application ,the
various averments made in the said draft plaint
/application are to be verified at the branch and RO to
secure Bank,s interest fully.

DRT Procedure
Original documents need not be filed in the Court / DRT at
the time of institution of the case. As and when the original
documents are required to be filed, photocopies of the
same to be kept in the Branch alongwith the receipt of the
dealing Advocate.
The said filing of original documents before the Court / DRT
be also recorded in the Order sheet of the Court / DRT. A
copy of the said order sheet be also kept at the branch.
Two sets of summons which are to be sent to the
defendants are to be collected from the DRT and served on
the defendants by speed post and
physically. The
registration / speed post receipt / A/D Card is to be handed
over to the advocate.

DRT Procedure
Where

the Debtors are not traceable despite best

efforts by the banks and the Recovery Officers, the
cases should be categorized as adjourned sine die
with an option to reopen as and when required.
In each recovery application filed before the DRT,
separate application for passing interim order of
injunction against the defendants from transferring /
alienating their personal assets shall be filed.
The telephone/ mobile number of all the advocates
handling the Banks cases have also to be
maintained at the branch.

DRT Procedure
It should be ensured that dealing advocates appear in the
cases entrusted to him on all the dates before the DRTs fully
prepared.
The witnesses who are to depose at the DRT must be
properly briefed by the advocate and he should also get
prepared to face cross examination from the side of
defendants.
The representative of the branch must attend the hearing
of the cases on all dates and finalize future strategy in the
matter in consultation with the advocate and RO and HO
whenever required.
The cases should be continuously / vigorously followed up
with the advocate/s for quickening the process of cases
leading to decree/issuance of certificate.
.

DRT Procedure
In cases where securities are available, immediate
steps have to be taken through the advocates for
obtaining interim reliefs in the form of appointment
of Commissioner / Receiver for making inventory
over the securities, sale of the securities and
adjustment of sale proceeds out of the assets
towards dues of the Bank.

The advocates be advised to file applications for

attachment of the personal assets of the borrower /
guarantor, a list of which has to be provided by the
branch for creating pressure on the borrower /
guarantor for payment of Banks dues.

DRT Procedure
In case the company has gone into liquidation
and the sale proceeds are lying with the official
liquidator, affidavit of claim has to be filed by the
advocate before the O.L for recovering Banks
share out of the sale proceeds.
As soon as the decree / recovery certificate is
issued / passed, the matter be followed up with
the advocate for initiation of execution
proceeding against the defendants / judgment
debtors / certificate debtors.

RULE 4

AMOUNT OF REFUND:-The Presiding Officer of the

Tribunal before which any case is filed for settlement of
the dues of the Banks and Financial Institutions, may
order refund of fee remitted at the time of filing the case
at the following rates:
50% of the fee remitted in the cases which are settled
prior to commencement of the hearing before the
Tribunal.
25% of the fee remitted in the cases which are settled
at any stage of the proceedings before the final order by
the Presiding Officer is passed.

RULE 5
PROCEDURES FOR REFUND:
The applicant and the defendants shall file
a joint application before the Registrar of
the Tribunal for refund of the court fee
indicating the details of the settlement.
The Presiding Officer shall pass orders for
refund of the court fee indicating the
amount of refund in the order.

SARFAESI act, 2002

This act gives power to secured lender to realise
dues through enforcement of security interest
without intervention of court.( effective from
21.06.2002)
The act deals with three aspects :
1.Promoting securitisation
2.Formation of asset Reconstruction Company.
3.Enforcement
of
security
interest
without
intervention of court.

Eligibility
1. The account must have become Non - performing Asset.
2. The security documents must be within the period of
limitation
3. The outstanding amount with interest must not be less than
Rs. 1.00 Lac in the account.
4. The outstanding amount with interests i.e. the amount due
should not be less than 20% of the principal amount.
5. Security interest must have been created by a way of
hypothecation and mortgage in favour of the bank for
securing the loan (pledge of movables is not covered under
the Act).
6. Immovable properties mortgaged with the bank should not be
agriculture land.
7. Secured assets must not be covered under Hire
Purchase/Lease Agreement.

Issuance of Notice
Notice to be served on both borrowers and guarantors if
alive giving 60 days time to repay the debt.. If any of the
borrower or guarantor is dead then the notice is to be sent
to the legal heirs of the deceased borrowers/guarantors
stating inter alia that they are jointly and severally liable
for payment of Banks dues
Notice be issued under the signature of Authorised Officer.
Notices should be sent at the addresses last
known/recorded with the Bank.
The book dues and the notional interests should not be
shown separately in the notice but the entire liability
should be calculated in respect of the loan account
calculating notional interest till the date of issuance of the
notice of the borrower.

Issuance of Notice
The securities to be enforced for recovery of the outstanding
amount should be specifically mentioned in the notice.
If a common security has been created in more than one
account, a single notice is to be given instead of separate
notice.
Notice is to be sent by Registered post/Speed post with
acknowledgement due.
The various loan accounts/credit facilities and the outstanding
amount against each should be specifically stated in the notice.
If any bank guarantee or bill discounting or any non fund
facilities have been given to the borrower and the same have
not devolved on the bank, the same should be specifically
mentioned in the notice reserving banks right to issue fresh
notice.

Service of Notice
If the borrower/guarantor is avoiding the service of
the above notice, the same shall be effected by
affixing the copy of the demand notice on the outer
door or some other conspicuous part of the house
or building where the borrower/guarantor carries on
business or ordinarily resides or personally works
for gain.
In addition to affixing the notice, the contents of
the notice be published in two leading newspaper,
one in vernacular language and the other in English
, where the notice could not be served on the
Borrowers/Guarantors through post or personally.

(Disposal of Representation/Objection
raised by the Borrower)
Under Section 13(3-A), the borrower
has right to make representation
against the above notice and that
must be disposed of by the Bank
within 15 days of receipt thereof .

Possession -Moveable
Possession of movable assets is to be taken in presence of
2 (two) witnesses.
Possession of the secured assets is to be taken after
sunrise and before sunset. If the process of possession
has started after sunrise the same must be completed as
fast as possible.
Panchnama has to be prepared /drawn as nearly as
possible as per appendix 1 to the Security Interest
(Enforcement) Rules, 2002.
Punchnama is to be signed by at least 2 (two) witnesses.
Inventory of the property is to be prepared in the form
given in appendix II to the Security Interest (Enforcement)
Rules, 2002 and a copy of the same is to be given /sent to
the borrower against his acknowledgement.

After taking possession of the property, the same is

to be kept in the custody of the
Authorized Officer or with any person authorized by
him in this regard.
Utmost care of the property is to be taken as
expected of an owner of ordinary prudence would
take in respect of the said property till they are sold
or otherwise disposed off. The goods may be
insured if necessary.
If the property is subject to speedy or natural
decay, or the expenses of keeping such property in
custody will outweigh, the same, the same may be
sold at once.

Possession Moveable
If the securities are under the lock of the
borrower and borrower is not there to
deliver possession, the Authorized Officer
can break open the lock to take possession
and make reference thereof in Appendix
I, to the Security Interest (Enforcement)
Rules, 2002 and relock the premises after
taking possession.

Possession Immovable
Possession is to be taken by delivering possession
notice as prepared in the form Appendix-IV to the
Security Interest (Enforcement) Rules, 2002 to the
borrower.
A copy of the notice is to be affixed on the outer
door or other conspicuous part of the property.
Immediately after taking possession of the property
the valuation is to be completed. In case there are
distressing conditions existing with the property, the
valuation report should indicate the gross valuation
and distress valuation.

Possession of Immovable
If the possession of the secured property is not with
the borrower and the same is in possession of another
person, the said person be given notice to handover
the vacant possession. The Authorized Officer can
take symbolic or constructive possession of the said
property and a copy of the possession notice be given
to the occupant besides affixing a copy thereof on the
main door of the property.
If the secured premises are locked, the Authorized
Officer shall break open the lock and mention thereof
in Appendix - IV of the Security Interest (Enforcement)
Rules, 2002 and relock after taking possession

Possession of Immovable

Under Rule 8(2) of security Interest (Enforcement

Rule),2002, the possession notice is to be
published in two newspapers one in vernacular
language and other in English Language having
sufficient circulation in the locality. The incident of
breaking open the lock should not be mentioned
in the notice to be published in the newspaper.
Such publication should be done as soon as
possible and not later than 7 days from date of
taking possession.

Possession of Immovable
Where borrower is inclined to give his consent or
willingness for taking possession by the bank, the
notice under section 13(2) SAEFAESI Act has to be
given and service of the same should be effected
on him and in reply to the said notice in writing,
the borrower should give his consent/willingness
to handover possession of the property and for
sale of the same. In the said event the Authorized
Officer can take possession of the property and
publish the notice in form Appendix IV of the
Security Interest Enforcement) Rules, 2002.

Possession of Immovable
In case there is apprehension of resistance or
obstruction in taking physical possession of the
secured property, the bank being the secured
creditor can request the District Magistrate or
Chief Judicial Magistrate within whose jurisdiction
such secured assets are situated in writing to take
possession of such assets and handover the same
to the Authorized Officer.
Police help may be sought by the Authorized
Officer while taking possession of the secured
properties.

At the time of taking possession of the moveable

assets, Panchanama is required to be made as per
rule 4(1) of the Security Interest (Enforcement
Rules), 2002 in presence of 2 witnesses and to be
signed by the said witnesses as per Appendix-I to
the said rule.
The said Panchanama is to be prepared in presence
of witnesses and signed by them and the signature
of the Borrowers, Guarantors are to be obtained on
the same in case they are present at the time of
taking such possession. In case of refusal to accept
the said Panchanama, such refusal is to be recorded
by the Authorised Officer at the bottom part of the
Panchanama.

As per 4(2) of the said rules, the Authorised

Officer shall make an inventory of the property as
per Appendix II and deliver a copy of the same to
the borrower, guarantor or any person certified to
receive on their behalf

Authorised Officers while returning the possession

of the assets should obtain a separate letter from
the Borrowers, Guarantors to safeguard the
interest of the Bank.

g) Under rule 8(6) and 8(7) of the Security

Interest Enforcement Rules 2002, the Authorised
Officer shall serve to the borrower a notice of 30
days for sale of the immoveable secured assets.
The definition of borrower under Rule 2(f) of the
SARFAESI Act 2002 also includes the guarantors.
Therefore, the Sale Notice has to be sent to the
Borrowers, Guarantors by Registered Post / Speed
Post as well as to be affixed on a conspicuous part
of the immoveable property.

Authorised Officers have to provide clear

30 days time from the date of publication
in Newspaper till the date of sale.
Under no circumstances the said period of
30 days can be reduced by any
Authorised Officer.( Rule 9(1) of Security
interest (Enforcement Rules) 2002)

(Fixation of Reserve Price, Earnest money, Date of

Inspection, Date of submission of Offer, Date of
sale)
.

Before effecting sale of immovable property Authorised

Officer shall obtain valuation of the property from an
empanelled valuer and fix the reserve price in
consultation with the appropriate authority of the Bank.
Earnest money should be at least 10% of the reserve
price.
The inspection date should be fixed at least 20 days
after the date of publication of the sale notice.
The last date for the submission of offer/bid should be 1
(one) day prior to the date of sale.
Date of sale should be fixed in such a way that there
should be at least 30 days clear gap between the date
of publication of the sale notice and the date of the sale.

(Publication of Sale Notice):

Sale notice has to be published in two newspapers
one of which is to be in vernacular language and
other in English Language having sufficient
circulation in the locality giving clear 30 days time
from the date of publication of notice in the
newspaper till the date of sale.( Example- If the Sale
Notice is published on 1st of March, 2010, sale date
can be fixed after 30 days excluding the date of
publication i.e. 1st April, 2010 or thereafter.)
If the sale notice has been published in newspapers
on different dates, the last date of publication is to
be considered for counting 30 days time.

(Publication of Sale Notice):

The copies of the sale notice published in the
newspapers should be sent to the borrower by
registered post/speed post with acknowledgement
due immediately upon publication of the sale notice
in the newspaper.
iv) The copy of the sale notice shall also be affixed
on a conspicuous part of immovable property.
All the auctions for sale of the secured assets under
SARFAESI Act-2002 to be conducted through eauction only except where the value of the loan or
of the property is less than Rs 5.00 lakh after taking
necessary permission from the Regional Office.

(Issuance of Sale Certificate) :

The highest bidder may be declared as the successful

purchaser and be advised to deposit 25% of the sale price
inclusive of the earnest money immediately with the
authorised officer conducting the sale and in case sale is
concluded after banking hours such deposit be made on
the next working day. The balance amount of 75% has to
be deposited within 15 days from the date of sale
containing a default clause that in the event of failure or
default of payment within the stipulated date, the amount
so deposited shall be forfeited. After the entire sale price
is deposited, the sale be confirmed in favour of the
purchaser through a letter.

(Issuance of Sale Certificate)

In case of sale by private treaty the authorised officer
shall send a notice to the mortgager intimating the
price at which the property is to be sold by way of
private treaty with a request to bring an intending
buyer who is ready and willing to buy the property at
the price above the price mentioned in the notice within
the stipulated time.
After the full amount is received from the successful
purchaser within the stipulated time, the authorised
officer may issue sale certificate in favour of the
purchaser. In the sale certificate to be issued it should
be mentioned that the properties sold is free from the
mortgage charge of the Bank.

(Issuance of Sale Certificate)

If the purchaser requires the authorised officer to
execute conveyance deed in his favour the
authorised officer may do the same and the sale
certificate if earlier issued shall be taken back from
the purchaser. It should inter alia be recorded in the
conveyance deed that the property is sold free of
mortgage charge of the Bank.

The entire cost of registration including stamp

papers shall be borne by the purchaser.

Refund of excess amount from the sale

proceeds
i) In case the sale proceeds is more than the dues
as claimed in the notice, the excess amount can
be refunded to the borrower/secured debtors (a
person whose property was sold).
12. Filing of suit where the sale proceeds is
less than the dues of the bank:
i) If dues of the Bank is less than the sale
proceeds, the suit is to filed for the balance
amount.

Appropriation of Sale Proceeds:

All costs, charges and expenses incurred by the
bank in connection with the sale of the property
shall be adjusted first out of the sale proceeds.
The balance amount of sale proceeds after such
adjustment shall be credited towards the
outstanding liability in the Loan accounts.

Thank You