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unless the applicant deposits the prescribed percentage of
the amount due from the borrower and makes an appeal
within 30 days from the order of the Tribunal.

An important power conferred on the Tribunal is that of making
an interim order (whether by way of injunction or stay) against
the defendant to debar him from transferring, alienating or
otherwise dealing with or disposing of any asset belonging to
him without prior permission of the Tribunal. This order can be
passed even while the claim is pending. After the claim is upheld
by the Tribunal, it issues a recovery certificate to the Recovery
Officer of the Tribunal who has various powers for execution
including attachment, sale, arrest, appropriation as Receiver
and power to require the defendant (debtor) to remit the
money to the Recovery Officer.
also decide to take-over the management of the assets,
The Act provides powers of a Civil Court to DRT and DRAT in appoint any person to manage the assets taken-over and
several matters. Such as summoning of witnesses, discovery also order settlement of dues from any person who has
and production of documents and receiving evidence on
acquired the secured assets from the borrower.
affidavits. The Act also requires both tribunals to dispose of
the applications or appeals within a period of 6 months. At Any persons aggrieved by the measures taken under the Act
present, there are 34 DRTs (few more being set up by the may approach DRT within 45 days (now, reduced to 30 days)
Government shortly) and 5 Appellate Tribunals in the from the date on which such measures were taken. The new
country..Yet, DRTs are found to be few in number in terms of law would not only help in recovering from the existing NPAs
a steep rise in the number of cases referred to them. of the banks/FIs, but also curb the instincts toward wilful

defaults in future. The legislation protects banks/FIs from
The major breakthrough took place when Securitisation and unnecessary legal hassles from defaulting companies and also
Reconstruction of Financial Assets and Enforcement of from cross legislation among the FIs since many companies
Security Interest (SARFAESI) Act was enacted in 2002 which had secured loans from multiple financial institutions.
provides for enforcement of security by banks/FIs in their
favour without the intervention of court/tribunal. For this, Lastly, sale of Assets to Asset Reconstruction Companies
the concerned borrowal account should have been classified (ARCs): The SARFAESI Act provides for setting up of Asset
as NPA. Reconstruction Company (ARC) which should obtain a
certificate of registration from the RBI after fulfilling certain
The provisions of the Act shall not apply in case of loans up conditions. The ARC can acquire financial assets of any bank
to Rs.1 lakh and in respect of any security interest created or FI by issuing a bond or any other security on mutually
in agriculture land. Likewise, the cases where the amount accepted terms between the ARC and the concerned bank/
due is less than 20 per cent of the principal amount and FI. On acquisition of financial asset by ARC from bank/FI, the
interest thereon, the same is outside the purview of the Act. former becomes a deemed lender and all rights of such
Banks/FIs have to serve the notice under section 13 (2) to bank/FI shall vest in it in relation to the financial assets.
the borrower asking him to repay the liabilities in full within
60 days from the date of notice. Any suit, appeal or other proceeding pending at the time of
acquisition of assets shall be continued by ARC. It can issue
The Act arms the lenders with powers to directly initiate security receipt to institutional buyers for subscription. The
recovery procedures by taking possession of the secured ARC can provide for proper management of the business of
assets of the borrowers which would include the transfer of the borrower, sale or lease of a part of whole of the
all underlying assets. The lender could, in effect, attach, sell business of the borrower, reschedulement of payment of
or auction any of the assets taken-over by them. They can debts by the borrower and settlement of dues payable

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