RECOVERY OF DEBT DETERMINED BY ‘DRT’

Recovery certificate

Section 19 (22) of the Recovery of debts and Bankruptcy Act, 1993 (‘Act’ for short) provides that the Presiding Officer of the Debts Recovery Tribunal (‘DRT’ for short) shall issue a certificate of recovery along with the final order, for payment of debt with interest under his signature to the Recovery Officer for recovery of the amount of debt specified in the certificate.  The said Recovery Certificate shall be deemed to be a decree for the purposes of initiating winding up of Companies, LLPs under the Companies Act and also to initiate insolvency proceedings under the Insolvency and Bankruptcy Code.

Mode of recovery

Section 25 of the Act provides that The Recovery Officer shall, on receipt of the copy of the certificate proceed to recover the amount of debt specified in the certificate by one or more of the following modes-

• attachment and sale of the movable or immovable property of the defendant;
• taking possession of property over which security interest is created or any other property of the defendant and appointing receiver for such property and to sell the same;
• arrest of the defendant and his detention in prison;
• appointing a receiver for the management of the movable or immovable properties of the defendant;
• any other mode of recovery as may be prescribed by the Central Government.

Withdrawal of recovery certificate

The President of DRT is having power to withdraw the recovery certificate issued by it or correct any clerical or arithmetical mistake in the certificate by sending intimation to the Recovery Officer.

Validity of certificate

The defendant shall not  dispute before the Recovery Officer as to  the correctness of the amount specified in the certificate, and no objection to the certificate on any other ground shall also be entertained by the Recovery Officer.

Stay of proceedings

The Presiding Officer may grant time to the defendant for making payment.  The defendant makes a down payment of not less than 25%. of the amount specified in the recovery certificate and gives an unconditional undertaking to pay the balance within a reasonable time.   The Recovery Officer shall, on receipt of the order, stay the proceedings until the expiry of the time so granted on the condition that the defendant shall forfeit his right to file appeal before the Appellate Tribunal challenging the order of DRT. 

If the defendant commits any default in payment of the amount, the stay of recovery proceedings shall stand withdrawn. The Recovery Officer shall take steps for recovery of remaining amount of debt due and payable. 

If a certificate for the recovery of debt has been received by the Recovery Officer and subsequently the amount of the outstanding demands is reduced or enhanced as a result of an appeal, the Presiding Officer shall, when the order which was the subject matter of such appeal has become final and conclusive, amend the certificate or withdraw it, as the case may be.

Recovery of dues

The Recovery officer may recover the amount, in addition to the mode of recovery as stipulated under Section 25 of the Act, in the following modes-

• If any amount is due from any person to the defendant, the Recovery Officer may require such person to deduct from the said amount, the amount of debt due from the defendant under this Act.  Such person shall comply with any such requisition and shall pay the sum so deducted to the credit of the Recovery Officer.  The amount liable to court attachment is not applicable to this sort of recovery.
• The Recovery Officer may require any person by notice in writing to any person from whom money is due or may become due to the defendant or to any person who holds or may subsequently hold money for or on account of the defendant, to
•  A notice under this sub-section may be issued to any person  to pay to the Recovery Officer either forthwith upon the money becoming due or being held or within the time specified in the notice (not being before the money becomes due or is held) so much of the money as is sufficient to pay the amount of debt due from the defendant or the whole of the money when it is equal to or less than that amount.
• The abovesaid notice may be issued to any person who holds or may subsequently hold any money for or on account of the defendant jointly with any other person and the shares of the joint holders in such amount shall be presumed, until the contrary is proved, to be equal.
• A copy of the notice shall be forwarded to the defendant at his last address known to the Recovery Officer and in the case of a joint account to all the joint holders at their last addresses known to the Recovery Officer.
• every person to whom a notice is issued shall be bound to comply with such notice,.
• If any such notice is issued to a post office, bank, financial institution, or an insurer, it shall not be necessary for any pass book, deposit receipt, policy or any other document to be produced for the purpose of any entry, endorsement or the like to be made before the payment is made notwithstanding any rule, practice or requirement to the contrary.
• Any claim respecting any property in relation to which a notice under this sub-section has been issued arising after the date of the notice shall be void as against any demand contained in the notice.
• If such person made objections to it by a statement on oath that the sum demanded or the part thereof is not due to the defendant or that he does not hold any money for or on account of the defendant, then he is not required to pay any such sum or part thereof. If it is discovered that such statement was false in any material particular, such person shall be personally liable to the Recovery Officer to the extent of his own liability to the defendant on the date of the notice, or to the extent of the defendant’s liability for any sum due under this Act, whichever is less.
• The Recovery Officer may, at any time or from time to time, amend or revoke any notice under this sub-section or extend the time for making any payment in pursuance of such notice.
• The Recovery Officer shall grant a receipt for any amount paid in compliance with a notice issued.  The person so paying shall be fully discharged from his liability to the defendant to the extent of the amount so paid.
• Any person discharging any liability to the defendant after the receipt of a notice under this sub-section shall be personally liable to the Recovery Officer to the extent of his own liability to the defendant so discharged or to the extent of the defendant’s liability for any debt due under this Act, whichever is less.
• If the person to whom a notice is sent fails to make payment to the Recovery Officer, he shall be deemed to be a defendant in default in respect of the amount specified in the notice and further proceedings may be taken against him for the realisation of the amount as if it were a debt due from him.  The notice shall have the same effect as an attachment of a debt by the Recovery Officer in exercise of his powers under section 25.
• The Recovery Officer may apply to the court in whose custody there is money belonging to the defendant for payment to him of the entire amount of such money, or if it is more than the amount of debt due, an amount sufficient to discharge the amount of debt so due.
• The Recovery Officer may, by order, at any stage of the execution of the certificate of recovery, require any person, and in case of a company, any of its officers against whom or which the certificate of recovery is issued, to declare on affidavit the particulars of his or its assets.
• The Recovery Officer may recover any amount of debt due from the defendant by distraint and sale of his movable property in the manner laid down in the Third Schedule to the Income-tax Act, 1961.

Appeal

Any person aggrieved by an order of the Recovery Officer made under this Act may, within 30 days from the date on which a copy of the order is issued to him, prefer an appeal to the DRT.   The DRT may, after giving an opportunity to the appellant to be heard, and after making such inquiry as it deems fit, confirm, modify or set aside the order made by the Recovery Officer.  such person has to deposit with the DRT 50% of the amount of debt due as determined by the DRT.