Before the enactment of Recovery of Debts Due to Banks and Financial Institutions Act (“RDDBFI”) 1993, Indian Banks and financial Institutions has to follow the erratic and extremely cumbersome procedure to recover the debts and securities from the defaulters. In 1991, the Narasimham Committee had recommended to setup the debt recovery tribunals to recovery procedure process for Banks. The Debt Recovery Tribunals and Debt recovery appellate tribunals are formed under the RDDBFI Act. The provision in the RDDBFI has empowered the DRT and DRAT to adjudge on debt recovery matters. Now in our country, there 39 DRTs and 5 DRATs in India.
Section 22 of RDDBFI Act, provides the Procedure and powers of the Tribunal and the Appellate Tribunal. The Tribunals are not bound by the Code of Civil Procedure and guided by the Principle of Natural Justice. For the purpose of discharging their duties, the Tribunals are vested with same powers as in the Code of Civil Procedure.
The pecuniary limit was previously set at ₹ 10 lakhs, but was raised to ₹ 20 lakhs through a notification on September 6, 2018 (Notification No. - S.O. 4312(E) dated 06.09.2018 - THE RECOVERY OF DEBTS AND BANKRUPTCY ACT, 1993 - RDB Act)
Civil Courts: Below ₹20 lakh.
According to the section 4 of RDDBFI Act, composition of DRT consists of one person who is appointed and notified by the Central Government. The Central Government may authorize the presiding officer or Judicial Member of any other Tribunal established under any other law to discharge the function of the Presiding Officer of the Debt Recovery Tribunal in addition to his/her being the Presiding Officer or Judicial Member of that Tribunal.
The process of repaying the mortgage loan in full and regaining ownership of the property.
Even after default to pay loan installment amount, under Section 60 of the Transfer of Property Act 1882 gives borrowers the right to recover the mortgaged property by repaying the entire loan amount along with the interest and other charges any.
Order 34 Rule 5 of the Code of Civil Procedure (CPC) allows borrowers to deposit recovery money in court to recover their mortgaged property while the case is pending before the court or tribunal.
SARFAESI Act, 2002 allows lenders to enforce security without court intervention, but borrowers can recover by settling the outstanding amount even after the declaration of possession (before the sale is confirmed).
Before Decree: Borrower can redeem by filing an application under CPC Order 34 Rule 5 by attaching proof of readiness to pay and thereafter the calculated amount (including principal, interest, and costs) and deposit the outstanding amount into court. The court will verify the sum and order redemption if valid.
If the lender acts under SARFAESI to enforce security without court intervention, approach the Debt Recovery Tribunal (DRT) to redeem by settling dues (including principal, interest, and costs) before the mortgaged property is sold.
That is under the SARFAESI Act, in order to redeem a mortgaged property, a borrower must pay the outstanding dues to the secured creditor at any time before the publication of public auction notice. The Section 13(8) of the SARFAESI Act provides how a borrower loses his right to redeem the property;
After Decree: If a foreclosure/sale decree is passed, redemption is typically barred unless the decree specifies a redemption period (e.g., 6 months under Order 34 Rule 5 CPC).
Limitation Period: The right to redeem generally exists for 30 years from the mortgage date (unless contractually reduced), but court decrees on mortgaged property limitation period become shorter.
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