Page 225 - DMGT512_FINANCIAL_INSTITUTIONS_AND_SERVICES

Financial Institutions and Services

Notes 4. Debt Recovery Tribunal (DRT): The banks and FIs can enforce their securities by initiating
recovery proceeding under the Recovery if Debts due to Banks and FI Act, 1993 (DRT Act)
by filing an application for recovery of dues before the Debt Recovery Tribunal constituted
under the Act.
5. Lok Adalats: Lok Adalats are made for the recovery of small NPAs upto 20 lacs. It is a
speedy way to recover the NPAs. Some of the main characteristics of NPAs are as follows:
(a) Recovery of small NPAs up to 20 Lacs
(b) Speedy Recovery

(c) Veil of Authority
(d) Soft Defaulters
(e) Less expensive

(f) Easier way to resolve
6. Proceeding under Code of Civil Procedure: For claims below 10 lacs, the banks and FIs can
initiate proceedings under the Code of Civil Procedure of 1908, as amended, in a Civil
Court.
7. Board for Industrial & Financial Reconstruction (BIFR)/AAIFR:
(a) BIFR has been given the power to consider revival and rehabilitation of companies
under the Sick Industrial Companies (Special Provisions) Act of 1985 (SICA), which
has been repealed by passing of the Sick Industrial Companies (Special Provisions)
Repeal Bill of 2001.
(b) The board of Directors shall make a reference to BIFR within sixty days from the
date of finalization of the duly audited accounts for the financial year at the end of
which the company becomes sick.
(c) The company making reference to BIFR to prepare a scheme for its revival and
rehabilitation and submit the same to BIFR the procedure is same as laid down
under the CPC.
(d) The shelter of BIFR misused by defaulting and dishonest borrowers.

(e) It is a time consuming process.
8. National Company Law Tribunal
(a) In December 2002, the Indian Parliament passed the Companies Act of 2002 (Second
Amendment) to restructure the Companies Act, 1956 leading to a new regime of
tackling corporate rescue and insolvency and setting up of NCLT.
(b) NCLT will abolish SICA, have the jurisdiction and power relating to winding up of
companies presently vested in the High Court and jurisdiction and power exercised
by Company Law Board.
(c) The second amendments seeks to improve upon the standards to be adopted to
measure the competence, performance and services of a bankruptcy court by
providing specialized qualification for the appointment of members to the NCLT.
(d) However, the quality and skills of judges, newly appointed or existing, will need to
be reinforced and no provision has been made for appropriate procedures to evaluate
the performance of judges based on the standards.

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