What is the role of the Recovery Officer in DRT?

Role of the Recovery Officer in DRT

The Recovery Officer plays a crucial role in the functioning of the Debt Recovery Tribunal (DRT) and is responsible for executing the orders passed by the DRT. While the DRT is responsible for adjudicating cases and issuing recovery orders, it is the Recovery Officer who ensures that the debts are actually recovered through a legal process. The Recovery Officer’s role is essential in making sure that the banks and financial institutions can recover their dues from borrowers who have defaulted on loans.

Here’s a detailed breakdown of the responsibilities and functions of a Recovery Officer in DRT:

1. Enforcement of DRT Orders

The Recovery Officer is tasked with enforcing the orders passed by the Presiding Officer (Judge) of the DRT. Once a final order is passed by the DRT directing the borrower (defaulter) to pay a certain amount, it becomes the responsibility of the Recovery Officer to take the necessary steps to recover the amount.

2. Issuance of Demand Notice

The Recovery Officer issues a demand notice to the borrower or the guarantor, informing them about the DRT's order and requiring them to pay the debt within a specified time period. This is the first step in the recovery process after an order has been passed. The demand notice contains the details of the debt owed and the consequences of non-compliance.

3. Attachment of Properties

If the borrower fails to comply with the demand notice, the Recovery Officer has the authority to attach the borrower’s movable and immovable properties. The attachment process involves:

• Movable Properties: The Recovery Officer may attach and seize movable assets like vehicles, bank accounts, or other valuables of the borrower.
• Immovable Properties: The Recovery Officer can also attach immovable properties like land, buildings, or homes that are in the borrower’s name. Once attached, the borrower cannot sell or transfer the property without the DRT's approval.

This attachment is done to secure the amount due from the borrower, and the attached properties may be sold to recover the outstanding loan amount.

4. Auction of Attached Property

After the property has been attached, the Recovery Officer can order the sale of the attached properties through a public auction. The steps involved in auctioning include:

• Issuing a notice for the auction and inviting bids from potential buyers.
• Conducting the auction in accordance with the legal procedures and ensuring transparency.
• Once the auction is completed, the proceeds from the sale are used to repay the outstanding debt owed by the borrower.

The auction process is carefully monitored to ensure that the properties are sold at a fair price and that the amount recovered is used to satisfy the lender's claims.

5. Seizure and Sale of Movable Property

In cases where the borrower has movable assets, such as vehicles, machinery, or goods, the Recovery Officer can seize these assets and sell them to recover the debt. The procedure for seizing and selling movable assets is similar to that of immovable property, but it often involves faster recovery.

6. Garnishment of Bank Accounts

The Recovery Officer has the power to garnish or freeze the borrower’s bank accounts. Once a bank account is garnished, the borrower cannot withdraw funds from it, and the amount available in the account may be used to satisfy the debt. The officer issues a notice to the bank, instructing them to freeze the borrower’s account and remit the amount to the DRT for debt repayment.

7. Arrest and Detention

In extreme cases, where the borrower persistently refuses to comply with the DRT's order and attempts to evade repayment, the Recovery Officer can order the arrest and detention of the defaulter. However, this is considered a last resort and is only used when other methods of recovery have been exhausted. The debtor may be detained in civil prison until the debt is paid or a satisfactory settlement is reached.

8. Management of Debtor’s Business

In certain situations, the Recovery Officer may take over the management of the borrower’s business or assets. This may happen when the debtor owns a company or business that is capable of generating revenue, and taking over its management may lead to quicker debt recovery. The Recovery Officer, under court orders, may appoint a receiver or take control of the company’s assets to ensure that the proceeds are directed towards repayment of the debt.

9. Executing Warrants

The Recovery Officer is empowered to issue and execute warrants for the attachment of property, auction notices, and in extreme cases, for the arrest of defaulters. These warrants are legal directives that allow the officer to carry out actions necessary for recovery, including seizing assets or detaining the debtor.

10. Legal Compliance

The Recovery Officer must ensure that all actions, including attachments, auctions, and seizures, comply with the legal framework laid out in the Recovery of Debts and Bankruptcy Act (RDB Act) and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act. Any procedural lapses or illegal actions can result in legal challenges, so the officer must adhere to the prescribed rules.

11. Coordinating with Other Agencies

The Recovery Officer may need to coordinate with law enforcement agencies, municipal authorities, or revenue departments to carry out the attachment and auction of properties. For instance, the officer may need assistance from local police to enforce an order or to deal with the borrower’s resistance during property seizure.

12. Maintenance of Records

The Recovery Officer is responsible for maintaining accurate records of all recovery proceedings, including notices issued, assets attached, auction details, and amounts recovered. These records are important for accountability and may be reviewed in case of an appeal to the Debt Recovery Appellate Tribunal (DRAT) or any higher judicial body.

13. Report to the DRT

The Recovery Officer is required to report the status of the recovery proceedings to the DRT. This report includes details about the recovery actions taken, the amount recovered, and any difficulties encountered during the process. Regular reporting ensures transparency and allows the DRT to monitor the effectiveness of its orders.

14. Interaction with Borrowers and Banks

The Recovery Officer interacts with both borrowers and banks throughout the recovery process. The officer may engage in negotiations or settlement discussions between the parties, especially if the borrower proposes a one-time settlement or another arrangement to avoid property attachment or auction.

15. Handling Appeals

In case the borrower or any third party challenges the actions of the Recovery Officer, such as the attachment of property or auction procedures, the officer must defend their actions in the Debt Recovery Appellate Tribunal (DRAT). The Recovery Officer’s decisions are subject to judicial review, and they must ensure that all recovery procedures are lawful and justified.

Conclusion:

The Recovery Officer in DRT plays a pivotal role in the execution of the recovery process once a debt recovery order has been passed. They have wide-ranging powers to enforce recovery through attachment, auction, seizure, and even arrest. However, the role requires a high degree of legal compliance, coordination, and transparency to ensure that the recovery is carried out in accordance with the law while protecting the rights of all parties involved.

Disclaimer: This information is intended for general guidance only and does not constitute legal advice. Please consult with a qualified lawyer for personalized advice specific to your situation.

Adcocate J.S. Rohilla (Civil & Criminal Lawyer in Indore)

Contact: 88271 22304

www.jsrohilla.com