An International Perspective of the Changes Proposed to the Debt Recovery Laws of India

Current Legal Regime In India As Amended By Drt Act With Respect To Major Debtor’S Rights

The benefits of the SARFAESI Act and the DRT Act have been extended to the listed bond market in India. Debenture trustees appointed in respect of debt securities listed in accordance with applicable SEBI regulations have been specifically included as 'secured creditors' under the SARFAESI Act, and corresponding changes have been made to various provisions of both the SARFAESI Act and the DRT Act. These changes potentially allow lenders that do not independently have rights under the SARFAESI Act or the DRT Act (such as domestic funds, mutual funds, insurance companies, foreign portfolio investors and other investors in the corporate debt market) to benefit from such rights when acting through a debenture trustee in respect of listed bonds (Trilegal, 2016).

Revamping the DRT mechanism, the Enforcement Act has allowed electronic filing of recovery applications, documents and written statements. Stay on recovery under a recovery certificate will be granted only if the borrower pays 25 per cent of the debt upfront and gives an unconditional undertaking to pay the balance within a reasonable time. It is now prescribed that 50 percent of the debt under the recovery certificate will need to be deposited for making an appeal against the order of the Recovery Officer. The Enforcement Act provides that the DRT will make every effort to complete the proceedings in two hearings and shall issue the recovery certificate within 30 days of completion of hearing. The District Magistrate has a time period of 60 days to clear an application by the creditor to take over possession of the collateral (Sardeshmukh, 2016).

When an application is filed for recovery of debt, the Tribunal shall issue summons to the defendant directing it to disclose the properties other than those identified by the applicant. The defendant is restrained from transferring assets except in the ordinary course of business without the prior approval of the Tribunal over which security has been created in favour of the applicant or where the value of the secured assets in not sufficient to satisfy the debt, other assets specified by the applicant or such other assets as disclosed to the Tribunal. The Act also empowers the Central Government to provide by rules e-filing of applications and written statements, service of summons and notices through electronic form and display of interim and final orders of on the website of the Tribunal and Appellate Tribunal. In view of pendency of cases the Act also provides that the Presiding Officers shall be eligible for reappointment and has increased their age of retirement from sixty-two to sixty-five years (Kumar & Mishra, 2016).