CONTENTS

Chapter Title
List of Abbreviations
List of Cases
List of Table
List of Figure
Preface

Chapter 1 Introduction 1-6

1.1 Identification of Problems
1.2 Objectives of the Proposed Research
1.3 Hypotheses
1.4 Limitation of the Study
1.5 Research Methodology
1.6 Framework of the Study

Chapter 2 CONCEPTUAL ANALYSIS OF NON-PERFORMING ASSETS 7-23

2.1 Definition of Non-performing Asset
2.2 Categorization of Assets
2.3 Special Mention Accounts
2.3.1 Classification of Special Mention Accounts
2.4 Gross NPA and Net NPA
2.5 Restructuring of NPA
2.5.1 Stages of Restructuring
2.6 Exit Option
2.7 Writing-Off Debt
2.8 Data Analysis for Analyzing Impact of NPA
2.9 Causes for Increasing Non-Performing Assets

Chapter 3 Legislative Measures for Non-Performing Assets Recovery 24-102

3.1 Constitutional Mandate
3.1.1 Constitutionality of Special Laws
3.2 General Laws for Loan Recovery
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3.2.1 Mortgage
3.2.2 Charges
3.2.3 Pledge
3.2.4 Hypothecation
3.3 Special Laws For NPA Recovery
3.3.1 The Recovery of Debt and Bankruptcy Act, 1993

3.3.1.1 Definition
Debt
Bank
Financial Institution
3.3.1.2 Framework of the Forum
(a) Establishment of the Tribunals
(b) Composition of tribunals
(c)Resignation and Removal of the Presiding Officers

3.3.1.3 Jurisdiction
(i) Jurisdiction of Civil Court Restricted
(ii)High Court’s Powers under Articles 226 and 227

3.3.1.4 Procedure to be Followed by Banks Approaching DRT

I.Original Application
(a) Documents Necessary with Application
(b) Court Fee
(c) Impleadment of Other Bank or Financial Institutions

II. Defence of Borrower

(a) Right of Defendant to Copies of Documents In OA

(b) Judgment in Absence of Written Statement

(c) Judgment on Admission of Liability

(d) Cross-Examination of Witnesses
III. Recovery Certificate
(a)Validity of Certificate

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 (b)Object of Recovery Certificate
(c)Power of Presiding Officer to Withdraw Certificate

(d) Power of Presiding Officer to Correct Clerical or

Arithmetical Mistakes
3.3.1.5 Modes of Recovery of Debts under DRT Act, 1993

A.Power to Grant Injunction

B.Other Modes of Recovery
C.Application of Certain Provisions of Income Tax Act

D.Appeal against the Order of Recovery Officer

3.3.1.6 Appeals to Appellate Tribunal (DRAT)

(a)Condonation of Delay by Appellate Tribunal (DRAT)

(b)Scope of Section 20 of The RDB Act

(c)Additional Evidence at Appellate Stage
(d)No Review or Revision of DRT Order
(e)Pre-Deposit on Filing Appeal and Waiver

(f)Appeal by Third Person

3.3.1.7 Powers of Tribunals
i.Tribunals Deemed to be a Court
ii.Tribunals Guided by Natural Justice
3.3.1.8 Limitation Act applicable to Tribunals
3.3.1.9 Overriding Effect of Act
3.3.1.10 Challenges in the RDB Act, 1993
3.3.2 The Securitisation and Reconstruction of
Financial Assets and Enforcement of
Security Interest Act, 2002
3.3.2.1 Scope of the SARFAESI Act
(a)Retroactive In Nature
(b)Simultaneous Proceedings under the
RDB Act and the SARFAESI Act
(c)Exemption From The NPA Act, 2002
(d)Pecuniary Limit

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(e)Agricultural Land
(f)Jurisdiction Of Civil Courts Barred
3.3.2.2 Definition
Bank
Borrower
3.3.2.3 Asset Reconstruction and Securitisation
A-Genesis And Development
B-Stakeholders
C-Registration of Securitisation or Reconstruction Companies

D-Application for Registration

E-Cancellation of Registration
3.3.2.4 SARFAESI Actions
A. Securitisation
i.Process of Securitization
ii.Notice to Obligor
iii.Issue of Security Receipts
B. Assets Reconstruction
i. Arbitration and Conciliation Act, 1996
ii.Directions to ARCS
C.Recovery of Dues without Intervention of the Court or DRT

I.Section 69 of the Transfer of Property Act, 1882

II.Demand Notice
III.Possession Notice
IV.Sell Notice
V.Right of Redemption
VI.Issuance of Sale Certificate and
Possession by Secured Creditor
VII.Other Measures
i.Take Over the Management
ii.Manner of Take-Over of Management
iii.Taking Over Possession of Unsecured
and Secured Assets
iv.Appointment of The Manager
v.Requisition from Borrower
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 vi.Procedure for Recovery of Shortfall of Secured Debt
3.3.2.5 Assistance of DM or CMM
3.3.2.6 Appeal to Debts Recovery Tribunals
(DRT/DRAT)
3.3.2.7 Protection of Interest of Borrowers
3.3.2.8 Central Registry
3.3.2.9 Offences and Penalties
3.3.2.10 Application of Other Laws
3.3.2.11 Overriding Effect
3.3.2.12 Limitation and the SARFAESI Act
3.3.2.13 Performance of ARCS
3.3.2.14 Challenges to the SARFAESI Act,
2002
3.3.2.15 The Enforcement of Security Interest 181 Amendment Act,
2016
Chapter 4 Conclusion And Suggestions 103-117
4.1 Conclusion 103
4.2 Suggestions 116
Bibliography 119-126
Publications
Curriculum Vitae

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 LIST OF ABBREVIATIONS

ALLL : Allowance for Loan and Lease Loss

ARC : Asset Reconstruction Company
ASC : Accounting Standards Codification
ASSOCHAM : Associated Chambers of Commerce
BCBS : Basel Committee on Banking Supervision
BIS : Bank for International Settlements
BOD : Board of Directors
CC : Cash Credit
CD : Corporate Debt
CDR : Corporate Debt Restructuring
CECL : Current Expected Credit Loss
CIRP : Corporate Insolvency Resolution Process
CJM : Chief Judicial Magistrate
CMM : Chief Metropolitan Magistrate
COC : Committee of Creditors CPC :
Code of Civil Procedure
CRAR : Capital to Risk Asset Ratio
DM : District Magistrate
DPD : Days Past Due
DRAT : Debt Recovery Appellate Tribunal
DRT : Debt Recovery Tribunal
EBA : European Bank Association
ECB : European Central Bank
ESIC : Employee's State Insurance Corporation
EU : European Union
FI : Financial Institution
FIRM : Forum on Insolvency Risk Management GDP :
Gross Domestic Product
GNPA : Gross Non-performing Asset
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IAS : International Accounting Standards
IBBI : Insolvency and Bankruptcy Board of India
IBC : Insolvency and Bankruptcy Code
IFRS : International Financial Reporting Standards
IP : Insolvency Professional
IPA : Insolvency Professional Agency
IRB : Internal Ratings-based
IRP : Insolvency Resolution Process
IU : Information Utilities
LAC : Latin American Countries
LCR : Liquidity Coverage Ratio
LIC : Life Insurance Corporation
NCLAT : National Company Law Appellate Tribunal
NCLT : National Company Law Tribunal
NF : Non-financial
NNPA : Net Non-Performing Assets
NPA : Non-Performing Assets
NPE : Non-Performing Exposures
NPL : Non-Performing Loan
NPV : Net Present Value
NSFR : Net Stable Funding Ratio
OD : Overdraft
OTS : One Time Settlement
PPP : Public-Private Partnerships
PSBs : Public Sector Banks
PTA : Prudential Treatment of problem Assets
RBI : Reserve Bank of India
RC : Reconstruction Company
RDB : Recovery of Debt and Bankruptcy
RDDBFI : Recovery of Debt due to Banks and Financial
Institutions

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LIST OF CASES
A
 A.K. Bhardwaj v. Punjab National Bank, (2007) 140 Comp. Cas. 706
(DRAT-Delhi)
 Ace Media Advertisers Pvt. Ltd. v. Bank of Baroda AIR 2009 All 120 (DB)
 Ajay G Podar v. Official Liquidator of Jaipur Spinning and Weaving Mills
(2008) 14 SCC 17
 AK. Bhardwaj v. Punjab National Bank, (2007) 140 Comp. Cas. 706
(DRAT—Delhi)
 Alchemist Asset Reconstruction Co. Ltd. v. hotel Gaudavan (P) Ltd. (2017)
145 SCL 428
 Allahabad Bank v. Bajarang Enterprises, (2004) 1 BC 141 (DRATRan)
 Allahabad Bank v. Canara Bank, AIR 2000 SC 1535
 Allahabad Bank v. Radha Krishna Maity, AIR 1999 SC 3426
 Allied Chemical Laboratories v. Presiding Officer, DRT, AIR 2005 Ori 32
B
 Bank of Baroda v. Jitendra Kumar Achratlal Sheth, (2000) 2 BC 64 (DRT-
Mum)
Bhanu Constructions Co. Ltd v. Recovery Officer, DRT, Hyderabad,
2010 (3) 563
Bhushan Power and Steel Ltd. v. Deepak Fasteners Ltd. (2018) 145 SCL 182
(NCLT)
 BPL and PSP workers Union v. BPL Ltd. 2011(2) Banker’s Journal 124
 Brihatakuchambal v. Presiding Officer, DRT-Chennai, 2010 (3) Banker’s
journal 502
C
 Canara Bank v. Paul D’Souza, (2003) 2 BC 19 (Kar-DB)
 Canara Bank v. Precision Metal Works (India) Pvt. Ltd. (2009) 3 BC
(DRAT—Del)
 Central Bank of India v. NCML Industries Ltd. (2017) 205 Comp. Cas. 377
NCLT
 Central Bank of India v. Ravindra, AIR 2001 SC 3095
 Central Bank of India v. South Indian Bank Ltd., (2008) 3 BC 10 (DRAT-
Chen)
 Central Bank of India v. State of Kerala, (2010) 153 Comp. Cas. 497 (SC)
D
 D.A. Dawood v. State Bank of Bikaner, (2001) 2 BC 72 (DRAT-Del)
 D.J. Enterprises Ltd. v. IFCI Ltd., (2009) 4 BC 23 (DRAT-Del)
 Dayanath Pandey v. State of U.P., AIR 2008 All. 103 (DB)
 Dharani Sugars & Chemical Ltd Vs. Union of India
2019 SCC OnLine SC 460

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 Digvision Electronics Ltd. v. Indian Bank, (2004) 4 SCC 311
 Dimapur Town Committee v. Debts Recovery Tribunal, (2004) 1 BC 145
(Gau-DB)
 Dr. Satish Sharma v. Sindicate Bank, (2008) 2 BC 28 (All) (DB)
E
 Edelweiss Asset Reconstruction Co. v. Kalputra Alloys P. Ltd. (2017) 205
Comp. Cas. 186 (NCLT)
 Fertiliser Mfg. Co. of India v. State Bank of India, (2002) 2 BC 60
(DRAT-Cal)
 Fruit and Vegetables Merchants Union v. Delhi Improvement Trust
AIR 1957 SC 344
G
G Gnanavadhivu v. Abdul Aziz Son & Co 2015 (3) banker’s journal
577
G. Manohar v. Indian Bank (ADB), Nagiri Branch, Chittoor, 2010(1)
Banker’s Journal 352
 Garlon Polyfab Industries Ltd. v. State Bank of India 2004 All LJ 2575
 Garments India Exports v. Dhanalakshmi Bank Ltd., (2008) 2 BC 106
(DRAT-Chen)
H
 Hafiz Zakir Hussain v. Akola Janta Commercial Co-operative Bank Ltd.,
AIR 2008 MP 193 (DB)
 Harsh Govardhan Sondagar v. International Assets Reconstruction Company
Ltd. (2014) 6 SCC 1
I
 ICICI v. Grapco Industries Ltd. (1999) 97 Comp. Cas. AIR 1999 SC 1975
 Indian Bank v, ABS Marine Products Ltd., AIR 2006 SC 1899
 Indian Overseas Bank v. Mr. D. T. V. Resolution Professional for Amtek
Auto Ltd. (2018) 145 SCL 138 NCLAT
 Indian Overseas Bank v. Mr. Dinkar T. Venkatsubramaniam Resolution
Professional for Amtek Auto Ltd. (2018) 145 SCL138 NCLAT
J
 J K Jute Mills Co Ltd v. Surendra Trading Co. (2017) 204 Comp. Cas. 483
NCLAT
 J.M. Financial Asset Reconstruction Co. v. Indus finance Ltd.
 J.P. Silk Mills Pvt. Ltd. Oriental Bank of Commerce, (2008) 1 BC 590
(All—DB)
 Jai Electronic v. Central Bank of India. (2008) 2 BC 251 (Mad—DB)

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 Jamshed M. Pandey v. Indian Renewable Energy Dev AG, (2006) 4
BC 245 (Del-DB)
K
 K. J. Doraisamy v. Asst. Genenral Manager, State Bank of India
(2007) 136 Comp. Cas. 568 (Mad);
 K.L. Tripathi v. State Bank of India, AIR 1984 SC 273
 Kailash T. Shah v. Pooja Tex-Prints (P) Ltd. (2018) 145 SCL 149 (NCLT)
 Kamal Gupta v. Bank of India, AIR 2008 Delhi 51 (DB)
L
 Lalit Kumar Jivabhai Thakkar v. State Bank of India, AIR 2010 Guj 4 (DB)
 Lingaraj Oil Industries Pvt. Ltd. v. State Bank of India, AIR 2009 Ori 132
 LPL Infrastructure Ltd. v. Kumar’s Mettalurgical Corp. Ltd. (2008) 142
Comp. Cas. 952 (AP);
 Luxco Electronics v. Corporation Bank, (2008) 1 BC 93 (DRAT—
All)
M
 M. Babu Rao v. Deputy Registrar of Co-op. Societies, (2005) 126
Comp. Cas. 708 (AP-FB)
 M.R. Utensils v. Union of India (2003) 113 Camp.Cas. 667 (Guj)
 M/s. Hotel Paras Garden v. Central Bank of India, 2015 (4) ABR 375
 Macquarie Bank Ltd. v. Shilpi Cable Technologies Ltd., (2018) 145
SCL 236
Madhukar Govindrao Taware v. Central Bank of India, 2011 (2)
Banker’s Journal 170
 Madras Bar Association v. Union of India, 2015 (5) SCC 201
 Manorama Mohanty v. Authorised Officer, Urban Co-operative Bank Ltd.,
2013 (1) OLR 613
 Mardia Chemicals Ltd. v. Union of India. (2004) 4 SCC 311
 Maruti Acetylene Co. Pvt Ltd. v Central Bank of India, (2009) 3 BC 29
(Mad) (DB)
 Mathew Varghese v. M. Amritha kumar, AIR 2015 SC 50
N
 Neelam Roller Floor Mills (P.) Ltd. v. Bank of Baroda, (2008) 1 BC 40
(DRAT-Kolkata)
 Newsfinds (India) v. Vorion Chemicals & Distilleries Ltd. (1976) 46 Comp.
Cas. 87 (Mad)

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 Nihar Ranjan Bhattacharjee v. Union of India (2007) 139 Comp Cas. 27
(Gau)
 Nikhil Mehta & Sons v. AMR Infrastructure Ltd. (2017) 143 SCL 278
(NCLAT)
 Nutan Warehousing Co. P. Ltd. v. Indian Bank, (2004) 4 BC 214
(DRAT-Mum)
O
 Omeshwar Baldwa v. Vasavi Co-operative Urban Bank Ltd., 2010 (1)
Banker’s Journal 320
 Oriental Bank of Commerce v. Sunder Lal fain, AIR 2008 SC 1339
(2008) 1 BC 582 (SC)
Oswal Agencies v. Recovery Officer, DRT, (2004) 2 BC 395 (All)
P
 Paresh Gupta v. Punjab National Bank, (2007) 140 Comp. Cas. 955 (DRAT-
Del)
 Patel Dayabhai Ramjibhai v. Ranuj Nagrik Sahakari Bank Ltd. AIR 2010
Guj 54
 Pradeep Kumar Gupta v. State of U.P. AIR 2010 All 3 (DB) Prashant
Khushe v. state of Maharashtra (2007) 3 BC 417(Bom)
 ) 1 BC 10 (DRATChen)
R
 R. Adavaiah v. Union of India, (2000) 102 Comp. Cas. 25 (AP) (DB)
R. Vimala v. State Bank of India, W.P. No. 7802 of 2016 decided on
22-08-2016 AP High Court
Radha Ravi v. Indian Bank, Alwarpet Branch, (1999) 96 Comp. Cas.
272 (Mad)
Rajan Kakar v. Vijaya Bank, AIR 2008 Delhi 17
 Rakesh Kumar v. Saroj Marwah, 2014 (3) Banker’s Journal 368
 Ram Lal Phutella v. State Bank of India, (2009) 4 BC 49 (DRATDel)
S
 S R Agrawal v. Oriental Bank of Commerce (2006) 1 BC 562 (UttDB)
 S.N. Mukherjee v. Union of India, AIR 1990 SC 1984
 S.P. Kanudia v. Chairperson Debts Recovery Appellate Tribunal,
(2007) 139 Comp. Cas. 144 (All)
 Sahir Shah v. Bank of India (2007) 138 Comp. Cas.745 (Ker) (DB)
 Sajeda Khatoon v. Bank of India, 2013 (1) CHN (Cal) 316
 Sandeep Singh Sandhu v. Debts Recovery Tribunal, (1999) 2 BC 556

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 (P&H)

T
 Tata Iron & Steel Co. Ltd. v. Presiding Officer, DRT, (2006) 3 BC 31
(Jhar)
Theatre Mathi v. Indian Bank, (2004) 4 BC 406 (Mad)
 Transcore v. Union of India, AIR 2007 SC 712
U
 Ultamatix Systems Pvt. Ltd. v. State Bank of India, (2008) 1 BC 365 (Bom)
(DB)
 Union of India v. Delhi High Court Bar Association AIR 2002 SC 1479
 Union of India v. R Gandhi, MANU SC 0378 (2010)
 Union of India v. Sankal Chand Himatlal Sheth (1977) 4 SCC 193
 Unique Engg. Works v. Union of India, (2004) 2 BC 241 (Utta-DB)
 Unique Engineering Works v. Union of India, (2004) 2 BC 241 (UttaDB)
V
 Vijay Verma v. Dena Bank, AIR 2008 Chd 54
 Vishal N. Kalsaria v. Bank of India (2016) 3 SCC 788
 Vitol S.A. v. Asian Natural Resources (I) Ltd. (2018) 145 SCL 30 (NCLT-
Ahd.)
 Vysya Co-operative Bank Ltd. v. B.V. Govindaraj, (2008) 2 BC 99
(DRAT-Chen)
W
 Western Agencies (Madras) Ltd. v. Commissioner of Income Tax,
(2003) 86 ITD 462 (Mad)

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 PREFACE
A Sound banking structure is the backbone of any country. However,
under the current scenario, where quality of assets has gone down considerably
and Non-Performing Asset (NPA) has resulted in sluggish credit growth that has
not only severely hampered the functioning of the banking system but also has
affected various development projects and schemes. The menace of non-
performing assets not only degenerate the government initiatives but also affect
private sector and common-man of the country.

The present study highlights the various issues, perspectives and future
directions of Non-Performing Asset (NPA) in Indian Banks. The current
banking environment shows that one of the major constraints of the competitive
efficiency of banks is the tendency to accumulate poor quality of assets because
NPAs act as a drag on profitability and inhibits the lending decisions of the
banks. There has been a significant rise in the level of NPAs over these past few
years. Some of the reasons for such rise include lax underwriting by banks; non-
performance of the business or purpose for which the loan was taken, willful
default by borrowers, fraud, sluggish legal system, change in regulatory
policies, resource shortages, adverse economic and market factors etc. For
effective solution of the serious problem of NPA there is a need of effective
regulatory framework to stop conversion of loans and advances into NPAs,
recovery of NPAs and converting NPAs into performing advances. The present
study deals with two special legislations the Recovery of Debt Act, 1993 and
The SARFAESI Act, 2002. The study also discusses the global scenario of
NPAs along with specific regions analysis.
The present study not throws light on the features of the two legislations
but also has examined the implications of the enactment of newly emerged the
Insolvency and Bankruptcy Code, 2016. The research has made an attempt to
examine the effectiveness of the enactments with special reference to increasing
ratio of Non-performing assets in the light of recent amendments including The
Enforcement of Security Interest and Recovery of Debts Laws and
Miscellaneous Provisions the Amendment Act, 2016 and judicial
pronouncements by the Supreme Court and various High Courts.

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