Chapter 29: Important Laws Relating to Recovery of Dues (JAIIB – Paper 2)

1. The Recovery of Debts and Bankruptcy Act, 1993 was enacted primarily to:

• A. Regulate capital markets
• B. Control foreign exchange transactions
• C. Provide speedy adjudication and recovery of debts due to banks and financial institutions
• D. Frame guidelines for priority sector lending

The DRB Act, 1993 was passed to establish Tribunals for the expeditious recovery of debts due to banks and financial institutions.

2. Which authority was set up under the DRB Act, 1993 for handling cases of debt recovery?

• A. Debt Recovery Tribunal (DRT)
• B. Securities Appellate Tribunal (SAT)
• C. National Company Law Tribunal (NCLT)
• D. Debt Management Authority

The Act provides for the establishment of Debt Recovery Tribunals (DRTs) and Debt Recovery Appellate Tribunals (DRATs) to handle recovery cases.

3. What is the minimum debt amount for a bank to file a case before a Debt Recovery Tribunal (DRT) under the DRB Act?

• A. ₹5 lakh
• B. ₹10 lakh
• C. ₹15 lakh
• D. ₹20 lakh

As per the amended provisions, banks and financial institutions can approach the DRT only if the debt due is ₹20 lakh or more.

4. Appeals against the orders of DRT are filed before which authority?

• A. National Company Law Tribunal (NCLT)
• B. Debt Recovery Appellate Tribunal (DRAT)
• C. Supreme Court
• D. Reserve Bank of India

Appeals against DRT orders are filed before the Debt Recovery Appellate Tribunal (DRAT).

5. Case Study: A bank files a case before DRT for recovery of ₹25 lakh. The borrower challenges the DRT order. Where should the borrower appeal?

• A. High Court
• B. RBI Ombudsman
• C. Debt Recovery Appellate Tribunal (DRAT)
• D. SEBI Appellate Tribunal

Borrower must appeal before the Debt Recovery Appellate Tribunal (DRAT) within the prescribed period if aggrieved by a DRT order.

6. The SARFAESI Act, 2002 empowers banks and financial institutions to recover loans without the intervention of:

• A. RBI
• B. SEBI
• C. DRAT
• D. Court of law

The SARFAESI Act allows banks to enforce security interests and recover NPAs without going through lengthy court procedures.

7. Under SARFAESI Act, banks can enforce their security interest if the borrower’s account is classified as:

• A. Non-Performing Asset (NPA)
• B. Standard Asset
• C. Performing Asset
• D. Healthy Account

SARFAESI applies only when the account is classified as an NPA, enabling banks to take possession of secured assets.

8. Which type of assets are excluded from the provisions of the SARFAESI Act?

• A. Commercial properties
• B. Industrial assets
• C. Agricultural land
• D. Residential flats

Agricultural land and small loans are excluded from SARFAESI to protect farmers and weaker sections.

9. The Insolvency and Bankruptcy Code (IBC), 2016 was enacted mainly to:

• A. Provide banking licenses
• B. Consolidate and amend laws relating to insolvency and bankruptcy of corporates, partnerships, and individuals
• C. Regulate securities market
• D. Introduce GST

IBC 2016 consolidates and simplifies insolvency and bankruptcy processes for companies, firms, and individuals.

10. Under IBC, the corporate insolvency resolution process (CIRP) must generally be completed within:

• A. 180 days (extendable up to 330 days)
• B. 90 days
• C. 60 days
• D. 2 years

IBC mandates completion of CIRP within 180 days, extendable to a maximum of 330 days including litigation delays.

11. Case Study: A corporate borrower defaults on repayment. The creditor initiates insolvency proceedings under IBC. Which authority will handle the case?

• A. Debt Recovery Tribunal (DRT)
• B. Supreme Court
• C. RBI
• D. National Company Law Tribunal (NCLT)

Corporate insolvency cases are adjudicated by the National Company Law Tribunal (NCLT) under IBC.

12. The Legal Services Authorities Act, 1987 was enacted to provide:

• A. Regulation of banking services
• B. Free and competent legal services to the weaker sections of society
• C. Recovery of debts from defaulters
• D. Regulation of corporate insolvency

The Act ensures access to justice by providing free legal services to weaker sections of society and establishing legal aid mechanisms.

13. Which body is constituted under the Legal Services Authorities Act at the national level?

• A. Bar Council of India
• B. Supreme Court of India
• C. Debt Recovery Tribunal
• D. National Legal Services Authority (NALSA)

NALSA is the apex body constituted under the Act to monitor and implement legal aid programs across the country.

14. Lok Adalats organized under the Legal Services Authorities Act are meant for:

• A. Speedy settlement of disputes through compromise
• B. Imposing penalties on defaulters
• C. Conducting criminal trials
• D. Supervising banking transactions

Lok Adalats provide a platform for amicable settlement of disputes without lengthy court procedures, saving time and costs.

15. Case Study: A poor farmer has a dispute with a bank regarding loan settlement. He cannot afford legal fees. Under the Legal Services Authorities Act, he can approach:

• A. Reserve Bank of India
• B. SEBI
• C. Lok Adalat / Legal Services Authority
• D. National Company Law Tribunal (NCLT)

The farmer can approach Lok Adalat or the concerned Legal Services Authority for free legal assistance and speedy settlement under this Act.

16. The primary objective of the Law of Limitation is to:

• A. Prevent stale claims and ensure timely filing of suits
• B. Provide unlimited time to file cases
• C. Increase penalties for defaulters
• D. Regulate banking operations

The Law of Limitation ensures disputes are brought to court within a reasonable time, preventing stale and outdated claims.

17. As per the Limitation Act, the limitation period for filing a suit for recovery of money based on a loan agreement is:

• A. 6 years
• B. 1 year
• C. 3 years
• D. 10 years

The general limitation period for filing a suit for recovery of money under a contract, including loans, is 3 years from the date of default.

18. The limitation period for enforcing a mortgage (foreclosure or sale) is:

• A. 3 years
• B. 12 years
• C. 6 years
• D. 30 years

The Limitation Act provides 12 years for enforcing a mortgage, starting from the date the money becomes due.

19. If a borrower makes part payment of a debt or acknowledges the debt in writing before the expiry of the limitation period:

• A. The limitation period expires immediately
• B. The limitation period reduces to 1 year
• C. No effect on limitation
• D. A fresh limitation period starts from the date of acknowledgment/payment

Acknowledgment of debt or part payment before expiry gives rise to a fresh 3-year limitation period under Section 18 of the Limitation Act.

20. Case Study: A bank loan became due on 1st January 2019. The borrower made a part payment on 30th December 2021. Till when can the bank file a suit for recovery?

• A. Till 31st December 2021
• B. Till 30th December 2024
• C. Till 1st January 2022
• D. Till 30th December 2022

The part payment on 30th December 2021 creates a fresh 3-year limitation, allowing the bank to file suit till 30th December 2024.