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CS Professional · Insolvency and Bankruptcy - Law and Practice · Debt Recovery and Securitization

In a section 17 application by Lotus Exports Ltd, the DRT finds that the possession of the secured asset taken by Apex Bank under section 13(4) was not in accordance with the Act and the rules. Which course of action is within the DRT's powers under the provision?

The DRT may declare the bank's recourse invalid, restore possession or management of the secured asset to the applicant, and pass other directions it considers appropriate and necessary regarding the recourse. It cannot wipe out the debt or send the matter to the NCLT.

  1. ADeclare the recourse invalid, restore possession or management to the applicant, and pass other appropriate directions regarding the recourseCorrect
  2. BOnly award compensation, as restoration of possession is not permitted
  3. CDirect the bank to withdraw its debt claim altogether
  4. DRefer the matter to the NCLT for restoration of possession

Explanation

Section 17(3) empowers the DRT, on finding that measures are not in accordance with the Act and rules and require restoration, to declare the recourse invalid, restore possession or management to the borrower or aggrieved person who applied, and pass other appropriate directions. It does not extinguish the debt or refer to the NCLT.

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