ALL TYPES OF BANK DEFAULT CASES IN INDIA

1. Loan Default / NPA Case

When a borrower fails to repay EMI or dues for 90 days, the account becomes NPA (Non-Performing Asset).

Actions Taken by Bank:

• Reminder calls & notices
• Freezing of account
• Reporting default to CIBIL
• Legal recovery process begins

2. SARFAESI Act, 2002 Proceedings

Banks/financial institutions can recover secured loans without court intervention.

Process:

• Section 13(2) Notice: 60 days demand notice
• Section 13(4): Bank takes possession of secured assets
• Sale/Auction of property
• Appeal can be filed before DRT

3. DRT (Debt Recovery Tribunal) Case

For recovery above ₹20 lakh, banks file Original Application (OA) under RDDBFI Act.

Outcome:

• Tribunal issues Recovery Certificate
• Attachment of assets
• Appointment of Recovery Officer

4. Civil Suit for Recovery

Banks can file civil suit under CPC for:

• Loan recovery
• Breach of agreement
• Fraud cases

Reliefs Sought

• Attachment
• Injunction
• Money decree

5. Cheque Bounce Case (Section 138, NI Act)

If a post-dated cheque given to the bank is dishonoured, bank may file criminal case.

Stages:

• Demand notice(30 days)
• Complaint before Magistrate
• Summons to accused
• Trial & conviction (fine & imprisonment)

6. Criminal Cases for Willful Default / Fraud

Bank may report to CBI, EOW, or Police if fraud is suspected.

Common IPC Sections:

• Section 406 – Criminal breach of trust
• Section 420 – Cheating
• Sections 468/471 – Forgery
• Section 120B – Conspiracy

7. Lok Adalat Proceedings

For settlement through mediation/compromise.

Benefits:

• One-Time Settlement (OTS)
• No court fees
• Faster resolution

8. Insolvency & Bankruptcy Code (IBC), 2016

Banks can initiate insolvency proceedings against corporate borrowers.

Outcome:

• CIRP begins
• Moratorium applied
• Resolution plan or liquidation

9. Arbitration Proceedings

Where loan agreement contains arbitration clause, bank may approach arbitrator.

Outcome:

• Arbitration award
• Award enforceable like a decree

10. Credit Card & Personal Loan Default

Unsecured loans → harsh recovery actions.

Proceedings:

• Recovery agents
• Civil suit
• CIBIL downgrade
• SARFAESI not applicable

11. Guarantor Liability

Guarantor is equally responsible.

Bank can:

• Sue guarantor directly
• Attach guarantor’s property
• Proceed under SARFAESI/DRT

12. Wilful Defaulter Proceedings

Borrower declared wilful defaulter if:

• Has money but intentionally does not pay
• Diverts funds
• Siphons bank loan

Consequences:

• No further loans for 5 years
• Legal action
• Name published
• Directors barred

13. Recovery Agent Actions

Banks appoint recovery agents for doorstep collection.

Regulations:

• RBI has strict guidelines
• Harassment is illegal
• Complaints can be filed with RBI Ombudsman

SUMMARY TABLE