Debt Recovery Tribunal in Nepal: Process, Appeal & Implementation

As with Financial Sector Reform Program, the Debt Recovery Tribunal was established to facilitate the institutional mechanism for recovering non-performing loans under business law. Debt Recovery Tribunal is an authorized agency to recover non-performing loans under the Financial Sector Reform Program. Debt recovery cases of banks and financial institutions are handled promptly to ensure the timely collection of both the principal and interest amounts from borrowers. This Tribunal was established as per the Act on Recovery of Debt of Bank and Financial Instrument, 2058 (2002).

The Government of Nepal can set up a Debt Recovery Tribunal by publishing a notice in the Nepal Gazette when needed. This tribunal will handle cases related to recovering debts for banks and financial institutions and this notice shall determine the jurisdiction of the tribunal. The number of tribunals can be increased as per the work load by the Government of Nepal.

The tribunal shall have the members as follows.

1. Law member,
2. Banking member, and
3. Accounts member

The law member will chair the tribunal. If there is more than one, the earliest appointed law member will take the lead. If they are absent, another law member will step in. If no law member is available, the senior banking member will chair the tribunal. A member serves for five years from the appointment date and can be reappointed.

The Government of Nepal can expand the tribunal's jurisdiction and grant it authority to handle debt recovery cases by publishing a notice in the Nepal Gazette.

Appellate Debt Recovery Tribunal

If needed, the Government of Nepal can set up a Debt Recovery Appellate Tribunal (within Nepal's court hierarchy) by publishing a notice in the Nepal Gazette to hear appeals against the debt tribunal’s decisions.

The Government of Nepal may appoint a sitting, former, or eligible High Court judge as the appeal hearing authority of the Appellate Tribunal through a notification in the Nepal Gazette. The tenure shall be as of the debt recovery tribunal with the provision of reappointment as required.

Procedure for Debt Recovery Process

1. The Tribunal has authority to originally try and settle the case of debt recovery as per the law.
2. The tribunal's three members shall decide collectively, with the majority opinion as the final decision.
3. Cases can be tried and settled if two members, including the law member, are present. Other actions, except final decisions or orders, can proceed if two members other than the law member are present.
4. If two members cannot reach a unanimous decision, the case shall be decided in the presence of the absent member.
5. If no majority is reached, the case shall be referred to the appellate tribunal for a resolution.
6. The Appellate Tribunal has the final authority to hear appeals on orders issued by the tribunal.
7. A bank or financial institution may file a debt recovery petition only if:
   • It has made sufficient efforts to settle the debt with the borrower.
   • It has taken necessary recovery actions but failed to recover the debt.

If a party petition and the tribunal find it necessary to prevent the transfer or sale of a borrower's security or a guarantor's property, it may issue an interim order to freeze the property until further notice.

Period of Settlement of Dispute: The tribunal must resolve a case within 150 days from the defense submission date or if no defense is filed, from the deadline of submission of the defense.

The tribunal's decision must be read to the parties or their attorneys, who must then sign a document confirming they have heard it. If the parties or their attorneys are absent during the decision, they must be informed within seven days.

Appeal

A party unsatisfied with the tribunal's decision may appeal to the appellate tribunal within 15 days of receiving a copy of the decision, following the prescribed format and paying the required fee.

Within seven days of registering the appeal, the Appellate Tribunal must give the defendant 30 days to submit a defense with supporting evidence. If the defendant misses the deadline due to uncontrollable circumstances and submits a request with valid reasons, the tribunal may grant an extension of up to 15 days.

Compromise: If both the plaintiff and defendant apply for a compromise before the case is settled, and they agree after understanding its meaning and consequences, the tribunal or appellate tribunal may approve the compromise at any stage of the proceedings.

Both the plaintiff and defendant must each pay half of the compromise fee, set at 0.50% of the claimed amount. The plaintiff's share will be deducted from the debt recovery fee already paid. The tribunal so making compromise has to order the debt recovery officer to implement the compromise.

Decision Implementation: After announcing a decision the tribunal must order the debt recovery officer to enforce it—either after the appellate tribunal's decision if an appeal is filed or after the appeal deadline expires if no appeal is made. The tribunal may set a deadline for implementing the decision when issuing the order.

Deposit for Appeal: A borrower filing an appeal under Section 19 must deposit 30% of the recoverable amount as determined by the tribunal.

Appeal Settlement Deadline: The appellate tribunal must resolve the appeal within 90 days from the defense submission date or, if none is filed, from the deadline. It must inform the tribunal within 15 days of the final decision.

Debt Recovery Procedure

1. Upon receiving the tribunal's order, the debt recovery officer must recover the debt within the specified time and transfer it to the concerned bank or financial institution.
2. To recover the principal and interest, the officer may:
   • Seize or auction the borrower’s property, whether pledged as security or not.
   • Seize or auction the guarantor’s property.
   • Arrest and detain the borrower or guarantor if an individual, as per prevailing law.

Liability of Guarantor:

1. A guarantor's liability is limited to the amount of the guarantee provided.
2. Despite any law to the contrary, this liability can be directly enforced against the guarantor.

Order of Debt Recovery Officer:

1. Any order issued by the debt recovery officer is equivalent to a tribunal order and must be followed by all concerned.
2. If anyone disobeys the debt recovery officer’s order, the tribunal may initiate contempt proceedings.

Debt Recovery Lawyer in Nepal

At Alpine Law Associates, we understand that recovering unpaid debts can be a stressful and legally complex process—especially when significant financial amounts and institutional accountability are at stake. As a legally registered, full-service law firm in Nepal, we specialize in debt recovery law, offering tailored legal solutions to banks, financial institutions, and private clients involved in non-performing loan disputes. From initiating recovery proceedings to handling appeals, freezing borrower assets, and ensuring enforcement through the Debt Recovery Tribunal, we manage every aspect of your case with precision and professionalism.

Our expert legal team is well-versed in the Act on Recovery of Debt of Bank and Financial Instrument, 2058 (2002), and actively works alongside key government bodies such as the Department of Financial Institutions, the Debt Recovery Tribunal, and the Appellate Tribunal. Whether you are a creditor seeking recovery or a guarantor requiring defense, we ensure your rights are protected through effective representation, strategic advice, and timely action. With Alpine Law Associates by your side, you're not just hiring a lawyer—you’re securing a trusted legal partner who knows the system and fights to get results.

Conclusion

The Debt Recovery Tribunal in Nepal serves as an essential legal mechanism to ensure the recovery of non-performing loans efficiently and fairly. Through a structured process, including case trials, appeals, and compromise settlements, the tribunal upholds financial stability and accountability. With clear timelines for dispute resolution and strict enforcement measures, the system provides banks and financial institutions with an effective means to recover debts while maintaining legal transparency and due process.