How Banks and NBFCs Select Panel Counsel for SARFAESI, DRT and IBC Work

Indian banks, non-banking financial companies, and asset reconstruction companies rely on outside counsel for recovery, SARFAESI enforcement, Debts Recovery Tribunal (DRT) proceedings, insolvency proceedings before the NCLT, and Section 138 cheque-dishonour complaints. Empanelment is therefore a consequential procurement decision for a financial institution's legal function — the quality of panel work shows up in procedural compliance, litigation timelines and the institution's audit position.

This article explains, in general terms, how Indian financial institutions evaluate and onboard panel counsel and what the process usually involves. Each institution's board-approved policy governs its own process; the description below is a general one, written from the institutional buyer's perspective.

Why Panel Counsel Selection Matters

The empanelment decision is not a procurement formality. The consequences of getting it wrong are material:

• Procedural compliance. Lapses in SARFAESI notices or DRT pleadings create grounds of challenge that delay enforcement and can invalidate a measure.
• Litigation timelines. Avoidable adjournments extend the life of a matter at forums where cause lists are heavy.
• Settlement position. A file that is procedurally sound strengthens the institution's position in any settlement discussion; a file with visible defects weakens it.
• Regulatory and audit exposure. Where recovery work is poorly documented or procedurally weak, internal audit, statutory audit, and regulatory inspections flag deficiencies.

For these reasons, institutions generally treat panel selection as a substantive decision, not a clerical empanelment exercise.

The Standard Empanelment Framework

Most Indian banks, NBFCs, and ARCs follow some version of the following framework. Specifics vary by institution — public sector banks in particular apply board-approved empanelment policies with eligibility conditions that commonly include a minimum period of standing at the bar — but the architecture is broadly consistent:

Stage 1 — Identification

Counsel are identified through internal referrals, the institution's existing panel and in-house team, public information about practice areas, and applications made in response to empanelment notices or otherwise, all subject to verification.

Stage 2 — Conflict Screen

Before substantive discussion, the institution asks for a conflict-screening response. Conflicts arise where the advocate or chambers act for borrowers, operational creditors, or co-lenders with overlapping exposure. The ability to identify and disclose conflicts clearly is itself a screening criterion, and vague or incomplete conflict positions are a reason not to proceed.

Stage 3 — Capability Assessment

Once conflict-clear, the institution assesses capability across the relevant mandate areas:

• Standing at the bar (date of enrolment and years of practice, where the policy prescribes a minimum)
• Familiarity with the relevant statutes and forums (SARFAESI Act 2002, Recovery of Debts and Bankruptcy Act 1993, IBC 2016, NI Act 1881)
• Procedural discipline (quality of pleadings, evidence management, hearing-readiness), verified through sample work and references
• Capacity (team size relative to expected matter volume)
• Supervision (who is responsible for each matter and how work is reviewed)

The assessment can be informal (a structured conversation) or formal (a written questionnaire with scored responses), depending on the institution and the scale of work.

Stage 4 — Engagement Terms

Engagement letters are settled covering scope, reporting cadence, escalation protocols, conflict management, and termination, together with the professional terms the institution's policy provides for. Those terms must sit within the Bar Council of India Rules, which among other things prohibit an advocate from stipulating for a fee contingent on the results of litigation.

Stage 5 — Panel Onboarding

Most institutions have a standard onboarding process. This typically involves KYC documentation, policy attestations (anti-bribery, code of conduct, confidentiality and data protection), background disclosures, tax registration details, and set-up on the institution's matter-management system. The time taken depends on the institution's internal approvals.

Stage 6 — Matter Allocation

Matters are allocated according to geography, mandate area, complexity, and availability, and institutions commonly review panel performance periodically — timeliness, compliance with reporting requirements, and the procedural soundness of the work.

Criteria Institutions Commonly Weigh

Beyond the formal framework, several criteria recur in empanelment assessments.

Forum Familiarity

Recovery work is forum-intensive. Institutions look for familiarity with the procedure of the forums where their matters are heard — the DRT and DRAT, the NCLT and NCLAT, the High Court and the Magistrates' courts — including registry requirements, statutory timelines and the scheme each forum applies.

Statutory Depth

Institutions look for command of the provisions that decide recovery files: the content requirements of a Section 13(2) notice and the Section 13(3A) reply, the Security Interest (Enforcement) Rules 2002 on possession and sale, the pre-deposit provisions on appeal, the requirements for a Section 7 application, and the effect of acknowledgements on limitation under Section 18 of the Limitation Act 1963. That depth shows in pleadings and in written opinions.

Procedural Discipline

Pleadings filed on time, evidence indexed properly, and hearing-readiness reduce adjournments and the need for intensive in-house monitoring. Institutions can test procedural discipline through sample work and references, which is harder than assessing substantive knowledge but more predictive of day-to-day execution.

Capacity and Supervision

A panel relationship requires actual capacity for the volume of work and clarity about who supervises each matter. Institutions look for a match between what is offered at empanelment and how matters are staffed in practice.

Reporting Discipline

Institutional clients usually require structured reporting — status updates on active matters, periodic portfolio reviews, alerts where an adverse development is likely, and documentation that supports internal audit. Reporting discipline is a process built into how work is done, not a document produced on request.

Conflict-Management Discipline

The willingness to identify and disclose conflicts, and to decline work where a conflict arises, is one of the clearest signals of reliability across a longer engagement.

Mandate Areas Covered by Panel Arrangements

Within institutional recovery and insolvency portfolios, panel arrangements usually cover the following areas.

SARFAESI Section 13 Enforcement

Section 13(2) demand notices, the Section 13(3A) reply to a borrower's representation, Section 13(4) measures, and Section 14 applications to the Chief Metropolitan Magistrate or District Magistrate are the core of secured-creditor enforcement. The framework is procedurally intensive: Section 13(3) requires the notice to give details of the amount payable and of the secured assets intended to be enforced, and defects in notice, service, possession or sale procedure create grounds for a Section 17 application once a measure is taken. The sequence is set out in the note on replying to a Section 13(2) notice.

DRT Original Applications

Original Applications under Section 19 of the Recovery of Debts and Bankruptcy Act 1993 require precise pleadings — the facts, the cause of action, the limitation position, the security particulars and the prayer — supported by a statement of account certified under the Bankers' Books Evidence Act 1891.

DRAT Appeals and Pre-Deposit

An appeal to the DRAT against a DRT recovery order requires a deposit of fifty per cent of the debt determined by the Tribunal under Section 21 of the Recovery of Debts and Bankruptcy Act 1993, which the DRAT may reduce to not less than twenty-five per cent; a SARFAESI appeal under Section 18 carries the same percentages, computed on the lower of the amount claimed and the amount determined. Neither deposit can be waived altogether, so an institution's response to a reduction application turns on a reconciled statement of account. The computation is worked through in the note on the Section 18 pre-deposit.

IBC Section 7 Applications

A financial creditor's application under Section 7 is decided on the existence of a financial debt and a default above the threshold, on a complete application in Form 1 under the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules 2016. On admission a moratorium under Section 14 takes effect and management of the corporate debtor vests in the interim resolution professional, who runs it as a going concern. The process is a collective resolution mechanism, so the decision to file is a decision about the corporate debtor as a whole, not only about the applicant's claim.

Personal Guarantor Insolvency

Part III of the Code has applied to personal guarantors of corporate debtors since 1 December 2019. The adjudicating authority is the NCLT under Section 60(1). Since 26 May 2026, Section 96(4) provides that the interim moratorium in Section 96 does not apply where the application concerns a personal guarantor to a corporate debtor, so filing under Section 94 or 95 no longer stays other proceedings. A resolution professional is appointed under Section 97 to examine the application and report under Section 99 before the NCLT decides whether to admit it, and the moratorium under Section 101 begins on admission. The process can lead to a repayment plan and, failing that, to bankruptcy proceedings. See the note on personal guarantor insolvency.

Wilful Defaulter Classification

Wilful-defaulter classification is governed by the RBI's entity-wise Wilful Defaulters and Large Defaulters Directions, 2025, issued on 28 November 2025 — for commercial banks, the Reserve Bank of India (Commercial Banks – Treatment of Wilful Defaulters and Large Defaulters) Directions, 2025 (RBI/DOR/2025-26/166) — which repealed and replaced the 2024 Directions. They set out a committee-based process of identification and review in which the borrower must be given notice and an opportunity to respond before classification. Procedural fairness at each stage determines whether a classification survives a challenge before the High Court; the borrower's side is discussed in the note on wilful-defaulter declarations.

Section 138 NI Act Complaints

For institutions with cheque-dishonour volumes, the timing of the statutory notice, filing within the Section 142(1)(b) window, interim compensation applications under Section 143A, and compounding under Section 147 all bear on the outcome of each complaint.

OTS, Restructuring and Settlement Documentation

One-time settlement letters, restructuring agreements and settlement deeds are an operationally important part of panel work. Documentation that anticipates later enforcement — standstills, revival on default, guarantor consents and closure deliverables — is what allows a settlement to hold. The legal framework is set out in the note on one-time settlements.

Points to Settle in an Empanelment Framework

Institutions designing or reviewing an empanelment framework commonly address the following:

Weighing depth as well as size. The overall size of a firm says little about its familiarity with the forums the institution uses; the assessment should test the specific mandate areas.

Verifying procedural discipline. Procedural quality is harder to assess in pre-engagement diligence than substantive knowledge, and reference checks and sample work are the practical way to test it.

Specific engagement letters. Engagement letters that reflect the institution's actual requirements — reporting cadence, escalation triggers, conflict-disclosure obligations — avoid friction later.

Performance review. The empanelment decision is a single moment; periodic review of timeliness, reporting and procedural soundness is what keeps a panel effective.

Conflict obligations. Explicit disclosure obligations and an escalation route for borderline cases protect both the institution and the advocate.

Closing — The Empanelment Decision Reframed

The empanelment decision is fundamentally a decision about institutional risk management. Panel work that is procedurally sound reduces friction in enforcement and produces documentation that survives later challenge. The framework above is a general description of how institutions assess that; each institution's own policy governs its process.

The page for banks, NBFCs and ARCs describes the chambers' practice areas relevant to institutional work, and queries may be directed through the contact page. Related reading includes SARFAESI Act Explained — A Practical Guide to NPA Resolution, DRT Guide, and the legal glossary on key statute-grounded definitions.

This article is general information on the law as it stands and is not legal advice.