Debt Recovery Tribunal

A Debts Recovery Tribunal (DRT) is a specialized legal body established under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDBFI Act). Its primary function is to adjudicate cases related to the recovery of debts owed to banks, financial institutions, and asset reconstruction companies. DRTs were established to provide a streamlined and expeditious mechanism for resolving disputes arising from non-performing assets (NPAs) and facilitating the recovery of outstanding dues.

What is Debt Recovery Tribunal DRT?

A Debt Recovery Tribunal DRT functions as a quasi-judicial statutory body established under the Recovery of Debt and Bankruptcy Act 1993. Its purpose is to adjudicate cases and facilitate the recovery of loans from banks and financial institutions. In 2020, the Indian Government raised the minimum limit for filing cases under DRTs to 20 lakh rupees. The Presiding Officer, appointed by the Central Government, heads the Debt Recovery Tribunal DRT. Appeals against DRT orders can be made to the Debt Recovery Appellate Tribunal (DRAT), which a Chairman heads. Financial institutions and banks file loan recovery applications with the DRT having jurisdiction over the debtor’s residence or business location. During adjudication, the DRT possesses powers akin to a District Court. Additionally, the Debt Recovery Tribunal (DRT) has recovery officers responsible for executing the orders it issues.

Background of Debt Recovery Tribunal

Before the enactment of the Recovery of Debt and Bankruptcy Act-1993, debt-related cases were filed in the Civil Courts. These cases were decided according to the provisions of the CPC (Civil Procedure Code). These used to take several years to resolve the case. Moreover, there was a lot of pendency in the cases. It would lead to unnecessary delays in the recovery of debts by the Banks.

Observing these issues in the system, in 1981, a committee headed by Mr. T. Tiwari was appointed. It was tasked with recommending reform measures in this system. The committee observed that the Courts were already burdened with regular cases. This leads to the treatment of loan recovery cases as other ordinary cases. Hence, the problems of pendency and delay are arising. Amond different recommendations of the committee, one was the establishment of tribunals (quasi-judicial bodies) that would only handle the recovery cases.

It took a decade to accept the recommendations and establish such a body. The Recovery of Debt and Bankruptcy Act-1993 was introduced to solve the issue of delay and pendency. The legislation was brought after the 1991 Economic liberalisation of the Economy.

the key aspects of DRTs:

Establishment and Jurisdiction: DRTs were established by the Government of India to address the rising issue of non-performing assets in the banking and financial sector. Each DRT is established for a specified territorial jurisdiction, and its jurisdiction extends to cases involving the recovery of debts due to banks and financial institutions within that jurisdiction.
Purpose and Function: The primary purpose of DRTs is to adjudicate cases related to debt recovery. When a borrower defaults on loan repayments, the creditor (bank or financial institution) can approach the DRT to recover the outstanding debt. DRTs provide a specialized forum for creditors to seek redressal and obtain orders for the recovery of dues.
Types of Cases Handled: DRTs handle cases involving the recovery of debts arising from loans, advances, or financial accommodations provided by banks, financial institutions, and asset reconstruction companies. These debts may include corporate loans, personal loans, credit facilities, mortgages, or any other form of financial assistance extended by the creditor.
Procedure for Filing a Case: To initiate proceedings before a DRT, the creditor must file an application seeking the recovery of the outstanding debt. The application must contain details of the debt, particulars of the borrower, and supporting documents such as loan agreements, promissory notes, and evidence of default.
Adjudication Process: DRTs follow a quasi-judicial process akin to civil courts. They have the authority to summon and examine witnesses, call for documents, and conduct hearings to adjudicate the merits of the case. DRTs are empowered to pass orders for the recovery of debts, including orders for the attachment and sale of the debtor’s property to satisfy the outstanding dues.
Appeals and Enforcement: Parties aggrieved by DRT orders have the right to appeal against the decision before the Debts Recovery Appellate Tribunal (DRAT). DRATs serve as appellate authorities, reviewing the decisions of DRTs and providing redressal to parties dissatisfied with the DRT’s judgment. Once a recovery order is passed by the DRT, it can be enforced through various means, including attachment and sale of the debtor’s assets.
Specialized Adjudication: DRTs offer a specialized forum for the expeditious resolution of debt recovery disputes. They are equipped with the necessary expertise and infrastructure to handle complex financial matters efficiently. The focus of DRTs on debt recovery cases ensures that disputes are resolved promptly, contributing to the efficient functioning of the banking and financial sector.

Features of DRT

The Debt Recovery Tribunal (DRT) is established to settle cases to restore the unpaid amounts of the NPAs (Non Performing Assets). The Banks declare these as per RBI guidelines.
Under Section 4 of the Recovery of Debt and Bankruptcy Act-1993, the DRT shall have only one member (called Presiding Officer).
- The notification of the Central Government shall appoint him.
- The Presiding Officer of one Tribunal can also preside over other Tribunals if the Central Government authorizes it.
- The Presiding Officer will have a term of 5 years or till the age of 65 years, whichever is earlier. He shall be eligible for reappointment.
- He should be qualified enough to be the District Judge.
For cases of recovery of debt greater than 20 Lakh Rs, Banks, and Financial Institutions can approach the DRT.
- For amounts lower than this, Banks and Financial Institutions approach the Civil Courts.
DRT and DRAT need to maintain the Principles of Natural Justice.
- However, they can regulate their own procedures. For this, they are not bound by the CPC (Civil Procedure Code) provisions.
One does not need a degree in Law to argue cases before the DRT.
DRTs are mandated to resolve the cases within 6 months.
- The appeals against the orders passed by DRT can be made before a DRAT within 45 days of such judgment.
- In the case of the SARFAESI Act, the time duration to dispose of the cases is 60 days to 4 months.
- The appeals before the Appellate Tribunal (DRAT) shall be disposed of within 6 months from the receiving date.
Before approaching the DRAT against the order of DRT, the aggrieved party needs to deposit 75% of the amount fixed by the order.
The Centre can appoint one or more Recovery Officers as an employee of the Tribunal.
They will discharge their duties under the superintendence of the Presiding Officer of the DRT.

Powers and Functions of DRT

A Debt Recovery Tribunal DRT is empowered to enforce the provisions of the Recovery of Debt and Bankruptcy Act-1993 and the SARFAESI (Securitization and Reconstruction of Financial Assets and Enforcement Of Security Interests) Act 2002.
DRT gets the authority to entertain debt recovery-related applications from financial institutions and banks from section 17 of the Recovery of Debt and Bankruptcy Act-1993.
While deciding the cases, the Debt Recovery Tribunal (DRT) acts as a District Court.
- It can pass orders for complete justice that are comprehensive and even go beyond the Civil Procedure Code (CPC).
Section 18 of the Recovery of Debt and Bankruptcy Act-1993 imposes restrictions on all the Courts from adjudicating on debt recovery-related matters except the Supreme Court and High Courts.
- It means that relief against the orders of DRAT can only be given by the Supreme Court and High Courts.
Supreme Court, in its judgment, has specified that the DRT and the DRAT have jurisdiction strictly confined to those cases that are mentioned in Section 17 of the Recovery of Debt and Bankruptcy Act-1993.
- Thus the Debt Recovery Tribunals (DRTs) cannot decide over the cases like property rights, succession issues, issuance of receipts, etc.
Section 17A was inserted in the act by an amendment in 2000. It specifies the powers of the Chairperson of the DRAT. Its general powers include.
- Superintendence and control of Tribunals under his jurisdiction.
- Reviewing the ACRs (Annual Confidential Reports) from various Presiding Officers.
- Direct Tribunals to present the status of cases under both the RDB Act and the SARFAESI Act.
- Review the performance of Presiding Officers.
- Organise meetings with Presiding Officers.
- Recommend disciplinary action against Presiding Officers to Centre through his report in case of misconduct or incapacity.

Documents Required

A statement is showing details of the debt due from a Respondent and the circumstances under which such debt has become due.
Any documents relied upon by the applicant and those mentioned in the application.
Details including crossed Bank Draft or Indian Postal Order representing the application fee.
Index of the documents to be produced.

Note: Where the parties to the lawsuit or proceedings are to be produced by an agent with the documents authorising him to represent as such agent or Vakalatnama in case of an Advocate also be appended to the application.

DRT Process

Procedure for filing of application

The applicant should apply with the Registrar within whose jurisdiction the applicant is functioning as a bank or financial institution in the present.

An application should be presented in the prescribed format.

The application can be presented by the applicant or by his agent or by an authorised legal practitioner.

The application to be presented to the registrar of the tribunal within whose jurisdiction his case falls or can be sent through registered post addressed to the Registrar.

Submission of application

If the application sent by post to be deemed to have been presented to the Registrar on the same day of receiving the request by the registrar.

The application should be presented in two sets. An empty file size envelops bearing full address of the respondent. The applicant should furnish full bearing address of each of the respondents.

Presentation and verification of application

The registrar or any other concerned officer authorised by him will approve every application on the date in which it is presented or deemed to have been filed under that rule and should sign the endorsement.

If on verification the application is found to be in order, it should be duly registered and give a serial number.

Issuance of original application number

The Registrar of DRT is responsible for the Overall Administration of the tribunal.

The Registrar will issue the Original Application (OA) number and summon after verifying the application. Also serves a copy of the application and paper book on each of the respondents. The respondent may file four complete sets indicating the reply to the application along with documents within one month (or extended time allowed by the tribunal) of its receipt.

Procedure Before Filing a Case in DRT

The following procedures are to be followed before filing the case in debt recovery tribunal.

Sell pledged goods after addressing particular notice to the lender.
In the case of hypothecated goods, get possession of the assets, and sell them after addressing the due in the form of notice.
In the case of LIC policies, handover such policies and designate the surrender value towards the loan account.
Set off the credit balance in any current or savings, account and TDRs in the names of the Borrowers or Guarantors, before filing a suit.
Proof of ownership or debt such as shares, debentures, NSC, Mutual Fund Securities should be realised and be adjusted against the outstanding.
Secure the documents or securities are enforceable against borrowers/guarantors while handling files to advocates for requesting Recovery Application before the tribunal.
Brief the advocate accurately by providing a detailed narrative or write-up and by examining in detail the conduct of the account, documents received up to the date, securities created and other relevant information relating to the account.
Analysis of the draft application to verify the correctness of every fact and relevant details stated in the draft application
After verifying the accuracy of the draft application, the branch has to forward the draft application to the concerned authority for approval along with the copy of the memorandum for legal action in the account and the copy of the narrative or write-up provided earlier to the advocate along with the list of documents.
After obtaining permission from the Authority, the Branch should discuss with the advocate about the changes or observations made by the appropriate authority while according approval and finalise the Application for recovery of updated dues of the Bank.

Procedure at Filing the Case in DRT

The following procedures are to be followed at the time filing the case in debt recovery tribunal.

The Recovery Application, in the prescribed format, should be submitted with the DRT within the specified time from the day of the appropriate authority mentioned for approval against the legal action.
Recovery Application should contain the description of all relevant documents and securities charged to the Bank.
While filing Recovery Application, Xerox copies of records are to be produced to the Advocates.
Original Documents should be maintained with the Branch till DRT requires the same.
Interim reliefs such as the injunction against properties, attachment before judgement, the appointment of Receiver, Recovery Certificate for admitted dues should be appealed as a rule.
Account Extracts to be provided and certified as per the provisions of Bankers Books Evidence Act and be annexed to the Recovery Application.
Penal Interest should not be compounded.
Costs for preserving the securities before filing suit and during the pendency of the lawsuit claimed.

Procedure After Filing the Case in DRT

The following procedures are to be followed after filing the case in debt recovery tribunal.

If the Recovery Application filed is satisfied in all respects, ORT will issue a serial number and summons to borrowers or guarantors called defendants.
Serving of warrant for quick disposal of the case and the Branch/Advocate should get to see that summons are served within one month.
If the summons is served on the defendants, proceedings commence with evidence by way of affidavits filed by the bank followed by cross-examination of Bank’s witnesses and vice versa followed by arguments ending up in Recovery Certificates in respect of the Bank.
Evidence by way of affidavits as preceding, clarifications or reports excepted by the DRT should be filed in time, and no adjournment to be asked on this score. Reply to counter-claims made by the borrowers should be submitted without any delay.
Defendants attempt to get an adjournment on various grounds including that their compromise proposal is pending consideration before the Bank’s Advocate should oppose the Bank.
The DRT has the controls to order arrest and detention in civil prison of those defendants who do not follow the specified orders of the DRT. Wherever the defendant disobeys the laws of the DRT, the Branch should notify the Bank’s Advocate to appeal for arrest and detention of such defendant.

Execution of Recovery Certificate

The Presiding Officer finally grants Recovery Certificate and sends it to Recovery Officer (R.O.) for execution. On receipt of the Recovery certificate, the recovery officer can issue the notice to Certificate Debtors, giving 15 days for payment of the amount stated in the Recovery Certificate.

If the defendant neglects to pay the amount, Recovery Officer will proceed to recover the amount by any one or more of the methods, which are listed below:

Attachment and sale of Movable or Immovable Property of the defendant.
Arrest and Detention of the defaulter.
Appointment of Receiver.
The closing of DRT Application after full recovery of bank dues, the application is closed by Recovery officer.

Appeal Against Recovery Officer

The appeal against an order of Recovery Officer to DRT can be requested within 30 days from the date of order. The Tribunals have to resolve the claim within six months. The appeal against the judgment of DRT can be made within 45 days only to DRAT(Debt Recovery Appellate Tribunal). For filling lawsuit, as per Section 21 of the tribunal the 50% of the fund to be deposited by the appellant and the Chair Person may reduce it up to 25% of the deposit amount.

FAQs

What is rule 18 of DRT?

As per Rule 18 of the Debt Recovery Tribunal (Procedure) Rules, 1993, The Tribunal may make such orders and decisions, that are necessary to give effect to its orders. Such orders are also given to prevent abuse of its process and to secure the ends of justice.

What is the mode of filing the cases in the DRT?

As per the Gazette notification of 31st January 2023, it is mandatory to file the cases in the DRT in online modes only.

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