Debt Recovery Tribunal
The Debt Recovery Tribunal (DRT) is a specialized judicial body in India established to facilitate the quick and efficient recovery of debts owed to banks and financial institutions by individuals or companies. The DRT was created under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDBFI Act), and its primary goal is to help banks and financial institutions recover bad loans that have become non-performing assets (NPAs).
Key Features of Debt Recovery Tribunal (DRT):
Jurisdiction:The DRT has the authority to hear cases related to the recovery of debts involving amounts greater than ₹20 lakh.
It has jurisdiction over individuals, businesses, and companies that have defaulted on their loans.
It does not have jurisdiction over cases where the debt amount is less than ₹20 lakh; such cases are handled by civil courts.
DRT Structure:The tribunal is presided over by a Presiding Officer, who is typically a judge with a judicial background.
There are multiple DRTs located across different regions of India to handle cases regionally.
Appeals against the orders of a DRT can be made to the Debt Recovery Appellate Tribunal (DRAT).
Applicable Laws:The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDBFI Act) governs the functioning of DRTs.
The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) empowers banks to recover debts without the intervention of courts or DRTs in certain cases, though borrowers can approach the DRT if they feel aggrieved by the bank’s actions.
Procedure for Filing a Case in DRT:
Filing of Application:The process begins when a bank or financial institution files an application with the DRT for the recovery of its debts.
The bank must file a written petition, which includes details of the debt owed, the default by the borrower, and the amount to be recovered.
Issuance of Notice:Once the application is admitted, the DRT issues a notice to the borrower (defendant) and any other parties involved, asking them to respond to the claims.
Hearing and Evidence:The DRT conducts a hearing where both parties present their arguments and evidence. The tribunal can examine witnesses, review documents, and hear expert testimony.
Issuance of Orders:After hearing both sides, the tribunal issues its judgment, which may include recovery orders for the bank to take possession of the borrower’s assets or properties, or other directions necessary for recovering the debt.
The DRT has the power to enforce its orders, including auctioning assets to recover the loan amount.
Powers of the DRT:
Attachment of Property: The DRT can order the attachment or sale of the borrower’s property to recover the loan amount.
Appointment of a Receiver: In some cases, the DRT can appoint a receiver to manage the assets of the defaulter until the debt is recovered.
Issuing Recovery Certificates: The DRT can issue recovery certificates, which act as legally binding documents that authorize the bank to recover the amount as per the tribunal’s order.
Appeal Process:
If a party is dissatisfied with the judgment of the DRT, they can file an appeal with the Debt Recovery Appellate Tribunal (DRAT) within 45 days of the DRT’s order.
However, the borrower must deposit 50% of the outstanding debt amount (as determined by the DRT) to appeal, although this can be reduced to 25% at the discretion of the appellate tribunal.
Securitisation and SARFAESI Act:
SARFAESI Act, 2002 allows banks to take possession of secured assets and auction them without the need to approach DRT if the loan becomes a non-performing asset (NPA). However, the borrower can appeal to the DRT if they believe the bank’s actions are unjustified.
The DRT acts as an appellate body under the SARFAESI Act, allowing borrowers to challenge the actions taken by banks and financial institutions under this law.
Fast-Track Recovery:
One of the main reasons for establishing DRTs was to expedite the debt recovery process. Earlier, debt recovery cases were handled in civil courts, which resulted in delays. The DRT system provides for faster resolution of cases, often ensuring that financial institutions can recover debts in a more time-bound manner.
Important Cases Handled by DRT:
Large-scale corporate defaults, such as the cases involving significant non-performing loans or insolvency proceedings, are often dealt with by DRTs.
Debt recovery for personal loans, home loans, and business loans when they exceed ₹20 lakh also falls under the tribunal’s jurisdiction.
Advantages of DRT:
Speedy Resolution: The primary advantage of DRT is that it expedites the process of debt recovery by providing a dedicated forum for resolving such disputes.
Reduction in Litigation Costs: DRT proceedings are streamlined and generally cost less compared to prolonged civil court cases.
Specialized Expertise: DRTs are designed specifically to handle debt recovery cases, ensuring that judges are familiar with the complexities of financial laws and loan agreements.
Limitations:
Overload of Cases: With the increasing number of defaults, especially in large corporate cases, DRTs are often overburdened, leading to delays.
Limited Jurisdiction: DRTs only handle cases where the debt exceeds ₹20 lakh, leaving smaller claims to be resolved through slower civil court processes.
In conclusion, Debt Recovery Tribunals play a crucial role in the Indian legal system by facilitating the recovery of bad debts owed to banks and financial institutions. They provide an efficient, cost-effective mechanism for financial institutions to recover their dues, ensuring that the banking system remains healthy and capable of extending credit to borrowers.