DRT ACT

Debt Recovery Tribunals were created to facilitate the speedy recovery of debt payable to banks and other financial institutions by their customers. DRTs was set up after the passing of Recovery of Debts due to Banks and Financial Institutions Act (RDBBFI), 1993.

Importance of DRT

The main objective and role of DRT is the recovery of funds from borrowers which is payable to banks and financial institutions. The Tribunals power is limited to settle cases regarding the restoration of the unpaid amount from NPAs as declared by the banks under the RBI guidelines. The Tribunal has all the powers vested with the District Court. The Tribunal also has a Recovery officer who guides in executing the recovery Certificates as passed by the Presiding Officers. DRT follows the legal procedure by emphasising on speedy disposal of the cases and fast implementation of the final order.

The provisions of this Act shall not apply where the amount of debt due to any bank or financial institution or to a consortium of banks or financial institutions is less then ten lakh rupees or such other amount, beingnot less than 20 lakh rupees, as the Central Government may, by notification, specify.

DEFINITIONS

“bank” means—
(i) banking company.
(ii) a corresponding new bank.
(iii) State Bank of India.
(iv) a subsidiary bank.
(v) a Regional Rural Bank.

“debt”
 means any liability (inclusive of interest) which is claimed as due from any person by a bank of a financial institution or by a consortium of banks or financial institutions during the course of any business activity undertaken by the bank or the financial institution or the consortium under any law for the time being in force, in cash or otherwise, whether secured or unsecured, or assigned, or whether payable under a decree or order of any civil court or any arbitration award or otherwise or under a mortgage and subsisting on, and legally recoverable on, the date of the application.

Establishment of Tribunal and Appellate Tribunal

The Central Government can set up one or more Debts Recovery Tribunals  and Debt recovery appellate tribunal to exercise the jurisdiction, powers and authority conferred under this Act.

The Central Government may also specify the areas where such tribunal may exercise jurisdiction for entertaining and deciding the applications filed before it.

Composition of DRT and DRAT.

DRT is controlled over by a Presiding Officer, who is qualified to be a District Judge and is appointed by notification by Central Government. DRAT is controlled over by a Chairperson , who is/has been/ qualified to be a HIGH COURT Judge or has been a member of the Indian Legal Service and has held a post in Grade I of that service for at least three years or has held office as the Presiding Officer of a Tribunal for at leastthree years. and is appointed by notification by Central Government.

The Presiding Officer of a Tribunal shall holdoffice for a term of five years from the date on which he enters upon his office or no person shall hold office as presiding officer after he has attained the age of sixty five years.
The Chairperson of an Appellate Tribunal shall hold office for a term of five years from the date on which he enters upon his office or no person shall hold office as presiding officer after he has attained the age of seventy years.
The Recovery Officers and other officers and employees of a Tribunal and appellate tribunal shall discharge their functions under the general superintendence of the Presiding Officer.

Resignation and removal.

The Presiding Officer of a Tribunal or the Chairperson of an Appellate Tribunal may, by notice in writing under his hand addressed to the Central Government, resign his office. But in that case they have to continue to hold office until the expiry of three months from the date of receipt of such notice or until a person duly appointed  enters upon his office.

Jurisdiction of DRTs

Under 17 of the RDDBFI Act, DRT has the authority to entertain any application from banks and financial institutions, in order to recover loans for such banks and financial institutions. DRAT being the Appellate Tribunal shall have the jurisdiction to entertain appeals against any order made by a DRT under the Act. However, Supreme Court has adjudged that DRT and DRAT cannot decide upon cases like succession rights of property, issuance of receipts, etc. Its jurisdiction is strictly confined only to cases mentioned in 17 of the Act.

Now, under 18 of the Act, other courts are barred to look into matters of debt apart from Supreme Court and High Court, who derive their authority from Article 226 and 227 of the Constitution. This provision is in line with the L Chandra Kumar’s judgment which states that Tribunals are only supplementary to High Courts and not a substitute for them.

The Process of DRT

APPLICATION BY BANK

Under 19 of the RDDBFI Act, the conditions are laid down as to under which DRT one has to file an application. Such an application can be filed by a bank or a financial institution to a DRT, that has the jurisdiction, and where the defendant either resides or carries out his business. Moreover, an application can also be filed with a DRT, if the cause of action arises wholly or partly within the limits of the jurisdiction. Along with the application, the prescribed needs to be paid. 

UNDER SARFAESI 

An application to the DRT can also be made under the Securitisation and Reconstruction for Enforcement of Security Interest Act (SARFAESI), 2002. Under SARFAESI, the secured creditor takes possession of the securities of the debtors, when he fails to discharge all his liabilities. However, there occurs a case, wherein the securities are not able to discharge of the entire debt. Under these circumstances, the creditors have an option of filing an application to the DRT for recovery of  the remaining dues. Moreover, under 17 of the SARFAESI Act, the borrowers can also appeal to the DRTs against the creditor’s findings.

Procedures to be followed post-filing an application

DRTs and DRATs are adjudicated by summary proceedings, in order to expediate the court proceedings. Under 19(12) of the Act, the DRT has the powers to proclaim an interim order against the borrower in order to restrict him from disposing or transferring any property belonging to him without the prior permission from the Tribunal. Moreover, the DRT can go to the extent of detaining the borrower for a period of maximum 3 months for any disobedience of an order or breach of any order issued under 19(12), 19(13) or 19(18) of the RDDBFI Act.

When an application is made under the normal application route, then the time frame to complete the case is 180 days. However, if the application is made to the DRT under the SARFAESI Act, then the cases are needed to be disposed off within 60 days to 4 months. If the time duration gets exceeded then under 16 of the SARFAESI Act, either party can appeal to DRAT to direct the DRT to dispose of the pending application.

Under 19(4), the application made to a DRT warrants summons to be issued to the defendant to show cause within 30 days as to why the prayed relief should not be granted. The defendant must turn in a written submission, for which extra time can be granted by the Tribunal. A defendant can also file a counter-claim against the complainant with respect to the alleged sum of money, but only in the first hearing, except also in cases where the Tribunal explicitly grants such permission.

Based on the DRTs order, the Presiding Officer shall issue a certificate to the Recovery Officer to recover the debt amount, which has been specified in it, The Recovery Officer may attach, sell or appoint a receiver for the management of the defendant’s property, in order to recover the debt. Moreover, the DRTs also possess the power to obtain a police warrant to arrest the defendant in these cases.

APPEAL TO DRAT

Under 20(3) of the RDDBFI Act, an appeal with the DRAT needs to be filed within a period of 30 days, from the date on which the copy of the order of the Tribunal is received by him. However, the provisio to 20(3) states that the Appellate Tribunal may also allow an appeal after the expiry of 30 days, if there is sufficient cause to indicate that the appeal could not have been filed earlier. It is pertinent to note that DRAT can also be approached in case of an interim relief to be obtained on interim application or miscellaneous application, which form a part of the original applications.

Under section 21 appeal shall only be entertained if appellate pays the 50% of the amount of debt. This amount can be reduced to 25% by giving reasons.

Powers of the Tribunal and the Appellate Tribunal

The Tribunal and appellate tribunal is not bound by civil procedure code but it has the same powers as vested in civil court.Any proceeding before the Tribunal or the Appellate Tribunal shall be deemed to be a judicial proceeding.

RECOVERY OF DEBT DETERMINED BY TRIBUNAL

Modes of recovery of debts

Under section 25 The Recovery Officer shall, on receipt of the copy of the certificate proceed to recover the amount of debt specified in the certificate by one or more of the following modes, namely
(a) attachment and sale of the movable or immovable property of the defendant
(b) arrest of the defendant and his detention in prison.
(c) appointing a receiver for the management of the movable or immovable properties of the defendant.
(d) any other mode as prescribed by Central Government.

Appeal Against Recovery Officer
Under section 30 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.