Debt Recovery Tribunals (DRT) Functioning in India
The Debt Recovery Tribunals (“DRTs”) are special tribunals constituted under the Recovery of Debts due to Banks and Financial Institutions Act (RDDBFI), 1993, to facilitate the recovery of debts involving banks and financial institutions from their borrowers. The Banks and Financial Institutions were facing a hard time in recovering their loans from the borrowers under the Civil Procedure Code, 1908 which prompted a need to formulate and effective debt recovery framework. The RDDBFI Act, 1993 was enacted back then to help such banks recover their loans smoothly. Currently, there are 39 DRTs and 5 Debt Recover appellate Tribunals (DRATs) across India.
The functioning of DRTs:
1. DRT is headed by a sole member known as the Presiding Office. Any person who has been or is qualified to become District Judge can be appointed as Presiding Officer of DRT.
2. An application can be filed in DRT for recovery of a debt due only when such debt due amounts to Rs. 20 lakhs or more.
3. Debt is any liability inclusive of interest, which is claimed to due from any person by any bank or financial institution or consortium thereof. Such liability may be secured or unsecured or assigned, whether payable under the order of court or arbitration award or under the mortgage. Such liability shall be subsisting and validly recoverable on the date of application.
4. Sec. 17 of the RDDBFI Act, vests jurisdiction, power and authority on DRT to entertain and decide application from banks and financial institutions to recover a debt due to such banks and financial institutions. Furthermore, section 18 bars the jurisdiction of all the other courts (except Supreme Court & High Court) from adjudication of matters relating to debt recovery under this Act.
5. Bank or Financial Institution can make an application to DRT which has jurisdiction in the region to which the financial body carries business. An application may likewise be filed to a specific DRT if the cause of action completely or in part emerges within the limits of its jurisdiction.
6. DRT after hearing both the parties and their submissions would pass the final judgment within 30 days from hearing. DRT will issue a Recovery Certificate (“RC”) within 15 days from the date of judgment and pass on the same to Recovery Officer. RC shall have the same effect as the decree of the civil court.
7. An aggrieved party can file for an appeal to Debt Recovery Appellate Tribunal (DRAT) having the jurisdiction to entertain the matter, against the order passed by DRT within 30 days from the date of passing of the order by DRT.
Role of DRTs under Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act)
An application can be made to the DRT under the Securitization and Remaking for Enforcement of Security Interest Act (SARFAESI), 2002. SARFAESI Act provides for the recovery of loan/debts by allowing the auction of securitized properties of the borrowers to recover the loan. The DRTs have been empowered to entertain appeals against the misuse of powers given to banks.
Any person aggrieved, by any order made by the Debts Recovery Tribunal may go to the Appellate Tribunal within thirty days from the date of receipt of the order of Debts Recovery Tribunal. Also, if the collateral security is not enough, the banks can file an application to the DRT for recovering the remaining amount.