DRT (Debt Recovery Tribunal) is a specialized tribunal in India that is responsible for the expeditious recovery of debts due to banks and financial institutions. It was established under the Recovery of Debts Due to Banks and Financial Institutions Act (RDBFI Act), 1993, to deal with the recovery of loans and debts that have become non-performing assets (NPAs). The primary function of the DRT is to facilitate the quick recovery of dues from defaulting borrowers and to resolve disputes between lenders and borrowers.
Overview of Debt Recovery Tribunal (DRT)
The Debt Recovery Tribunal (DRT) was created to handle cases involving the recovery of debts, primarily owed to banks and financial institutions. The DRT system was introduced as part of the government’s effort to streamline the process of recovering debts and reduce the burden on regular civil courts, which are often overburdened with cases.
Key Functions of the Debt Recovery Tribunal (DRT):
Debt Recovery:
- The primary function of the DRT is to provide a forum for the expeditious recovery of debts owed to banks and financial institutions. This includes the recovery of loans, interest, and penalties from borrowers who have defaulted.
Dispute Resolution:
- The DRT handles cases where disputes arise between lenders (banks/financial institutions) and borrowers (individuals or companies) regarding non-payment of debts or loan defaults. The tribunal resolves these disputes and ensures that creditors can recover the owed amounts.
Expedited Procedure:
- The Debt Recovery Tribunals have been designed to provide faster resolutions of recovery cases. The proceedings in the DRT are quicker compared to regular civil suits, ensuring that financial institutions can recover their dues without significant delays.
Possession of Property:
- If a borrower fails to repay the debt, the DRT can order the taking possession of the borrower’s property (movable or immovable) to recover the dues. This is often done through the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI Act), 2002, which empowers banks to recover loans by taking possession of collateral.
Issuance of Recovery Certificate:
- After hearing the case and arriving at a decision, the DRT can issue a Recovery Certificate (RC) in favor of the creditor, directing the borrower to repay the amount due.
Auction of Seized Assets:
- In case the borrower does not comply with the recovery process, the DRT may order the auction of the seized assets to recover the dues. This is particularly common in cases where the loan is secured by collateral (property, vehicles, etc.).
Appeals:
- If a party is dissatisfied with the decision of a DRT, they can appeal to the Debt Recovery Appellate Tribunal (DRAT). DRAT hears appeals against the orders passed by DRTs.
Enforcement of DRT Orders:
- If the debtor fails to pay after a Recovery Certificate has been issued, the DRT can enforce the order by directing the attachment and sale of the debtor’s property or other assets.
Legal Framework Governing DRTs
Recovery of Debts Due to Banks and Financial Institutions Act (RDBFI Act), 1993:
- This Act provides the legal framework for the establishment of Debt Recovery Tribunals (DRTs) to deal with cases involving the recovery of loans and debts owed to financial institutions. It lays down the procedure for filing applications, hearings, and the enforcement of recovery orders.
Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI Act), 2002:
- This Act allows banks and financial institutions to take possession of the secured assets of borrowers without going to court, in case of default. The SARFAESI Act provides mechanisms for the recovery of loans, including the powers to seize properties and auction them to recover the dues.
Debt Recovery Appellate Tribunal (DRAT):
- The DRAT is a higher appellate body where parties can appeal against orders passed by the Debt Recovery Tribunals (DRTs). The DRAT has the authority to uphold, modify, or overturn the decisions of DRTs.
Process of Recovery in DRT
Filing an Application:
- A bank or financial institution files an application before the Debt Recovery Tribunal for the recovery of dues. The application must include details of the debt, loan agreements, and evidence of default.
Issuance of Notice:
- Once the application is filed, the DRT issues a notice to the borrower, requiring them to appear before the tribunal. The borrower is given an opportunity to respond and defend against the claims of the lender.
Hearing and Evidence:
- Both parties (the bank or financial institution and the borrower) present their cases before the DRT. The tribunal evaluates the evidence, including documents, witnesses, and arguments, to decide the case.
Order and Recovery Certificate:
- After hearing both sides, the DRT issues an order either in favor of the creditor or the borrower. If the decision is in favor of the creditor, the tribunal issues a Recovery Certificate (RC) for the amount due, including the principal, interest, and penalties.
Execution of Recovery Certificate:
- If the borrower fails to pay after the Recovery Certificate is issued, the DRT can proceed with the enforcement of the certificate. This may involve the attachment and sale of the borrower’s assets or property.
Appeal to DRAT:
- If the borrower or the bank disagrees with the DRT’s decision, they can file an appeal with the Debt Recovery Appellate Tribunal (DRAT), which will hear the case again and pass its order.
Powers of DRT
Power to Attach and Sell Property:
- DRTs have the authority to attach and sell the property of the borrower if the recovery of dues is not made voluntarily. This is done through a legal process that allows banks to recover the defaulted amount.
Power to Issue Recovery Certificates:
- The tribunal can issue a Recovery Certificate (RC), which is enforceable in the same manner as a civil court decree. This allows banks and financial institutions to initiate proceedings for the recovery of debts.
Power to Order the Appointment of Receiver:
- The DRT can appoint a receiver to manage the borrower’s assets if necessary. This can include managing the sale of properties and distribution of proceeds to the creditor.
Power to Dismiss Applications:
- If the DRT finds that the application for debt recovery is not valid or lacks merit, it can dismiss the case. It can also dismiss appeals filed by borrowers who fail to show sufficient cause.
Appealing to Debt Recovery Appellate Tribunal (DRAT)
Appeal Against DRT Orders:
- If a party is dissatisfied with the decision of the DRT, they can file an appeal before the Debt Recovery Appellate Tribunal (DRAT). This appeal must be filed within 45 days from the date of the DRT’s order.
Grounds for Appeal:
- Appeals can be filed on grounds such as the incorrect application of the law, erroneous findings of fact, or failure to follow proper legal procedures.
DRAT’s Powers:
- DRAT can either affirm, modify, or set aside the decision made by the DRT. If the appeal is successful, the recovery process can be stayed or revised.
Benefits of DRT
Expedited Recovery Process:
- The primary benefit of DRT is that it provides a faster, specialized forum for the recovery of debts, as opposed to traditional civil courts, which can have significant backlogs.
Reduced Burden on Civil Courts:
- DRTs help reduce the caseload of regular civil courts by handling specialized matters related to debt recovery and financial disputes.
Enforcement of Orders:
- DRTs have the authority to enforce their orders directly, including the attachment and sale of property, ensuring that the recovery process is effective.
Specialized Jurisdiction:
- DRTs have expertise in handling financial disputes, ensuring that cases related to debts, loans, and NPAs are decided by specialized judges.
Conclusion
The Debt Recovery Tribunal (DRT) plays a crucial role in the expeditious recovery of debts owed to banks and financial institutions. It offers a faster and more efficient alternative to traditional court procedures for recovering loans that have become non-performing assets (NPAs). If you are facing a DRT case, it is advisable to seek legal advice to understand your rights, obligations, and the best course of action to defend against or settle the claim.
If you need more information or legal assistance regarding DRT matters, feel free to ask!