Debt Recovery Tribunal (DRT)

What is a Debt Recovery Tribunal (DRT)?                         

The Recovery of Debts and Bankruptcy Act, 1993 (RDB Act) (formerly known as the RDDBFI Act, 1993) created the Debt Recovery Tribunal (DRT), a special court.
It was established to guarantee prompt recovery of debts owed to banks and other financial institutions without the need for drawn-out civil court actions.

Why DRT is Applied?

When a borrower fails to repay a loan or credit facility and the bank or other financial institution wants to pursue legal action to recoup the unpaid balance, DRT is used.

Principal Motives for DRT Applications:

1. To get non-performing assets (NPAs) back to uphold the borrower’s security interests (mortgage, hypothecation, etc.).
2. DRT offers quicker adjudication to prevent delays in civil courts.
3. To get recovery certificates that are directly enforceable against the assets of the borrower.

When DRT Can Be Approached?

 As per Section 1(4) of the RDB Act:

• The DRT has authority over debts over ₹20 lakh or more.
• Claims below ₹20 lakh are brought in civil courts.

Involved Legal Provisions

1. The 1993 Recovery of Debts and Bankruptcy Act
2. Oversees the establishment, jurisdiction, and powers of DRTs.
3. The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002.
4. Permits banks to enforce secured loans without the need for judicial intervention; however, borrowers may file an appeal with the DRT under Section 17.

Legal Procedure for Debt Recovery through DRT

 Step 1: Filing of Application (Original Application)
Sent by the bank or other financial organisation in accordance with RDB Act Section 19.
The application has to contain:

• Information about the credit or loan facility
• Amount owed plus interest
• Security and collateral documents
• Specifics of the demand notice and default

The application is submitted to the DRT with geographical jurisdiction, which includes the borrower’s residence, place of business, or the location of the loan transaction.

Step 2: Issue of Summons

 The defendant (borrower) receives a summons from the Tribunal.

• Within the allotted time, which is typically 30 days, the borrower must submit a written statement (reply).

Step 3: Hearing and Evidence

• Documents and oral testimony are presented by the bank and the borrower.
• The DRT is quicker and less complex than a civil court trial since it uses a summary method.

Step 4: Tribunal Decision

• The DRT issues a Recovery Certificate (RC) outlining the amount owed and passes a final order after taking into account all available evidence.
• This certificate is executed by the DRT’s Recovery Officer.

Step 5: Recovery Certificate Execution

• The debt may be recouped by the Recovery Officer through:
• Selling and attaching both immovable and moveable property
• The borrower’s arrest and custody (in rare situations)
• Designating a receiver to oversee the borrower’s assets

Step 6: File an appeal
According to Section 20 of the RDB Act, any party who feels wronged by the DRT’s decision may file an appeal with the Debt Recovery Appellate Tribunal (DRAT) within 45 days.

Advocate Garima Gupta