Debt Recovery Tribunal: Quick Guide

Debt Recovery Tribunals (DRTs) were established to expedite the recovery of debts due to banks and other financial institutions from their customers. They were instituted following the Recovery of Debts due to Banks and Financial Institutions Act (RDBBFI), 1993. If a person or entity is aggrieved by the orders of the DRT, they can appeal to the Debt Recovery Appellate Tribunal (DRAT). However, appeals are entertained only after depositing 75% of the debt amount as determined by the DRT. Below, we delve into the intricacies of the Debt Recovery Tribunal Act.

Importance of Debt Recovery Tribunals

DRTs primarily aim to recover funds from borrowers on behalf of banks and financial institutions. Their power is centered around settling disputes regarding unpaid amounts from Non-Performing Assets (NPAs) as declared by banks under Reserve Bank of India guidelines. Equipped with powers of the District Court, DRTs have a Recovery Officer who supervises the execution of Recovery Certificates approved by Presiding Officers. DRTs prioritize speedy case disposal and efficient implementation of final orders.

Applicability of the Act

The Debt Recovery Tribunals Act is applicable to the following:

• Pan-India, excluding the State of Jammu and Kashmir.
• Cases where the debt amount is not less than Rs. 10,00,000.
• Original applications for debt recovery filed solely by Banks and Financial Institutions.

Establishment of Tribunals and Appellate

The Central Government is empowered to set up multiple Debts Recovery Tribunals, delegating jurisdiction, powers, and authority under this Act. Additionally, the government specifies tribunal jurisdictions for case entertainments.

Composition of DRT

The DRT is led by a Presiding Officer, qualified to be a District Judge, appointed by the Central Government. A Presiding Officer from another DRT may also be authorized to discharge duties as necessary.

Documents Required for Application

An application to the DRT should include:

• A statement detailing the debt owed by a Respondent, alongside contextual circumstances.
• Any relevant documents referred to in the application.
• Details including a crossed Bank Draft or Indian Postal Order covering the application fee.
• An indexed list of documents.

Note: Agents representing parties, or Advocates presenting cases, must include authorization documents or a Vakalatnama with their applications.

Application Fee

Applications must be accompanied by the prescribed fee:

• The fee is payable via crossed demand draft in respect to the Registrar, or at the Registrar’s office location.
• The fee can also be remitted through crossed Indian Postal Order, favoring the Registrar at the central post office where the tribunal is situated.

The DRT Process

Filing an Application

To initiate a DRT application, the applicant, or their authorized agent or legal representative, must apply with the Registrar within their jurisdiction. Applications should follow the prescribed format, delivered personally or via registered post.

Submission Guidelines

Documents sent by post are deemed received upon Registrar acknowledgment. Applications should include two sets of documents with comprehensive addresses for each respondent.

Application Review and Verification

The Registrar or an authorized officer reviews each application, endorsing and registering compliant submissions, and assigning a serial number.

Issuance of Original Application Number

The DRT Registrar oversees tribunal administration, issuing Original Application (OA) numbers and serving copies of applications and paper books to respondents. Respondents must file replies within one month, or within an extended period authorized by the tribunal.

Pre-Filing Procedures in DRT

Before filing a case in the DRT, certain steps must be followed, including:

• Selling pledged goods following a specific notice to the lender.
• Seizing hypothecated goods, offering them for sale post-notice.
• Redirecting LIC policies to loan accounts as surrender values.
• Offsetting credit balances, shares, debentures, or securities.
• Realizing and adjusting securities or debts against outstanding balances.
• Ensuring all securities are enforceable and notifying advocates accordingly.
• Providing advocates with an exhaustive narrative of the dynamic and status of the account.
• Verification and approval processes for the drafting application.
• Discussing with advocates necessary changes post-approval, finalizing the recovery application.

Filing a Case in DRT

For a successful filing, the following procedures apply:

• Submit the Recovery Application in the prescribed format and timeline, featuring all associated documents and securities.
• Produce photocopied documents with originals retained at the branch.
• Seek necessary interim reliefs.
• Provide certified account extracts under the Bankers Books Evidence Act.
• Avoid compounding penal interest.
• Claim for incurred security preservation costs.

Post-Filing DRT Procedures

After filing, if the application is deemed satisfactory, a serial number and summons are issued to defendants. Key steps include:

• Ensuring the serving of summons is within one month.
• Commencing proceedings with affidavit-based evidence.
• Responding promptly to borrower counterclaims.
• Opposing adjournment requests by defendants unless justified.
• Alerting bank advocates if defendants disobey DRT orders, leading to potential arrest or detention.

Execution of Recovery Certificate

The Recovery Certificate is issued by the Presiding Officer, forwarded to the Recovery Officer (R.O.), who issues payment notices to Certificate Debtors. If debts remain unpaid, the Recovery Officer can enforce recovery through:

• Attachment and sale of debtor properties.
• Arrest and detention.
• Appointment of a Receiver.
• Application closure post-debt recovery.

Appeal Against Recovery Officer Orders

Appeals against Recovery Officer orders must be filed within 30 days. Immediate resolution is expected within six months, and appeals against DRT judgments can be taken to the DRAT within 45 days, with specific deposit requirements under Section 21.