Debt Recovery Tribunal (DRT)
The major source of revenue of financial Institutions and Banks is the interest that they obtain from the debtors against the Loan/credit that they give to them. So, the repayment of the loan by the Debtors is one of the main concerns of these institutions. Subsequent laws have been made for this issue, but following the complex procedure in filing a suit in a civil court according to the Indian judicial hierarchy would be too much time consuming.
The Narsimha committee in 1991 recognised this issue and recommended the formation of special tribunals like Debt Recovery Tribunal (DRT’s) and Debt Recovery Appellate Tribunal (DRAT’s). This led to the formation of Recovery of Debt Due to Banks and Financial Institutions Act 1993 from which these tribunals drive their authority. Today our country has 39 DRT’s and 5 DRAT’s.
The primary objective and role of DRT is the recovery of money which the borrowers had taken from Financial Institutions and banks. It is composed of one member 'presiding officer’ who is appointed by the Central Government. The status of the officer is the same as of a district judge.
DRT gain its authority from Section17 of RDDBFI Act to adjudicate on matter from financial institution and banks for recovery of Debt. The Tribunal has the powers to determine each case in line with natural justice principles
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.
Banks and other Financial Institutions generally takes a security against the loan as collateral but sometimes the Collateral fails to fully recover the debt amount. Then, the creditor can file an application under Securitisation and Reconstruction for Enforcement of Security Interest Act (SARFAESI Act) 2002.
Procedure
Section 19 of the RDDBFI Act lays down conditions as to which DRT the financial institute has to file the application, it is generally where the defendant it resides or carries out his business.
For the bank to file an application for recovery of Dept under RDDBFI act 1993 the minimum amount should be 20 lacs.
Note - According to a judgement of Supreme Court, the minimum recovery amount can be as low as Rs.1,00,000 provided that permission is granted by the DRT
The banks also have to deposit a court fee for the proceedings, the court fee is relative to the amount to be recovered. It is Rs.1000 for every one lakh, Subject to a maximum of Rs. 1,50,000.
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.
Appeal - The aggrieved party has the right to appeal against the order in the Dept recovery appellate Tribunal (DRAT) provided that the appeal is made within 45 days from the date of order by DRT. However, exemptions can be granted in special cases which depend on the discretion of the Tribunal.
It is provided that the defendant must deposit 50% of the debt amount to the DRT as security for the filing of appeal in DRAT.
Note - A Supreme Court Judgement stated that the amount can be reduced to 25% which depends according to the discretion of the DRAT.
As the burden is increasing on civil courts, the DRT and DRAT are a relief with a speedier and more proficient method of recovery of debts.