What is the Debt Recovery Tribunal in India? How does it Works?

  • What is the Debt Recovery Tribunal in India? How does it Works?

    Date : 14-01-2019 17:32

    Debt Recovery Tribunals also known as DRTs were created to facilitate the speedy recovery of debt payable to banks and other financial institutions by their customers. The banks and financial institutions had been facing problems in recovery of loans advanced by them to individual people or business entities. Due to this, the banks and financial institutions started restraining themselves from advancing out loans. There was a need to have an effective system to recover the money from the borrower.

    DRTs was set up after the passing of Recovery of Debts due to Banks and Financial Institutions Act (RDBBFI), 1993.

    Keeping in line with the international trends on helping financial institutions recover their bad debts quickly and efficiently, the Government of India has constituted thirty-three Debts Recovery Tribunals across the country.

    Debts Recovery Tribunal is located across the country. Some cities have more than one Debts Recovery Tribunals. New Delhi, Chennai, Kolkata, and Mumbai have three Debts Recovery Tribunals. Ahmedabad and Chandigarh have two Debts Recovery Tribunal (DRT) each. One Debts Recovery Tribunal has been constituted at Allahabad, Aurangabad, Bangalore, Coimbatore, Cuttack, Ernakulam, Guwahati, Hyderabad, Jabalpur, Jaipur, Lucknow, Madurai, Nagpur, Patna, Pune, Visakhapatnam, and Ranchi.

    The setting up of a Debts Recovery Tribunal is dependent upon the volume of cases. Higher the number of cases within a territorial area, more Debts Recovery Tribunal would be set up.

    The recovery of outstanding loans generally advanced by banks to individual borrowers or corporate entities was a big issue, until the DRTs were established and largely determined the growth of the financial sector of the country. The Government revenues were getting impacted to the extent that the growth of the economy had slowed down. Banks and FIIS shied away from advancing loans as recovery of the loans was the biggest challenge they faced. The most important step to develop the economy was to have a progressive and effective system and a mechanism to recover the dues from borrowers.

    The main objective and role of DRT is the recovery of funds from borrowers which is payable to banks and financial institutions. The Tribunal has all the powers vested with the District Court. The Tribunal also has a Recovery officer who guides in executing the recovery Certificates as passed by the Presiding Officers. DRT follows the legal procedure by emphasizing on speedy disposal of the cases and fast implementation of the final order.

    DRT follows a complicated procedure.

    Application- There are following procedure involved in making application to Debt Recovery Tribunal which is as follows:

    ●      Procedure of filling the application- The applicant should apply with the Registrar within whose jurisdiction the applicant is functioning as a bank or financial institution in the present. An application should be presented in the prescribed format. The application can be presented by the applicant or by his agent or by an authorized legal practitioner. The application to be presented to the registrar of the tribunal within whose jurisdiction his case falls or can be sent through registered post addressed to the Registrar.

    ●      Submission of application- If the application sent by post to be deemed to have been presented to the Registrar on the same day of receiving the request by the registrar. The application should be presented in two sets. An empty file size envelope bearing full address of the respondent. The applicant should furnish full bearing address of each of the respondents.

    ●      Presentation and verification of application-
    The registrar or any other concerned officer authorized by him will approve every application on the date in which it is presented or deemed to have been filed under that rule and should sign the endorsement. If on verification the application is found to be in order, it should be duly registered and give a serial number.

    ●      Issuance of original application number-The Registrar of DRT is responsible for the Overall Administration of the tribunal. The Registrar will issue the Original Application (OA) number and summon after verifying the application.  Also serves a copy of the application and paper book on each of the respondents. The respondent may file four complete sets indicating the reply to the application along with documents within one month (or extended time allowed by the tribunal) of its receipt.

     Service of Summon/Notice- The Registrar of DRT or any other officer that has been authorized by the Presiding Officer will issue a notice which will be served by the applicant to the defendant. The summon also includes the paper book of the petition which is served to defendant generally by hand or registered post with Acknowledgement Due (AD) or speed post. With the consent, of Registrar, Summon/Notice can likewise be additionally sent through email or fax, in any case, in such occasion, it must be guaranteed that defendant gets a duplicate of the paper book on the primary date of his appearance. If the Summon/Notice has been sent through registered post or email or fax, an affidavit ought to be filed expressing method of dispatch and the accuracy of the address where it was sent.

    Hearing of the case before Presiding Officer-The defendant is required to file for the reply within one month from the date of service of the notice. The defendant can be allowed to file the reply after some time only with the permission of the DRT. DRT may proceed ex-parte if the defendant even after the extension of time is not able to file his reply.

    The claim for counterclaim- The defendant can file for counterclaim only on the first hearing. After that, the permission of DRT would be required. The claim for counterclaim will have the same impact as a countersuit would in any proceedings.

    Admission of liability by the defendant-The Presiding Officer would pass an order if the defendant admits his liability, instructing him to pay the required amount within a period of 30 days from the date of the order of DRT.

    Affidavits- In a situation where the defendant tries to deny his commitment in that occasion, Presiding Office may require the parties to him to file an affidavit for proving any fact which will be read in the hearing as per DRT wishes. If the case requires a witness to be present for cross-examination, which needs to be recorded, then DRT may order the witness to be present for cross-examination and if the witness is not present at the time of the hearing, the affidavit would not be taken into evidence.

    Interim Order by DRT- DRT has the power to pass an interim order against the defendant, restricting him from disposing or transferring his property without the prior assent of the Tribunal. DRT is also authorized to confine the defendant for a period of three months on the ground of disobedience of any order issued.

    Execution of Recovery Certificate- The Presiding Officer finally grants Recovery Certificate and sends it to Recovery Officer (R.O.) for execution. On receipt of the Recovery certificate, the recovery officer can issue the notice to Certificate Debtors, giving 15 days for payment of the amount stated in the Recovery Certificate. If the defendant neglects to pay the amount, Recovery Officer will proceed to recover the amount by any one or more of the methods, which are listed below:

    ●      Attachment and sale of Movable

    ●      Immovable Property of the defendant.

    ●      Arrest and Detention of the defaulter.

    ●      Appointment of Receiver.

    ●      The closing of DRT Application after full recovery of bank dues, the application is closed by Recovery officer.

    Appeal Against Recovery Officer- The appeal against an order of Recovery Officer to DRT can be requested within 30 days from the date of order. The Tribunals have to resolve the claim within six months. The appeal against the judgment of DRT can be made within 45 days only to DRAT(Debt Recovery Appellate Tribunal). For filing lawsuit, as per Section 21 of the tribunal, the 50% of the fund to be deposited by the appellant and the Chairperson may reduce it up to 25% of the deposit amount.
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