Recovery Proceedings by Banks and Financial Institutions before the Debts Recovery Tribunals

The Debts Recovery Tribunals (DRTs) and the Debts Recovery Appellate Tribunals (DRATs) are statutory bodies, established by the Government of India for the expeditious adjudication and recovery of debts due to banks and financial institutions. The DRTs are governed by the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and the Debts Recovery Tribunal (Procedure) Rules, 1993. The DRTs are functioning under the Ministry of Finance and the concerned High Court of the state has supervisory jurisdiction.

When a bank or a financial institution has to recover any debt from any person, it can apply to the Debts Recovery Tribunal for recovery against such person. However, with time, the Debts Recovery Tribunal now deals with two different Acts, namely the Recovery of Debts Due to Banks and Financial Institutions (RDDBFI) Act, 1993 as well as the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interests (SARFAESI) Act, 2002. Under the RDDBFI Act, 1993, banks and financial institution approach DRT whereas, under the SARFAESI Act, 2002, borrowers, guarantors, and any other person aggrieved by any action of the bank or financial institution, can approach the DRT.

Pecuniary Jurisdiction:

An application for recovery before the DRT could be filed, where the debt due to the bank or financial institution or to a consortium of banks or financial institutions from the borrower is more than Rs.10 lakhs.

Composition of the Tribunal:

Each Debts Recovery Tribunal (DRT) is presided over by a Presiding Officer. The Presiding Officer is generally equivalent to the rank of District& Sessions Judge.

Each Debt Recovery Tribunal also has two Recovery Officers who help in executing the recovery Certificates as passed by the Presiding Officers.

The DRATs are presided over by the Chairperson. A person qualified to be a judge of the High Court or who has been a Member of the Indian Legal Service and has held a post in Grade-I of the service for at least three years or who has held the post of Presiding Officer of DRT for a minimum period of three years can be appointed as the Chairperson of DRAT.

Recovery Proceedings before DRT:

The aggrieved bank has to apply to the tribunal for recovery of its dues. The applicant bank is also required to file proof affidavit and loan documents and statements of account before the DRT. Thereafter, the DRT issued summons to the defendant (Bank Borrower) to show cause within 30 days, why action should not be taken against them to recover the Bank’s dues.

If notice could not be served upon the defendant, for any reason, the DRT would publish the notice against the defendant in the newspapers. If the defendant does not appear before the Tribunal at the time and date mentioned in the notice served to them, then the DRT would pass ex-parte order against the defendant.

In case the defendant appears before the Tribunal and files the written statement of defence, setoff or counterclaim wherever necessary.

The Tribunal has the authority to pass an interim order against Defendant to prevent him from alienating and or disposing of his property. The defendant may also be asked to furnish security sufficient to satisfy the certificate of recovery. Since the Tribunal is free from the trappings of a civil court it can pass any kind of order whether interim or final to fulfil the object of the Act.

Once the stage of pleadings is complete, arguments would be heard and orders passed. On receipt of the order in its favour, the applicant bank has to apply the DRT for ‘Recovery Certificate’. The Recovery Officer issues notice to the defaulters and demand them to clear the dues as per the Recovery Certificate issued by the DRT within 15 days from the date of the notice. On default of payment within the notice period, the Recovery Officer shall proceed to recover the amount of debt specified in the certificate by one or more of the following modes, namely: -

1. Attachment and sale of the movable or immovable property of the defendant;
2. Arrest of the defendant and his detention in prison;
3. Appoint a receiver for the management of the movable or immovable properties of the defendant.

Appellate Authority:

Debt Recovery Appellate Tribunal (DRAT) is the appellate authority to hear and dispose of appeals arising out of the decisions of the DRTs. Any party aggrieved by the order of the DRT, can appeal before the DRAT, within 45 days of receiving the orders of the DRT. Before filing an appeal before the DRAT, the borrower has to deposit 75% of the amount which is due from him to the Bank or financial institution, however, the Appellate Tribunal has got the power to reduce or waive this amount.

An appeal against the order of the Appellate Tribunal can be entertained by the High Court, on fulfilment of condition precedent of deposit.