Debt Recovery Tribunals and Debt Recovery Appellate Tribunals (DRT and DRAT)

Debt Recovery Tribunals and Debt Recovery Appellate Tribunals (DRT and DRAT)

Debt Recovery Tribunals (DRTs) and Debt Recovery Appellate Tribunals (DRATs) are tribunals established to recover debts owed to banks and financial institutions:

Purpose: The Recovery of Debts and Bankruptcy Act (RDB Act) of 1993 established DRTs and DRATs to provide a quick way to recover debts and adjudicate them.

Jurisdiction: DRTs have original jurisdiction, while DRATs have appellate jurisdiction.

Procedure: Lenders and borrowers can file original applications (OAs) in DRTs, and appeals in DRATs.

Authority: DRTs and DRATs have the same authority as civil courts and operate on the principle of natural justice.

Appeals: A person or business can appeal a DRT order to the DRAT within 45 days of receiving the order. The DRAT will not consider the appeal until the person pays 75% of the debt.

About Debt Recovery Tribunal

The Debts Recovery Tribunals (DRTs) and Debts Recovery Appellate Tribunals (DRATs) were established under the Recovery of Debts and Bankruptcy Act (RDB Act), 1993 with the specific objective of providing expeditious adjudication and recovery of debts due to Banks and Financial Institutions.

At present, 39 Debts Recovery Tribunals (DRTs) and 5 Debts Recovery Appellate Tribunals (DRATs) are functioning across the country. Each DRT and DRAT are headed by a Presiding Officer and a Chairperson respectively.

Debt Recovery Laws

Recovery of Debts and Bankruptcy (RDB Act), 1993 is an Act to provide for the establishment of Tribunals for expeditious adjudication and recovery of debts due to Banks and Financial Institutions and for matters connected therewith or incidental thereto

Securitization & Reconstruction of Financial Assets & Enforcement of Security Interest (SARFAESI) Act, 2002 is an Act to regulate securitisation and reconstruction of Financial Assets and enforcement of security interest and for matters connected therewith or incidental thereto.

Debts Recovery Tribunals and Debts Recovery Appellate Tribunals

The Debts recovery Tribunals (DRTs) and Debts Recovery Appellate Tribunal (DRATs) have been established under RDB Act, 1993 with the specific objective of providing expeditious adjudication and recovery of debts due to Banks and Financial Institutions.

At present, 39 DRTs and 5 DRATs are functioning across the country. Each DRT and DRAT are headed by a Presiding Officer and a Chairperson respectively.

OA: Original Application filed by Banks/Financial Institutions.

SA: Application under SARFAESI Act filed by Borrowers/Guaranters/Third Party

Debt Recovery Tribunals and Debt Recovery Appellate Tribunals (DRT and DRAT)

Debt Recovery Tribunals (DRT) and Debt Recovery Appellate Tribunals (DRAT) are quasi-judicial bodies established in India under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDBFI Act). Their primary purpose is to expedite the recovery of debts owed to banks and financial institutions, providing an alternative to lengthy civil court processes.

Debt Recovery Tribunals (DRT)

• DRTs have jurisdiction over cases where the debt amount exceeds the specified threshold, and their decisions are enforceable as civil court decrees.
• They possess powers similar to those of a District Court, including summoning witnesses, requiring document production, and issuing commissions for evidence collection.
• Each DRT is headed by a Presiding Officer, who must be qualified as a District Judge. The presiding officer is appointed by the Central Government for a term of five years or until they reach the age of 62,
• Banks and financial institutions initiate proceedings by filing an Original Application (OA) with the DRT. The tribunal then adjudicates the case, allowing the borrower to present their defense.
• DRTs are currently operational in 39 locations across India, ensuring accessibility for financial institutions seeking debt recovery.

Debt Recovery Appellate Tribunals (DRAT)

• DRATs serve as appellate bodies for decisions made by DRTs. If a party is dissatisfied with a DRT’s ruling, they can appeal to the DRAT within 45 days of receiving the order.
• A critical requirement for filing an appeal is that the appellant must deposit 75% of the disputed amount as determined by the DRT before their appeal can be considered.
• Each DRAT is headed by a Chairperson, who must have qualifications akin to those of a High Court judge. The Chairperson serves a term of five years and may continue until reaching the age of 65.
• There are currently 5 DRATs functioning in major cities: Mumbai, Delhi, Kolkata, Allahabad, and Chennai. These locations allow for centralized appellate hearings across different regions of India.

The establishment of DRTs and DRATs has significantly improved the efficiency of debt recovery processes in India. By providing specialized forums for adjudication outside traditional civil courts, these tribunals aim to reduce backlog and expedite financial recoveries for banks and financial institutions.

Debt Recovery Tribunals and Debt Recovery Appellate Tribunals (DRT and DRAT)

Debt Recovery Tribunals (DRT) and Debt Recovery Appellate Tribunals (DRAT) are quasi-judicial bodies in India established to expedite the recovery of debts owed to banks and financial institutions. These tribunals aim to provide an alternative to the lengthy and complex process of civil litigation.

1. Debt Recovery Tribunals (DRT)

DRTs were established under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDBFI Act) to help financial institutions recover bad loans efficiently.

• Monetary Threshold: DRTs handle cases where the debt amount is ₹20 lakh or more. For smaller amounts, the recovery process takes place in civil courts.
• Types of Cases:
  • Recovery of loans and advances given by banks/financial institutions.
  • Cases related to the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).
  • Settlement of disputes involving borrowers and lenders.
• Presiding Officer (PO): The head of a DRT is a Presiding Officer, typically a person of the rank of a District Judge.
• No Civil Courts: Civil courts have no jurisdiction to hear debt recovery matters that fall under DRT’s purview.
• Issue orders for the attachment, sale, and seizure of properties (secured and mortgaged).
• Enforce the recovery of debts through liquidation of secured assets.
• Summon witnesses, require the production of documents, and issue orders similar to those of civil courts.

1. Application by Lender: A bank/financial institution files an application to the DRT.
2. Notice to Borrower: The borrower receives a notice to present their case.
3. Hearing: The DRT examines the evidence and arguments from both sides.
4. Order for Recovery: The DRT can order attachment, sale of properties, or other necessary actions to recover the debt.

2. Debt Recovery Appellate Tribunals (DRAT)

DRATs are appellate bodies that hear appeals against the orders of the Debt Recovery Tribunals (DRTs). They were also established under the RDDBFI Act, 1993.

• Appellate Jurisdiction: DRATs have the authority to hear appeals against decisions of DRTs.
• Monetary Deposit for Appeal: To file an appeal before DRAT, the borrower must deposit 50% of the debt amount as per the DRT’s order (can be reduced to 25% at the discretion of DRAT).
• Chairperson: A DRAT is headed by a Chairperson, who is usually a former Judge of a High Court or an experienced judicial officer.
• Hear and decide appeals from orders passed by DRTs.
• Amend, modify, or reverse orders passed by DRTs.
• Exercise the same powers as a civil court while hearing appeals.

Key Differences: DRT vs. DRAT

Debt Recovery Tribunals and Debt Recovery Appellate Tribunals (DRT and DRAT)

1. Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDBFI Act)
2. Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act)

• Speedy Recovery: Faster process compared to civil courts.
• Cost-Effective: Avoids lengthy litigation and associated legal costs.
• Specialized Tribunal: Focuses only on debt recovery issues.
• Reduced Burden on Courts: Reduces the burden on regular civil courts.

Challenges of DRT and DRAT

• Backlog of Cases: Increase in non-performing assets (NPAs) has led to a backlog of cases.
• Capacity Issues: Shortage of Presiding Officers and Chairpersons in DRTs/DRATs.
• Delays in Appeals: The process of appeals to DRAT may delay final recovery.
• Burden of Deposit: The 50% deposit required to file an appeal may be burdensome for borrowers.

If you’d like more details on any specific part, such as the SARFAESI Act’s relation to DRTs or the role of banks in DRT proceedings, I can elaborate.

Debt Recovery Tribunals and Debt Recovery Appellate Tribunals (DRT and DRAT)

Debt Recovery Tribunals (DRTs) and Debt Recovery Appellate Tribunals (DRATs) are specialized tribunals in India established under the Recovery of Debts and Bankruptcy Act, 1993. They are designed to provide expeditious adjudication and recovery of debts owed to banks, financial institutions, and other entities.

Debt Recovery Tribunals (DRTs)

• Jurisdiction: DRTs have the authority to hear and decide cases related to the recovery of debts, including those arising from loans, advances, and other financial transactions.
• Powers: DRTs have the power to:
  • Issue summons, notices, and orders
  • Adjourn hearings
  • Receive evidence
  • Pass interim orders
  • Pass final decrees or orders
  • Execute decrees and orders
• Process: The recovery process typically involves the filing of an Original Application (OA) by the creditor, followed by service of notice to the debtor. The DRT then conducts hearings, considers evidence, and passes orders or decrees.

Debt Recovery Appellate Tribunals (DRATs)

• Jurisdiction: DRATs hear appeals against the orders or decrees passed by DRTs.
• Powers: DRATs have the power to:
  • Admit or dismiss appeals
  • Hear appeals
  • Pass orders or decrees
  • Modify or set aside orders or decrees of DRTs
• Process: An appeal can be filed against a DRT order within a specified time period. The DRAT then hears the appeal, considers the arguments and evidence, and passes an order or decree.

Key Objectives of DRTs and DRATs:

• To provide a specialized forum for speedy resolution of debt recovery disputes.
• To reduce the burden on the regular civil courts.
• To enhance the recovery rate of bad loans.
• To protect the interests of both creditors and debtors.

Benefits of DRTs and DRATs:

• Specialized expertise: DRTs and DRATs are staffed with judges and members who have expertise in banking, finance, and commercial law.
• Simplified procedures: The procedures followed by DRTs and DRATs are simplified and streamlined to ensure speedy disposal of cases.
• Swift disposal of cases: DRTs and DRATs are mandated to dispose of cases within a specified timeframe.
• Effective enforcement of decrees: DRTs have powers to enforce their decrees effectively, including attachment and sale of property.

DRTs and DRATs play a crucial role in the Indian financial system by providing a mechanism for the efficient recovery of debts and protecting the interests of both creditors and debtors.