Debt Recovery with DRT and DRAT

Debt Recovery with DRT and DRAT

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The Government of India established the Debts Recovery Tribunals (DRTs) and Debts Recovery Appellate Tribunals (DRATs) as statutory entities for the swift adjudication and collection of debts owed to banks and financial institutions. The Recovery of Debts Owing to Banks and Financial Institutions Act of 1993 and the Debts Recovery Tribunal (Procedure) Regulations of 1993 set forth the rules that apply to DRTs. The state's relevant High Court has supervisory power over the DRTs, which are run by the Ministry of Finance. A bank or other financial institution can apply to the Debts Recovery Tribunal for recovery against a person when it needs to recoup any debt from that person. Yet over time, the Debts Recovery Tribunal has come to deal with two distinct Acts, namely the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interests (SARFAESI) Act of 2002 and the Recovery of Debts Due to Banks and Financial Institutions (RDDBFI) Act of 1993. In contrast to the SARFAESI Act of 2002, which gives borrowers, guarantors, and anyone else who has been wronged by a bank or financial institution the right to contact the DRT, the RDDBFI Act of 1993 only allows banks and financial institutions to do so.

If the amount owed by the borrower to the bank, financial institution, or group of banks or financial institutions exceeds Rs. 10 lakhs, an application for recovery before the DRT may be filed. A Presiding Officer oversees each Debts Recovery Tribunal (DRT). In most cases, the Presiding Officer has the same authority as a District and Sessions Judge. Additionally, each Debt Recovery Tribunal includes two Recovery Officers who assist in putting the recovery certificates that have been approved by the presiding officers into effect. The Chairman is in charge of the DRATs. The Chairman of DRAT may be appointed by the High Court, by a Member of the Indian Law Service who has held a Grade-I position in the service for at least three years, or by a Presiding Officer of DRT who has maintained that position for at least three years.

Recovery procedures before the DRT - The harmed bank must request recovery of its debts from the tribunal. Before the DRT, the applicant bank must also submit a proof affidavit, loan documentation, and statements of account. The defendant (Bank Borrower) was then served with a summons asking them to provide justification within 30 days as to why legal action should not be taken to recoup the Bank's unpaid debts. The DRT would publish the notice against the defendant in the newspapers if notice could not be delivered to the defendant for any reason. The DRT will issue an ex-parte order against the defendant if they do not come before the Tribunal on the day and time specified in the notice that was served on them. In the event that the defendant comes before the Tribunal and submits the required formal report of defence, setoff, or counterclaim.

To stop the Defendant from alienating or disposing of his property, the Tribunal has the power to issue an interim order. Additionally, the defendant might be required to provide security good enough to meet the certificate of recovery. The Tribunal may issue any type of order, whether preliminary or final, to carry out the purposes of the Act because it is not bound by the restrictions of a civil court. Following the conclusion of the pleading phase, arguments would be heard and decisions would be made. The applicant bank must submit an application to the DRT for a "Recovery Certificate" as soon as it receives the order in its favour. The Recovery Officer notifies the defaulters and demands that they pay their debts in accordance with the terms of the Recovery Certificate granted by the DRT within 15 days of the notice's date. The Recovery Officer will go forward to recover the debt amount mentioned in the certificate by one or more of the following methods if payment is not received within the notice period:

• The appointment of a receiver to oversee the defendant's movable or immovable property

• The appointment of a receiver to oversee the defendant's movable or immovable property

• a receiver may be appointed to administer the defendant's movable or immovable property.

Appellate Authority - The DRAT or, the Debt Recovery Appellate Tribunal (DRAT) happens to be the appellate body that is responsible for hearing and deciding appeals related to DRT decisions. Within 45 days of receiving the DRT's orders, any party who feels wronged by them may file an appeal before the DRAT. The borrower must deposit 75% of the total amount owed to the bank or financial institution before bringing an appeal before the DRAT, albeit the Appellate Tribunal has the authority to lower or waive this requirement. Upon fulfilment of the prerequisite condition of deposit, the High Court may hear an appeal against the Appellate Tribunal's decision.