The Debt Recovery Tribunal (DRT) is a specialized forum established to facilitate the speedy resolution of disputes related to loan recovery for banks and financial institutions. In India, the increasing number of non-performing assets (NPAs) has made the role of the DRT more crucial than ever. If you are a lender facing difficulties in recovering dues from borrowers, approaching the DRT could be your best legal remedy. This article will guide you through the process of when and how to approach the DRT for loan recovery cases, the jurisdiction and powers of the DRT, and the legal framework governing these proceedings.
Understanding the Jurisdiction of DRT
The DRT was established under the Recovery of Debts and Bankruptcy Act, 1993 (RDB Act) to address claims by banks and financial institutions where the amount of debt exceeds Rs. 20 lakh. The DRT has the authority to adjudicate and recover debts in a time-bound manner, which is a significant advantage over the traditional civil court system.
DRTs have the power to:
- Issue recovery certificates for the amount due.
- Attach and sell movable or immovable property of the debtor.
- Appoint receivers.
- Adjudicate counterclaims and set-offs.
The jurisdiction of a particular DRT is determined based on the location of the bank or financial institution’s branch where the debt is payable or where the borrower resides or carries on business.
When to Approach the DRT
A lender should approach the DRT in the following situations:
- Non-Performing Asset (NPA) Classification: When a borrower’s account has been classified as an NPA, indicating prolonged default.
- Failure to Repay: Despite repeated reminders and notices, the borrower fails to repay the outstanding dues.
- SARFAESI Action: After serving notices under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, if the borrower still fails to comply.
- Debt Amount: The total outstanding amount must be Rs. 20 lakh or more.
How to Approach the DRT
- Filing an Application: The bank or financial institution must file an Original Application (OA) with the DRT having territorial and pecuniary jurisdiction over the matter. The application must include:
- Details of the loan agreement.
- Statement of accounts and outstanding balance.
- Notices served to the borrower.
- Evidence of default.
- Payment of Court Fees: The applicant must pay the prescribed court fee based on the amount of debt claimed.
- Issuance of Summons: Once the application is accepted, the DRT issues summons to the borrower, requiring them to respond within a specified time frame.
- Hearing and Evidence: Both parties present their arguments and evidence. The DRT follows a summary procedure, ensuring swift adjudication.
- Final Order: The DRT issues a final order, which may include a recovery certificate directing the borrower to pay the outstanding amount. If the borrower fails to comply, the recovery officer is empowered to attach and sell the borrower’s property.
Appeals and Enforcement
An aggrieved party can appeal against the DRT’s order before the Debt Recovery Appellate Tribunal (DRAT) within 30 days of the order. The appellant must deposit 50% of the decreed amount unless a waiver is granted.
Role of Legal Representation
Engaging a skilled advocate experienced in DRT matters is crucial for navigating the complexities of loan recovery cases. A well-drafted application, proper documentation, and effective representation can significantly impact the outcome.
About the Author
Advocate Ayush S. Jain is a seasoned legal professional practicing at the High Court of Gujarat and District & Sessions Courts of Ahmedabad and Gandhinagar. Specializing in Civil, Commercial, Criminal, and Matrimonial disputes, Advocate Ayush also has extensive expertise in DRT matters, NCLT proceedings, Consumer Matters, MSME cases, and Intellectual Property laws. Known for his strategic approach and commitment to client satisfaction, he offers comprehensive legal solutions with professionalism and integrity. For legal assistance, feel free to reach out at 7440772911 or [email protected].