Published On : August 27, 2021 13:14 IST
Introduction
Various Tribunals are set up to deal with the problems as related to solving administrative or tax related disputes. Debt Recovery Tribunals were the ones that were created for the speedy recovery of debt.
It is also known as DRTs and any person who is not satisfied with the orders of DRT can appeal against its orders to Debt Recovery Appellate Tribunal (DRAT). But unless the aggrieved does not deposit 75% of debt that is due determined by DRT, DRAT does not entertain the appeal of that aggrieved person.
Why is the DRT important?
DRT follows the legal procedures with its main focus on the speedy disposal of cases. As its main aim is to recover the funds from borrowers which is payable to the banks. This Tribunal has all the powers as similar to that of District Court. DRT also has a Recovery Officer who helps in executing the recovery process and certificates which are as passed by the officers.
This Tribunal is headed by an officer who is qualified to be a District Judge and is appointed by the Central Government. Also, at present there are 39 Debt Recovery Tribunals and 5 Debt Recovery Appellate Tribunals that are functioning across the country.
Recovery of Debts and Bankruptcy Act (RDB Act), 1993
“The RDB Act, 1993 provides the establishment of Debt Recovery Tribunals (DRTs) with the original jurisdiction and Debts Recovery Appellate Tribunals (DRATs) with appellate jurisdiction, for expeditious adjudication and recovery of debts due to banks and financial institutions, insolvency resolution and bankruptcy of individuals and partnership firms and connected matters therewith. The Act aims to safeguard the interest of banks and financial institutions as lenders, while not discouraging borrowers. The Tribunals have not yet commenced taking up insolvency resolution and bankruptcy matters as the related provisions are not yet in force. The Act is applicable to cases where the amount of debt due to any bank or financial institution defined under the Act or a consortium of banks or financial institutions is Rs.20 lakhs or more.”[i]
Applicability of the Act
The Debt Recovery Tribunals Act applies to the following:
- DRT applies where the debt taken is not less than Rs 20,00,000.
- It is applied only when the Banks and other Financial Institutions file the application.
Establishment of Tribunal and Appellate
As the Central Government can set up one or more than one tribunals to recover debts and to exercise its jurisdiction powers and authority, this is what is granted under this Act. The Central Government also specifies the particular areas for the Tribunals to exercise its jurisdiction powers.
How is the DRT composed? What are its duties?
A Debt Recovery Tribunal which is headed by a Presiding Officer, the officer here is as such a judge in a District Court. The Central Government has the power to authorise another presiding officer other than already appointed Presiding officer. It also consists of a Registrar who heads the Registry which consists of staff members.
The Presiding Officer shall be appointed for a term of 5 years or 62 years of age, whichever shall be qualified as a District Judge.
There are several duties of the Presiding Officer these are:
- To Execute the final decision.
- To calculate the total debt amount and deposit it back to the Bank.
- Its duty is also to conduct the public auction which is as per Section 25 – 28 of RDB Act.
- The Recovery Officer cannot add or remove people whose work is to complete the certificate. But the officer can expand the area of persons to satisfy the certificate.
What is the process that DRT follows?
Procedure for filing of application
There are certain procedures which are to be kept in mind while filing the case in DRT. These are as follows:
- The application to DRT should be submitted within the specific time period which is calculated from the day when an appropriate authority approves against the legal action.
- All the relevant documents and the securities that are charged to the bank should be contained in the Recovery Application.
- The copies of the application should be produced to the Advocates.
- The Original Copies should be kept with the branch.
- As per the provisions of the Bankers Books Evidence Act the Account extracts are to be provided.
Submission of application
The application should be presented in two sets if the application is sent through post to the Registrar on the same day of receiving the request by the registrar. Following are the two sets:
- An empty file size envelop that should contain full address of the respondent.
- Applicant should provide full address of the respondent.
Presentation and Verification of application
Every application will be approved by the registrar and any other officer authorised by him and that too on the date in which it is filed under the rule or deemed to have been filed. Then only should sign the endorsement.
It is registered only if on verification it is found to be in order and is given an appropriate serial number.
Issuance of Original application Number
As we know that it is the Registrar of DRT who is responsible for the Overall Administration of the Tribunal he only will have the power to verify the application and then issue the Original Application Number which is also known as OA Number and summon. After issuing of the OA Number copy of the application and paper book is distributed to every respondent. After receiving the receipts the respondent may file four complete sets as response to the application along with extended time allowed by the tribunal.
Procedure before filing a Case in DRT
Following are the procedures which are to be followed before filing a case in DRT:
- After sending notice to the lender, to sell pledged goods.
- To get the possession of the goods and sell them after submitting the due in form of notice in case of pledged goods.
- In case of LIC policies, to designate the surrender value in the account of loan.
- Before filing a suit in the names of borrowers or guarantors, to set off credit balance in any current or savings account.
- To secure the documents while handling files to advocates that are enforceable against the borrowers for requesting the Recovery Application before the tribunal.
- After getting permission from the authority, there should be discussion about the changes made by an appropriate authority between the Branch and advocate while approval and finalising of the Application.
Procedure after Filing case in DRT
- If the recovery application which is filed is satisfied in all respects, ORT(Office of Residential Tenancies) will issue summons to borrowers called s defendants.
- Serve warrant for Branch to get to see that cases are disposed off within one month.
- All the evidences should be filed in DRT in time and no adjournment is to be asked on the score.
- The DRT has the controls to arrest in civil prison of those defendants who don’t follow the specific orders of DRT. The Branch should notify Bank’s advocate whenever the defendant disobeys the laws of DRT.
SARFAESI Act, 2002
SARFAESI (Securitisation and Reconstruction for Enforcement of Security Interest) Act, 2002 can also be used to make an application to the DRT. Under this Act when debtor fails to discharge all his liabilities, the creditor takes the possession of the securities of the debtors. But when the securities are not able to discharge the entire debt, the creditors can file an application to the DRT for recovery of the remaining dues. Moreover under this Act, the borrowers can also appeal against the findings of creditor to DRT.
Jurisdiction of Debt Recovery Tribunals
- DRTs entertain recovery of debts which are due after receiving applications from the banks and financial institutions.
- The banks may make an application that carries on business within the jurisdiction of local limits.
- From the Supreme Court and High Court, the Act bars all other courts from the judgements of matters relating to debt.
- Other Courts are not allowed to look into the matters of debt except from Supreme Court and High Court who gain their authority from Article 226 and Article 227 of the Indian Constitution.
Change in DRTs Post Insolvency and Bankruptcy Code, 2016
- IBS which is also known as Insolvency and Bankruptcy Code, 2016 was brought in order to unify the legal framework on bankruptcy and insolvency issues by the government. It consolidated various laws which are relating to insolvency by amendments. Such laws include Companies Act, 2013; RDDBFI 1993; SARFAESI, 2002.
- It also get away with many old laws which includes Presidency Towns Insolvency Act, 1909; Sick Industrial Companies Act, 1985 etc.
Case Laws
- Unique Engineering Works Vs Union of India (Uoi) And Ors.[i]
Right of Borrower to Receive Compensation and Costs in Certain Cases
It was held that if the tribunal holds the possession by the secured creditor by the secured assets as the wrongful and further directs that secured creditor to return such assets to the borrower, the borrower will be entitled to pay such costs and compensation that may be determined by the Tribunal.
- M/S Transcore Vs Union of India & Anr[ii]
Debts Recovery Tribunal Refuses to Grant permission for Withdrawal of the Application Filed
For seeking permission to withdraw any application which is made under the first provision shall be dealt with speedily and is disposed of within thirty days from the date of such application. Further if DRT refuses to withdraw the application filed it shall pass orders only after giving the appropriate reasons.
- Raghunath Rai Bareja And Another Vs Punjab National Bank and Others[iii]
No Such Inherent Powers of The Court are there where the Execution Proceedings are Transferred to the DRT
As the Tribunal in the present case was established in 1993 and on the date of its establishment no proceeding was pending before that date. Much after the Tribunal was established the third execution petition was filed by the respondent- bank. Hence there is no such proceeding is pending before any court to the Tribunal which makes us know that the order was clearly illegal and without jurisdiction.
- Nahar Industrial Enterprises Ltd Vs Hongkong & Shanghai Corp[iv]
The High Court or Supreme Court Have no Power to Transfer a Civil Suit to Debt Recovery Tribunal
It was held that the matter of the suit and proceeding before the Tribunal is not at all connected, although the litigation process appears to be the same. DRT can only issue recovery certificates but cannot pass a decree. The entire procedure of proceedings before the DRT revolves around the legally recoverable dues of the bank.
- Authorized Officer, Indian Overseas Bank Vs M/S. Ashok Saw Mill[v]
Any Application disposed by DRT Should be Within Sixty Days from Filing of the Application
As DRT can from time to time extend the said period for reasons to be recorded in writing. Hence, the total period of application with the Debt Recovery Tribunal shall not exceed four months from the date of making such application. If the application is not disposed of within the prescribed time, make an application in such form to be prescribed to the Appellate Tribunal which further makes an order for disposal of the pending application by the DRT.
Conclusion
In the Present Scenario the code still faces confusion as the presence of more than one forum is there. Simultaneous proceedings are there before the Civil Court as the interplay of the SARFAESI Act and DRT Act remains unsolved. The rate of disposal in DRT is alarming as the tribunal is unable to reduce the pending cases. A delay in disposal of cases is because of the fact that proceedings are overlapped and such overlapping is worrisome.
With respect to recovery of debt many companies related legislations mandates and asks for interpretation.
For clearing the pending cases, establishing measures like specifying strict timelines for various stages of judgement and equipping them to deal with the complicated cases will help. Despite many shortcomings DRT’s must be strengthened because failure in debt management will leave its negative impact on future development of the country.
References :
[i] Unique Engineering Works Vs Union of India (Uoi) And Ors. on 15 December, 2003 (II (2004) BC 241)
[ii]M/S Transcore Vs Union Of India & Anr on 29 November, 2006 (Appeal (civil) 3228 of 2006)
[iii]Raghunath Rai Bareja And Another Vs Punjab National Bank And Others on 6 December, 2006 (Civil Appeal No. 5634 of 2006)
[iv]Nahar Industrial Enterprises Ltd Vs Hongkong & Shanghai Corp on 29 July, 2009 (Civil Appeal No. – 4796 of 2009)
[v]Auth. Offr., Indian Overseas Bank… Vs M/S. Ashok Saw Mill on 16 July, 2009 (S.L.P. (C) No. 27399 of 2008)