DRT
DRT stands for Debt Recovery Tribunal, which is a specialized tribunal in India established to facilitate the quick resolution of disputes related to the recovery of debts owed to banks and financial institutions. The DRT operates under the provisions of the Recovery of Debts and Bankruptcy Act (RDB Act), 1993. The tribunal primarily handles cases where the amount of debt involved is ₹20 lakh or more.
Purpose of DRT:
The DRT was created to expedite the recovery process for financial institutions and banks, which faced significant delays when going through the regular court system. Before the establishment of the DRT, banks had to file civil suits for recovery, which was a lengthy and cumbersome process. With DRT, the focus is on quicker dispute resolution and the enforcement of recovery proceedings.
Key Aspects of Debt Recovery Tribunal:
Jurisdiction:
- DRTs handle cases related to the recovery of debts by banks or financial institutions where the outstanding debt is ₹20 lakh or more.
- DRTs have jurisdiction over all matters involving the recovery of debts, including applications by banks and financial institutions for recovery of dues.
- The tribunal can also handle matters like asset sales, possession of properties secured under loans, and any other dispute directly related to debt recovery.
Legislative Framework:
- Recovery of Debts and Bankruptcy Act, 1993 (RDB Act) is the primary legislation governing the DRT. The Act was enacted to provide a more efficient and cost-effective process for banks to recover debts.
- SARFAESI Act, 2002 (Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act) allows banks to seize and auction off properties of borrowers who default on their loans without court intervention, though appeals under SARFAESI can also be brought before the DRT.
Composition:
- Each Debt Recovery Tribunal is presided over by a Presiding Officer, who is typically a judge or a senior legal professional with expertise in banking law and debt recovery.
- In some cases, DRTs also have a Recovery Officer who is responsible for executing the recovery orders passed by the tribunal.
Debt Recovery Appellate Tribunal (DRAT):
- Any party aggrieved by the decision of the DRT can appeal to the Debt Recovery Appellate Tribunal (DRAT). The appeal must be filed within 30 days of the DRT order.
- DRAT reviews cases to ensure that the DRT’s orders are fair and lawful.
Filing of Cases:
- Banks or financial institutions initiate cases in DRT by filing an Original Application (OA) for the recovery of loans.
- The DRT is responsible for conducting hearings and passing judgments related to the recovery of dues. The tribunal has the authority to order the attachment or sale of properties pledged as collateral.
Powers of DRT:
- The DRT has powers similar to those of a civil court, including summoning witnesses, taking evidence, issuing commissions, and examining documents.
- It can pass interim orders, issue decrees, and also take possession of the collateral or assets of the borrower.
- It has the power to enforce its orders, including the sale of assets or properties of the defaulter to recover the dues.
SARFAESI Act and DRT:
- Under the SARFAESI Act, banks and financial institutions have the right to take possession of collateral and auction it without involving the court, but the borrower can approach the DRT to challenge the action taken under SARFAESI.
- The borrower has the right to file an application before the DRT to challenge the notice of possession or sale initiated by the bank.
Speedy Resolution:
- One of the main objectives of DRT is to provide speedy resolution of cases. The tribunal is required to dispose of cases within 180 days from the date of filing.
- This time-bound process is meant to reduce the backlog of debt-related cases that were earlier taking years to resolve in civil courts.
Appeals and Orders:
- If a party is dissatisfied with the decision of the DRT, they can appeal to the DRAT within 30 days of the DRT’s order.
- The DRAT has the authority to confirm, modify, or overturn the decisions made by the DRT.
Recovery Procedure:
- Once a DRT passes an order for recovery, the Recovery Officer ensures that the amount is recovered from the borrower. This may include the sale of mortgaged property or other assets.
- The tribunal may also appoint a receiver to manage or take possession of assets until the debt is fully recovered.
Advantages of DRT:
- Faster Resolution: The tribunal system was set up to avoid the delays of regular civil courts, providing quicker resolution to debt recovery cases.
- Specialized Focus: DRTs are focused exclusively on debt recovery, making the system more efficient for handling financial disputes.
- Reduced Court Burden: By diverting large-value debt cases from the regular courts, DRTs help reduce the burden on the judicial system.
- Direct Recovery Mechanism: With mechanisms like SARFAESI, financial institutions have a streamlined path to recover debts by seizing and selling assets without going through lengthy court battles.
Challenges and Criticisms:
- Backlog of Cases: Despite the creation of DRTs to speed up recovery, many tribunals face backlogs due to the volume of cases.
- Understaffed Tribunals: Some DRTs suffer from a shortage of staff and resources, which affects the speed at which cases can be resolved.
- Borrower’s Rights: While DRTs facilitate quicker recovery for banks, borrowers sometimes face challenges in protecting their rights if they are unable to defend their case within the limited time frames.
- Appeal Restrictions: The borrower has to deposit a portion (50%) of the outstanding debt to appeal to the DRAT, which can be a burden for some borrowers.
Conclusion:
The Debt Recovery Tribunal plays a crucial role in helping banks and financial institutions recover their debts efficiently and fairly. By providing a specialized forum for debt recovery cases, it reduces the burden on the civil courts and provides a faster route for dispute resolution. However, like any legal institution, DRTs face challenges, such as case backlogs and limited resources, which can sometimes delay justice.
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