Debt Recovery Tribunals (DRT): How Banks and Creditors Recover Dues
What is a Debt Recovery Tribunal?
A Debt Recovery Tribunal (DRT) is a specialised tribunal established under the Recovery of Debts and Bankruptcy Act 1993 (the RDDB Act) to adjudicate applications by banks and financial institutions for the recovery of debts above a prescribed threshold. The aim is to provide a faster forum than ordinary civil courts for recovery of large bank dues.
Appeals from a DRT lie to the Debts Recovery Appellate Tribunal (DRAT).
How does a bank recover dues through the DRT?
A bank initiates recovery by filing an Original Application (OA) before the DRT having jurisdiction. The broad process is:
- The bank files the OA setting out the debt and the security;
- The borrower and guarantors are issued notice and file their reply;
- The tribunal hears the matter and, if the claim is established, issues a Recovery Certificate;
- A Recovery Officer executes the certificate, which may involve attachment and sale of the borrower's property.
The DRT can also grant interim measures, such as injunctions and attachment, to protect the bank's position pending adjudication.
How does the SARFAESI Act fit in?
The SARFAESI Act 2002 gives secured creditors a separate, faster route to enforce security without first approaching the tribunal. Under SARFAESI, a secured creditor can, after classifying an account as a non-performing asset and issuing a statutory demand notice, take measures including taking possession of secured assets and selling them.
A borrower aggrieved by SARFAESI measures can apply to the DRT, which is the forum that hears such challenges. In this way the DRT serves both as the recovery forum under the RDDB Act and as the appellate-style check on SARFAESI enforcement.
What rights does a borrower have?
A borrower is not without remedies. Borrowers and guarantors may:
- File a reply and contest the claim and the amount;
- Raise disputes about the validity of the security or the conduct of the creditor;
- Challenge SARFAESI measures before the DRT within the prescribed time;
- Appeal an adverse order to the DRAT, subject to the deposit conditions the law prescribes.
Settlement and one-time-settlement arrangements are also common, and borrowers can negotiate while proceedings are pending.
Why use the DRT rather than a civil court?
The DRT framework is designed for speed and specialisation in bank recovery, with simplified procedure and a dedicated execution mechanism through the Recovery Officer. This generally makes it more efficient than a regular civil suit for the recovery of secured and large institutional debts, while preserving a borrower's right to be heard and to appeal.
Frequently Asked Questions