Debt Recovery Tribunal (DRT): Jurisdiction, Powers and Procedure
In this topic, we will see what Debt Recovery Tribunal (DRT) are, their duties, quantity, optional nature, composition, and the extent and scope of DRTs. We will also study their pecuniary limit and jurisdiction. Along with this, we will cover the process of debt recovery, including the application route and the SARFAESI route.
Debt Recovery in India
Banks and financial institutions in India have been facing difficulties for a long time regarding the recovery of debts from customers. The process that was earlier used for debt recovery was not systematic and was also very lengthy.
In the year 1991, the Narasimham Committee recommended that there should be special tribunals like DRTs. so that the debt recovery process could be made systematic and efficient.
Due to the recommendation of this committee. the Recovery of Debts Due to Banks and Financial Institutions Act, also known as the RDBFI Act, was enacted. Through this Act, DRTs and DRATs derive their authority to inquire into matters related to debt recovery.
Constitutionality of DRT
Since its existence in India, the constitutional validity of DRTs has been questioned. Articles 39 and 5 are relevant in this regard.
In 1995, the Delhi High Court struck down the RDBFI Act on the ground that it was unconstitutional and affected the independence of the judiciary. Despite this, the Supreme Court allowed DRTs to function.
The Supreme Court held that if amendments were made to the existing Act, then these tribunals could continue to function. After the government made further amendments, the Supreme Court declared that the Act had become constitutional in nature.
Composition of Debt Recovery Tribunal (DRT)
Under the provisions of the RDBFI Act, a tribunal shall consist of only one member, known as the Presiding Officer. The Presiding Officer is appointed by the Central Government.
If authorized by the Central Government, the Presiding Officer of one tribunal may discharge the functions of another tribunal.
The Presiding Officer is appointed for a term of five years and retires after attaining the age of sixty-two years. The qualification required for the Presiding Officer is the same as that of a District Judge.
Extent and Scope of the Act
Under this Act, liabilities can be approached for recovery of debt where the amount involved is more than ten lakhs. If the amount is less than ten lakhs, then banks or financial institutions can approach the civil court under the Code of Civil Procedure.
However, the Act also states that in certain situations where the amount is more than one lakh rupees and the Central Government directs that the case should be investigated by DRTs, then DRTs can investigate such cases.
DRTs and DRATs follow the principles of natural justice. They have the power to regulate their own procedure and are not bound by the procedure laid down in the CPC. A law degree is also not mandatory to appear before DRTs.
Jurisdiction of DRT and DRAT
The jurisdiction of DRT and DRAT includes the authority to entertain any application that comes from a bank or financial institution. DRAT, being an appellate tribunal, entertains appeals against the orders passed by DRT.
The Supreme Court has held that DRT and DRAT cannot decide cases related to succession rights of property, situations of research, and certain other matters which fall outside their jurisdiction. Their jurisdiction is mentioned in Section 17 of the Act. Section 18 provides that apart from the Supreme Court and High Courts, other courts are barred from interfering in matters related to debt recovery.
This provision is in line with the judgment of L. Chandra Kumar, where Justice Shailendra Kumar stated that tribunals are supplementary to the High Courts and not a substitute for them.
Application Route
In the process of debt recovery, the application route under Section 19 of the RDB Act plays an important role. An application for debt recovery can be filed by a bank or financial institution before the DRT having jurisdiction.
The DRT where the defendant resides or carries on business has jurisdiction. The application can be filed before that tribunal, and the prescribed fees must be paid along with the application.
SARFAESI Route
Under the SARFAESI Act, secured creditors are empowered to enforce security interests when the borrower fails to discharge his liabilities.
If the entire debt is not recovered through the enforcement of security, then for the remaining amount, an application can be filed before the DRT. DRT has the power to conduct summary proceedings. It can pass interim orders, impose restrictions on the transfer of property, and through the Recovery Officer, attachment, sale, or appointment of a receiver can be carried out.
In cases where securities are insufficient to discharge the entire debt, creditors have the option to approach the DRT to recover the remaining dues. Section 17 of the SARFAESI Act provides that the borrower can file an appeal before the DRT against the actions or findings of the creditor.
Procedure After Filing of Application
After the filing of the application, the Debt Recovery Tribunal (DRT) handles the case through summary proceedings.
- DRT has the power to pass interim orders, including orders for arrest of the borrower and orders restraining the transfer or disposal of property.
- The borrower must obtain prior permission from the tribunal before transferring or disposing of any property.
- DRT can also order detention of the borrower for a maximum period of three months if the borrower fails to comply with the orders of the tribunal.
- Such orders are passed under Section 19 sub-section 12, Section 13, or Section 19(16) of the RDB Act.
- When a case is filed under the normal application route, it must be completed within 180 days.
If the application is filed under the SARFAESI Act, then the case must be disposed of within sixty days to four months.
If this time limit expires, any party may file an appeal before the DRAT requesting it to direct the DRT to dispose of the pending application at the earliest.
Issuance of Summons and Counter Claim
According to Section 19(4), when an application is filed before the DRT, summons must be issued to the defendant within thirty days.
The defendant is then required to submit a written submission. The DRT may grant additional time, and the defendant may also file a counter claim.
A counter claim may be filed on the first hearing day, or later with the permission of the tribunal.
Recovery Certificate and Role of Recovery Officer
After the DRT passes its order, the Presiding Officer issues a recovery certificate to the Recovery Officer for the recovery of the debt amount. Recovery Officer has the power to attach the property, sell it, or appoint a receiver to manage the defendant’s property.
The Recovery Officer may sell the defendant’s property to recover the debt amount. Debt Recovery Tribunal (DRT) also has the power to issue police warrants for the arrest of the defendant.