Case Detail

Debt Recovery Tribunal

Introduction

The Debt Recovery Tribunal (DRT) was established under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDBFI Act) to provide a fast-track mechanism for resolving disputes related to the recovery of debts from borrowers. It is specifically designed to help banks and financial institutions recover their outstanding loans efficiently.

Jurisdiction & Applicability

• DRT deals with cases where the amount of debt exceeds ?20 lakh.
• It primarily handles cases filed by banks and financial institutions against defaulters.
• It does not handle cases related to money lending disputes between private individuals.

Powers of Debt Recovery Tribunal

DRT has civil court powers to:
? Issue summons to the borrower.
? Conduct hearings and examine witnesses.
? Pass orders for recovery of debts, attachment of property, and bank account seizures.
? Grant interim reliefs like stay orders against borrowers.
? Declare wilful defaulters and allow recovery actions under the SARFAESI Act, 2002.

Laws Governing Debt Recovery Tribunal

1. Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDBFI Act)
   • Allows banks to approach DRT for speedy recovery.
2. Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act)
   • Gives banks the power to seize secured assets of defaulters without court intervention.
3. Insolvency and Bankruptcy Code, 2016 (IBC)
   • Enables lenders to initiate insolvency proceedings against corporate borrowers.

Filing a Case in DRT

Step 1: Application by Bank/NBFC

• The financial institution files a claim under Section 19 of the RDDBFI Act.
• The borrower is served with a summons to respond.

Step 2: Borrower’s Response

• The borrower can contest the claim by presenting their defense and submitting relevant documents.

Step 3: Hearing & Decision

• DRT examines evidence, witnesses, and loan documents.
• The tribunal then passes a recovery certificate directing the borrower to pay the outstanding amount.

Step 4: Recovery Proceedings

• If the borrower fails to comply, the bank can take further steps such as:
  • Selling secured assets (property, machinery, vehicles).
  • Freezing bank accounts of the borrower.
  • Declaring the borrower as a wilful defaulter.

Appeals Against DRT Orders

• A borrower can appeal against DRT’s decision in the Debt Recovery Appellate Tribunal (DRAT) within 30 days.
• The appeal requires a pre-deposit of 50% of the debt amount.

Important Case Laws in Debt Recovery

1. Mardia Chemicals Ltd. v. Union of India (2004)

• Judgment: Borrowers have the right to challenge arbitrary actions taken under SARFAESI Act.

2. Transcore v. Union of India (2006)

• Judgment: Banks can use both SARFAESI Act and RDDBFI Act simultaneously for debt recovery.

3. ICICI Bank v. Official Liquidator (2010)

• Judgment: Secured creditors have priority in asset distribution during liquidation.

Real-Life DRT Cases We Solved

1. Business Loan Default

• Case: A company defaulted on a ?5 crore loan.
• Outcome: DRT ordered asset seizure, and the bank recovered the loan through an auction.

2. Home Loan Non-Payment

• Case: A borrower failed to repay an ?80 lakh home loan.
• Outcome: The property was auctioned, and the bank recovered the dues.

3. Unsecured Loan Dispute

• Case: A business took an unsecured loan of ?1.2 crore and failed to repay.
• Outcome: The company’s bank accounts were frozen for recovery.

Conclusion

The Debt Recovery Tribunal plays a crucial role in helping banks and financial institutions recover bad debts efficiently. With rising loan defaults, DRT and SARFAESI mechanisms have become critical tools in financial litigation.

? Total Cases Solved: 25+