Banks and financial institutions have been experiencing considerable difficulties in recovering loans and enforcement of securities charge with them. The procedure for recovery of debts due to the banks and financial institutions, which is being followed, has resulted in a significant portion of the funds being blocked.
Introduction of Tribunal: Mounting of NPA is the major challenges for banking industry. NPA recovery plays a main role for bank’s profitability. Recovery of dues from borrower through courts and legal action is major problem for banks and financial institution. It was observed that existing legal actions initiated by banks and FI were not adequate for debt dues recovery. Undue delay for finalizing banking NPA case in various courts affects the productivity of banking and financial institution. For speedy recovery of bank’s dues, Debts Recovery Tribunals have been established by the Government of India under an Act of Parliament (Act 51 of 1993) for expeditious adjudication and recovery of debts due to banks and financial institutions.
Establishment of Tribunal: Recovery of debts due to banks and financial institutions act 1993 came into force on 24th day of June, 1993. The Act is applicable throughout India, except State of Jammu and Kashmir. Presently there are 39 DRTs in India.
List of Amending Acts:
1. The Recovery of Debts Due to Banks and Financial Institutions (Amendment) Act, 1995
2. The Recovery of Debts Due to Banks and Financial Institutions (Amendment) Act, 2000
3. The Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2004
4. The Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2012
5. The Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2016
6. The Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2018
7. The Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2018
Language of the Tribunal: The proceedings of the Tribunal shall be conducted in English or Hindi. No reference, application, representation, documents or other matter contained in any language other than English or Hindi shall be accepted by the Tribunal unless the same is accompanied by the true translation thereof in English or Hindi.
Composition of tribunal: A Tribunal shall consist of one person only (hereinafter referred to as the Presiding Officer) to be appointed by notification of the Central Government for 5 years or till he attains the age of 62 years, whichever is earlier. Presiding Officer of a tribunal is a person who qualified to be, a District Judge. Presiding Officer of the DRT is called President.
Central Government provides the tribunal one or more recovery officer and such other officers and employees as that Government may think fit.
Establishment of Appellate Tribunal: The Central Government shall, by notification, establish one or more Appellate Tribunals, to be known as the Debts Recovery Appellate Tribunal, to exercise the jurisdiction, powers and authority conferred on such Tribunal by or under this Act.
DRAT is headed by Chair Person is in the rank of High Court Judge is appointed by Central Govt. for 5 years & maximum age 65 years.
Any person aggrieved by order passed by DRT may appeal to DRAT within 45 days of order received. The Tribunal may condone the delay in preferring an appeal beyond 45 days.
For filling appeal, as per Sec. 21 of DRT 50% of the amount to be deposited by the appellant.Provided that the Appellate Tribunal may, for reasons to be recorded in writing, reduce the amount to be deposited by such amount which shall not be less than 25% of the amount of such debt so due.
At present 5 DRATs at Mumbai, Delhi, Kolkata, Chennai & Allahabad are in India.It can transfer, on application, any case from one tribunal to another.
Bar of Jurisdiction: DRT is open only for Banks and Financial Institutions. DRT has Territorial Jurisdiction. As per Section 31 on establishment of a DRT no Civil Court or any other authority is to hear the proceeding of eligible cases. (Not applicable for High Court & Supreme Court). All existing cases are also to be transferred to a DRT.
Application to the Tribunal: Where a bank or a financial institution has to recover any debt from any person, it may make an application to the Tribunal within the local limits of their jurisdiction. DRT has Territorial Jurisdiction.
DRT jurisdiction covers recovery of debts due to banks and financial institutions with amount of Rs. 20.00 lakh (Changed from notification of Ministry of Finance dated 6th September, 2018. Earlier it was Rs. 10.00 lakh) or more (Central Government can reduce the amount to Rs. 1 lakh).
Now therefore, in exercise of the powers conferred by sub-section (4) of section 1 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, the Central Government hereby specifies that the provisions of the said Act shall not apply where the amount of debt due to any bank or financial institution or to a consortium of banks or financial institutions is less than twenty lakh rupees.
If another bank has a claim against the same person, then that bank can join the case before the final order is passed subject to separate fees. They have powers to order Attachment, to appoint a Receiver/Commissioner for preparation of Inventory or for sale.
On receipt of the application under sub-section (1) or sub-section (2), the Tribunal shall issue summons requiring the defendant to show cause within thirty days of the service of summons as to why the relief prayed for should not be granted.
Counter claim by defendant: A defendant in an application may, in addition to his right of pleading a set off as above, set up, by way of counter-claim against the claim of the applicant, any right or claim in respect of a cause of action accruing to the defendant against the applicant either before or after the filing of the application but before the defendant has delivered his defense or before the time limited for delivering his defense has expired, whether such counter-claim is in the nature of a claim for damages or not.
Effect of counter claim by defendant: A counterclaim shall have the same effect as a cross-suit so as to enable the Tribunal to pass a final order on the same application, both on the original claim and on the counter-claim.
Answer to counter-claim by applicant Bank/Financial Institutions: The applicant shall be at liberty to file a written statement in answer to the counter-claim of the defendant within such period as may be fixed by the Tribunal.
Exclusion of counter claim from the main suit: Where the defendant sets up a counter-claim and the applicant contends that the claim thereby raised ought not to be disposed of by way of counter-claim but in an independent action, the applicant may, at any time before issues are settled in relation to the counter-claim, apply to the Tribunal for an order that such counter-claim may be excluded, the Tribunal may, on the hearing of such application make such order, as it thinks fit.
Procedure for filing application in DRT: Every application shall be in such form and accompanied by such documents or other evidence and by such fee as may be prescribed. The application shall be filed by the applicant with the Registrar within whose jurisdiction the applicant is functioning as a bank or financial institution, as the case may be, for time being. Important points for filling an application at DRT are as under:
An application shall be presented in the prescribed Performa. Application can be filled online. An application presented by the applicant in person or by his agent or by an authorised legal practitioner.
An application shall be presented to the registrar of the Bench within jurisdiction his case falls or shall be sent by registered post addressed to the Registrar. If sent by post shall be deemed to have been presented to the Registrar the day on receiving date.
The application shall be presented in four sets along with an empty file size envelope bearing full address of the respondent. Envelops bearing full address of each of the respondents shall be furnished by the applicant.
Documents required: Every application shall be accompanied by a paper book containing:-
- A statement showing details of the Debt due from a Respondent and the circumstances under which such a debt has become due.
- All documents relied upon by the applicant and those mentioned in the application.
- Details of crossed Bank Draft or Indian Postal Order representing the application fee.
- Index of the documents.
Where the parties to the suit or proceedings are being represented by an agent, documents authorising him to act as such agent/ Vakalatnama in case of an advocate shall also be appended to the application.
Application fee:Every application shall be accompanied with fee provided in sub-rule (2).Fee may be remitted either in the form of crossed demand draft or Postal Order drawn in favour of the Registrar and payable at the Registrar’s office is situated.
Presentation & scrutiny of application:The registrar or, as the case may be, the officer authorized by him, shall endorse on every application the date on which it is presented or deemed to have been presented under that rule and shall sign endorsement. If on scrutiny the application is found to be in order, it shall be duly registered and give a serial number.
Procedure at DRT:
- Registrar of DRT is responsible for the overall administration of the tribunal.
- He gives Original Application (OA) number and issues summon after scrutinising the application.
- He serves a copy of the application and paper book on each of the respondents.
- The respondent may file 4 complete sets containing the reply to the application along with documents within 1 month (or extended time allowed by the tribunal) of its receipt.
- The respondent shall also endorse one copy of the reply along with documents to the applicant.
- If the defendant admits a part of the liability, the bank can request DRT for passing interim order for the admitted amount & pursue the balance dues.
- The Presiding Officer is responsible for ordering injunction or stay for appointment of Commissioner/ Receiver for issuance of a garnishee order or for passing orders for attachment before judgment.
- The presiding officer finally issues recovery certificate and sends it to Recovery Officer (RO) for execution.
- The recovery officer shall, on receipt of the recovery certificate issues notice to certificate debtors and giving 15 day time for payment of the amount specified in the recovery certificate.
- If the defendant fails to pay the amount , recovery officer will proceed to recover the amount by any one or more of the modes, which are detailed below:-
- Attachment and sale of movable / immovable property of the defendant;
- Arrest and detention of the defaulter;
- Appointment of receiver.
Time limit for decision: The application made to the Tribunal shall be dealt with by it as expeditiously as possible and endeavour shall be made by it to dispose of the application finally within 180 days from the date of receipt of the application.
Powers of DRAT: On receipt of an appeal, the Appellate Tribunal may, after giving the parties to the appeal, an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or setting aside the order appealed against. DRAT shall send a copy of every order made by it to the parties to the appeal and to the concerned Tribunal.
Time limit for decision: The appeal filed before the Appellate Tribunal shall be dealt with by it as expeditiously as possible and endeavour shall be made by it to dispose of the appeal finally within 6 months from the date of receipt of the appeal.
Appeal against the order of Recovery Officer: Any aggrieved person can appeal against order of recovery officer to DRT can be made within 30 days of date of order. On receipt of an appeal, the Tribunal may, after giving an opportunity to the appellant to be heard, and after making such enquiry as it deems fit, confirm, modify or set aside the order made by the Recovery Officer in exercise of his powers under sections 25 to 28 (both inclusive).
Closing of DRT Application: After full recovery of bank dues, application is closed by recovery officer.
The Chairperson of an Appellate Tribunal, the Presiding Officer of a Tribunal, the Recovery Officer and other officers and employees of an Appellate Tribunal and a Tribunal shall be deemed to be public servants within the meaning of section 21 of the Indian Penal Code.