Debt Recovery Tribunal - Powers & Functions

Author - Advocate Praveen Kumar and Associate Kantika Mukherjee

Banks and financial institutions were facing a very strange problem of recovering loans which they have given to any individual or business organizations. Because of this reason, the banks and financial institutions have been restraining themselves from giving out any loans. This situation called for an effective system to recover the loaned money from the borrowers. This concern gave rise to the establishment of Debt Recovery Tribunals (DRTs) following the passing of the Recovery of Debts due to Banks and Financial Institutions Act (RDDBFI), 1993

In this article we are going to discuss about DRT and Debt Recovery tribunal jurisdiction also Power of recovery officer under DRT

Debt Recovery Tribunals has been set up to effectively facilitate the loaned money recovery which involves banks and financial institutions from their customers. The Petitions against orders passed through DRTs comes before the Debts Recovery Appellate Tribunal (DRAT)

The debt recovery appellate tribunals were set up in 5 places in India, they are; Mumbai, Allahabad, Delhi, Chennai and Kolkata, and the debt recovery tribunals were set up in 23 places in India. The total numbers of tribunals are 32.

Importance of DRT

The primary goal and function of DRT is the recovery of loaned money from borrowers which is owed to banks and financial institutions from customers. The power and functions of debt recovery tribunal is restricted to settling down the cases concerning the recovery of the due amount from non-performing assets as affirmed by the banks as per the RBI guidelines.

The Tribunal has the powers bestowed with the District Court. The Tribunal shall have a Recovery officer who would be guiding towards executing the recovery Certificates as passed through the Presiding Officers. DRT is required to follow the legal process by stressing on prompt disposal of the matters and fast execution of the final order.

Applicability of the Act - DRT Act Summary 

• The Debt Recovery Tribunal Act is allocable to all over India except for the State of Jammu and Kashmir.

• It is also applicable where the due amount is not below Rs. 10, 00,000

• It is also applicable when the original application for recovery of Debts has been filed only by Banks and the Financial Institutions.

Establishment of Tribunal and Appellate

The Central Government could establish more than one Debts Recovery Tribunals through Debt Debts Recovery Tribunals to carry out the jurisdiction, powers and rights conferred under this Act.

The Central Government can also stipulate the areas where such a tribunal might carry out their jurisdiction for deciding the applications filed before it.

Composition of DRT

As per Section 4 of the Debt Recovery Tribunal Act,  

• The tribunal must be composed of only one individual, who is the presiding officer (P.O), and appointed by the central government through a notification.

• It is also mentioned in the Act that central government may also,

1. Allow any individual as presiding officer from any tribunal set under any other law for the time being in force towards discharging the power of presiding officer of any debt tribunal.

2. Allow any judicial member holding such position as in any other tribunal set under any other law for the time being in force towards discharging the power as presiding officer (P.O) in debts recovery tribunal furthermore to that of being a judicial member of another tribunal. 

The concerns with DRTs

The leading concern relating with debt recovery through DRTs is its slower procedure of resolution (resolving the pending debts disputes). To overcome this concern the government has made several efforts and out of which one of the main efforts was the amendment to the RDDBFI Act 1993 made in 2016. Likewise, the new Insolvency and Bankruptcy Code gives power to DRTs for considering cases of Bankruptcy from people as well as unlimited liability partnerships.

The amendment provided timelines for several measures in the adjudication procedure before the debt recovery tribunals.  The deadline for filing of written statements, passing of orders, petitions, etc. has been reduced. The Act allows the Central Government to make available uniform procedural rules for the cases in the Debts Recovery Tribunals and Appellate Tribunals.

The amendment has also increased the retirement age of Presiding Recovery Officer DRT from 62 years to 65 years as well as that of the Chairpersons of Appellate Tribunals from 65 years to 67 years. It likewise makes the Presiding Officers and Chairpersons entitled for reelection to their positions.

The amendment also allowed banks to file cases in DRTs having jurisdiction in the area of bank branch where the loaned money is pending, rather in the DRT which have jurisdiction over the respondent’s area of residence or commerce.

Also, in order to reduce delays, the cost on a defaulter to delay recovery timelines through protracted petitions and proceedings were increased.  Now the borrower shall deposit at least 25% of the due amounts with the debt recovery appellate tribunal (DRAT) under the DRT Act to avail an appeal. Earlier, this rule was only needed under the SARFAESI Act.

Therefore, the Debt recovery tribunal is established by the central government to control the losses faced by the banks and NBFC.