Banking awareness : Debt Recovery Tribunal

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Banking awareness : Debt Recovery Tribunal

Keeping in line with the international trends on helping financial institutions recover their bad debts quickly and efficiently, the Government of India has constituted thirty three Debts Recovery Tribunals and five Debts Recovery Appellate Tribunals across the country. 

The Debts Recovery Tribunal (DRT) enforces provisions of the Recovery of Debts Due to Banks and Financial Institutions (RDDBFI) Act, 1993 and also Securitization and Reconstruction of Financial Assets and Enforcement of Security Interests (SARFAESI) Act, 2002. 

Under the Recovery of Debts Due to Banks and Financial Institutions (RDDBFI) Act, 1993 banks approach the Debts Recovery Tribunal (DRT) whereas, under Securitization and Reconstruction of Financial Assets and Enforcement of Security Interests (SARFAESI) Act, 2002 borrowers, guarantors, and other any other person aggrieved by any action of the bank can approach the Debts Recovery Tribunal (DRT). 

Debts Recovery Tribunal are located across the country. Some cities have more than one Debts Recovery Tribunals. New Delhi, Chennai, Kolkata and Mumbai have three Debts Recovery Tribunals. Ahmedabad and Chandigarh have two Debts Recovery Tribunal (DRT) each. One Debts Recovery Tribunal has been constituted at Allahabad, Aurangabad, Bangalore, Coimbatore, Cuttack, Earnakulam, Guwahati, Hyderabad, Jabalpur, Jaipur, Lucknow, Madurai,Nagpur, Patna, Pune, Vishakapatnam and Ranchi.

Appeals against orders passed by Debts Recovery Tribunal (DRT) lie before Debts Recovery Appellate Tribunal (DRAT). There five Debts Recovery Appellate Tribunal (DRATs) located in the country. One Debts Recovery Appellate Tribunal (DRAT) is located each at Delhi, Allahabad, Mumbai, Chennai and Kolkatta. A Debts Recovery Appellate Tribunal (DRAT) conducts circuit sittings in different cities where Debts Recovery Tribunal (DRTs) are located over which it has appellate jurisdiction. 

There are a number of States that do not have a Debts Recovery Tribunal. The Banks & Financial Institutions and other parties in these States have to go to Debts Recovery Tribunal located in other states having jurisdiction over there area. Thus the territorial jurisdiction of some Debts Recovery Tribunal is very vast. For example, the Debts Recovery Tribunal located in Guwahati has jurisdiction over all the seven North Eastern States. Similarly, the territorial jurisdiction of the Debts Recovery Tribunal-2 Chandhigarh too has a very wide jurisdiction over the States of Punjab, Himachal and Harayana, Chandhigarh. 

The setting up of a Debts Recovery Tribunal is dependent upon the volume of cases. Higher the number of cases within a territorial area, more Debts Recovery Tribunal would be set up. 

Each Debts Recovery Tribunal (DRT) is presided over by a Presiding Officer. The Presiding Officer is generally equavalent to the rank of Dist. & Sessions Judge. A Presiding Officer of a Debts Recovery Tribunal is assisted by a number of officers of other ranks, but none of them need necessarily have a judicial background. Therefore, the Presiding Officer of a Debts Recovery Tribunal is the sole judicial authority to hear and pass any judicial order. 

Each Debts Recovery Tribunal has two Recovery Officers. The work amongst the Recovery Officers of a Debts Recovery Tribunal (DRT) is allocated by the Presiding Officer of the Tribunal. Though the Recovery Officer of the Tribunal need not be a judicial Officer, but the orders passed by a Recovery Officer are judicial in nature, and are appealable before the Presiding Officer of the Debts Recovery Tribunal (DRT). 

The Debts Recovery Tribunal are governed by provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, also popularly called as the RDDBFI Act. Rules have been framed and notified under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. 

After the enactment of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interests (SARFAESI) Act any aggrieved person can approach a Debts Recovery Tribunal (DRT). Earlier only Banks were entitled to approach the Debts Recovery Tribunal (DRT). 

The Debts Recovery Tribunal (DRT) are fully empowered to pass comprehensive orders and can travel beyond the Civil procedure Code to render complete justice. A Debts Recovery Tribunal (DRT) can hear cross suits, counter claims and allow set offs. However, a Debts Recovery Tribunal (DRT) cannot hear claims of damages or deficiency of services or breach of contract or criminal negligence on the part of the lenders. In addition, a Debts Recovery Tribunal (DRT) cannot express an opinion beyond its domain, or the list pending before it. 

The Debts Recovery Tribunal can appoint Receivers, Commissioners, pass ex-parte orders, ad-interim orders, interim orders apart from powers to Review its own decisions and hear appeals against orders passed by the Recovery Officers of the Tribunal. 

The recording of evidence by Debts Recovery Tribunal is somewhat unique. All evidences are taken by way of an affidavit. Cross examinations is allowed only on request by the defense, and that too if the Debts Recovery Tribunal (DRT) feels that such a cross examinations is in the interest of justice. Frivolous cross examination are denied is the same can be brought on record by way of affidavit. There are a number of other unique features in the proceedings before the Debts Recovery Tribunal all aimed at expediting the proceedings. 

Recent issues related with DRTs

The leading issue related with debt recovery through DRTs is the slow process of resolution (settling debts and finding end to defaults). Like several other debt recovery mechanisms, the DRTs are slow to work out on pending disputes. Nearly 93000 cases are pending in front of all the DRTs in the country at the end of 2016. The World Bank estimated that it took 4.3 years on average in India to resolve insolvency under the old laws, more than twice as long as in China. Similarly, the average recoveries were just 25.7 cents on the dollar in India. This is one of the worst among the similar economies.

  • The number of DRTs are small given the increasing number of cases. –
  • Delay in settling the cases is long.
  • The DRTs were not able to handle cases related to large borrowers.
  • Timely appointment of officials for DRT has not been made.