Debt Recovery Tribunal (DRT) — Process and Legal Representation for Borrowers and Lenders

Pecuniary Jurisdiction: DRT handles claims of Rs. 20 lakhs and above. Claims below this threshold are handled by civil courts or other forums.

Territorial Jurisdiction: The DRT within whose territorial jurisdiction the defendant resides, carries on business, or where the cause of action arises has jurisdiction.

Appellate Jurisdiction: Appeals against DRT orders lie with the Debt Recovery Appellate Tribunal (DRAT). There are 5 DRATs across India.

Step 1 — Filing: The bank files an Original Application (OA) before the DRT with details of the loan, default, and amount claimed. The OA must be accompanied by a statement of account and supporting documents.

Step 2 — Summons: The DRT issues summons to the borrower/defendant requiring a written statement to be filed within 30 days (extendable by 30 days).

Step 3 — Interim Orders: The DRT can pass interim orders including attachment of property, appointment of receiver, or injunction against disposal of assets.

Step 4 — Hearing: The DRT hears both parties, examines evidence, and passes a final order. The procedure is summary in nature.

The borrower can defend the claim on various grounds: (1) The loan amount claimed is incorrect, (2) The account was wrongly classified as NPA, (3) The claim is barred by limitation, (4) Force majeure or circumstances beyond control, (5) The bank has not given proper credit for payments made, or (6) The interest charged is excessive or contrary to RBI guidelines.

The written statement must be filed within 30 days, failing which the DRT can proceed ex-parte. Evidence must be filed in the form of affidavits. Cross-examination of witnesses is permitted.

The DRT can pass several types of orders: (1) Recovery certificate for the amount due, (2) Order for sale of mortgaged/charged property, (3) Appointment of receiver for management of property, (4) Interim attachment of property, (5) Injunction against disposal of assets, and (6) Dismissal of the claim application.

The recovery certificate issued by the DRT is executable as a decree of a civil court. The Recovery Officer attached to the DRT executes the certificate by attaching and selling the borrower's property.

Appeals against DRT orders lie with the Debt Recovery Appellate Tribunal (DRAT). The appeal must be filed within 30 days from the date of the order. The DRAT can condone delay for sufficient cause.

The appeal must be accompanied by pre-deposit of 50% of the debt amount (reduced to 25% for appeals by borrowers under the DRT amendment). The DRAT can waive or reduce the pre-deposit in exceptional cases.

Further appeals lie with the High Court under Article 226/227 (writ jurisdiction) and the Supreme Court under Article 136 (Special Leave Petition).

The DRT also handles appeals under Section 17 of the SARFAESI Act. Borrowers can file an application (SA) before the DRT challenging the bank's possession notice or other SARFAESI actions.

The DRT has concurrent jurisdiction for SARFAESI matters and recovery applications. Borrowers can file both a written statement to the OA and an SA against SARFAESI action, which are heard together.