Overview of Debt Recovery Tribunal

OBJECTIVE DRT is constituted under Recovery of Debts Due to Banks and Financial Institutions Act, 1993

( ‘Act’) providing speedy recovery for Banks and Financial Institutions unlike civil court and other forums.

Debt Recovery Tribunal (hereinafter referred as ‘DRT’) is a specially created forum for fast and speedy recovery of debts due to Banks and Financial Institutions.

It is stipulated that DRT is to decide the Application as expeditiously as possible and endeavour should be made to dispose the Application within 180 days from the receipt of Application.

CONSTITUTION OF DRT

DRT is constituted by the Central Government under Section 3 of Act to exercise the power and jurisdiction as conferred by this act.

The Central Government may also specify the area where such DRT shall exercise its jurisdiction.

COMPOSITION OF DRT

Staff of Tribunal

Recovery Officer

Registrar

Assistant Registrar

Presiding Officer

1. Presiding Officer

Presiding Officer

AppointmentThe PO is appointed by

Central Government. The Central Government may

also authorise any other PO or Judicial Member of a DRT other than DRT to discharge

the function of PO of DRT.

QualificationA person who is or has been or qualified to be a District

Judge shall only be appointed as a PO.

TermThe PO shall hold office for a period of 5 years from the date of his appointment or

attainment of 65 years whichever is earlier. He/she is eligible for reappointment.

2. Recovery Officer

a) Appointment The Central Government shall provide the DRT with one or more ROs.

b) Duties ROs discharge their functions under the general superintendence of the PO. Primary duty of RO is to

execute the Recovery Certificate issued by PO after hearing the Original Application.

No objection to the Recovery Certificate on any ground shall be entertained by the RO and has got no power to decide any legal question arising out of the final order, at the time of execution of the final order.

He shall make recovery by any of the modes as provided by Chapter V of the Act.

3. Registrara) Appointment The Central Government shall provide the DRT with Registrar.

b) Duties The Registrar is custodian of record of the DRT as well as of the seal of the DRT. Seal of DRT can be

used only under authority of Registrar in normal course or upon a specific direction by PO of the DRT only.

The Registrar has authority to receive all documents/applications on behalf of DRT and will examine them so that the same conforms to the Rules/Regulations of the DRT.

He/she may direct any party before DRT for carrying out necessary amendment in the documents or for payment of proper Court fees and may fix date of hearing before PO.

4. Assistant Registrar

a) Appointment The Central Government shall provide the DRT with Assistant Registrar to whom the powers and

duties of the Registrar may be delegated.

b) Duties The Assistant Registrar of the DRT shall assist the Registrar in the work relating to the Registry and

Administration of the DRT.

JURISDICTION OF DRT AND BAR OF JURISDICTION

As per Section 17 of the Act DRT shall exercise the jurisdiction, powers and authority to entertain and decide applications from the Banks and Financial Institutions for recovery of debts due to such Banks and Financial Institutions.

1. Territorial Jurisdiction

According to Rule 6 of the Rules, OA shall be filed by

the Applicant with the Registrar within whose

jurisdiction:

The Applicant is functioning as a

Bank or Financial Institution for the

time being, or

The Borrower, or each of the Borrowers where there

are more than one, at the time of making application,

actually and voluntarily resides, or carries on

business, or personally works for gain, or

Any of the Borrowers where there are more than one, at

the time of making the application, actually and

voluntarily resides, or carries on business, or

personally works for gain, or

The cause of action, wholly

or in part, arises.

2. Pecuniary Jurisdiction

The amount of debt due to any Bank or Financial

Institution or to a consortium of Banks or Financial institutions is

more than ten lakhs (Rs. 10 Lacs) rupees.

The Central Government may by notification

specify those cases not being less than one lakh

(Rs.1 Lakh) to be decided by DRT.

Bar of Jurisdiction

No court or other authority shall have, or be entitled to exercise, any jurisdiction, powers or authority (except the Supreme Court and the High Court exercising jurisdiction under Articles 226 and 227 of the Constitution) in relation to the matters specified in section 17 of the Act.

Proceeding

Original Application Procedure

Filing of OA

Documents to

accompany OA

Format of Application

Relief and Interim Relief

PROCEEDING BEFORE DRT

1. Original Applicationa) Filing of Original Application The Applicant/Applicants(Joinder of Applicants under Section 19(2) of the Act) may file an OA as per

Rule 4 of the Rules under Section 19 of the Act to the Registrar within whose jurisdiction his case falls.

OA may be presented either in Person or by his Agent or by duly authorised Legal Practitioners to the Registrar or may sent by registered post addressed to registrar.

OA shall be presented in two (2) sets, in a paper book along with an empty file size envelope bearing full address of the Borrower/Guarantor/Corporate Guarantor (commonly referred hereinafter as ‘Borrowers’)

If the number of Borrowers are more than one, then sufficient number of extra paper-books together with empty file size envelopes bearing full address of each of the Borrower shall be furnished by the Applicant.

Every OA shall be accompanied by the true copies of the document on which the Applicant relies.

A copy of the OA and paper book shall be served on each of the Borrower as soon as they are filed, by registered post.

b) Documents to accompany OA

i. OA under Section 19 of the Act shall be accompanied by a paper book containing:

A statement showing details of the debt due from a Borrower and circumstances under which such debt has become due; and shall also disclose details of the case and decision in that case which is sought to be reviewed; (statement of account duly certified by bank under the Banker’s Book of Evidence;

All documents relied upon by the Applicant and those mentioned in the OA;

Demand draft/Indian Postal Order representing the application fee;

Index of Documents.

ii. The documents referred above shall be neatly typed in double space on one side of the paper, duly attested by a senior officer of the Bank or Financial Institution, as the case may be, and numbered accordingly.

iii. Where the parties to the suit or proceedings are being represented by an agent, documents authorising him to act as such agent shall also be appended to the OA.

iv. Provided that where an OA is filed by legal practitioner, it shall be accompanied by a duly executed Vakalatnama.

c) Format of Application

Every OA as given in Rule 4 of the Rules shall be filed as per Form-I annexed to the Rules. The format as provided is annexed herewith as Annexure-1.

d) Relief

Banks and Financial Institution under each of the loan facility would file OA before DRT seeking the following final reliefs:

i. To issue a Joint and Several Decree and a Recovery Certificate of recovery in favour of the Bank/Financial Institution and against the Borrowers, for an amount due along with cost, pendent lite and future interest and other charges at the contractual rates on the footing of the compound interest till realization in full;

ii. Order for the auction sale of secured assets (including project, participating interest (PI), receivables, movable assets, monies, cash flows, etc.) that are secured with the Applicant Bank/Financial Institution towards the realization/ satisfaction of the decretal amount;

iii. Order that the decretal amount be recovered from the other assets and properties of Guarantor, Corporate Guarantor under the Corporate Guarantee;

iv. In case debt, could not be recovered or fully satisfied by either of the above procedure the Applicant may also claim sale of any other property of the borrower whether Tangible or Intangible, Movable or Immovable.

v. Grant such other directions and/or reliefs as the Hon’ble Tribunal may deem fit and proper to meet the ends of justice.

vi. Award costs of the present Application in favour of the Applicant.

e) Interim Relief

Banks/Financial Institutions under each of the loan facility would file OA before DRT seeking the following interim reliefs:

i. Direct Borrowers to furnish security for an amount of equivalent to the due amount; 

ii. Restrain the borrowers, their agents, employees, attorneys, representatives, successors, assigns etc. from selling, disposing of or creating any third-party interest or creating any charge and/or encumbrance in any manner over the entire assets secured under the entire transaction documents; 

iii. Restraining the Borrower, guarantor and corporate guarantors from paying dues of any unsecured creditors, borrowing or availing of facilities from other Banks/Financial institutions, from paying remuneration to managerial personnel.

iv. The Applicant apprehends that the above secured properties and receivables, PI, monies may not be sufficient to satisfy its claim, hence the borrowers be restrained by way of an interim ex-parte order from:

contracting any financial liability direct or contingent, or

altering its share capital, or

transferring, alienating or otherwise dealing with, or disposing off and/or creating any fresh encumbrance including modification of existing charge with ROC, in any manner,

all their movable, immovable, tangible and intangible properties (whether owned through itself or subsidiaries or tenanted and whether in single name or jointly with any other persons) including vehicles, Bank lockers, Bank Accounts, Fixed Deposit Receipts, Demat Accounts, LIC policies, Mutual Fund Schemes, Shares and Securities, hypothecated stocks, shares, Life Insurance Policies, Mutual Funds, Bonds, plant & machinery, spares and consumables etc. wherever lying and any other properties and assets belonging to them including beneficiary interests without prior permission of this Hon’ble DRT;  

v. Pass an ex-parte ad interim order directing the Borrowers to file a comprehensive affidavit of their assets both in India as well as in foreign countries along with documentary evidence;

vi. Direct the Borrowers to disclose the list of PI and receivables due to it from third parties and direct such third parties to deposit and/or attach such receivables with Court or route it directly to the Applicant or any other account as may be directed by this Hon’ble DRT;

vii. Restraining the Borrowers from travelling and leaving the Jurisdiction of DRT or country as the same will hamper and obstruct the recovery process initiated by the Applicant Bank and the Borrowers be directed to deposit their passports before the Hon’ble Tribunal;

viii. Attachment of the whole or such portion of the Properties as claimed by the Applicant;

ix. Grant permission to the Applicant Bank to publish the Interim Order passed by the Hon’ble Tribunal, in public interest, in leading English, Hindi or vernacular newspapers having wide publication;

x. Pass any other Order(s) as this Hon'ble DRT may in the facts and circumstances of the present case deem fit and proper, in the interest of justice.

Publication of the name of borrower/guarantorsWhere Borrowers defaults in repayment of loan a Bank/Financial Institution may publish its/their names or make a public disclosure of the names of the defaulters in the local newspaper.

Publication of Photograph of defaulter – With respect to publication of photograph of defaulters different High Courts have divergent views:

In favour – Madras High Court in Mr. K J Doraiswamy vs The Assistant General Manager, State Bank of India Erode Branch & Ors., upheld Bank's right to publish the photograph of a borrower who had defaulted on repayment of a loan along with details of the property that had been pledged as security for the loan.  

In favour – Madhya Pradesh High Court in Ku. Archana Chauhan v. State Bank of India, Jabalpur held that publication of photographs of the borrowers cannot be said to be impermissible mode. Action cannot be said to be arbitrary or illegal in any manner. It cannot be said to be defamatory publication. 

Against – Calcutta High Court in Ujjal Kumar Das & Anr. V/s State Bank of India & Ors. held that publication of photographs in newspapers, magazines etc. not being permissible under any rule/notification/guideline is illegal. Moreover, the threat to publish photographs is also illegal.

2. Procedure

After OA is filed, DRT issues summon to borrowers to show cause within 30 days as to why relief claimed by applicant should not be granted, the DRT may also pass ex-parte ad-interim order, under Section 19(4) of the Act.

According to Section 19(4A) of the Act after summons are served, except in ordinary course of business for which the Borrowers shall be accountable, they shall not dispose of the property without prior approval of the DRT.

Under Section 19(5) within 30 days from service of summon borrower shall file written statement along with the documents to bring forth his defence.

The PO may if the written statement is not filed within the stipulated time, extend the time not exceeding 15 days.

Every pleading to be accompanied with affidavit. Affidavit of witnesses(if any) shall also be filed simultaneously.

On receipt or failure of filing of Written Statement the DRT shall fix a date for hearing on admission or denial by the parties under Section 19(5A) of the Act.

If borrower makes an admission of debt due then DRT shall order to pay such amount to the extent of admission.

As per Section 19(5B) of the Act If borrower fails to comply with the order then DRT shall issue Recovery Certificate(RC) to the extent of amount admitted.

Once the pleadings of both the parties are

complete then PO will fix the date of

tendering of evidences by way of affidavit.

Cross Examination After tendering the affidavit of evidence, on application, the PO may in the interest of justice may allow the cross examination of the witnesses.

Section19(20)After hearing both the

parties, within 30 days of conclusion of

hearing DRT may pass such interim or final

order/Recovery Certificate {section 19(22) of the Act}

Such order includes payment of interest from

the date on or before which payment of the

amount, if found due, up to the date of realization

or actual payment, for initiation of Recovery proceeding before the RO under Chapter V of

the Act.

Section 19(24)The above OA must be dealt expeditiously and

endeavour shall be made to complete the

proceedings in 2 hearings and dispose OA within

180 days from its receipt.

RECOVERY PROCEEDING BEFORE RO

A. The recovery proceeding shall be dealt by RO and governed by Second and Third Schedule to the Income Tax Act 1961 and the Income Tax (Certificate Proceedings) Rules, 1962 read with chapter V of the Act.

B. When Recovery Certificate (RC) is issued by PO then RO may issue a notice to Certificate Debtor to pay the amount as specified in Recovery Certificate within 15 days of such notice. If Certificate Debtor fails to do so the RO may proceed to recover the amount by any of the following modes:

by attachment and sale of the Borrowers movable or immovable property;

taking possession of property over which security interest is created and appointing receiver for the same;

Arrest the Borrowers in civil prison;

Appointing receiver for the management of properties of the Borrowers;

Any other mode.

C. When the assets are realised by sale or otherwise the proceeds shall first be adjusted towards the amount due and if their remains any balance the same shall be utilised towards any other amount receivable and still if something remains then that shall be paid to the Borrower.

D. Once the decree/recovery certificate attains finality, the same neither can be objected nor challenged on grounds of the correctness of the same or on any other ground before the RO.

E. If any objection is made on ground of attachment of such property in recovery proceeding which is not liable to such attachment under the certificate, then the RO may investigate on such claim.

F. Any person aggrieved by the order of RO, may prefer an appeal within 30 days from such order to the PO, DRT.

APPEAL

Appeal against DRAT in High Court.

Appeal against the order of DRT in DRAT.

Appeal against the order of RO before PO,DRT.

Any person (bank or financial institution or borrower) who is aggrieved by an order of the DRT under this act, may prefer an appeal to DRAT having jurisdiction in the matter.

No right to appeal to the parties wherein order is passed by the DRT in pursuance of the consent between the parties.

Every appeal should be filed within 30 days from the date copy of order of the DRT is made available to the appellant.

If the DRAT is satisfied that there was sufficient cause for not filing an appeal within the stipulated period, then DRAT may allow such appeal even after expiry of 30 days.

1.Appeal against the order of DRT in DRAT(SECTION 20).

Deposit of Debt due – The Borrowers shall deposit with the DRAT 50% of the debt due from him to the Bank or Financial Institution. The DRAT may, for reasons to be recorded in writing, reduce the amount to be deposited but which shall not be less than 25% of the debt due.

The Supreme Court in Axis bank v. SBS Organic Private Ltd. And Ors held that an appeal before the DRAT can be entertained only if the Borrowers deposits fifty per cent of the amount in terms of the order passed by the Debt Recovery Tribunal or fifty per cent of the amount due from the Borrowers as claimed by the secured creditor, whichever is less. The DRAT may reduce the amount to twenty five percent.

The Supreme Court in Deluxe Cotton Corporation and Ors. V. Bank of Baroda held that appeal filed along with the application of condonation of delay in filing the appeal, was nevertheless appeal in the eyes of law. Therefore, bar under Section 21 of the Act would, apply even at stage of consideration of Application for condonation of delay accompanying appeal under Section 20 of the Act.

The appeal shall be dealt as expeditiously as possible and endeavour shall be made to dispose of the appeal finally within 6 months from the date of receipt of appeal. 

After hearing both the parties the DRAT may as it deems fit either confirm, modify or set aside the order made by the DRT.

Any person (bank or financial institution or borrowers) who is aggrieved by an order of the RO under this act, may prefer an appeal to the PO, DRT within thirty days (30 days) from the date on which a copy of order is issued to him. (Refer Annexure-II).

After hearing both the parties the PO, DRT may as it deems fit either confirm, modify or set aside the order made by the RO.

2. Appeal against the order of RO before PO, DRT(Section 30)

 

Any person being aggrieved by the DRAT Order may challenge the same before High Court under Article 226 of the Indian Constitution in a Writ Petition.  

3. Appeal against DRAT Order

FEW DRT CASES ABOVE RS. 100 CRORES. 

i. ICICI VS HANJER BIOTECH ENERGIES PVT. LTD.

ii. ICICI VS NAFTOGAZ INDIA PVT LTD.

iii. ICICI VS SPANCO LTD.

iv. EARCL & ORS. VS BIRLA SURYA

v. EARCL VS BABA GANGARAM INVESTMENT SERVICES PVT. LTD.

vi. UCO BANK VS REI AGRO LTD.

vii. SBI VS. CONTINENTAL CONSTRUCTION LTD.

viii. SBI VS. PAN INDIA MOTORS PVT. LTD.

ix. ICICI VS. ORIENTAL TRIMEX LTD.

x. AXIS BANK LTD. V. GOLF TECHNOLOGIES PVT. LTD.

VOCABULARY

1. Debt It means any liability including interest claimed as due from any person by a Bank or Financial

Institution or their consortium during the course of any business activity undertaken by the Bank or Financial Institution under any law for the time being in force in cash or otherwise, whether secured or unsecured, or whether payable under a decree or order of any Civil Court or otherwise subsisting on the date of the application.

The liability must be legally recoverable liability and will cover all those cases where liability is secured by mortgage, charge, hypothecation or in any other manner known to law.

2. Borrower – means any person who has been granted financial assistance by any Bank or Financial Institution or who has given any guarantee or created any mortgage or pledge as security for the financial assistance granted by any Bank or Financial institution.

3. Defaulter – It means non-payment of any principal debt or interest thereon or any other amount payable by a borrower to the Bank or Financial Institution.

4. Application – It means an Original Application filed under Section 19 of the Act and includes an "Appeal" filed under section 30(1) of the Act.

5. Applicant - Where a Bank or Financial Institution must recover any debt from any person, it makes an application called Original Application to the DRT against such person. According, to the Rules Applicant includes:

Applicant means a person making an application under Section 19 of the Act;

Also, includes an Applicant who files an appeal under section 30(1) of the Act;

Applicant shall also include Asset Reconstruction Company;

Financial Institution does not include Non-Banking Financial Institution.

 

7. Bank – For the purpose of DRT, Bank includes –

Banking company;

A corresponding new Bank;

State Bank of India;

A subsidiary Bank;

A Regional Rural Bank;

Asset Reconstruction Company.

8. Financial Institution – It includes:

A public financial institution within the meaning of Section 4A of the Companies Act, 1956 (1 of 1956);

Such other institution as the Central Government may, having regard to its business activity and the area of its operation in India may specify.

ANNEXURE-I FORM-I

(See Rule 4]) APPLICATION UNDER SECTION 19 OF THE RECOVERY OF DEBTS DUE TO BANKS AND FINANCIAL INSTITUTIONS 2[ACT], 1993 For use in Tribunal's office......................................... Date of filing................................................................. Date of receipt by post ............................................... or Registration No ............................................................ Signature Registrar In the DEBTS RECOVERY TRIBUNAL (Name of the place) Between

A B Applicant

And

C

D Defendant

*Delete whichever is not applicable. DETAILS OF APPLICATION: 1. Particulars of the applicant: (i) Name of the applicant: (ii) Address of registered office: (iii) Address for service of all notices 2. Particulars of the defendant (i) Name of the defendant: (ii) Office address of the defendant (iii) Address for service of all notices

3. Jurisdiction of the Tribunal: The applicant declares that the subject matter of the recovery of debt due falls within the jurisdiction of the Tribunal. 4. Limitation: The applicant further declares that the application is within the limitation prescribed in Section 24 of the Recovery of Debts to Banks and Financial Institutions Act, 1993 5. Facts of the case: The facts of the case are given below: (Give here a concise statement of facts in a chronological order, each paragraph containing as nearly as possible a separate issue, fact or otherwise) 6. Relief(s) sought: In view of the facts mentioned in para 5 above, the applicant prays for the following relief(s)— (Specify below the relief(s) sought explaining the ground for relief (s) and the legal provisions (if any) relied upon). 7. Interim order, if prayed for: Pending final decision on the application, the applicant seeks issue of the following interim order: (Give here the nature of the interim order prayed for with reasons). 8. Matter not pending with any other court, etc.: The applicant further declares that the matter regarding which the application has been made is not pending before any court of law or any other authority or any other Bench of the Tribunal. 9. Particulars of bank draft/postal order in respect of the application fee: (1) Name of the bank on which drawn: (2) Demand draft no: or (1) Number of Indian Postal Order(s): (2) Name of the issuing post office:

(3) Date of issue of postal order (s); (4) Post office at which payable: 10. Details of index: An index in duplicate containing the details of the documents to be relied upon is enclosed. 11. List of enclosures:

VERIFICATION

I........................son/daughter/wife of Shri......................being the .................(Name in full and block letters) (designation) of............ (name of the company) holding a valid power of attorney from..............(name of the company) do hereby verify that the contents of paras 1 to 11 are true to my personal knowledge and belief and that I have not suppressed any material facts.

Signature of the Applicant. Place: Date: To The Registrar, .......................................... ..........................................

ANNEXURE-II FORM III

(Refer rule 4) APPEAL UNDER SECTION 30(1) OF THE RECOVERY OF DEBTS DUE TO BANKS AND FINANCIAL INSTITUTIONS ACT, 1993 (51 OF 1993) For use of Tribunal's office ...................... Date of filing ...................... Date of Receipt by post ...................... Or Registration No. ...................... Signature Registrar IN THE DEBTS RECOVERY TRIBUNAL .................................. (Name of place) Between ................................ Appellant(s)/Judgment-Creditor(s) and .............................. Respondent(s)/Judgment-Debtor(s) Details of appeal: (I) Particulars of the Appellant(s) (i) Name of the appellant: (ii) Address of the Registered office of the appellant: (iii) Address for service of all notices: (II) Particulars of the respondent(s): (i) Name(s) of respondent: (ii) Office address of the respondent: (iii) Address for service of all notices: (III) Jurisdiction of the Tribunal: The appellant declares that the subject matter of the appeal falls within the jurisdiction of the Tribunal.

(IV) Limitation: The appellant declares that the appeal is within the limitation as prescribed in section 30(1) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993). (V) Facts of the case: (Give here a concise statement of facts and grounds of appeal against the specific order of Recovery Officer, in a chronological order) (VI) Relief(s) sought: In view of the facts mentioned in paragraph V above, the appellant prays for the following relief(s). (Specify below the relief(s) sought explaining the grounds of relief(s) and the legal provisions (if any) relied upon). (VII) Interim order, if prayed for-- Pending final decision on the appeal the appellant seeks issue of the following interim order: (Give here the nature of the interim order prayed for with reasons) (VIII) Matter not pending with any other Court, etc.: The appellant further declares that the matter regarding which this appeal has been made is not pending before any Court of law or any other authority or any other Tribunal(s). (IX) Details of index - An index in duplicate containing the details of the documents to be relied upon is enclosed. (X) List of enclosures:

VERIFICATION I ................... (name in full block letters) son/daughter/wife of .................. holding a valid power of attorney from ..................... (Name of the company) do hereby verify that the contents of para I to IX are true to my personal knowledge and belief and that I have not suppressed any material fact(s).

Signature of the Applicant Place: Date: To Registrar Debts Recovery Tribunal

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