For financial institutions, banks, and NBFCs in India, a critical tool for debt recovery is the Debt Recovery Tribunal (DRT). Created under the Recovery of Debts and Bankruptcy Act, 1993, the DRT provides a dedicated forum for secured creditors to efficiently recover their dues. This guide aims to demystify the process, from establishing jurisdiction to obtaining a Recovery Certificate and navigating the appellate process, all from the perspective of a seasoned legal practitioner in Chennai.
Understanding DRT Jurisdiction: Pecuniary Thresholds
The DRT has a specific pecuniary jurisdiction, which refers to the minimum amount of debt it can handle. As of the current rules, a secured creditor can file a case in DRT (known as an Original Application or OA) only if the debt amount is ₹20 lakhs or more. This DRT jurisdiction amount 20 lakhs threshold ensures that the tribunal focuses on significant commercial disputes, leaving smaller matters to civil courts. It is important to note that this threshold applies to the total outstanding amount, including principal and interest, as of the date of filing.
Beyond the pecuniary limit, the DRT’s territorial jurisdiction is determined by the location of the cause of action, the defendant’s residence, or the situs of the secured asset. For entities in Chennai, the DRT Chennai bench is the relevant forum.
The Anatomy of an Original Application (OA)
An Original Application is the formal pleading filed by a secured creditor to initiate proceedings in the DRT. Drafting a robust OA is the most critical step in the DRT process. It is akin to a plaint in a civil suit but tailored to the specific requirements of the DRT.
Key components of an OA include:
- Details of the Secured Creditor & Borrower: Names, addresses, and full particulars of both parties.
- Statement of Facts: A clear, chronological narrative of the loan transaction, detailing the loan sanction, disbursement, security creation (e.g., mortgage, hypothecation), and the subsequent default.
- Documents & Evidence: The OA must be supported by a comprehensive list of documents, including the loan agreement, sanction letter, security documents, and most importantly, a certified copy of the statement of accounts (SoA) showing the outstanding debt.
- Prayer Clause: The specific relief sought from the DRT, which includes a judgment for the outstanding amount and the issuance of a Recovery Certificate (RC).
The authoritative evidence in a DRT case is the Statement of Accounts, as certified by an officer of the bank. This document holds significant weight in establishing the debt amount.
Navigating the DRT Process: From Filing to Recovery Certificate
Once the OA is filed and accepted, the tribunal issues a notice to the borrower and any guarantors. The process then follows several key stages:
- Filing & Admission: The OA is filed along with the required documents and court fees. The DRT scrutinises the application for compliance with the law.
- Service of Summons: The tribunal serves summons on the defendant(s), who are required to file a written statement in response.
- Written Statement & Rejoinder: The borrower files their written statement, and the bank may file a rejoinder to address the points raised.
- Evidence Stage: Both parties present their evidence, which is typically in the form of affidavits. Cross-examination of deponents can also take place.
- Final Arguments & Judgment: The tribunal hears final arguments and pronounces its judgment.
If the judgment is in the bank’s favour, the DRT issues a Recovery Certificate (RC). This is not just a judgment; it’s an executable order that grants the Recovery Officer the power to seize and sell the secured assets.
The Recovery Certificate and Its Execution
A recovery certificate steps into the execution phase, handled by the Recovery Officer. The officer has broad powers to attach and sell the secured assets. These steps include:
- Attachment of Property: The Recovery Officer can attach both movable and immovable property of the borrower.
- Sale of Assets: The attached assets are sold to recover the outstanding dues.
- Garnishee Order: The officer can also issue a garnishee order to attach money held by a third party on behalf of the debtor.
The RC process is robust and often requires police assistance for physical possession, especially when co-ordinating with other legal measures like those under the SARFAESI Act.
Appeals to the Debt Recovery Appellate Tribunal (DRAT)
If a party is aggrieved by the order of the DRT, they can appeal to the Debt Recovery Appellate Tribunal (DRAT). This is the next level of judicial review.
- Filing a DRAT Appeal: The appeal must be filed with the DRAT within 45 days of the DRT’s order.
- Pre-deposit Condition: A significant condition for a borrower to file a DRAT appeal is the mandatory pre-deposit of 50% of the amount determined by the DRT, which can be reduced to 25% for reasons to be recorded in writing. This condition is a key feature of the DRT system, designed to prevent frivolous appeals and ensure that appeals are genuine.
Co-existence and Complementarity
The DRT process can be run alongside other legal remedies. While the DRT deals with the debt, specific measures can be taken under the SARFAESI Act, such as symbolic possession of the secured asset. Both the DRT and SARFAESI mechanisms are statutory tools for debt recovery. The DRT handles the judicial aspect of debt adjudication and issues the RC, while SARFAESI allows the creditor to take direct action without court intervention, though with certain judicial oversight. Similarly, the enforcement of a personal guarantor’s guarantee can be pursued in the DRT.
Our Process in Chennai for DRT Matters
At Aran Law, we provide comprehensive legal services for secured creditors and banks. Our process for handling DRT matters is meticulous and client-focused.
- Triage & Consultation: We begin with a detailed review of your NPA account, including the loan documentation and all relevant correspondence.
- Document Room & OA Drafting: Our team meticulously prepares the Original Application, ensuring all evidence, including the certified Statement of Accounts, is in order to file a case in DRT effectively.
- Filing at DRT Chennai: We manage the entire filing process at the Debt Recovery Tribunal in Chennai, ensuring all procedural requirements are met.
- Interim Protection: Where necessary, we seek interim orders from the DRT to secure the assets pending the final judgment.
- Execution & Read-Outs: Post-judgment, we coordinate with the Recovery Officer to execute the Recovery Certificate, keeping you informed with regular read-outs on the progress of asset attachment and sale.
Frequently Asked Questions
The minimum debt amount is ₹20 lakhs for secured creditors to file an Original Application in the Debt Recovery Tribunal.
An RC is an executable order issued by the DRT after it passes a judgment in favour of the secured creditor. It empowers the Recovery Officer to recover the debt by attaching and selling the borrower’s assets.
Yes. Guarantors are typically co-defendants in an Original Application and are jointly and severally liable for the debt. The DRT can pass a judgment against both the principal borrower and the guarantors.
Yes, settlements are common. Parties can settle the matter at any stage of the proceedings. Once a settlement is reached, the terms are often recorded, and the OA is disposed of by the DRT as ‘settled.’
The Recovery Officer is a quasi-judicial authority who executes the Recovery Certificate issued by the DRT. Their powers include attaching and selling movable and immovable properties of the borrower to realise the debt.
Important Disclaimer
This blog post provides general information and should not be considered legal advice. The information contained herein is for educational purposes only. The outcome of any legal matter depends on its specific facts, the documents available, and the particular forum. Please seek tailored legal advice from a qualified professional before taking any action.
