What is DRT?

Indian banks and financial institutions had

since long been suffering to recover debts and

enforce securities from the defaulters. As the

procedure regarding such recovery was erratic

and extremely cumbersome, the Narasimham
Committee of 1991recommended the setting
up of Special Tribunals like DRTs (Debt
Recovery Tribunals) and DRATs (Debt Recovery
Appellate Tribunals), in order to streamline
such processes.The Committee's
recommendation led to the enactment of

Recovery of Debts Due to Banks and Financial

Institutions Act ("RDDBFI")1993, from which
DRTS and DRATsderive their authority to
adjudge on debt recovery matters. Since its
inception,we have 39 DRTs and 5 DRATs
functioning in the country.
 Compositionof DRTS
Under 4 of the RDDBFI Act, the Tribunal shall be
comprised of only one member ("Presiding
Officer"), who shall be appointed bythe Central
Government upon notification.Upon
authorisation of the Central government, the
Presiding Officer ("PO") of one Tribunal may
also discharge functions of Presiding Officers
of another Tribunal. The PO shall be appointed
for a term of 5 years or 62 years of age,
whichever is earlier and shall bequalified as a
District Judge.
Pecuniary limit under
DRTS and the procedure
The DRTs can be approached for recovery of
debts which are more than Rs. 10 lakhs in
value. For lower amounts than the above
mentionedvalue, the banks and financial
institutions ("creditors"), need to approach a
civil court under CPC (Civil Procedure Code).
However, the Act warrants that for other
amounts more than Rs. 1lakh, the Central
government can direct certain cases to be
adjudged by DRTS. Furthermore, SARFAESI Act,
also specifies certain amounts pertaining to
different cases, which can be taken up by the
DRTs.

Now, 22(1)mandates the DRTs andthe DRATS

to be governed by the principles of natural
justice. In pursuance of such principles, they
possess the powers to regulate their
procedure and not be bound by the one laid
down in CPC. Moreover, in order to argue
in DRTs, a law degree is not required.
Jurisdiction of DRTS
Under 17 of the RDDBFI Act, DRT has the
authority toentertain any application from
banks and financial institutions, in order to
recover loans for such banks and financial

institutions. DRAT being the Appellate Tribunal

shallhave the jurisdiction to entertain appeals
against any order made by a DRT under the
Act. However, Supreme Court has adjudged
that DRT and DRAT cannot decide upon cases
like succession rights of property, issuance of
receipts,etc. Its jurisdiction is strictly confined
only to cases mentioned in 17 of the Act.

Now, under 18 of the Act, other courts are

barred to look into matters of debt apart from
Supreme Court and High Court, who derive
their authority from Article 226 and 227 of the
Constitution. This provision is in line with the L
Chandra Kumar's judgment whichstates that
Tribunals are only supplementary to High
Courts and not a substitute for them.
The Process of DR

The Application Route

Under 19 of the RDDBFI Act, the conditions are
laid down as to under which DRT one has to file

an application. Such an application can be filed

by a bank or a financial institution to aDRT, that
has the jurisdiction,and where the defendant
either resides or carries out his business.

Moreove, an application can also be filed with

a DRT, if the cause of actionarises wholly or
partly within the limits of the jurisdiction. Along
with the application, the prescribed needs to be
paid.
SARFAESI Route

An application to the DRT can also be made

under the Securitisation and Reconstruction for

Enforcement of Security Interest Act

(SARFAESI), 2002. Under SARFAESI,the
secured creditor takes possessionof the
securities of the debtors, when he fails to
discharge allhis liabilities. However, there
Occursa case, wherein the securities are not
able to discharge of the entire debt. Under
these circumstances, the creditors have an
optionof filing an application to the DRT for
recovery of the remaining dues. Moreover,
under 17 of the SARFAESI Act, the borrowers
can also appeal to the DRTs against the
creditor's findings.
Procedure for DRAT
India currently houses only 5 DRATs which are
located in Mumbai, Delhi, Kolkata, Chennai and
Allahabad. Now, under 20(3)of the RDDBFI Act,
appeal with the DRAT needs tobe filed
within a period of 45 days, from the date on
which the copy of the order of the Tribunal is
received by him. However, the provisio to 20(3)
states that the Appellate Tribunal may also
allowan appeal after the expiry of 45 days, if
there is sufficient cause to indicate that the
appeal couldnot have been filed earlier. It is
pertinent to note that DRAT can also be
approached incase of an interim relief to be
obtained on interim application or
miscellaneous application, which form a part
of the original applications.

DRATS are deemed to be expensive, such that

aggrieved party is required to deposit 75% of
the amount determined by the order of the DRT.
In case the matter is routed through the
SARFAESI Act,the deposit limit is 50% of the
amount claimed by the creditor. These
exorbitant deposits often deter the defendants
from appealing to the DRATs.
Distinction between the
two forums
1. The first basic point of difference between
the two tribunals is that DRT is regulated by
SARFAESIAct and its Parent Act i.e. the DRT
Act, on the other hand NCLT is regulated by
theCompanies Act and IBC.

2. Secondly, the very nature of the relief

provided by these bodies is different. While
NCLT COncerns itself with liquidation and
bankruptcy proceedings, DRT is more focussed
on debt recovery.

3. Thirdly, NCLT proides remedy sought to

companies in case of default in payment of
debts that are both operational and financial
which gives both banks and financial
institutions the right to approach NCLT for the
recovery of loan amount.
Conclusion
The present law involving the code stillfaces
confusion as the presence of more than one
available forum is tested by implementation of
law. The disposal rate of DRTs is alarming as
they are unable to reduce the pending cases.
The existence of many company related
legislations with respect to recovery of debt
mandates andasks for interpretation. Adelay
in disposal of cases due to overlapping
proceedings is worrisome. The interplay of
rules of the Code, the SARFAESIAct and the
DRT Act remains unresolved. Simultaneous

proceedings before the civil court, the DRT and

the NCLT for recovery of the same debt is
contributing to an inefficient insolvency
regime.