PROCEDURE OF DEBTS RECOVERY TRIBUNAL

Chapter III of the ‘Debts Recovery Tribunal Act, 1993 (‘Act’ for short) and the Debts Recovery Tribunal Rules, 1993 (‘Rules’ for short) provide the procedure of filing and recovery of the debts by the banks from the lenders.

Who can file an application?

Section 19 of the Act provides that a bank or a financial institution which is to recover the debts from its lenders may file an application before the Debts Recovery Tribunal (‘DRT’ for short).  

Where to file?

An application may be filed by a bank or a financial institution before the DRT within the local limits of whose jurisdiction-

• the branch or any other office of the bank or financial institution is maintaining an account in which debt claimed is outstanding, for the time being; or
• the defendant, or each of the defendants 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
• any of the defendants, 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.

Withdrawal of application

The bank or financial institution may, with the permission of the Debts Recovery Tribunal, on an application made by it, withdraw the application. The said application shall be dealt with by it as expeditiously as possible and disposed of within thirty days from the date of such application. If the DRT refuses to grant permission for withdrawal of the application filed under this sub-section, it shall pass such orders after recording the reasons therefor.

Language of the Tribunal

The proceedings of the Tribunal shall be conducted in English or Hindi.  Any reference, application, representation, documents or other matter contained in any language other than English or Hindi shall be accepted by the Tribunal if the same is accompanied by the true translation thereof in English or Hindi.

Procedure for filing an application

A bank or a financial institution, which has to recover its debt from any person, may file an application to the DRT and against the same person another bank or financial institution also has claim to recover its debt, then, the later bank or financial institution may join the applicant bank or financial institution at any stage of the proceedings, before the final order is passed, by making an application to that DRT.

The application may be in the form as prescribed in the Rules.  The application may be filed in person or by his agent or by a duly authorised legal practitioner. The application shall be presented to the Registrar who is having jurisdiction to entertain the application. The application may also be sent by Speed Post to the Registrar. The application shall be deemed to have been presented to the Registrar the day on which it was received in the office of the Registrar.

• The application shall be presented in two sets in a paper book along with an empty file size envelope bearing full address of the defendants and where the number of defendant is more than one, then sufficient number of extra paper-books together with empty file size envelopes bearing full address of each of the respondents shall be furnished by the applicant.
• The application shall be filed along with the following fee-

• If the amount to be recovered is Rs.10 lakh, the fee is Rs.12000/-
• If the amount to be recovered is more than Rs.10 lakhs then the fee payable is-

• Rs.12,000/- +Rs.1000/- for every Rs. 1 lakh subject to a maximum of Rs.1.5 lakhs.

• Application for Review – 50% of the fee payable above.
• Application for interlocutory order – Rs.10/-
• Vakalat – Rs.5/-.

• The required copies of documents shall be attached to the application.
• Every application shall set forth concisely under distinct heads, the grounds for such application and such grounds shall be numbered consecutively and shall be typed in double space on one side of the paper.
• It shall not be necessary to present separate applications to seek interim order of direction if in the original application the same is prayed for.
• The applicant shall-

• state particulars of the debt secured by security interest over properties or assets belonging to any of the defendants and the estimated value of such securities;
• if the estimated value of securities is not sufficient to satisfy the debt claimed, state particulars of any other properties or assets owned by any of the defendants, if any; and
• if the estimated value of such other assets is not sufficient to recover the debt, seek an order directing the defendant to disclose to the Tribunal particulars of other properties or assets owned by the defendants.

• Every application shall be accompanied by a paper book containing, -

• statement showing details of the debt due from a defendant and the circumstances under which such a debt has become due;

• all documents relied upon by the applicant;
• details of the fee;
•  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.
• The authorisation letter authorising the person who appear before DRT on behalf of the bank or financial institution.
• If the case is represented by an Advocate, a Vakalatnama is to be filed along with the application.

• The application shall not seek relief or reliefs based on more than a single cause of action in one single application unless the reliefs prayed for are consequential to one another.
• A copy of the application and paper book shall be served on each of the respondents as soon as they are filed, by registered post.

Scrutiny

If on scrutiny, the application is found to be in order, it shall be duly registered and given a serial number. If the application is found to be defective and the defect noticed is formal in nature, the Registrar may allow the party to rectify the same in his presence and if the said defect is not formal in nature, the Registrar, may allow the applicant such time to rectify the defect as he may deem fit.

Rejection

If the applicant failed to rectify the defect within the time allowed, the Registrar may by order and for reasons to be recorded in writing, decline to register the application.

Review

Against the order of rejection, the applicant may file a review petition before DRT within 60 days. The petition shall be verified by means of an affidavit. If there is no sufficient ground for a review, it shall reject the application but where the DRT is of opinion that the application for review should be granted, shall grant the same. No such application shall be granted without previous notice to the opposite party to enable him to appear and to be heard in support of the order, a review of which is applied for.

Summon

The DRT, on receipt of application shall issue summons with following directions to the defendant—

• to show cause within thirty days of the service of summons as to why relief prayed for should not be granted;
• direct the defendant to disclose particulars of properties or assets other than properties and assets specified by the applicant under clauses (a) and (b) of sub-section (3A); and
• to restrain the defendant from dealing with or disposing of such assets and properties disclosed under clause (c) of sub-section (3A) pending the hearing and disposal of the application for attachment of properties.

The defendant, on service of summons, shall not transfer by way of sale, lease or otherwise except in the ordinary course of his business any of the assets over which security interest is created and other properties and assets specified or disclosed under sub-section (3A), without the prior approval of DRT. The DRT shall not grant such approval without giving notice to the applicant bank or financial institution to show cause as to why approval prayed for should not be granted.  The defendant shall be liable to account for the sale proceeds realised by sale of secured assets in the ordinary course of business and deposit such sale proceeds in the account maintained with the bank or financial institution holding security interest over such assets.

Written Statement

The defendant shall within a period of 30 days from the date of service of summons, present a written statement of his defence including claim for set-off or counter-claim, if any, and such written statement shall be accompanied with original documents or true copies thereof with the leave of the DRT, relied on by the defendant in his defence. The said period of 30 days may further be extended to 15 days. On receipt of the written statement the DRT shall fix a date of hearing for admission or denial of documents produced by the parties to the proceedings and also for continuation or vacation of the interim order.

If the defendant makes an admission of the full or part of the amount of debt due to a bank or financial institution, the DRT shall order such defendant to pay the amount, to the extent of the admission within a period of 30 days from the date of such order failing which the DRT may issue a certificate in accordance to the extent of the amount of debt due admitted by the defendant. If the defendant claims to set-off against the applicant’s demand any ascertained sum of money legally recoverable by him from such applicant, the defendant may, at the first hearing of the application, but not afterwards unless permitted by the DRT, present a written statement containing the particulars of the debt the debt sought to be set-off along with original documents and other evidence relied on in support of claim of set-off in relation to any ascertained sum of money, against the applicant.

Where it appears to the Tribunal that either applicant or defendant desires the production other of witness for cross examination, and that such witness can be produced an order shall not be made authorising the evidence of such witness to be given by affidavit.

If at any stage of the proceedings, the DRT on an application made by the applicant along with particulars of property to be attached and estimated value thereof, or otherwise is satisfied, that the defendant, with intent to obstruct or delay or frustrate the execution of any order for the recovery of debt that may be passed against him,—

(i) is about to dispose of the whole or any part of his property; or

(ii) is about to remove the whole or any part of his property from the local limits of the jurisdiction of the Tribunal; or

(iii) is likely to cause any damage or mischief to the property or affect its value by misuse or creating third party interest,

the DRT may direct the defendant, within a time to be fixed by it, either to furnish security, in such sum as may be specified in the order, to produce and place at the disposal of the DRT, when required, the said property or the value of the same, or such portion thereof as may be sufficient to satisfy the certificate for the recovery of the debt, or to appear and show cause why he should not furnish security. If the defendant fails to comply with the order of DRT, then the DRT may order for the attachment of the said properties.

Order

The DRT may, after giving the applicant and the defendant, an opportunity of being heard, in respect of all claims, set-off or counter-claim, if any, and interest on such claims, within 30 days from the date of conclusion of the hearings, pass interim or final order as it deems fit which may include order for payment of interest from the date on which payment of the amount is found due up to the date of realisation or actual payment. the DRT shall clearly specify the assets of the borrower which security interest is created in favour of any bank or financial institution and direct the Recovery Officers to distribute the sale proceeds of such assets. Every order of the Tribunal shall be in writing and shall be signed and dated by the Presiding Officer of the Tribunal.  Every order passed on an application shall be communicated to the applicant and to the defendant either in person or by registered post free of cost.