By Adv. Prachi Bansal, Associate, Lex Maven-
The banking industry is the backbone of all the economic and non- economic units in India with the growth in banking industry the support system and facilities for other business sectors has increased. Banking policies/ RBI Policies has played an important role in upholding and maintaining the market during the tough situations some examples are the period of demonetization and covid-19 pandemic but with the efficient policies and easy procedure of taking loan from banks has saved many of the Indian business units from getting shut down by providing easy loans to the needy businesses with no complex procedure, but due to non-recovery of the debts given by way of loan the banking and financial institutions are also facing a lot of trouble in proper flow of the funds. In this situation The Securitization and Reconstruction Of Financial Assets And Enforcement of Security Interest Act 2002 has played an important role in recovery of the debts of the banks and financial institutions by allowing them to auction the commercial and residential properties of the defaulters who had borrowed the loan from such institutions.
The Securitization And Reconstruction Of Financial Assets and Enforcement Of Security Interest Act 2002 had gave rise to the idea of DRT .i.e. Debt Recovery Tribunal which is a quasi-judicial body formed for the adjudication of cases or disputes between the borrower and the banking and financial institutions and acts as a remedy for the innocent borrowers as well who are becoming a victim of wrongful auction of the property without any default in payment of debt to the financial institutions providing that the application shall be made within the 45 days of the incidence.
The first DRT .i.e. Debt Recovery Tribunal was inaugurated in Kolkata on 27th April 1994 under the Recovery of Debts due to Banks And Financial institutions Act 1993 with an object to recover the money from borrowers which is due to the Banks and financial institutions and to create a proficient legal procedure for speedy and efficient disposal of cases and the matters where the amount due is more than 20% of the principal amount is dealt by DRT. Unlike DRT the SARFAESI Act consists of DRAT .i.e. Debt Recovery Appellate Tribunal for making an appeal against the order made by DRT under sec 18 of SARFAESI Act 2002.
PROCEDURE FOLLOWED BY DRT
Following are the procedure followed by the Debt Recovery Tribunal
- Filling an Application
An application is first filled in DRT either directly under Recovery Of Debts And Bankruptcy Act 1993 or through the SARFAESI Act 2002. If the application is made directly than there is a need to pay the required fees or if the application is made through SARFAESI Act than it should be filled under section 13 (2) of the Act wherein a notice containing the amount to be repaid in full to be sent to the borrower after considering the debt as a Non- performing Asset by the financial Institution providing 60 days time for complying with the notice to the borrower. And if the borrower fails to comply with notice than the financial institution can take the ownership of the property of the borrower and can initiate the procedure of auction of the property of the borrower and in regards to which the borrower can make an application to DRT under section 17 of the Act.
2.Service Of Summons or Notice
The DRT Registrar or any other authorized presiding officer will issue a notice on behalf of the applicant to the defendant along with the paper book of the petition to be served to the defendant.
3.Hearing of case
The case then will be heard before the presiding officer by filling of reply by the defendant in one month in accordance to the summons or notice so served and if the defendant fails to do so the presiding officer can pass an ex-parte order in favor of the applicant and in case the defendant admits his / her liability then the presiding officer may instruct them to pay the amount within the period of 30 days of the order by DRT.
4.Interim Order by DRT
The DRT under section 19(12) of the recovery of debts Due to Banks and Financial Institutions Act, 1993 has power to pass an interim order against the defendant to restrict them on disposing the property without the prior permission of the tribunal.
5.Judgement
The presiding officer of the DRT after hearing both the parties will pass the judgement within 30 days from hearing the matter and will issue a recovery certificate to the recovery officer within 15 days of the judgement.
DEBT RECOVERY APPELLATE TRIBUNAL
Section 18 of SARFAESI Act says that any person aggrieved of any order passed by Debts Recovery Tribunal may prefer an appeal within thirty days along with such fee as may be prescribed under the act to the appellate tribunal also no appeal shall be entertained unless the borrower has deposited fifty percent of the amount of debt due by the borrower and as per the amount so claimed by the secured creditors or determined by the DRT (whichever is less) to the Debt Recovery Appellate Tribunal and also the appellate tribunal with the reasons recorded in writing may reduce the amount not less than twenty five percent of debt to be paid by the borrowers with this the DRAT can also dispose appeal in accordance with the provisions of Recovery of Debts Due to Banks and Financial Institutions Act, 1993.
Some of the relevant cases related to section 18 of SARFAESI Act are as follows-
- Narayan Chand Ghosh vs UCO Bank AIR 2011 SC 1913
In this case the Apex Court has stated that there is an absolute bar to the entertainment of an appeal under Section 18 of the Act unless: the condition precedent, as stipulated, is fulfilled. Unless the borrower makes, with the Appellate Tribunal, a pre-deposit of fifty per cent of the debt due from him or determined, an appeal under the said provision cannot be entertained by the Appellate Tribunal.
2. Axis Bank v/s SBS Organic Pvt. Ltd. & Ors 2016 (12) SCC 18.
In this case the Apex Court held that the appeal in DRAT would be entertained only when the borrower deposits the 50% of the amount in terms of the order passed by DRT or 50% of the sum due from the borrowers as asserted by the secured creditor, whichever is less. The DRAT in his discretion may reduce the amount to 25%.
Conclusion
Thus, The DRAT has been established to take up the appeal against the decision passed by the DRT and has contributed in reducing the burden of civil courts in matters relating to the recovery of debts of the financial institutions section also it has helped to support the financial institutions in proper flow of funds with the provision of 50 % of security deposit and had become an efficient way in fast disposal of matters relating to the disputes between the borrower and the financial institutions. despite all these facts there is only 5 DRATs in the country as per the 2018 survey which is the reason why the matters get delayed in adjudication at DRAT, this also depicts that there is a need to increase the number of DRATs in the country in order to speed up the recovery process.
