Nirma University

Institute of Law

IX Semester B.Com. LL.B.(Hons.)Course

Report of Field Visit of

Debt Recovery Tribunal

As a part of Clinical Training

For the Academic year (2015-16)

Prepared & Submitted By

Mohit Mittal

11BBL059

Table of Content

Sr. No

Subject

Page No.

Preface

Acknowledgement

Introduction:

Brief

about

the

Debt

Recovery

Tribunal
4

Role and Function of DRT

Power and Function of the DRT

Brief reporting of the cases attended & observed

during the Field Visit

7.

Observations of the Functioning of the DRT Court

11

Experience during the Field Visit

8.

Conclusion

12

Preface

This report is an outcome of the Field Visit of the Debt Recovery Tribunal,
Ahmedabad for the students of ninth semester. The main constituents of
the project are the report on cases observed at the DRT during the visit, I
have tried my best to do justice with my activities and put it in black and
white with the same effort as I did it during the visit.

Date: 3rd Oct, 2015

Name & Signature

Acknowledgment

I would firstly like to thank the Institute of Law, Nirma University for giving me
such an opportunity to undergo the field visit in the Debt Recovery Tribunal
during the ninth Semester.

I would like to express my profound gratitude for the project guidance to Asst.
Prof. Shailja Tripathi who has so ably guided us in this field visit.

I am thankful for the guidance and for providing necessary information

regarding the project and also for their support during the field visit.

I have tried to cover all the aspects of the field visit and every care has been
taken to make the report faultless. I have written the report in my own words
and if there is any error with respect to the cases, then they are mine only.

INTRODUCTION: BRIEF ABOUT DEBT RECOVERY TRIBUNAL

Debt Recovery Tribunals (DRT) are a special purpose quasi judicial courts that
are established for keeping in line with the international trends on helping
financial institutions recover their bad debts quickly and efficiently, the
Government of India has constituted thirty three Debts Recovery Tribunals and
five Debts Recovery Appellate Tribunals across the country. The Government of
India had established six new DRT in 2014 particularly at Chandigarh,
Bengaluru, Ernakulum, Dehradun, Siliguri, and Hyderabad.

The Debts Recovery Tribunal (DRT) enforces provisions of the Recovery of Debts
Due to Banks and Financial Institutions (RDDB&FI) Act, 1993 and also
Securitization and Reconstruction of Financial Assets and Enforcement of
Security Interests (SARFAESI) Act, 2002 and Debts Recovery Tribunal
(Procedure) Rules 1993.

Under the Recovery of Debts Due to Banks and Financial Institutions

(RDDB&FI) Act, 1993 banks can approach the Debts Recovery Tribunal (DRTs)
whereas, under Securitization and Reconstruction of Financial Assets and
Enforcement of Security Interests (SARFAESI) Act, 2002 borrowers, guarantors,
and other any other person aggrieved by any action of the bank or debtors can
approach the Debts Recovery Tribunal (DRT) for recovering their claims.

Debts Recovery Tribunal are located across the country. Some cities have more
than one Debts Recovery Tribunals. New Delhi, Chennai, Kolkata and Mumbai
have three Debts Recovery Tribunals. Ahmedabad and Chandigarh have two
Debts Recovery Tribunal (DRT). One Debts Recovery Tribunal has been
constituted at Allahabad, Aurangabad, Bangalore, Coimbatore, Cuttack,
Earnakulam, Guwahati, Hyderabad, Jabalpur, Jaipur, Lucknow, Madurai,
Nagpur, Patna, Pune, Vishakapatnam and Ranchi.

Each Debts Recovery Tribunal (DRT) is presided over by a Presiding Officer. The
Presiding Officer is generally equivalent to the rank of Dist. & Sessions Judge.
A Presiding Officer of a Debts Recovery Tribunal is assisted by a number of
officers of other ranks, but none of them need necessarily have a judicial
background. Therefore, the Presiding Officer of a Debts Recovery Tribunal is
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the

sole

judicial

authority

to

hear

and

pass

any

judicial

order.

Each Debts Recovery Tribunal has two Recovery Officers. The work amongst
the Recovery Officers of a Debts Recovery Tribunal (DRT) is allocated by the
Presiding Officer of the Tribunal. Though the Recovery Officer of the Tribunal
need not be a judicial Officer, but the orders passed by a Recovery Officer are
judicial in nature, and are appealable before the Presiding Officer of the Debts
Recovery Tribunal (DRT).

Appeals against orders passed by Debts Recovery Tribunal (DRT) lie before
Debts Recovery Appellate Tribunal (DRAT). As per sub-section (3) of section 20,
of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993,
appeal has to be filed within 45 days from the date on which a copy of the order
aggrieved has been passed or deemed to have been passed by the Tribunal is
received. But, Appeals filed after the expiry of said limitation period as
contained under Sub section (3) of section 20 of the Recovery of Debts Due to
Banks and Financial Institutions Act, 1993, should be accompanied

by a

petition to condone the delay with requisite fee, which will be considered first
by the Tribunal before the main appeal is taken up.

There are five Debts Recovery Appellate Tribunal (DRATs) located in the
country. One Debts Recovery Appellate Tribunal (DRAT) is located each at
Delhi, Allahabad, Mumbai, Chennai and Kolkata. A Debts Recovery Appellate
Tribunal (DRAT) conducts circuit sittings in different cities where Debts
Recovery Tribunal (DRTs) is located over which it has appellate jurisdiction.

The Debts Recovery Tribunal (DRT) is fully empowered to pass comprehensive

orders and can travel beyond the civil procedure Code to render complete
7

justice. A Debts Recovery Tribunal (DRT) can hear cross suits, counter claims
and allow set offs. However, a Debts Recovery Tribunal (DRT) cannot hear
claims of damages or deficiency of services or breach of contract or criminal
negligence on the part of the lenders. In addition, a Debts Recovery Tribunal
(DRT) cannot express an opinion beyond its domain, or the list pending before
it.

ROLE & FUNCTION OF DRT

In Indian Bank v. ABS Marine Products1, Indian Bank asked for a suit filed by
ABS Marine in the Calcutta High Court to be transferred to the DRT. The
Supreme Court held that such an independent suit filed by a borrower could
not be transferred to the DRT without his consent, since his right to approach
a civil court cannot be taken away.

Then in another case of SBI v. Ranjan

Chemicals Ltd2., the Supreme Court held that its power to transfer a suit did
not depend on the consent of the parties. The concern that this decision raised
is that the DRT may be unable to handle suits which involve complex questions
of law or fact, and that the Bank could prevent a borrower from approaching a
civil court to resolve these questions by merely filing a claim in the DRT. The
DRT has summary proceedings and has traditionally been considered illequipped to consider claims like misrepresentation or fraud, which require
cross-examination of witnesses.

1 (2006) 5 SCC 72
2 (2007) 1 SCC 97
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POWERS AND FUNCTIONS OF THE DEBT RECOVERY TRIBUNAL:

Custody of the records of the Appellant Tribunal shall be with the

Registrar and have can exercise other functions as are assigned to him
under these rules or through Presiding Officer by separate order in
writing.

Registrar shall also have in his custody the official Seal.

The seal of the Appellate Tribunal shall not be affixed to any certified
copy issued by the Tribunal save under the authority in writing of the
Registrar.

BRIEF DESCRIPTION OF THE CASE ATTENDED DURING THE FIELD VISIT

Recovery Suit in DRT: - Kotak Mahindra Bank Limited vs. Ram Kumar Jat &
Ors.
Facts of the Cases: That the Applicant is, a Banking company a body corporate constituted
under the Companies Act, 1956 having its Registered Office at 27BKC, C

27, G Block, Bandra Kurla Complex, Bandra (E), Mumbai 400051.

That the Defendant had initially applied for seeking credit facility in the
form of Commercial Vehicle Loan from the applicant bank to purchase
the TATA LPK 2518 bearing Registration No. GJ 1 LJ 9844, which was
sanctioned by the applicant bank. The documents governing the terms
and conditions of the said loan were executed by the defendants at the

branch office of the applicant bank situated at Ashram Road, Branch.

That while seeking the aforesaid loan facility, defendants agreed to avail
the said credit facility on the terms & conditions stated in the loan
agreement and also agreed to repay interest along with other charges as

stated in the loan documents.

That repayment of the sanctioned loan amount was to be made by the
defendants in 33 installments of Rs. 42,700/- each, starting from

05.07.2013 to 05.03.2016 at the rate of 21.56% of interest per annum.

That looking to the regular defaults committed by the defendants, the
applicant bank issued legal notice dated 26.12.2014 to the defendants,
but the defendants failed to make the payment and appear before the
applicant.

Applicants Contentions:
That as a result of defaults committed by the defendants on regular
basis, the applicant bank is entitled to recover above mentioned principle
amount of Rs. 12,15,410.70/- and on this amount the applicant bank is
10

also entitled to recover the interest at the rate of 36% per annum from

19.12.2014 till the final payment.

The applicant is also entitled to realize outstanding amount by the sale of
hypothecated TATA LPK 2518 bearing Registration No. GJ 1 LJ 9844, &
personal movable and immovable properties of defendants and the sale
proceeds are allowed to be appropriated towards recovery of amount.

Defendant: The Other party does not appear in the tribunal after repeated
service of notice and therefore the tribunal passes the ex-parte order in favor of
the applicant banks.
Development in the Cases: After receiving the favorable order in the matters,
the case is in the execution stage whereby the receiving officer has accepted the
recovery certificate issued by the Presiding Officer and initiated the Execution
Proceedings.

11

GENERAL OBSERVATIONS OF THE FUNCTIONING OF THE DRT

By looking at the working of the Indian Judiciary, I felt that the whole system
was tainted by political influence and corruption. Though it was not a new
thing to know, but still I was surprised to look at things this way in real. For
most of the time, the cases would be adjourned and forwarded to a future date.
There was absolutely no sense of time, or to the problems of the victims. In
case of fresh appeal sometimes the court even does not hear it and without
assigning the reason assigns future date. My personal view is that it was very
discouraging and disappointing to look at the condition of our Judicial System.
The working of the Courts was so slow and a lot of delay could be seen in the
procedure of imparting justice to the victims.
DRT at Ahmedabad is present at the Ellisbridge. One in which the court
proceeding occurs sand others for keeping the records of the pending and ongoing cases. In consumer courts, the opposite parties has to pay a cost of Rs.
500 if they fails to respond in time and this kept on increasing if there is a
further failure. Under DRT, only bank & Financial Institutions were allowed to
file an application but after passing of SARFAESI Act, any secured creditor can
claim the money from the debtor.
In DRT, there is a speedy of justice delivery. But the concept of cost paying in
DRT is good as it mandates the opposite party to respond in time, other wise
they have to pay a cost.

12

Conclusion
The Debts Recovery Tribunals performed well and helped the Banks and
Financial Institutions recover substantially large parts of these non performing
assets and bad debts. Further, the DRTs caused an increase in state-level bank
lending, as Banks trusted that there's a mechanism in position to recuperate
the dues. Nevertheless, interest rates arose after the DRTs were established
and all issues for credit expansion were resolved. Although, clashes are
inevitable the DRT has helped the Banks and financial sectors recover huge
levels of loans, which earlier would take years to recuperate on account of the
long civil procedures. With the enactment of the SARFAESI Act, 2002 (The
Securitization and Reconstruction of Financial Assets & Enforcement of
Security Interest Act, 2002) it is becoming possible to ensure speedy recovery
and instil confidence to the borrower that they would be heard fairly especially
once the borrower has a good track-record / relation with the Bank aside from
having valuable and marketable security pledged to the Bank. The sole possible
remedy to the Banks and Financial Institutions to avoid clashes is do a
complete due diligence before advancing loans to borrowers viz. title search,
residence verification etc. However, there is no dispute to the fact that is it
Public Sector or Private Sector Banking DRT could be the forum for speedy
recovery of debts.

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