Answer By law4u team
The Debt Recovery Tribunal (DRT) is a specialized quasi-judicial body established under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. It primarily deals with recovery of debts owed to banks and financial institutions. In personal bankruptcy cases in India, particularly before the full implementation of the Insolvency and Bankruptcy Code (IBC) for individuals, the DRT has played an important role in adjudicating and facilitating debt recovery and insolvency resolution for individuals and partnership firms.
Role of DRT in Personal Bankruptcy
1. Adjudication of Debt Recovery Cases
The DRT is empowered to hear cases related to recovery of debts above a certain threshold (currently ₹20 lakh).
Individuals or creditors file recovery suits for unpaid debts, and the DRT adjudicates these claims promptly.
2. Facilitation of Debt Settlement
The DRT facilitates out-of-court settlements between debtors and creditors.
It encourages compromise to avoid prolonged litigation, helping debtors resolve dues amicably.
3. Enforcement of Recovery Orders
Upon passing orders for repayment or recovery, the DRT oversees the enforcement through attachment and sale of debtor’s movable and immovable assets.
It ensures that creditors’ dues are realized through lawful means.
4. Jurisdiction Over Personal Guarantors and Individual Debtors
The DRT has jurisdiction to deal with cases involving personal guarantors who have guaranteed corporate debts.
It also handles cases where individuals default on loans from banks or financial institutions.
5. Interim Relief and Protection
DRT can grant interim relief to debtors, including stay on recovery proceedings under specific circumstances.
This protects debtors from harassment while cases are pending.
6. Coordination with Other Forums
The DRT works alongside other forums like Debt Recovery Appellate Tribunal (DRAT) and NCLT in cases involving insolvency and bankruptcy of individuals and companies.
It complements the insolvency process by providing speedy debt recovery mechanisms.
Limitations and Transition with IBC
With the advent of the Insolvency and Bankruptcy Code (IBC), especially the framework for individuals and partnership firms (effective from 2021), the role of the DRT is gradually being integrated and supplemented by the Insolvency Resolution Process for individuals.
IBC provides a more comprehensive and time-bound mechanism for personal insolvency, but DRT remains relevant for certain debt recovery matters outside the IBC ambit.
Example
An individual defaults on a loan of ₹50 lakh taken from a bank. The bank files a suit in the DRT for recovery of the dues.
Role of DRT:
The DRT hears the case and passes an order for repayment schedule.
If the individual fails to comply, the DRT may order attachment of the individual’s property.
The DRT may also encourage both parties to settle the matter amicably during the proceedings.
The individual may approach the DRT for interim relief to stay recovery temporarily while negotiating repayment terms.
