A loan default may lead to recovery on a formal basis if the lender finds that routine measures for recovery of dues are no longer adequate. If the debt is recoverable then the borrower can approach the Debt Recovery Tribunal (DRT) under the Recovery of Debts and Bankruptcy Act, 1993. There is a procedure for DRT recovery, which must be known to the borrower.
When Can a Bank Start DRT Recovery?
A lender does not take every overdue loan directly to the DRT. The legal framework applies to debts falling within the jurisdiction of the Tribunal. The Act defines “debt” broadly to include liabilities claimed as due to a bank or financial institution, whether secured or unsecured, subject to the conditions of the law.
If the lender wishes to recover through the Tribunal, it has to file an Original Application giving the details of its claim. The application details how much the bank says is owed and how the bank is trying to get it back. Supporting records form an important part of the lender’s case.
The Borrower Receives Summons
After the application enters the DRT process, the borrower is served with summons. This is when the borrower formally becomes involved.
The summons gives the defendant an opportunity to explain why the relief sought by the bank should not be granted. The statutory procedure provides a time period for filing the written statement, making the response stage particularly important.
A borrower should examine the case papers rather than responding only to the amount mentioned in a collection call. The actual DRT application may contain details about the loan account, interest, security and other components of the bank’s claim.
Filing the Written Statement
The borrower’s written statement is the main opportunity to place a defence before the Tribunal. It can address issues connected with the bank’s claim.
The borrower may dispute the outstanding amount, identify payments not properly accounted for, or raise another objection supported by documents. Where legally applicable, the defendant can also raise a set-off or counter-claim.
The response should deal with the lender’s allegations specifically. Financial difficulty alone does not answer the legal questions raised in a recovery application.
How the Tribunal Examines the Matter
The DRT considers the pleadings, documents and submissions placed before it. It is intended to adjudicate recovery claims through a specialised process.
Both sides can present their cases personally or through authorised legal representation. The Tribunal may also deal with interim applications and other procedural issues.
At this stage, the borrower addresses the actual dispute. The focus differs where the borrower accepts liability from a case challenging calculation, enforceability or another aspect of the claim.
What Happens After the DRT Gives Its Decision?
If the Tribunal determines that an amount is payable, it can issue a recovery certificate for enforcement. The matter then goes to a recovery stage and does not just end with the decision of the Tribunal.
The Recovery Officer shall take steps for recovery of the amount mentioned in the certificate. The law provides several recovery methods, including attachment and sale of movable or immovable property, taking possession of property over which a security interest exists in the circumstances permitted by law, appointment of a receiver and other prescribed measures.
The recovery certificate marks the shift from adjudication to enforcement. At this stage, the borrower is dealing with a determined liability rather than only the bank’s original claim.
Can Recovery Proceedings Be Stayed or Payment Time Be Granted?
The law provides limited mechanisms through which additional time for payment may be granted after a recovery certificate has been issued. Section 27 permits the Presiding Officer, subject to specified conditions, to grant time for payment. One of the statutory conditions is that a down payment of not less than 25 per cent of the amount stated in the recovery certificate is paid and an unconditional undertaking is given to pay the balance within a reasonable period acceptable to the bank or financial institution holding the certificate.
This does not create an automatic right to postpone recovery; the statutory conditions apply.
What Should Borrowers Understand About DRT Recovery?
DRT proceedings are not simply another demand for an overdue EMI. They provide a formal legal record of the lender’s right to recover and give the borrower a fixed opportunity to respond.
The main thing is to know the exact stage of the case. A borrower facing summons should focus on the pleadings and written statement, while a borrower dealing with a recovery certificate should understand the enforcement stage.
The DRT process can therefore be viewed as a sequence: the lender files its recovery claim, the borrower receives an opportunity to answer it, the Tribunal adjudicates the dispute, and an amount found recoverable can move into enforcement. Understanding this sequence helps borrowers recognise what each document means and what stage their loan recovery matter has reached.
