To handle tax-related issues, several tribunals, including DRT, have been established. Anyone who disagrees with a DRT order can appeal in DRAT. Read on to know!
In the 1980s and 1990s, Indian banks lacked access to any specialized means of collecting unpaid debt from borrowers. The Tiwari Committee studied the legal and other challenges banks and financial institutions (FI) faced in 1981 and recommended the creation of special tribunals for the recovery of debts owed by banks and financial organizations. Here the Difference between DRT and DRAT in india.
To establish the Debt Recovery Tribunal throughout the entire nation, the Recovery of Debts Due to Banks and Financial Institutions Act (RDDBFI Act), 1993 was enacted. There are currently 39 DRT and 5 DRAT in operation nationwide.
In this blog, we will discuss the difference between debt recovery tribunals and Debt recovery appellate tribunal.
What is the Debt Recovery Tribunal?
To resolve issues relating to administrative or tax-related disputes, various Tribunals have been established. To facilitate the quick collection of debt, Debt Recovery Tribunals (Drt) were established.
The objective of the Debt Recovery Tribunal (DRT)
The (DRT full form) Debt Recovery Tribunal’s goal is the fast adjudication and recovery of debts owed to banks and FIs..
What is the Minimum Due Amount to File a Case in DRT?
The minimum amount owed to financial institutions (FIs) and banks should be more than 20 lac rupees.
1. Composition of DRT
The presiding officer is the only member, and there is only one of them. Presiding officer:
- Should be qualified to work as a district judge
- Can have a term of 5 years
- can serve in the position until he turns 62.
- The government can appoint recovery officers to assist the presiding officer.
2. Extent and Scope of DRTs
Debts of more than Rs. 10 lakhs can be collected by contacting the DRTs. Banks and other financial institutions, sometimes known as “creditors,” must apply to a civil court under CPC for amounts less than the aforementioned value (Civil Procedure Code).
The Act guarantees, however, that for amounts greater than Rs. 1 lakh, the Central Government may order that certain cases be decided by DRTs. Additionally, the SARFAESI Act establishes specific dollar amounts for various cases that the DRTs may take on.
Now, 22(1) requires that the natural justice principles be applied to both the DRTs and the DRATs. They have the authority to set their procedures by these principles and are not constrained by the CPC-mandated one. A law degree is not necessary to present cases in DRTs, either.
What is the Debt Recovery Appellate Tribunal (DRAT)?
A person or business who feels wronged by DRT orders may appeal those decisions to the Debt Recovery Appellate Tribunal (DRAT).
Within 45 days of obtaining the DRT orders, the appeal must be filed. The debt recovery appellate tribunal won’t consider the appeal until the person pays 75% of the debt that was judged to be owed by the DRT.
Both DRT and DRAT operate by the notion of natural justice and are endowed with the same authority as any civil court.
Composition of DRAT
It only has one member, who is referred to as the Chairperson of the Appellate Tribunal. The Chairperson:
- Should be qualified to be the judge of the high court
- Should be a member of legal service
- Held a presiding officer position for at least three years.
- Can have a term of 5 years
- Can serve in the position until the age of 65.
DRT and DRAT Procedure
Procedure for DRT
Any bank or financial institution may contact a DRT to begin legal action for loans with default balances greater than 10 lakhs. Lower dollar amounts must be pursued in civil court and must adhere to the Civil Procedure Code.
There are two Approaches to the DRT.
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Application Route
In this case, the bank or financial institution can submit the form at the DRT and apply with the DRT by the Recovery of Debts Due to Banks and Financial Institutions Act.
The form must be submitted to the DRT where the defaulter maintains a residence or a place of business.
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SARFAESI Route
Securitization and Reconstruction for Enforcement of Security Interest Act (SARFAESI), enacted in 2002, is known by these initials. This law relates to secured credit and loans. Secured loans have a lower likelihood of defaulting because the borrower has pledged collateral as security for the loan.
As a result, in the case of a default, the creditor seizes the collateral asset to pay off the debt. However, if certain conditions exist and the collateral is unable to cover the entire debt and the shortfall is sizable, the creditor may pursue the DRT full form by the provisions of this act.
Post-application Procedure
To prevent the borrower from selling any property, the DRT may issue an interim order against the borrower. For the duration of the proceedings, the temporary order will freeze all of the borrower’s assets. Additionally, the DRT reserves the right to hold the borrower in custody for three months if they are found guilty of a misdemeanor or show signs of being a flight risk.
The DRT is required to expedite the case by the standard application procedure under the RDDBFI act within 180 working days.
However, if the DRT has been contracted under the SARFAESI Act, the process must be accelerated within 60 to 120 days. Any further delay grants the parties the right to request that the case be resolved by the DRAT.
The defendant receives a summons as soon as the application is filed, giving him thirty days to respond in writing. If the defendant requests one, the PO may decide to grant the request. The defendant may decide to take revenge on the bank or other financial institution.
After the procedures are finished, the PO will provide the debt collection officer with a certificate that lists the attachments to the debt that can be sold to pay off the obligation.
Procedure for DRAT
Only 5 DRATs are now located in India, and they are in Mumbai, Delhi, Kolkata, Chennai, and Allahabad. According to Section 20(3) of the RDDBFI Act, a DRAT appeal must now be lodged within 45 days of the day the DRAT receives a copy of the Tribunal’s order.
The Appellate Tribunal, however, may also grant an appeal after the lapse of 45 days if there is sufficient justification to suggest that the appeal could not have been lodged sooner, according to the provision in 20(3).
It is important to remember that DRAT can also be contacted if temporary relief is required for an interim application or other application that is part of the initial application.
DRATs are thought to be costly, so the party that feels wronged must put down 75% of the amount decided by the DRT’s order.
If the matter is handled under the SARFAESI Act: https://legislative.gov.in/sites/default/files/A2002-54.pdf, the deposit cap is set at 50% of the creditor’s claim amount. The defendants frequently refrain from using the DRATs because of these outrageous deposits.
Conclusion
We hope that after reading the information above, one now understands the difference between DRT and DRAT.
The main difference between them is that anyone who is dissatisfied with the DRT’s decisions can appeal them to the Debt Recovery Appellate Tribunal (DRAT) in India. However, until the individual who feels aggrieved fails to deposit 75% of the sum that is due as calculated by DRT and DRAT will not consider their appeal.
Contact Vakilsearch right away if you have any such doubts or questions regarding issues relating to the financial market, their legal experts will clear all your doubts and also provide the best legal services for all your needs.
