Debt recovery tribunals’ overhaul on the cards to tackle pendency2 min read . Updated: 24 Dec 2015, 02:40 AM IST
Digitising the system, adequate staffing, presence in every district are among the proposed measures
New Delhi: The government is planning an overhaul of debt recovery tribunals (DRTs) as they are set to become the backbone of insolvency proceedings for individuals and partnership firms in the proposed bankruptcy code.
From moving the entire system online to adequate staffing to ensuring DRTs have a presence in every district, a new-look DRT is on the cards, according to two people familiar with the development who declined to be named.
The insolvency and bankruptcy code of 2015 envisages a key role for DRTs and debt recovery appellate tribunals in deciding on insolvency applications of individuals and partnership firms, a function performed by local district courts at present.
It requires a massive expansion of DRTs to make them more accessible to individuals as well as revamping the existing system.
The present system is inefficient, said Harsh Pais, partner at Trilegal, a law firm.
“Recovery and monetization of security under the Sarfaesi (the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002) and DRT processes is not just delayed, but also inefficient for all but the simplest of cases," he said.
“This causes loss to lenders, borrowers and the economy at large because of the resulting erosion in value," he added.
DRTs currently function as quasi-judicial forums intended to facilitate debt recovery by banks. There are 33 DRTs at present and the government plans to add another six.
A DRT is supposed to dispose of a matter referred to it within 180 days of the receipt of an application, according to the proposed code.
However, the debt recovery process so far has been ridden with problems as huge delays and a deluge of cases have led to high levels of pendency.
In 2014-15, DRTs disposed of more than 14,000 applications, recovering ₹ 5,826 crore, finance ministry data shows. However, there were 61,784 cases pending, involving more than ₹ 3.76 trillion at these DRTs at the end of December 2014.
“The government has a grand plan of revitalizing the entire debt recovery set-up. They will be high-technology ports. There will be a massive induction of new professionals. Many of the cases will be decided by online communication and disposed of quickly," said one of the persons cited above.
“DRTs will sit in circuits in all the districts as the bankruptcy bill will take away the jurisdiction of district courts... For this, there will have to be an infusion of manpower and technology as well as a new outlook and procedure," he added.
The finance ministry has started an e-DRT initiative to digitize all data, e-filing of cases, issuing of warrants and notices digitally, tracking of cases online and uploading orders and judgments online, said the second person.
“In addition, it will also help in tracking the performance of the tribunals on some key parameters like the disposal rate of cases, the time taken in issuing summons, hearing and disposal of cases, and the pendency," the person said.