INTERVIEW QUESTIONS ON BANKING LAW, DEBT RECOVERY TRIBUNAL (DRT) & SARFAESI ACT

FAQ ON BANKING LEGAL RECOVERY, DRT & SARFAESI:

Q1. What is the DRT and who can file a case there?
A: The Debt Recovery Tribunal (DRT) is a special forum for banks and notified financial institutions to recover debts of ₹20 lakh or more from borrowers (individuals, firms, companies, PSUs). Private individuals and unregistered lenders cannot file cases in DRT.

Q2. What is the process for recovery under the RDB Act?
A: Banks file an Original Application (OA) under Section 19 of the Recovery of Debts and Bankruptcy Act, 1993. The DRT hears the case and, if satisfied, issues a recovery certificate for enforcement against the borrower.

Q3. What is a recovery certificate and how is it enforced?
A: A recovery certificate is a legal order from DRT that empowers the Recovery Officer to attach, auction, or take possession of the defaulting party’s property, arrest and detain them if needed, and recover the certified amount.

Q4. Who is the Recovery Officer (RO) and how is the post filled?
A: The Recovery Officer is a government official appointed by the central government to execute DRT recovery orders, with powers similar to a tax recovery officer—attach, auction, seize property, arrest debtors, and recover dues.

Q5. What is the SARFAESI Act and why is it important?
A: The SARFAESI Act, 2002 allows banks and eligible NBFCs to quickly recover dues on NPAs by directly seizing and auctioning secured assets without requiring court approval first. It makes loan recovery fast, strengthens bank balance sheets, and improves credit discipline.

Q6. Who can use SARFAESI Act powers?
A: All banks and eligible NBFCs (with assets at least ₹100 crore and loan amounts at least ₹50 lakh) can use SARFAESI to enforce security interests and recover dues. Borrowers can challenge these actions at DRT.

Q7. Can government companies or PSUs be sued in DRT?
A: Yes, government companies and PSUs (registered under the Companies Act) can face DRT recovery proceedings if they default on bank loans above ₹20 lakh. Government departments (not companies) have certain legal immunities.

Q8. How many DRTs and DRATs are there in India and Delhi?
A: India has 39 DRTs (Debt Recovery Tribunals), with 3 located in Delhi. There are 5 DRATs (Debt Recovery Appellate Tribunals) in Mumbai, Delhi, Kolkata, Chennai, and Allahabad.

Q9. What if the debt to be recovered is less than ₹20 lakh?
A: If the amount is below ₹20 lakh, banks, NBFCs, or creditors must file a civil suit in the regular courts—not in DRT—for recovery.

Q10. Can NBFCs use DRT for recovery?
A: Generally, NBFCs cannot file recovery cases in DRT under the RDB Act unless specially notified by the government. Most NBFCs must use SARFAESI (if eligible), arbitration, or civil courts for recovery.

Q11. What is the difference between SARFAESI Act and RDB Act?
A: SARFAESI is used for fast, direct recovery of secured loans by enforcing collateral without court intervention. RDB Act (DRT) is a judicial process for banks/NBFCs to recover debts (secured or unsecured) above ₹20 lakh.

Q12. What is the DRT recovery process from start to finish?
A: Bank files OA → DRT hears case & issues recovery certificate → Recovery Officer attaches/auctions property or seizes assets → funds recovered and distributed as per law.

Authored By Advocate Alok Kumar, an experienced practising lawyer in Delhi NCR.