1. Role of DRT in
BANKRUPTCY PROCESS
PREPARED BY - VIJAY CHAUHAN
2. Introduction to DRT
DRT is constituted under Recovery of Debts Due to Banks and Financial
Institutions Act, 1993 ( ‘Act’) providing speedy recovery for Banks and
Financial Institutions unlike civil court and other forums.
Debt Recovery Tribunal (hereinafter referred as ‘DRT’) is a specially
created forum for fast and speedy recovery of debts due to Banks and
Financial Institutions.
It is stipulated that DRT is to decide the Application as expeditiously
as possible and endeavour should be made to dispose the Application
within 180 days from the receipt of Application.
3. Inter-relation
• As per section 79 (1), "Adjudicating Authority" means the Debt Recovery
Tribunal.
• Since Part 3 specifically mentions that it is applicable for Insolvency
resolution and bankruptcy for individuals and partnership firms ---- Section
79 (1) can be used in relation to said purpose only.
• Part 3 was drafted for adjudication of any dispute in which the amount of
default is not less than one thousand rupees. (Sec 78)
• the appropriate adjudicating authority will be the Debt Recovery Tribunal
that is situated at the place where the individual debtor actually and
voluntarily resides or carries on business or works for gain.
• Civil Courts --- No authority to entertain suits or proceedings.
• Thus, matters related to insolvency and bankruptcy of individuals and
partnership & proprietorship firms its only debt recovery tribunals which
are by law empowered to undertake and dispose of the cases therewith.
4. The Subjects
• Three sets of entities will fall under the ambit of individual
insolvency provisions.
• The entities falling under the horizon of individual insolvency
would include :
1. Personal guarantor --- Section 5 (22) of the IBC defines a personal guarantor as an
individual who is the surety in a contract of guarantee to the corporate debtor.
2. Corporate debtor
3. Partnership & proprietorship firms
4. and Other individual borrowers.
5. Jurisdiction under the Code
• Appeal shall be made within 30
days --- extended for 15 days.
• Appeal shall be made within 45
days --- extended for 15 days
• Only on question of law.
6. REMEDIES offered by DRT
• Obtaining Bankruptcy order
• Enforceable against the estate of bankrupt. [sec 155 read
with 128]
• Mode of Enforcement is BANKRUPTCY ORDER [sec
126 read with 128]
• Bankruptcy order will not be applicable to excluded debts
and debt incurred by means of fraud or breach of trust.
[Sec 139]
7. Pre- requisites for availing the remedies
Filing of application for bankruptcy order. [Sec 121]
Such application can only be filed -
1. When DRT has rejected application for Insolvency resolution proceedings, the
repayment plan.
2. By a creditor whose claim is not satisfied after completion of repayment plan under
chapter 3 of part 3.
Application will be filed along with –
1. Records of insolvency resolution process
2. Copy of order passed by DRT permitting the creditor to apply for bankruptcy
3. Details of debt owed by debtor on the date of application for bankruptcy. And any
other relevant document.
8. Role of adjudicating authority
1. Directing board for appointment of bankruptcy trustee.
2. Passing of bankruptcy order.
3. Sending notice to creditors asking them to register their claims.
4. Passing of discharge order
on the expiry of bankruptcy order from bankruptcy commencement date.
Within 7 days of approval of CoC for completion of administration of estate.
5. Passing order regarding preference transactions –
That preference transaction was void.
That property transferred under preference transaction shall be vested to
bankruptcy order.
That the original position should be restored.
CAN order bankruptcy trustee to pay dividend or pay it’s interest.
9. Role of adjudicating authority
• An application for bankruptcy by the debtor shall not be
withdrawn without the leave of the Adjudicating Authority
• An application for bankruptcy by the creditor shall not be
withdrawn without the permission of the Adjudicating Authority.
• Appointment of bankruptcy trustee
• The Adjudicating Authority shall issue public notice to collate the
claims of creditors.