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DRT case or Lok Adalat notice for a loan: what borrowers in India should know
How Debt Recovery Tribunals and Lok Adalats handle bank recovery: the ₹20 lakh DRT threshold, filing a reply, DRAT appeals and pre-deposits, and settling before a Lok Adalat.
Banks and financial institutions recover larger debts through the Debt Recovery Tribunal (DRT) under the Recovery of Debts and Bankruptcy Act, 1993 (RDB Act). The DRT hears claims of ₹20 lakh or more; smaller claims go to civil courts or other forums. If you receive a DRT summons, you must appear and file a written statement by the date given. You can contest the amount, the charges and the procedure. Appeals go to the Debt Recovery Appellate Tribunal (DRAT), usually with a pre-deposit of part of the amount. A Lok Adalat is a different forum. It is a free, voluntary settlement forum run by legal services authorities, and lenders use it heavily for loan and card dues, often before a case is filed. A Lok Adalat award is final and binding, with no appeal. Go with a realistic offer and read the terms before signing.
This guide is part of debt settlement mistakes. It is general information, not legal advice.
DRT and Lok Adalat compared
| Point | Debt Recovery Tribunal | Lok Adalat |
|---|---|---|
| Law | Recovery of Debts and Bankruptcy Act, 1993 | Legal Services Authorities Act, 1987 |
| Who uses it | Banks and financial institutions | Lenders and borrowers, by consent |
| Claim size | ₹20 lakh or more | No minimum; common for small loans and cards |
| Nature | Adjudication: the tribunal decides | Conciliation: both sides must agree |
| Cost to borrower | Lawyer's fees; no court fee to defend | Free |
| Outcome | Recovery certificate, enforced by a recovery officer | Award, deemed a civil court decree |
| Appeal | To the DRAT, with pre-deposit | None; the award is final |
| Also handles | SARFAESI challenges under Section 17 | Cheque bounce cases referred by courts, pre-litigation disputes |
Facing a DRT case
- Read the summons for the hearing date and the time to file your written statement.
- Get a lawyer, or legal aid if you qualify. DRT practice is technical.
- Collect documents: sanction letter, key fact statement, statements of account, correspondence, payment receipts, any settlement offers.
- Check the claim. Is interest charged at the agreed rate? Are there penal charges not disclosed? Did the bank credit your payments? Is the claim within limitation?
- File your written statement in time, with any counter-claim or set-off.
- Consider settlement throughout. DRT cases are often settled, and the tribunal can record the settlement.
Recovery certificate. If the DRT allows the claim, it issues a recovery certificate. The recovery officer can then attach and sell property, attach bank accounts, or take other steps under the Act.
Appeal to the DRAT. Against a DRT order in a recovery case, an appeal lies to the DRAT within 45 days of receiving the order (Section 20 of the RDB Act). Under Section 21, the borrower must deposit 50% of the amount due as determined by the DRT. The DRAT can reduce this, for recorded reasons, but not below 25%. For SARFAESI matters, the appeal under Section 18 of SARFAESI must be filed within 30 days and also requires 50% of the debt (as claimed or as determined, whichever is less), reducible to 25%. The Supreme Court has held that the deposit cannot be waived entirely. These are substantial sums, so weigh settlement before an appeal.
The Lok Adalat route
Legal services authorities hold National Lok Adalats on announced dates across the country, as well as regular and permanent Lok Adalats. Lenders send many overdue accounts to them, often as pre-litigation matters.
| Step | What happens |
|---|---|
| Notice | You receive a notice from the District Legal Services Authority or a taluka committee, at the lender's request |
| Before the date | Contact the lender's representative for the figure they will offer |
| At the Lok Adalat | A bench of a judicial officer and members helps both sides agree |
| Agreement | Terms are written up as an award and signed |
| Effect | The award is a decree, final and binding, with no appeal |
Advantages: free, quick, often with significant waivers of interest and charges, and an enforceable end to the dispute.
Risks: you cannot appeal. If you agree to instalments you cannot meet, the lender can execute the award like a decree. Read the amount, the dates and the default clause.
Court fees. Where a pending case is settled in a Lok Adalat, the Act provides for refund of the court fee paid, which may matter if you filed the case.
Worked example: Lok Adalat settlement (illustrative)
A card account has dues of ₹1,45,000, of which principal is ₹82,000. The lender's Lok Adalat offer is ₹70,000 in two instalments of ₹35,000.
- Waiver: ₹1,45,000 − ₹70,000 = ₹75,000, about 52%
- As a share of principal: ₹70,000 ÷ ₹82,000 ≈ 85%
If you can pay ₹35,000 now and ₹35,000 next month, this is a reasonable outcome. If not, ask on the day for three or four instalments, or a lower lump sum. Do not sign terms you cannot meet. Try the numbers in the settlement offer calculator.
The account will usually be reported as settled. See settled status on CIBIL.
Related guides
When to consult a professional
Always for a DRT case. For a Lok Adalat, many borrowers attend alone, but you can ask the legal services authority's panel lawyer or front office for advice before the date, free if you are eligible.
Frequently asked questions
Do I have to attend a pre-litigation Lok Adalat?
It is voluntary. If you do not attend, no award is made, and the lender may file a case. Attending gives you a chance to settle on better terms.
Can I appeal a Lok Adalat award if I later think the deal was unfair?
There is no appeal. Awards can be challenged only on limited grounds, such as fraud or lack of consent, through a writ petition. Read carefully before signing.
Can a DRT order my arrest?
Under the RDB Act, the recovery officer has powers that include, in some circumstances, arrest and detention as a mode of recovery. It is rare and subject to safeguards. Take legal advice early.
Is the DRT relevant to personal insolvency?
The IBC names the DRT as the authority for individual insolvency, but those provisions are not in force. Only the personal guarantor provisions are, and those cases go to the NCLT. See IBC status.
Sources
- Department of Financial Services: DRT and DRAT administration
- National Legal Services Authority: Lok Adalat schedules
- India Code: Recovery of Debts and Bankruptcy Act, 1993 and Legal Services Authorities Act, 1987
