Top 5 Defenses Available to Borrowers Before the Debt Recovery Tribunal

Understanding Your Rights as a Borrower

In the financial landscape, borrowers often face difficulties that may lead to legal actions such as those initiated by banks or financial institutions. One crucial aspect to comprehend is the defenses available to borrowers, particularly before the Debt Recovery Tribunal (DRT). In this blog post, we will explore the top five defenses borrowers can employ to protect their interests against recovery proceedings.

1. Improper Service of Notice

One of the most potent defenses available to borrowers is the improper service of notice. For any legal action to be valid, the borrower must be formally notified of the proceedings as per the guidelines outlined in the law. If a borrower receives a notice that does not meet these standards—such as being sent to an incorrect address or not being served in a timely manner—they can challenge the legitimacy of the claim in the DRT. This defense can potentially halt recovery proceedings, granting the borrower time to rectify the situation.

2. Loan Already Regularized

Another significant defense is demonstrating that the loan has already been regularized. Borrowers may find themselves in a situation where they have made all requisite payments or entered into an agreement to settle outstanding dues, yet the financial institution continues its pursuit. In these cases, presenting evidence to the DRT showing that the loan is regularized can effectively negate the creditors' claims, leading to a dismissal of the recovery application.

3. Wrongful Valuation of Secured Assets

Disputing the valuation of secured assets is also a common defense among borrowers. Financial institutions often decrease the value of collateral to justify recovery actions. Borrowers can defend against this by providing independent valuations that reflect a higher worth of the secured assets. If evidence shows that the institution acted inappropriately or neglected standard procedures in valuing the assets, it may lead to an unfavorable outcome for the lender.

4. Settlement Pending

A borrower may also assert that a settlement is pending as a strategic defense. If negotiations are ongoing with the lender regarding repayment frameworks or restructuring of the loan, it is reasonable to request the tribunal to stay proceedings until the settlement discussions conclude. This defense underscores the borrower’s willingness to resolve the issue amicably, potentially persuading the DRT to allow for more time for resolution.

5. Violation of SARFAESI Rules

Lastly, borrowers can argue that their rights have been infringed upon due to a violation of the SARFAESI Act. Financial institutions are obligated to adhere to the regulations defined in this act, which includes the proper conduct concerning the recovery of dues and enforcement of security interest. If a borrower identifies discrepancies or violations in the process undertaken by the creditor, they can present this case before the DRT, which may result in the cancellation of unjust recovery actions.

In conclusion, understanding these defenses can empower borrowers to navigate legal proceedings effectively. Engaging competent legal counsel to explore these options is advisable to enhance the chances of a favorable outcome before the Debt Recovery Tribunal.