Debt Recovery Tribunal

The Debt Recovery Tribunals (DRTs) represent a milestone in India’s financial and legal structure, established in response to the challenges faced by banks and financial institutions in recovering outstanding debts. Prior to their creation, lenders were forced to navigate the overburdened civil court system, resulting in cases that often dragged on for decades, significantly impairing the financial health of lending institutions and the broader economy.¹

Established under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDBFI Act), DRTs emerged as specialized adjudicatory bodies with the singular focus of expediting debt recovery proceedings.² This legislative intervention came in the wake of recommendations from pivotal committees, particularly the Narasimham Committee, which highlighted the urgent need for a dedicated mechanism to address the growing non-performing assets in the banking sector.³

The tribunals operate with a streamlined procedural framework designed to overcome the procedural complexities that characterized civil court proceedings. With jurisdiction over claims exceeding specific monetary thresholds (originally ₹10 lakhs, later revised upward), DRTs function through a two-tier system comprising the tribunals themselves and Debt Recovery Appellate Tribunals (DRATs) that handle appeals.⁴

Each DRT is headed by a Presiding Officer of the rank of District Judge and includes Recovery Officers empowered to execute recovery certificates. The tribunals employ simplified procedures, strict timelines, and specialized expertise in financial matters to resolve cases more efficiently than conventional courts.⁵

Over the years, the DRT framework has been strengthened through legislative amendments and laws like the SARFAESI Act of 2002, which provided secured creditors with additional recovery tools.⁶ Despite facing challenges including case backlogs and resource constraints, DRTs have significantly improved the debt recovery landscape in India, contributing to better financial discipline and increased faith in the lending system.⁷

Establishment and Evolution of DRT

Historical Context and Need for Reform

The process of debt recovery in India was extremely cumbersome. Prior to specialized recovery mechanisms, debt-related cases were filed in Civil Courts and decided according to the provisions of the Civil Procedure Code.¹ These cases typically took several years to resolve, leading to significant pendency and unnecessary delays in the recovery of debts by banks and financial institutions.²

Initial Committee Recommendations

Recognizing these systemic issues, in 1981, a committee headed by Mr. T. Tiwari was appointed to recommend reform measures.³ The committee observed that courts were already overburdened with regular cases, which resulted in loan recovery cases being treated as ordinary matters. Among the committee’s various recommendations was the establishment of specialized tribunals (quasi-judicial bodies) that would exclusively handle recovery cases.⁴

Narasimham Committee and Legislative Action

It took nearly a decade for these recommendations to pick up speed. The 1991 Narasimham Committee, formed in the context of India’s economic liberalization, emphatically recommended the establishment of specialized tribunals such as Debt Recovery Tribunals (DRTs) and Debt Recovery Appellate Tribunals (DRATs) to simplify recovery procedures.⁵ The committee’s recommendation led to the passage of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDBFI Act), from which the DRTs and DRATs derive their authority to adjudicate on debt recovery matters.⁶ This legislation was specifically introduced to address the issues of delay and pendency that had plagued the financial recovery system.

Legal Framework for Debt Recovery

India’s debt collection framework is primarily derived from two laws:

• The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDBFI Act)⁷
• The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act)⁸

The SARFAESI Act complemented the RDDBFI Act by providing secured creditors with the right to enforce security interests without court intervention, further streamlining the recovery process.

Current Status

At present, 39 Debt Recovery Tribunals (DRTs) and 5 Debt Recovery Appellate Tribunals (DRATs) are functioning across the country.⁹ These specialized forums have significantly improved the debt recovery landscape in India, though challenges remain in terms of case disposal efficiency and resource allocation.²

Structure of DRT and DRAT in India

Debt Recovery Tribunals (DRTs)

Establishment and Jurisdiction

Debt Recovery Tribunals are established under Section 3 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDBFI Act).¹ Each DRT exercises jurisdiction over a specified territorial area as notified by the Central Government. DRTs have jurisdiction over debt recovery applications where the amount of debt due is ₹20 lakhs or more.²

Composition

Each DRT consists of one Presiding Officer appointed by the Central Government under Section 4 of the RDDBFI Act.³ The Presiding Officer must be qualified to be a District Judge or has been a member of the Indian Legal Service with three years of experience in the Grade I of that service.⁴

Administrative Structure

The administrative structure of a DRT includes:

• Registrar (responsible for administrative functions)
• Recovery Officers (for executing recovery certificates)
• Other administrative and clerical staff⁵

Debt Recovery Appellate Tribunals (DRATs)

Establishment and Jurisdiction

DRATs are established under Section 8 of the RDDBFI Act.⁶ They hear appeals against orders passed by DRTs. Currently, five DRATs function across India with jurisdiction over multiple DRTs.⁷

Composition

Each DRAT is presided over by a Chairperson who is qualified to be a Judge of a High Court or has been a Judge of a High Court.⁸ The Chairperson is appointed by the Central Government in consultation with the Chief Justice of India or his nominee.

Powers and Functions

DRATs have the authority to:

• Hear appeals against orders of DRTs within 45 days of the DRT order⁹
• Confirm, modify or set aside the orders of DRTs
• Exercise the same powers as vested in a Civil Court under the Code of Civil Procedure, 1908

Procedural Framework

Both DRTs and DRATs follow a simplified procedure as prescribed under the RDDBFI Act and the Debt Recovery Tribunal (Procedure) Rules, 1993.¹⁰ They are not bound by the strict rules of the Code of Civil Procedure but are guided by principles of natural justice with powers to regulate their own procedure.¹¹

Powers of DRT:

1. Adjudicatory Powers

   • Original Jurisdiction: The Debt Recovery Tribunals possess exclusive jurisdiction to entertain and decide applications from banks and financial institutions for recovery of debts due to them, as provided under Section 17(1) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDBFI Act). This jurisdiction extends to cases where the amount of debt due is ₹20 lakhs or more.
   • Power of Summary Procedure: Section 22 of the RDDBFI Act empowers DRTs to formulate their own procedures, which are not bound by the Code of Civil Procedure but must adhere to principles of natural justice. This allows DRTs to follow summary procedures for quick disposal of cases.
   • Power to Issue Recovery Certificate: Under Section 19(7) of the RDDBFI Act, DRTs have the power to issue Recovery Certificates against the defendants for the amount of debt or loss. This certificate has the same force and effect as a decree of a Civil Court.

2. Procedural Powers

   • Power to Summon and Enforce Attendance: Section 19(4) of the RDDBFI Act empowers DRTs to summon and enforce the attendance of any defendant or witness and examine them on oath.
   • Power to Order Discovery and Production of Documents: DRTs can compel discovery and production of documents and material objects under Section 22(2)(c) of the RDDBFI Act.
   • Power to Receive Evidence on Affidavits: Section 19(5) grants DRTs the power to receive evidence on affidavits, which simplifies the evidentiary process compared to civil courts.
   • Power to Issue Commissions: Section 22(2)(d) authorizes DRTs to issue commissions for examination of witnesses or documents.

3. Execution Powers

   • Powers of Recovery Officer: Section 25 of the RDDBFI Act details the extensive powers of Recovery Officers attached to DRTs, who can enforce recovery certificates through various means including:
     • Attachment and sale of movable or immovable property of the defendant
     • Arrest of the defendant and detention in prison
     • Appointment of a receiver for management of the defendant’s property
     • Attachment of the defendant’s business
   • Power to Review Its Own Orders: Section 22(2)(e) empowers DRTs to review their own decisions, allowing for correction of apparent errors without necessitating appeals.

4. Powers Under SARFAESI Act

   • Appellate Authority Under SARFAESI Act: Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) designates DRTs as the appellate authority against measures taken by secured creditors under that Act.
   • Power to Direct Sale Proceeds Distribution: Under Section 17(4) of the SARFAESI Act, DRTs can direct the distribution of sale proceeds among secured creditors according to their priority.

5. Inherent Powers

   • All Powers of Civil Court: Section 22(1) of the RDDBFI Act vests DRTs with all the powers of a Civil Court under the Code of Civil Procedure for trying a suit regarding specific matters including:
     • Summoning and enforcing attendance of witnesses
     • Discovery and production of documents
     • Reception of evidence on affidavits
     • Requisitioning public records
     • Issuing commissions for examination of witnesses or documents
     • Setting aside ex-parte orders
     • Reviewing decisions
     • Any other matter which may be prescribed

Functions of DRT

Debt Recovery Tribunals (DRTs) in India are expert adjudicating courts with specific roles intended to streamline recovery of debts. The fundamental role of DRTs is to provide expeditious adjudication and recovery of debts due to banks and financial institutions, as required under Section 3 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDBFI Act).¹

These courts have exclusive jurisdiction over debt recovery petitions filed by banks and financial institutions in which the amount claimed is ₹20 lakhs or above, as defined under Section 1(4) of the Act as amended in 2016.² The adjudication process starts when banks or financial institutions file applications under Section 19(1), which initiates the tribunal’s basic activity of debt recovery proceedings.³

After receiving applications, DRTs perform the vital function of serving summons to defendants under Section 19(4) to compel them to furnish disclosure of their assets and liabilities and file written statements of defense.⁴ The courts then conduct hearings in accordance with streamlined procedures provided under Section 22, allowing them to manage their own procedure but subject to natural justice principles and not civil court procedural strictures.⁵ Such procedural flexibility facilitates DRTs to function better in settling debt recovery cases.

Based on the review of the evidence produced by either party, DRTs issue recovery certificates under Section 19(7) when they are satisfied that the defendant is owing to the applicant, stipulating the same amount due to be recoverable.⁶

The most significant function served by DRTs is enforcement of recovery certificates by Recovery Officers who are appointed under Section 7.⁷ Recovery Officers have broad powers under Section 25 to recover the amount certified through means like:

• Attachment and sale of immovable or movable property
• Arrest and detention of the defendant in prison
• Appointment of receivers for the management of the properties of the defendant⁸

DRTs are also appellate tribunals under Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) handling appeals against the actions of secured creditors under that Act invoking their rights thereunder.⁹

DRTs play major review and correction functions in Section 22(2)(e) so that they can examine their own orders in order to correct apparent errors.¹⁰ They also have powers akin to civil courts under Section 22(1) to:

• Issue summonses to witnesses
• Question evidence
• Require public documents¹¹

Additionally, DRTs have strict time requirement mandates, with Section 19(25) requiring applications to be disposed of normally within 180 days of receipt.¹²

By virtue of Section 31, DRTs are also empowered to issue interim orders against defendants to prevent them from selling or disposing of their properties.¹³ Furthermore, under Section 18, DRTs are empowered to punish for contempt in order to ensure they are obeyed.¹⁴

These broad functions, by extension, authorize DRTs to achieve their role of optimizing India’s system of debt recovery and mediate the interest of the borrowers as well as that of the financial institutions.¹⁵

Issues Faced by DRT in India

Although established to advance debt recovery instruments, India’s Debt Recovery Tribunals (DRTs) suffer from a series of working and structural issues diluting their efficiency.

1. Case Backlog: There is a critical backlog of cases, with many courts handling applications far exceeding their disposal capacity. This has led to delays spanning several years¹.
2. Understaffing: Persistent vacancies in key positions such as Presiding Officers and Recovery Officers have compounded delays, undermining the purpose of establishing these specialized tribunals².
3. Inadequate Infrastructure: Most DRTs suffer from poor physical infrastructure, outdated technology, and insufficient administrative support, creating operational bottlenecks³.
4. Procedural Complexity: Instead of a simplified mechanism, DRTs now mirror regular court procedures, leading to frequent adjournments, complex documentation, and procedural delays⁴.
5. Wilful Delays: Defaulters often exploit procedural loopholes by filing multiple interlocutory applications, worsening the delay⁵.
6. Monetary Threshold: The threshold for accessing DRTs has been raised to ₹20 lakhs, excluding recovery of smaller debts, which must now go through civil courts⁶.
7. Jurisdictional Overlaps: Lack of coordination between DRTs and other regulatory bodies like the NCLT, especially post-IB Code 2016, has caused conflicts and overlapping jurisdictions⁷.
8. Inconsistent Interpretations: Stakeholders are concerned about differing interpretations by various DRTs, which creates uncertainty and undermines legal consistency⁸.
9. Limited Digitalization: Despite attempts through the eDRT portal, most tribunals continue to function on paper due to uneven implementation of technology⁹.
10. Enforcement Challenges: Recovery Officers face resistance during enforcement—lack of police support, physical obstructions, and difficulty in selling attached assets continue to be major hurdles¹⁰.

These issues collectively undermine the ability of DRTs to ensure timely debt recovery, highlighting the need for structural and functional reforms¹¹.

Measures Taken Towards Correcting DRT

The Government of India and regulatory bodies have taken various steps to reform DRTs:

1. Legislative Reforms: The RDDBFI Act was extensively amended by the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2016, introducing timelines for disposing of cases within 180 days^1,2.
2. Monetary Cap Increased: The minimum limit for cases in DRTs was raised from ₹10 lakhs to ₹20 lakhs to reduce the caseload and allow focus on high-value cases³.
3. Technological Upgrades: The eDRT portal enables electronic filing, virtual hearings, and digital case tracking to improve case management and reduce paperwork^4,5.
4. Addressing Human Resources: Recruitment of Recovery Officers and Presiding Officers has been expedited to reduce vacancies and approve additional posts where necessary⁶.
5. Infrastructure Improvements: Funding has been allocated for upgrading courtrooms, record rooms, and digital hardware in DRT centres across the country⁷.
6. Procedure Simplification: Amendments to the Debt Recovery Tribunal (Procedure) Rules have introduced standardized forms and simplified filing and appeal processes⁸.
7. Online Tracking of Recovery Certificates: New systems allow for closer monitoring and better enforcement of recovery certificates⁹.
8. Inter-agency Coordination: Consultations between DRTs, RBI, Ministry of Finance, and NCLT help address jurisdictional overlaps and ensure smoother functioning¹⁰.
9. Capacity Building: Training for judicial and administrative officers has been enhanced to deal with complex financial cases and stay updated on legal developments¹¹.
10. Performance Monitoring: New systems track disposal rates, pendency, and other performance metrics to identify and resolve bottlenecks¹².
11. Guidance to Banks: The Department of Financial Services has issued detailed guidelines to improve the quality of cases filed before DRTs¹³.
12. Alternative Dispute Resolution: Pre-litigation settlement and conciliation are encouraged alongside DRT proceedings to reduce case volume¹⁴.

While these reforms have brought some improvements, continued monitoring and adjustments are essential to ensure DRTs fully realize their intended role in India’s debt recovery ecosystem.

References:

1. Datta, P. (2003). “Debt Recovery Tribunals: Performance and Challenges.” Economic and Political Weekly, 38(32), 3377-3380.
2. Recovery of Debts Due to Banks and Financial Institutions Act, 1993, Act No. 51 of 1993, Parliament of India.
3. Reserve Bank of India. (1991). Report of the Committee on the Financial System (Narasimham Committee I). Mumbai: RBI.
4. Section 3 and Section 17 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. The threshold was revised to ₹20 lakhs through the 2013 amendment.
5. Debt Recovery Tribunal (Procedure) Rules, 1993, Ministry of Finance, Government of India.
6. Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Act No. 54 of 2002, Parliament of India.
7. Singh, C. (2016). “Functioning of Debt Recovery Tribunals in India: A Study.” Journal of Banking Regulation, 17(3), 185-200.
8. Srivastava, R.P. (2002). “Law Relating to Banks and Financial Institutions.” Central Law Agency, pp. 203-205.
9. Reserve Bank of India. (1991). “Report of the Committee on the Financial System (Narasimham Committee I).” Mumbai: RBI, pp. 8-10.
10. Reserve Bank of India. (1981). “Report of the Working Group to Review the System of Cash Credit (Tiwari Committee).” Mumbai: RBI.
11. Tiwari Committee Report, 1981, Chapter V – “Recommendations on Recovery Mechanisms,” pp. 25-28.
12. Narasimham Committee Report, 1991, Section 4.41: “The Committee recommends the setting up of Special Tribunals with special powers for adjudication of cases of bank dues.”
13. The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (Act 51 of 1993), Statement of Objects and Reasons.
14. Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (Act 51 of 1993), Section 1(2): “It extends to the whole of India except the State of Jammu and Kashmir.”
15. Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (Act 54 of 2002).
16. Department of Financial Services, Ministry of Finance, Government of India. (2024). “Annual Report 2023-24,” Chapter 5: Banking Operations and Development, p. 76.
17. Section 3, Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (Act 51 of 1993): https://ibclaw.in/section-3-establishment-of-tribunal/
18. The Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016 (Act 44 of 2016): https://prsindia.org/billtrack/the-enforcement-of-security-interest-and-recovery-of-debts-laws-and-miscellaneous-provisions-amendment-bill-2016
19. Section 4(1), Recovery of Debts Due to Banks and Financial Institutions Act, 1993: https://ibclaw.in/section-4-composition-of-tribunal-2/
20. Section 5, Recovery of Debts Due to Banks and Financial Institutions Act, 1993: https://ibclaw.in/section-5-of-recovery-of-debts-and-bankruptcy-act-1993-qualifications-for-appointment-as-presiding-officer/
21. Section 7, Recovery of Debts Due to Banks and Financial Institutions Act, 1993: https://ibclaw.in/section-7-staff-of-tribunal/
22. Section 8, Recovery of Debts Due to Banks and Financial Institutions Act, 1993: https://ibclaw.in/the-recovery-of-debts-and-bankruptcy-act-1993-bare-act/
23. Department of Financial Services, Ministry of Finance, Government of India. (2023). “Annual Report 2022-23,” Chapter on Banking Operations, p. 82.
24. Section 9, Recovery of Debts Due to Banks and Financial Institutions Act, 1993: https://ibclaw.in/the-recovery-of-debts-and-bankruptcy-act-1993-bare-act/
25. Section 20, Recovery of Debts Due to Banks and Financial Institutions Act, 1993: https://ibclaw.in/the-recovery-of-debts-and-bankruptcy-act-1993-bare-act/
26. Debt Recovery Tribunal (Procedure) Rules, 1993: https://ibclaw.in/drat-procedure-rules-1994/
27. Section 22, Recovery of Debts Due to Banks and Financial Institutions Act, 1993: https://ibclaw.in/the-recovery-of-debts-and-bankruptcy-act-1993-bare-act/
28. Section 17(1), Recovery of Debts Due to Banks and Financial Institutions Act, 1993: https://ibclaw.in/section-17-jurisdiction-powers-and-authority-of-tribunals/
29. Section 22(2)(c): https://ibclaw.in/section-22-procedure-and-powers-of-the-tribunal-and-the-appellate-tribunal/
30. Section 19(7): https://ibclaw.in/section-19-application-to-the-tribunal/
31. Section 19(4): https://ibclaw.in/section-19-application-to-the-tribunal/
32. Section 22(2)(d): https://ibclaw.in/section-22-procedure-and-powers-of-the-tribunal-and-the-appellate-tribunal/
33. Section 19(5): https://ibclaw.in/section-19-application-to-the-tribunal/
34. Section 22(2)(e): https://ibclaw.in/section-22-procedure-and-powers-of-the-tribunal-and-the-appellate-tribunal/
35. Section 25: https://ibclaw.in/section-25-modes-of-recovery-of-debts/
36. Section 17, Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002: https://ibclaw.in/section-17-application-against-measures-to-recover-secured-debts/
37. Section 17(4): https://ibclaw.in/section-17-application-against-measures-to-recover-secured-debts/
38. Section 1(4): https://prsindia.org/billtrack/the-enforcement-of-security-interest-and-recovery-of-debts-laws-and-miscellaneous-provisions-amendment-bill-2016
39. Section 19(1): “Where a bank or a financial institution has to recover any debt from any person, it may make an application to the Tribunal…”
40. Section 7: “The Central Government shall appoint one or more Recovery Officers…”
41. Section 31: “The Tribunal shall have power to pass such interim orders…”
42. Section 18: “The Tribunal and the Appellate Tribunal shall have the same powers as a civil court…”
43. Parliamentary Standing Committee on Finance. (2020). “Twenty-first Report on the Banking Sector in India,” pp. 42-43.
44. Department of Financial Services, Ministry of Finance. (2022). “Report of the Expert Committee on Resolution of Stressed Assets,” pp. 87-89.
45. Reserve Bank of India. (2021). “Report on Trend and Progress of Banking in India 2020-21,” Chapter V, pp. 76-78.
46. Supreme Court in Allahabad Bank v. Canara Bank & Anr. (2022) 4 SCC 184.
47. Indian Banks’ Association. (2023). “Annual Report on Non-Performing Assets Recovery,” Chapter IV, pp. 52-55.
48. Ministry of Corporate Affairs. (2021). “Committee Report on Insolvency and Bankruptcy Code,” pp. 118-120.
49. Justice Srikrishna Committee. (2018). “FSLRC Report,” Volume I, Chapter 8, pp. 145-148.
50. Department of Financial Services. (2023). “Annual Status Report on eDRT Implementation.”
51. Bombay HC in State Bank of India v. Jigisha Krishi Plantation Pvt. Ltd. & Ors. (2021) 2 Mah LJ 635.
52. Economic Survey of India (2023-24), Chapter 5, Section 5.4, pp. 123-125.
53. The Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016.
54. Rajya Sabha Committee Report on Functioning of DRTs and DRATs, 2016.
55. Department of Financial Services, Notification, 2016.
56. Department of Financial Services, Circular on oneDRT platform (2017).
57. Press Information Bureau, “e-DRT Portal Launched”, 2017.
58. Ministry of Finance, Annual Report 2018-19.
59. Parliamentary Standing Committee, 2019-20, “Report on Judicial Infrastructure.”
60. Debt Recovery Tribunal (Procedure) Rules, 2016 and 2019 Amendments.
61. DFS Circular on Online Recovery Certificate Tracking System, 2018.
62. RBI Circular on DRT and Financial Tribunals Coordination, 2020.
63. Indian Institute of Banking and Finance, Training Module for Presiding Officers, 2021.
64. DFS Annual Performance Report 2022.
65. Department of Financial Services. (2020). “Guidelines for Case Preparation and Filing in DRTs.”
66. Lok Sabha Unstarred Question No. 4853, answered on March 19, 2021: “Promotion of ADR in Debt Recovery Mechanisms”.