The Debt Recovery Tribunal (DRT) and Debt Recovery Appellate Tribunal (DRAT) were established under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDB Act, also called RDB Act) to provide a speedy mechanism for recovery of debts due to banks and financial institutions. DRTs replace the regular civil court jurisdiction for bank debt recovery.
Legal Framework
| Provision | Subject |
|---|---|
| S.3 RDDB Act | Establishment of DRTs |
| S.8 RDDB Act | Establishment of DRATs |
| S.17 RDDB Act | Jurisdiction of DRT |
| S.18 RDDB Act | Bar of jurisdiction of other courts |
| S.19 RDDB Act | Application to DRT (procedure) |
| S.22 RDDB Act | Limitation: 3 years from date debt becomes due |
| S.25 RDDB Act | Recovery Officer |
| S.29 RDDB Act | Power of DRT (deemed civil court) |
| S.31 RDDB Act | Transfer of pending cases from civil courts |
| S.17 SARFAESI | Appeal against S.13(4) measures to DRT |
Structure
| Body | Function | Composition |
|---|---|---|
| DRT (Debt Recovery Tribunal) | Original jurisdiction: adjudicates and recovers | Presiding Officer (District Judge rank) |
| DRAT (Debt Recovery Appellate Tribunal) | Appellate jurisdiction: hears appeals from DRT | Chairperson (High Court Judge rank) |
Currently 39 DRTs and 5 DRATs across India.
Jurisdiction of DRT
Pecuniary Jurisdiction
| Threshold | Rule |
|---|---|
| Original jurisdiction | Debt of Rs.20 lakh or more (increased from Rs.10 lakh by 2018 amendment) |
| Below Rs.20 lakh | Civil court retains jurisdiction |
| No upper limit | DRT handles all amounts above threshold |
| SARFAESI appeals | S.17 SARFAESI: all amounts (no minimum for appeal) |
Subject Matter Jurisdiction
| Can Adjudicate | Cannot Adjudicate |
|---|---|
| Debts due to banks (any bank under BR Act) | Debts due to cooperative banks (unless banking company) |
| Debts due to financial institutions (public FIs) | Debts due to individuals or private lenders |
| Counter-claims by borrowers against banks (S.19(6)) | Criminal matters |
| SARFAESI appeals (S.17) | Matrimonial or succession disputes |
| Applications for certificates of recovery | Disputes between individuals (non-banking) |
Territorial Jurisdiction
| Rule | Provision |
|---|---|
| Where branch of bank is situated | S.17(2) |
| Where cause of action arises | S.17(2) |
| Where secured asset is located (SARFAESI appeals) | S.17 SARFAESI |
Procedure Before DRT
| Stage | Requirement |
|---|---|
| Filing | Original Application (OA) by bank/FI; prescribed form |
| Service | Summons to defendant (30 days to file defence) |
| Written statement | Defendant files within 30 days (extendable by 15 days) |
| Evidence | Affidavit-based; oral evidence only if necessary |
| Powers | DRT has powers of civil court: summon witnesses, discovery, inspection |
| Time limit | Must dispose within 180 days from date of OA |
| Order | Recovery certificate issued to Recovery Officer |
| Execution | Recovery Officer executes (attachment, sale, arrest) |
Powers of DRT
| Power | Source |
|---|---|
| Civil court powers | S.29 (summons, evidence, discovery) |
| Issue Recovery Certificate | S.19(22) |
| Pass interim orders | S.19(7) (attachment before judgment) |
| Stay proceedings of civil court | S.31 (priority over civil courts) |
| Transfer cases from civil court | S.31 |
| Set aside ex-parte orders | General power |
| Adjudicate counter-claims | S.19(6): borrower may counter-claim |
Recovery Modes (Recovery Officer)
| Mode | Provision |
|---|---|
| Attachment and sale of movable property | S.25-28 |
| Attachment and sale of immovable property | S.25-28 |
| Arrest and detention of judgment debtor | S.25 |
| Appointment of receiver | S.25 |
Bar of Civil Court Jurisdiction (S.18)
No court (civil) shall have jurisdiction to entertain any suit or proceeding in respect of any matter which a DRT is empowered to determine. Once DRT jurisdiction is established, the civil court cannot hear the case.
Exception: Writ jurisdiction of High Court (Art.226/227) and Supreme Court (Art.32) is not barred.
Illustrations
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DRT vs civil court (the speed difference): Bank of India has a Rs.50 lakh loan defaulted by M/s Sharma Traders. Civil court route: File money suit → defendant delays (adjournments, transfer petitions, appeals) → decree in 7-12 years → execution proceedings → another 3-5 years → total: 10-15 years. By then, Sharma Traders has sold all assets. DRT route: File Original Application → mandatory 180-day disposal target → Recovery Certificate → Recovery Officer attaches property and sells → total: 6-18 months. The RDDB Act was enacted precisely because 3+ lakh cases were pending in civil courts in 1993 with no end in sight.
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Pecuniary threshold (the Rs.20 lakh cutoff): Alpha Bank has two defaulting borrowers:
- Borrower A owes Rs.25 lakh → DRT has jurisdiction. File OA before DRT.
- Borrower B owes Rs.12 lakh → Below Rs.20 lakh threshold. DRT has NO jurisdiction. Must file civil suit in District Court.
This threshold means small borrowers still face the slow civil court system, while big defaults get fast-tracked through DRT. The 2018 amendment raised the threshold from Rs.10 lakh to Rs.20 lakh effectively pushing more cases BACK to civil courts (reducing DRT workload but slowing recovery for medium-sized loans).
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Counter-claim power (S.19(6) borrower's weapon): SBI files OA in DRT claiming Rs.1 crore from ABC Company (loan default). ABC says: "Wait SBI wrongfully debited Rs.15 lakh from our current account last year without authority. We have a counter-claim." Under S.19(6), ABC can file a counter-claim WITHIN the same DRT proceedings. The DRT adjudicates both: SBI's claim of Rs.1 crore AND ABC's counter-claim of Rs.15 lakh. Net result: if both succeed, ABC owes Rs.85 lakh. Without S.19(6), ABC would have to file a separate civil suit back to the slow track.
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DRT's dual role (RDDB + SARFAESI): Same DRT, two different functions:
- Under RDDB Act: DRT is a TRIAL COURT. Bank files OA, DRT conducts hearing, passes order, issues Recovery Certificate. DRT adjudicates the dispute (is the debt valid? how much is owed?).
- Under SARFAESI S.17: DRT is an APPELLATE COURT. Bank has already taken possession under S.13(4). Borrower files appeal: "The bank acted illegally." DRT reviews whether the bank followed procedure correctly. DRT doesn't decide "is the debt valid?" it decides "did the bank follow SARFAESI process correctly?"
Different entry point, different standard of review same tribunal.
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Bar of civil court (S.18 why you can't escape to District Court): A borrower owes Rs.30 lakh to Canara Bank. Instead of waiting for DRT proceedings, the borrower files a civil suit in District Court seeking a declaration that the loan agreement is void. District Court must return the plaint under S.18: "This matter falls within DRT jurisdiction. Civil court cannot entertain it." The borrower's only forum is DRT (or writ jurisdiction of High Court under Art.226). S.18 prevents "forum shopping" borrowers can't dodge DRT by filing in a friendlier civil court.
Recall Check
- What is the pecuniary threshold for DRT jurisdiction?
- Can a borrower file a counter-claim before the DRT?
- What is the time limit for disposal of an Original Application before the DRT?
Key Cases
Delhi High Court Bar Association v. Union of India (2002) Delhi-HC-Bar-Association-v-Union-of-India-2002 Issue: Whether the RDDB Act is constitutionally valid; whether DRTs provide an adequate alternative to civil courts. Rule: The Act is valid if the tribunal provides the same safeguards as civil courts (independence, fair procedure, appeal). Held: The Supreme Court upheld the constitutional validity of the RDDB Act and DRTs. The tribunals provide adequate adjudicatory mechanism: presiding officers have judicial qualifications, procedure is quasi-judicial, appeal lies to DRAT and then High Court. The bar on civil court jurisdiction (S.18) is constitutionally valid.
ICICI Bank v. Prakash Kaur (2007) ICICI-Bank-v-Prakash-Kaur-2007 Issue: Whether DRT jurisdiction is exclusive or concurrent with civil courts for bank debt recovery above Rs.10 lakh (now Rs.20 lakh). Rule: Once the RDDB Act threshold is met, DRT jurisdiction is exclusive; civil courts cannot entertain the suit (S.18). Held: DRT jurisdiction under the RDDB Act is exclusive for debts above the prescribed threshold. Banks must approach DRT, not civil courts. Civil courts must return plaints for presentation before DRT. The only exception is writ jurisdiction of constitutional courts.
Distinctions
| Aspect | DRT (RDDB Act) | SARFAESI (S.13) | Civil Court |
|---|---|---|---|
| Nature | Adjudicatory tribunal | Self-help enforcement | Adversarial court |
| Who initiates | Bank files OA | Bank takes possession | Any party files suit |
| Pre-condition | Debt ≥ Rs.20 lakh | NPA + secured asset + 60-day notice | None |
| Time to resolution | 180 days (statutory target) | 3-6 months (typical) | 5-15 years |
| Appeal | DRAT → HC | DRT (S.17) → DRAT (S.18) → HC | District Court → HC → SC |
| Execution | Recovery Officer (own enforcement) | CMM assists (S.14 SARFAESI) | Execution through court |
| Counter-claim | Yes (S.19(6)) | Limited (S.17 only) | Yes |
| Secured + unsecured | Both (any debt) | Only secured debts | Both |
| Agricultural land | Can adjudicate | Excluded from S.13 | Can adjudicate |
Flashcards
Q: What is the RDDB Act, 1993? A: Recovery of Debts Due to Banks and Financial Institutions Act, 1993. Establishes DRTs and DRATs for speedy adjudication and recovery of bank debts.
Q: What is the minimum debt threshold for DRT jurisdiction? A: Rs.20 lakh (increased from Rs.10 lakh by 2018 amendment).
Q: What is the time limit for DRT to dispose of an application? A: 180 days from the date of filing the Original Application.
Q: Can a borrower file a counter-claim before the DRT? A: Yes. S.19(6) allows the defendant (borrower) to file a counter-claim against the bank, which the DRT adjudicates together with the bank's application.
Q: What is the relationship between DRT and civil court? A: S.18 bars civil court jurisdiction for matters within DRT's purview. DRT jurisdiction is exclusive for debts above Rs.20 lakh due to banks/FIs.
Q: What orders can a DRT pass? A: Recovery certificate (directing Recovery Officer to execute), interim orders (attachment before judgment), directions for payment, dismissal of OA if bank's claim fails.
Q: What is the dual role of DRT under RDDB Act and SARFAESI? A: (1) Original jurisdiction: adjudicates bank debt recovery applications under RDDB Act. (2) Appellate jurisdiction: hears borrower appeals against S.13(4) SARFAESI measures under S.17 SARFAESI.
Q: What is DRAT? A: Debt Recovery Appellate Tribunal. Hears appeals from DRT orders. Chairperson has High Court Judge qualifications. Further appeal lies to High Court.
Exam Scenario
Omega Bank has an outstanding loan of Rs.15,00,000 from a borrower. The loan is unsecured (no collateral). Omega Bank files an Original Application before the DRT. The borrower objects to DRT jurisdiction arguing the amount is below Rs.20 lakh. Advise.
Under the RDDB Act as amended in 2018, the DRT has jurisdiction only where the debt is Rs.20 lakh or more (S.17(1)). The debt here is Rs.15,00,000 (below Rs.20 lakh). The DRT does not have jurisdiction.
Omega Bank must file a civil suit (money suit) before the appropriate civil court. The bar under S.18 only operates one way: it prevents civil courts from entertaining matters within DRT's jurisdiction. Where the amount is below the threshold, civil courts retain jurisdiction.
Additionally, since the loan is unsecured, SARFAESI is unavailable (SARFAESI requires a security interest in a secured asset). Omega Bank's remedies are limited to: (1) civil suit in appropriate court, (2) insolvency proceedings if borrower is insolvent, or (3) arbitration if the loan agreement provides for it. The bank cannot use either DRT or SARFAESI for this debt.