Debt Recovery Tribunals (DRTs) were established to provide banks and financial institutions with a faster alternative to civil courts for recovering loans. Created by the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDBA 1993, commonly referred to as the DRT Act), these tribunals have exclusive jurisdiction over bank debt recovery claims above INR 20 lakh. This article explains the complete DRT recovery process from the filing of an Original Application to the execution of a Recovery Certificate.
- Scheduled Commercial Banks (including foreign bank branches in India)
- Scheduled Co-operative Banks
- All India Financial Institutions (such as NABARD, NHB, SIDBI, EXIM Bank)
- Asset Reconstruction Companies (ARCs) that have acquired debt from eligible institutions
- Regional Rural Banks (in certain jurisdictions)
Jurisdictional threshold: The debt amount must exceed INR 20 lakh. Debts below this threshold must be recovered through civil courts.
Jurisdiction: The DRT within whose territorial jurisdiction: (a) the defendant resides or carries on business or personally works for gain; or (b) the branch of the bank that advanced the loan is located; or (c) any property of the defendant is situated.
There are 39 DRTs and 5 Debt Recovery Appellate Tribunals (DRATs) across India.
Filing an Original Application (OA)
Form and content: The application under Section 19 of the RDBA 1993 (called an Original Application or OA) must include:
- Full particulars of the applicant (bank) and all defendants (borrowers, guarantors, co-borrowers)
- Details of the financial assistance, loan type, disbursement amount, date, account number
- Statement of the outstanding amount (principal, interest up to the date of filing, penal interest if any)
- Details of the security, property mortgaged, assets hypothecated, shares pledged
- The grounds of recovery
Court fees: As per the Schedule to the RDBA 1993, the filing fee is 0.5% of the amount claimed, subject to a cap of INR 1.5 lakh. This fee cap was introduced to make the tribunal accessible even for large-ticket recovery matters.
Documents to file: The OA must be accompanied by: the loan agreement and all facility letters; the security documents (mortgage deed, hypothecation agreement, guarantee deeds); demand notice sent to the borrower; statement of account from the date of disbursement certified by an officer of the bank; and any other documents relied upon.
Proceedings: From Filing to Recovery Certificate
Service of Summons
Upon receipt of the OA, the DRT issues summons to the defendants. Service is typically by registered post, hand delivery through the bailiff, or electronic means. The DRT tracks service; if a defendant evades service, the DRT may order service by publication in newspapers.
Written Statement and Counter-Claim
Defendants have 30 days from service of summons to file a written statement. The written statement may include a counter-claim against the bank (for example, for wrongful freezing of accounts, for excessive interest charges, or for damages arising from the bank’s conduct). Counter-claims are adjudicated by the DRT along with the main OA.
Interlocutory Applications
Section 19(8) of the RDBA 1993 empowers the DRT to issue interim orders, including:
- Injunctions against dissipation or transfer of assets by the defendant
- Appointment of a receiver over specific properties
- Attachment before judgment (restraining the defendant from dealing with identified assets)
These interlocutory remedies are important tools for lenders where there is a risk that the defendant will remove or dissipate assets during the pendency of proceedings.
Evidence
OA proceedings before the DRT are conducted primarily on the basis of affidavit evidence, the bank files an affidavit of evidence setting out the facts, attaches documents, and the defendant files a reply affidavit. Oral evidence through cross-examination is permitted but is ordered only in cases where there are genuine factual disputes requiring determination.
Adjudication and Recovery Certificate
Upon completion of proceedings, the Presiding Officer of the DRT delivers a judgment. If the DRT finds in favour of the bank, it issues a Recovery Certificate (RC), a document recording the amount the defendant is liable to pay, including principal, interest up to the date of judgment, costs, and continuing interest. The Recovery Certificate is issued to the Recovery Officer of the DRT for execution.
Execution of the Recovery Certificate
The Recovery Officer is a statutory officer attached to the DRT with extensive powers of execution:
- Attachment and sale of moveable property, bank accounts, shares, vehicles, machinery, stock
- Attachment and sale of immoveable property, land, buildings (with appropriate procedural steps including attachment notice, valuation, sale notice, auction)
- Arrest and detention of the debtor, the Recovery Officer may order civil detention of a judgment debtor who has the means to pay but refuses to do so
- Appointment of a receiver, to manage and realise secured assets
No automatic stay of Recovery Certificate execution: unlike court decrees, a Recovery Certificate is not automatically stayed upon filing of an appeal to the DRAT. The Recovery Officer may proceed with execution unless the DRAT specifically grants a stay (which typically requires a deposit of 50% of the decreed amount as a condition).
Appeal to the Debt Recovery Appellate Tribunal
Under Section 20 of the RDBA 1993, any person aggrieved by a DRT order may appeal to the DRAT within 30 days of the order. For an appeal by the borrower (the losing defendant), the DRAT has power to condone delay but usually requires a deposit of 50% of the decreed amount as a condition for entertaining the appeal and granting a stay. This deposit condition has been challenged constitutionally but upheld as a reasonable procedural safeguard.
Relationship with SARFAESI and IBC
Parallel with SARFAESI: A bank can simultaneously pursue SARFAESI enforcement (out-of-court possession and sale of secured assets) and DRT proceedings (for the unsecured portion of the debt or as a parallel track). The two proceedings are not mutually exclusive.
IBC moratorium: Section 14 of the Insolvency and Bankruptcy Code, 2016 imposes an automatic moratorium on all proceedings against the corporate debtor from the date of admission of an insolvency application by the NCLT. This moratorium stays DRT proceedings as well, an admitted IBC case brings DRT OAs to a standstill. This is a major shift in the recovery landscape; where the borrower or any financial creditor files under IBC, DRT becomes secondary.
Key Takeaways
- DRT proceedings begin with an Original Application under Section 19 of the RDBA 1993, require filing fees of 0.5% of the claim (capped at INR 1.5 lakh), and proceed primarily on affidavit evidence, with the tribunal having powers to grant interim injunctions and appoint receivers during the pendency of proceedings.
- The Recovery Certificate issued by the DRT is executed by the Recovery Officer, who has powers to attach bank accounts, sell properties, and arrest and detain a debtor who has the means to pay, without an automatic stay even if appeal is filed.
- When an IBC insolvency application is admitted against the same borrower, the Section 14 moratorium automatically stays all DRT proceedings, making IBC the primary resolution forum for large corporate defaults.
This article is for informational purposes only and does not constitute legal advice. Readers should seek appropriate professional counsel for their specific circumstances.
META TITLE: Debt Recovery Tribunal India: Process End to End