The Government of Infia enacted The Recovery of Debt due to Banks and Financial

Institutions Act, 1993 for setting up Debt Recovert Tribunals for expedious
adjudication and recovery of debts due to banks. The Debts Recovery Tribunal have
been constituted under Section 3 of the Act, 19931. The tribunal deals with two
different Acts, namely the Recovery of Debt due to Banks and Financial Institutions
as well as the Securitisation and Reconstruction of Financial Assets and Enforcement
of Secutity Interests Act. This tribunal is the result of the Tiwari Committee,
constituted in 1981. The Committee observed that the civil courts are burdened with
diverse types of cases. Recovery of dues due to bank and financial institutions is not
given any priority by the civil courts. The banks and financial institutions like any
other litigant have to go through a process of pursuing the cases for recovery through
civil courts for unduly long periods. Thus, the committee suggested the establishment
of a tribunal solely for the purpose of recovery of debts due to banks and financial
instituion. The Tiwari Committee report was endorsed by the Narasimhan Committee
in 1991. Confirming to the recommendations of Narasimhan Committee, the
Government of India in 1993 enacted a legislation of Recovery of Debts due to Banks
and Financial Institutions Act. The object of the Act is to provide for the
establishment of Tribunals for expeditious adjudication and recovery of debts due to
banks and financial institutions and for matters connected therewith or incidental
thereto.2
The constitutional validity of the tribunals was challenged in Union of India v. Delhi
High Court Bar Association and Anr3. The supreme court upheld the validity of the
tribunals and observed that enactemet of laws regarding banking tribunal is withing
the legislative competence of parliament under Entry 45 of List I. The Honble court
further observed that even though the tribunals can regulate its own procedure, the Act
requires that any procedure laid down by it must be guided by the principles of natural
justice,
The Debts Recovery Tribuanl enforced provisions of the Recovery of Debts due to
Bank and Financial Institutions Act, 1993 and also Securitisation and Reconstruction
1 http://www.bankdrt.org/
2 http://drtsarfaesi.blogspot.in/
3 2002 (4) SCC 275

of Financial Assets and Enforcement of Security Interests Act, 2002 Under the 1993
Act, banks approach the Debts Recovery Tribunal whereas, under the 2002 Act
borrowers, guarantors and other person aggrieved by ant action of the Bank approach
the Debts Recovery Tribunal.
Section 3 of the 1993 act provides for the establishment of the tribunals. Presently
there are 33 Debt Recovery Tribunals and 5 Debt Recovery Appellate Tribunals. The
tribunal consists of only one person knows as Presiding Officer who is appointed by
the Central Government The Presiding officer must be, or have been, or is qualified to
be, a District Judge and he holds office for a term of 5 years or until he attains the age
of sixty two years, whichever is earlier. The act also provides for the appointment of
Recovery Officers as the staff of the Tribunal, they are to be appointed by the Central
Government and are to discharge their functions under the general superintendence of
the Presiding Officer. The Debt Recovery Appellate Tribunal is presisded by the
chairperson who is, or has been been, or is qualified to be, a judge of a High Court; or
has been a member of the Indian Legal Services and has held a post in Grade I of that
service for at least three years; or has held office as the Presiding officer of a Tribunal
for at least three years. The Chairperson hold office for a term of five years or until he
attains the age of 65, whichever is earlier.
The Debt Recovery Tribunal exercises the jurisdiction, powers and authority to
entertain and decide applications from the banks and financial institutions for
recovery of debts due to such banks and financial institutions. The Chairperson of the
Appellate Tribunal shall exercise general power of superintendence and control over
the Tribunals under his Jurisdiction including the powert of appraising the work and
recording the annual confedential reports of the presiding officer. The act also
provides for the bar of jurisdiction of normal courts of law except the Supreme Court
and High Court exercising jurisdiction under article 226 and 227 of the Constitution
in relation to the jurisdiction of the Tribunals.
The Bank or the Financial Institution may make an application to recover debt from
any person to the Tribunal within the local limits of whose jurisction the defednant
actually and voluntarily resides or carries on business or personaly works for gain; or
the cause of action, wholly or on party, arises. On receiving the application the
Tribunal issues summons requiring the defendant to show cause withing thirty days of

the service of summons as to why the relief prayed for should not be granted. The
defendant is entitled to clain set off against the applicant, at the first hearing of the
application, but not afterwards unless permitted by the Tribunal. The defendant also
has the right to raise a counter claim against the applicant. The Tribunal has power to
make an interim order against the defendant to debar him from transferring, alienating
or otherwise dealing with, or disposing of, any property and assets belonging to him
without the prior permission of the Tribunal. When the Tribunal is satisfied that the
defendant, with intent to obstruct or delay or frustate the execution of any order tor
the recovery of the debt that may be passed against him is likely to dispose, harm or
move out of local jurisction of the Tribunal whole or any part of his property, the
Tribunal may direct the defendant to furnish security or to appear and show cause
why he should not furnish security. When the defendant fails to furnish security
within the time fixed by the Tribunal or fails to show cause, the Tribunal may order
attachement of the properties claimes by the applicant as the properties secured in his
favour sufficient to satisfy any certificate for the recovery of debt. In case of the
defendant does not comply with the above, the Tribunal may order such person to be
detained in the civil prison for a maximun tern of three months. The Tribunal has the
power to appoint a reviever, remove any person from the possession or custody of the
property, commit the same to the possession, custody or management of the reciever,
confer upon the reciever all such power, as to bringing and defending suits in the
courts or filing and defending application before the Tribunal and realization,
managemnt, protection, preservation and improvement of the property, the collection
of the rents and profits thereof, the application and disposal of such rents and profits,
and the execution of documents as the owner himself has, or such of those powers as
the Tribunal thinks fit, and appoint a Commissioner for preparation of an inventory of
the properties of the defendant or for the sale thereof.
The Tribunal after hearing both the parties passes an order for payment of interest
from the date on or before which payment of the amount is found due up to the date of
realizaton or actual payment, on the application as it thinks fit to meet the ends of
justice. The Presiding Officer shall isssue a certificate under his signature on the basis
of the order of the Tribunal to the Recovery Officer for recovery of the amount of debt
specified in the certificate. Any person aggrieved by the order made by the Tribunal
may appeal to the Debt Recovery Appellate Tribunal within 45 days from the date on

which a copy of the order made has been received by him, When the appeal is by any
person from whom the amount of debt is due to a Bank or financial institution, the
person must deposit seventy five percent of the mount of debt due from him as
determined by the Tribunal.
The procedure laid down by the Code of Civil Procedure, 1908 does not apply to the
Tribunals and they have the power to regulate their own procedures. However, the
provisions of the Limitation Act, 1963 apply to an appication made to a Tribunal.
The Recovery Officer shall, on reciept of the copy of the cerificate of recovery,
proceed to recover the amount of debt specified by attachemnt and sale of the
movable and immpvable property of the defendant; arrest of the defedant and his
detention in prison; appoint a reciever for the managemnt of the properties of the
defendant. The Defendant cannot dispute the correctness of the amount specifies in
the certificate before the Recovery Officer.
When the Recovery Officer receives a certificate issued under S.19(7), he may direct
any person from whom any amount is due to the defendant to deduct the said amount,
the amount of debt due from the defendant. He may by a notice in writing require any
person from whom money is due or may become due to the defendant, to pay to the
Recovery Officer either forthwith upon the money becoming due or being held or
withing the time specified in the notice so much of the money as is sufficient to pay
the amount of bedt due from the defendnat or the whole of the money. A person
aggrieved by an order of the Recovery Officer may, within thirty days from the date
of reciept of the order prefer an appeal to the Tribunal.
Before the 2002, the banks to recover debt had to make an application to the Debt
Recovery Tribunal. In 2002, The Seciritization and Reconstruction of Financial Assets
and Enforcement of Security Interest Act was passed that gavepower to the bank to
recover its debt by simply giving a notice to the borrower under Section 13 sub-clause
4 of the Act. Howver Section 17 of the Act provides for an appeal to the borrower
aggrieved by any measure taken by the bank under s.13(4). The Debt Recovery
Tribunal is to consider whether any of the measures taken by the bank for
enforcement of the security interest are in accordance with the provisions of this act.
Id the Debts Recovery Tribunal comes to the conclusion that the measures taken by
the Bank are not in accordance with the Act, it may require restoration of the

management of the business to the borrower or restoration of possession of the

secured assets to the borrower. An application made to the Debt Recovery Tribunal
shall be disposed within sixty days from the date of such application and shall not
exceed four months from the date of making such application. 4
However, there are many problems with the functioning of the Debts Recovery
Tribunal. In 2013-14 the amount recovered was only Rs. 30,950 crore, while the
outstanding value of debt sought to be recovered was Rs. 2,26,600 crore. Recovery
was only thirteen percent of the amount at stake. The Tribunals are also not able to
dispose off the applications within the time period specified by law leading to grave
delay.5 There are only 33 Debts Recovery Tribunals and only 5 Debt Recovery
Appellate Tribunals in the country. This small number of Tribunals are not able to
dispose off the cases in a timely manner. Reserve Bank of India governor Raghuram
Rajan observed that If bankers cannot get their money back, they are not goint to
give you loans at a cheaper price. So, making sure debt recovery tribunals work better,
making sure that you don't have excess number of stays, excess number of appeals
that is what we need to focus on

4 http://www.lawyersclubindia.com/articles/Jurisdiction-of-DRTunder-SARFAESI-Act-An-overview-4696.asp
5 http://www.business-standard.com/article/finance/debt-recoverytribunals-more-pains-than-gains-for-banks-114121600139_1.html