Debt Recovery Tribunal (DRT & DRAT) Exhaustive Legal Jurisprudence Guide

1. Legislative Origin, Committees & Statutory Evolution

The establishment of specialized Debt Recovery Tribunals (DRT) in India marked a fundamental shift away from traditional civil courts for bank loan recovery. Prior to 1993, public sector banks and financial institutions faced delays extending over a decade in civil suits. To resolve this systemic crisis, two high-level committees laid the groundwork:

• Tiwari Committee Report (1981): First identified the urgent necessity of establishing exclusive quasi-judicial tribunals equipped with summary procedures for financial debt enforcement.
• Narasimham Committee Report (1991): Highlighted that mounting Non-Performing Assets (NPAs) threatened financial sector stability, recommending dedicated statutory tribunals with exclusive pecuniary jurisdiction.
• RDDBFI Act 1993 Enactment: Parliament enacted the Recovery of Debts Due to Banks and Financial Institutions (RDDBFI) Act, 1993 (subsequently amended as the Recovery of Debts and Bankruptcy Act, 1993 in 2016).

2. Organizational Structure: 39 DRTs & 5 Appellate DRAT Seats

As verified on official government portals including drt.gov.in and the Department of Financial Services, the debt recovery quasi-judicial network comprises:

• 39 DRTs (Original Jurisdiction): Functioning as courts of first instance for recovery claims where the pecuniary value equals or exceeds Rs. 20 Lakhs. Each DRT is presided over by a Presiding Officer (a qualified District Judge or advocate eligible for District Judgeship).
• 5 DRATs (Appellate Jurisdiction): Appellate bodies created to hear appeals against final and interim orders passed by DRTs. Located in Delhi, Mumbai, Kolkata, Chennai, and Allahabad. Each DRAT is headed by a Chairperson (a qualified High Court Judge).
• e-DRT Digital System: Allows advocates and litigants to perform e-filing, track cause lists, check diary status, and view daily orders online across all 39 DRTs.

3. Procedural Mechanics: Original Application (OA) vs Securitisation Application (SA)

Litigation before DRT operates under two primary statutory frameworks:

A. Original Application (OA) Defense under Section 19 RDB Act

When a bank institutes an Original Application (OA) under Section 19 of the RDB Act for recovery of money, the defendant borrower receives a summons to show cause. Strategic defenses in OA litigation include:

• Contesting Unilateral Interest Hikes: Challenging bank calculations that capitalize penal interest or apply uncontracted interest rates contrary to Supreme Court guidelines in Central Bank of India v. Ravindra (2002).
• Filing Set-Off & Counterclaim (Section 19(8)): The borrower possesses a statutory right to plead set-off or file a counterclaim against the bank for damages resulting from unauthorized refusal of sanctioned working capital or wrongful debit entries.
• Limitation Act Defenses: Verifying whether the bank instituted the OA within the mandatory 3-year limitation period under Article 62 and Article 137 of the Limitation Act 1963.

B. Securitisation Application (SA) under Section 17 SARFAESI Act

Borrowers or aggrieved third parties can file a Securitisation Application (SA) under Section 17 of the SARFAESI Act within 45 days of any measure taken by a bank under Section 13(4) or Section 14 (DM physical possession order). Under Section 17(3), the DRT holds statutory authority to quash illegal bank notices, set aside physical possession, and restore property to the borrower.

4. Section 18 DRAT Appeals & Pre-Deposit Waiver Mechanics

Filing an appeal before DRAT under Section 18 of the SARFAESI Act requires a statutory pre-deposit of 50% of the debt claimed or determined by DRT. However, under the proviso to Section 18, the Chairperson of DRAT holds discretionary authority to reduce the pre-deposit to a minimum of 25% upon written demonstration of financial hardship, unadjusted auction proceeds, or patent illegality in the DRT order.