Recovery of Debts Due to Banks Act, 1993 | DRT & DRAT | Supreme Court Guide
The Recovery of Debts Due to Banks and Financial Institutions Act, 1993
Comprehensive Blog
By
Jayprakash B. Somani
Advocate, Supreme Court of India, New Delhi
Cell: PA 9322188701
Website: www.jayprakashsomani.com
Introduction
The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDBFI Act, 1993) was enacted to create a specialised mechanism for speedy recovery of dues owed to banks and financial institutions. Prior to this legislation, banks and financial institutions were required to approach civil courts—a slow and cumbersome process that resulted in vast amounts of public funds remaining locked in prolonged litigation.
The RDDBFI Act sought to address this systemic issue by establishing Debt Recovery Tribunals (DRTs) and Debt Recovery Appellate Tribunals (DRATs) to adjudicate recovery disputes expeditiously and efficiently.
1. Background and Purpose
India’s financial sector witnessed large-scale lending operations by banks and financial institutions. However, recovery of non-performing assets through traditional civil courts proved to be extremely slow, thereby delaying the recycling of credit and hampering overall economic growth.
Based on the recommendations of expert committees, including the Narasimham Committee and the Tiwari Committee, Parliament introduced the RDDBFI Act in 1993. The objective was to ensure efficient and speedy adjudication of recovery matters, thereby unlocking blocked capital and strengthening the banking system.
2. Structure of the Act (Parts, Chapters & Sections)
Unlike modern statutes with elaborate part-wise divisions, the RDDBFI Act follows a simplified structure focusing on the establishment and functioning of specialised tribunals.
Chapter-wise Structure
| Chapter | Subject Matter |
|---|---|
| I | Preliminary — Short title, extent, commencement and definitions (Sections 1–2) |
| II | Establishment of Tribunal and Appellate Tribunal (Sections 3–7) |
| III | Jurisdiction, Powers and Authority of Tribunals (Sections 8–10 and related provisions) |
| IV | Procedure of Tribunals (Applications, hearings, and adjudication) |
| V | Recovery of Debt Determined by Tribunal (Recovery certificates and execution) |
| VI | Miscellaneous Provisions |
Note: Section numbers may vary slightly due to amendments, but the above structure reflects the logical framework of the Act.
3. Salient Features of the RDDBFI Act
Purpose and Scope
Provides for expeditious recovery of debts due to banks and financial institutions
Extends to the whole of India, subject to notified exceptions
Applicable to debts above the minimum threshold prescribed by the Central Government (initially ?10 lakh, subject to revision)
Tribunals
Establishes Debt Recovery Tribunals (DRTs) as adjudicating authorities
Creates Debt Recovery Appellate Tribunals (DRATs) for appellate review
Introduces summary procedures to avoid prolonged civil litigation
Object
To release huge amounts of public money blocked in court proceedings
To provide banks and financial institutions with a specialised and time-bound recovery forum
4. Important Sections Explained
Section 1 — Short Title, Extent and Commencement
Specifies the name of the Act, its territorial applicability, commencement, and minimum debt threshold.
Section 2 — Definitions
Defines essential terms such as bank, financial institution, debt, Tribunal, and other foundational expressions.
Section 3 — Establishment of Tribunals
Empowers the Central Government to constitute Debt Recovery Tribunals.
Sections 4 and 5 — Composition and Appointment
Provide for the appointment, qualifications, and service conditions of Presiding Officers and members.
Section 8 — Appellate Tribunal
Provides for the establishment of DRATs to hear appeals against DRT orders.
Section 17 — Application for Recovery
Confers jurisdiction upon DRTs to entertain and decide applications for recovery of debts.
Section 19 — Procedure of Tribunals
One of the most significant provisions, detailing procedural aspects such as filing of applications, issuance of recovery certificates, award of interest, and powers akin to those under the Civil Procedure Code.
Section 25 — Powers of Recovery Officer
Empowers Recovery Officers to enforce recovery through attachment, sale of property, arrest, and other lawful means.
Sections 31 and 31A — Transfer and Enforcement
Provide for transfer of pending cases from civil courts to DRTs and enforcement of decrees through recovery certificates.
5. Interaction with Other Laws
The RDDBFI Act operates alongside statutes such as the SARFAESI Act, 2002. In Transcore v. Union of India, the Supreme Court held that the RDDBFI Act is a complete code in itself for recovery of debts and, being a special law, prevails over general laws in cases of conflict.
Although the Insolvency and Bankruptcy Code, 2016 has introduced a comprehensive insolvency framework, the RDDBFI Act continues to play a crucial role in recovery proceedings outside insolvency resolution.
6. Supreme Court and High Court Jurisprudence
Union of India v. Delhi Bar Association
Constitutional validity of the RDDBFI Act was challenged
The Supreme Court upheld the Act, affirming Parliament’s competence to create specialised tribunals for banking and financial recovery matters
M/s Transcore v. Union of India & Anr. (2008) 1 SCC 125
The Supreme Court ruled that the RDDBFI Act constitutes a complete code for debt recovery
It reaffirmed the Act’s overriding effect over general laws in matters of recovery
7. Key Features and Practical Impact
Exclusive Jurisdiction: DRTs replace civil courts for covered recovery matters
Speedy Disposal: Summary proceedings significantly reduce delays
Appeal Mechanism: Appeals lie to DRATs and further to constitutional courts on questions of law
Monetary Threshold: Only debts above notified limits fall within tribunal jurisdiction
8. Conclusion
The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 marked a significant reform in India’s financial legal framework. By creating specialised tribunals with defined powers, procedures, and timelines, the Act addressed the chronic issue of delayed debt recovery and stagnant capital.
Judicial affirmation by the Supreme Court of its constitutional validity and status as a self-contained recovery code underscores its continued relevance, even in the evolving landscape shaped by SARFAESI and the Insolvency and Bankruptcy Code.
