A PROJECT REPORT ON

Establishment of Tribunals under

the Recovery of Debts and

Bankruptcy Act, 1993

SUBMITTED TO: SUBMITTED BY:

Mrs. NIDHI SHARMA VRATIKA PHOGAT
U.I.L.S B.COM. LL.B (HONS.)
PANJAB UNIVERSITY SECTION- D
ROLL NO. 252/14
SEMESTER-8
 Acknowledgement
I owe a great thanks to a great many people who helped and supported me during the writing of this
project.

My deepest thanks to my Business Law Lecturer, Mrs. Nidhi Sharma, the guide of the project for
guiding me and correcting various documents of mine with attention and care. She has taken pain to
go through the project and make necessary corrections as and when needed.

I would also thank my Institution and my faculty members without whom this project would have
been a distant reality. I also extend my heartfelt thanks to my family and well-wishers.

VRATIKA

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 Table Of Contents

 Acknowledgement………………………………………………………………………………………. 2
 Table of Contents………………………………………………………………………………………… 3
 Introduction and History of the Act…………………………………………………… 4
 Object of the Act………………………………………………………………………………………….. 5
 Enactment of the Act…………………………………………………………………………………. 5
 Establishment of Tribunals and Appellate Tribunal…………………. 6
Authorities under RDDBFI Act……………………………………………………………………….. 6
 Bibliography…………………………………………………………………………………………………… 12
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 Introduction And History Of The Act

Banks and financial institutions duly registered with Reserve Bank of India (RBI) provide loan
facility to legal entities and individuals (borrowers). In the event where the borrower fails to repay
loan amount or any part thereof which also includes unpaid interests and other charges and/or debt
becomes Non-Performing Asset (NPA), banks and financial institutions can recover the debt by
approaching appropriate judicial forums.1
Banks and financial institutions experienced considerable difficulties in recovering loans and
enforcement of securities charged with them. The procedure for recovery of debts due to the banks
and financial institution which was being followed has resulted in a significant portion of the funds
beings blocked.
The Committee on the Financial System considered the setting up of the Special Tribunals with
special adjudication of such matters and speedy recovery as critical to the successful
implementation of the financial sector reforms. An urgent need was, therefore, felt to work out a
suitable mechanism through which the dues to the banks and financial institutions could be realised.
In 1981 a committee had examined the legal and financial institutions and suggested remedial
measures including changes in law. This Committee also suggested setting up of Special Tribunals
for recovery of dues of the banks and financial institutions by summary procedure. Keeping in view
the recommendations of the above Committee the Recovery of Debts Due to Banks and Financial
Institutions Bill, 1993 was introduced in the Parliament.
During the pendency of the Bill, while the Parliament was not in session, the President, having been
satisfied that the circumstances exist which render it necessary for him to take immediate action to
give effect to that Bill, promulgated the Recovery of Debts due to Banks and Financial Institutions
Ordinance, 1993 (Ord. 25 of 1993). To replace the said Ordinance by an Act of Parliament the
Recovery of Debts Due to Banks and Financial Institutions Bill was introduced in the Parliament. 2

Debt Recovery Tribunals were established to facilitate the debt recovery involving banks and other
financial institutions with their customers. DRTs were set up after the passing of Recovery of Debts
due to Banks and Financial Institutions Act (RDBBFI), 1993. Appeals against orders passed by
DRTs lie before Debts Recovery Appellate Tribunal (DRAT). DRTs can take cases from banks for
disputed loans above Rs 10 Lakhs. At present, there are 33 DRTs and 5 DRATs functioning at
various parts of the country. In 2014, the government has created six new DRTs to speed up loan
related dispute settlement.
Compared to the ordinary court procedures, DRTs were able to handle large number of cases with
low delay during the initial phases. Though the DRTs have made impact on recovery front, several
issues related to their performance in the background of rising volume of NPAs have appeared in
later period. Inadequate infrastructure coupled with insufficient number of DRTs has made them
incompetent to handle the rising volume of disputes.
Recent issues related with DRTs
The leading issue related with debt recovery through DRTs is the slow process of resolution
(settling debts and finding end to defaults). Like several other debt recovery mechanisms, the DRTs
are slow to work out on pending disputes. Nearly 93000 cases are pending in front of all the DRTs
in the country at the end of 2016. The World Bank estimated that it took 4.3 years on average in
India to resolve insolvency under the old laws, more than twice as long as in China. Similarly, the
average recoveries were just 25.7 cents on the dollar in India. This is one of the worst among the
similar economies.
 The number of DRTs are small given the increasing number of cases. –
 Delay in settling the cases is long.
 The DRTs were not able to handle cases related to large borrowers.
 Timely appointment of officials for DRT has not been made.
Recent efforts to rejuvenate DRTs: the RDBBFI amendment 2016
To correct the situation, government has made several efforts. Major one is the amendment to the
RDBBFI Act 1993 in 2016. Similarly, the new Insolvency and Bankruptcy Code give powers to
DRTs to consider cases of Bankruptcy from individuals and unlimited liability partnerships.
Following are the main changes made to the RDBBFI Act in 2016 though the amendments are yet
to be enforced.
The amendment gives timelines for various steps in the adjudication process before the debt
recovery tribunals. Time limit for filing of written statements, passing of orders, appeals, etc. have
been reduced. The Act Empowers the Central Government to provide for uniform procedural rules
for the proceedings in the Debts Recovery Tribunals and Appellate Tribunals.
The amendment increases the retirement age of Presiding Officers of Debt Recovery Tribunals from
62 years to 65 years and that of the Chairpersons of Appellate Tribunals from 65 years to 67 years.
It also makes Presiding Officers and Chairpersons eligible for reappointment to their positions.
The amendment allows banks to file cases in DRTs having jurisdiction over the area of bank branch
where the debt is pending, instead in the DRT which have jurisdiction over the defendant’s area of
residence or business.
Similarly, to reduce delays, the he cost on a borrower to delay recovery timelines through protracted
appeals and proceedings has been increased.
Borrowers will have to deposit at least 25% of the outstanding amounts with the debt recovery
appellate tribunal (DRAT) under the DRT Act to avail an appeal. Previously, this provision was
required only under the SARFAESI Act.

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 Object Of The Act

The 1993 Act created Debt Recovery Tribunals (DRTS) to adjudicated debt recovery cases. This
was done to move cases out of civil courts, with the idea of reducing time taken for debt recovery,
and for providing technical expertise. This was aimed at assisting banks and financial institutions in
recovering outstanding debt from defaulters.
The Committee on the Financial System headed by Shri M. Narasimham considered the setting up
of the Special Tribunals with special powers for adjudication of such matters and speedy recovery
as critical to the successful implementation of the financial sector reforms. An urgent need was,
therefore, felt to work out a suitable mechanism through which the dues to the banks and financial
institutions could be realised without delay. In 1981 a Committee under the Chairmanship of Shri T.
Tiwari had examined the legal and other difficulties faced by banks and financial institutions and
suggested remedial measures including changes in law. The Tiwari Committee had also suggested
setting up of Special Tribunals for recovery of dues of the banks and financial institutions by
following a summary procedure. The setting up of Special Tribunals will not only fulfil a long-felt
need, but also will be an important step in the implementation of the Report of Narasimham
Committee. Whereas on 30th September, 1990 more than fifteen lakhs of cases filed by the public
sector banks and about 304 cases filed by the financial institutions were pending in various courts,
recovery of debts involved more than Rs. 5622 crores in dues of Public Sector Banks and about Rs.
391 crores of dues of the financial institutions. The locking up of such huge amount of public
money in litigation prevents proper utilisation and recycling of the funds for the development of the
country. The Bill seeks to provide for the establishment of Tribunals and Appellate Tribunals for
expeditious adjudication and recovery of debts due to banks and financial institutions.3

Enactment Of The Act

The Recovery of Debts due to Banks and Financial Institutions Bill having been passed by both the
Houses of Parliament received the assent of the President on 27th August, 1993. It came on the
Statute Book as the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of
1993). The nomenclature of the Act has been amended by the Insolvency and Bankruptcy Code,

3https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2808408
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2016 (31 of 2016), sec. 249 and Fifth Schedule. Now the Act stands as THE RECOVERY OF
DEBTS AND BANKRUPTCY ACT, 1993 (51 of 1993) (Came into force on 24-6-1993).

Establishment Of Tribunals And Appellate Tribunal

(Chapter II of the Act)
Authorities under RDDBFI Act

I. Debt Recovery Tribunal

Section 3, provides for the establishment of Debt Recovery Tribunal (DRT), by notification to be
issued by the Central Government, for exercising, jurisdiction, powers, and authority conferred on
such tribunal under the RDDBFI Act. First DRT was established in Kolkata in the year 1994.
Presently 33 DRTs are functioning at various places in India, and 6 more DRTs are also being
established. As per section 4, DRT consists of sole member only, known as Presiding Officer.
Section 5, provides that a person who has been or is qualified to become District Judge can be
appointed as Presiding Office of DRT. Section 6 provides that the terms of the Presiding Office
shall end after the expiry of the period of 5 years from the date he enters the office and he will be
eligible for reappointment provided he has not attained the age of 65 years.4

The Sections of the Act read as follows:

3. Establishment of Tribunal.—(1) The Central Government shall, by notification, establish one or

more Tribunals, to be known as the Debts Recovery Tribunal, to exercise the jurisdiction,
powers and authority conferred on such Tribunal by or under this Act.
(1A) The Central Government shall by notification establish such number of Debts Recovery
Tribunals and its benches as it may consider necessary, to exercise the jurisdiction, powers and
authority of the Adjudicating Authority conferred on such Tribunal by or under the Insolvency
and Bankruptcy Code, 2016.

4ibid.
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 (2) The Central Government shall also specify, in the notification referred to in sub-section (1),
the areas within which the Tribunal may exercise jurisdiction for entertaining and deciding the
applications filed before it.

4. Composition of Tribunal.—(1) A Tribunal shall consist of one person only (hereinafter referred
to as the Presiding Officer) to be appointed by notification, by the Central Government.
(2) Notwithstanding anything contained in sub-section (1), the Central Government may—
(a) authorise the Presiding Officer of any other Tribunal established under any other law
for the time being in force to discharge the function of the Presiding Officer of a Debt
Recovery Tribunal under this Act in addition to his being the Presiding Officer of that
Tribunal; or
(b) Authorise the judicial Member holding post as such in any other Tribunal, established
under any other law for the time being in force, to discharge the functions of the
Presiding Officer of Debts Recovery Tribunal under this Act, in addition to his being
the judicial Member of that Tribunal.]

5. Qualifications for appointment as a Presiding officer. — The person shall not be qualified for
appointment as the Presiding Officer of a Tribunal unless he is, or has been, or is qualified to be,
a District Judge.

6. Term of office of Presiding Officer. — The Presiding Officer of a Tribunal shall hold office for a
term of five years from the date on which he enters upon his office and shall be eligible for
reappointment:
Provided that no person shall hold office as the Presiding Officer of a Tribunal after he has

attained the age of sixty-five years.

6A. Qualifications, terms and conditions of service of Presiding Officer.-- Notwithstanding anything
contained in this Act, the qualifications, appointment, term of office, salaries and allowances,
resignation, removal and the other terms and conditions of service of the Presiding Officer of the
Tribunal appointed after the commencement of Part XIV of Chapter VI of the Finance Act, 2017, shall
be governed by the provisions of section 184 of that Act: Provided that the Presiding Officer appointed
before the commencement of Part XIV of Chapter VI of the Finance Act, 2017, shall

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continue to be governed by the provisions of this Act, and the rules made thereunder as if the
provisions of section 184 of the Finance Act, 2017 had not come into force.]

7. Staff of Tribunal.—(1) The Central Government shall provide the Tribunal [with one or more
Recovery Officers] and such other officers and employees as that Government may think fit.
(2) [The Recovery Officers] and other officers and employees of a Tribunal shall discharge their
functions under the general superintendence of the Presiding Officer.
(3) The salaries and allowances and other conditions of service of the [Recovery Officers] and

other officers and employees of a Tribunal shall be such as may be prescribed.

II. Debt Recovery Appellate Tribunal

Sections 8 -11 deals with the establishment, qualification, and term of the Chair Person of the Debt
Recovery Appellate Tribunal (DRAT). DRAT is established to exercise control and powers
conferred under the RDDBFI Act. DRAT consist of sole member to be known as Chair Person. A
person is eligible to become a Chair Person, if he has been an or qualified to become a High Court
Judge, or has been a member of the Indian Legal Services and held a Grade 1 post as such member
for the minimum period of three years or has held office of Presiding Officer of Tribunal for period
of at least three years. The Chair Person of DRAT can hold his office for the period of five years and
is also eligible for reappointment, provided, that he has not attained the age of seventy years.
Presently there are 5 DRATs in India in Delhi, Chennai, Mumbai, Allahabad, and Kolkata. DRAT
has appellate and supervisory jurisdiction over DRTs.5

The sections read as follows:

8. Establishment of Appellate Tribunal.—(1) The Central Government shall, by notification,

establish one or more Appellate Tribunals, to be known as the Debts Recovery Appellate
Tribunal, to exercise the jurisdiction, powers and authority conferred on such Tribunal by or
under this Act:

5ibid.
8
 Provided that the Central Government may authorise the Chairperson of any other Appellate
Tribunal, established under other law for the time being in force, to discharge the functions of
the Chairperson of the Debts Recovery Appellate Tribunal under this Act in addition to his
being the Chairperson of that Appellate Tribunal.

(1A) The Central Government shall, by notification, establish such number of Debt Recovery
Appellate Tribunals to exercise jurisdiction, powers and authority to entertain appeal against the
order made by the Adjudicating Authority under Part in of the Insolvency and Bankruptcy Code,
2016.
(2) The Central Government shall also specify in the notification, referred to in sub-section (1)
the Tribunals in relation to which the Appellate Tribunal may exercise jurisdiction.
(3) Notwithstanding anything contained in sub-sections (1) and (2), the Central Government may
authorise the Chairperson of an Appellate Tribunal to discharge also the functions of the
Chairperson of other Appellate Tribunal.]

9. Composition of Appellate Tribunal.—An Appellate Tribunal shall consist of one person only
(hereinafter referred to as the Chairperson of the Appellate Tribunal]) to be appointed, by
notification, by the Central Government.

10. Qualifications for appointment as Chairperson of the Appellate Tribunal.—A person shall not be
qualified for appointment as the Chairperson of an Appellate Tribunal unless he—
(a) is, or has been, or is qualified to be, a Judge of a High Court; or
(b) has been a member of the Indian Legal Service and has held a post in Grade I of that
service for at least three years; or
(c) has held office as the Presiding Officer of a Tribunal for at least three years.

11. Term of office of Chairperson of Appellate Tribunal.—The Chairperson of an Appellate

Tribunal shall hold office for a term of five years from the date on which he enters upon his
office and shall be eligible for reappointment:
Provided that no person shall hold office as the Chairperson of a Appellate Tribunal after has
attained the age of sixty seven Years.

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12. Staff of the Appellate Tribunal—The provisions of Section 7 (except those relating to Recovery
Officer) shall so far as may be,apply to an Apeallate Tribunal as they apply to a Tribunal and
accordingly references to that section to the “Tribunal” shall be construed as references to
"Appellate Tribunal” and "Recovery Officer" shall be deemed to have been omitted.

13. Salary and allowances and other terms and conditions of service of the Presiding officers.—
The salary and allowances payable to and other terms and conditions of service (including
pension, gratuity and other retirement benefits) of, [the Presiding Officer of a Tribunal or the
Chairperson of an Appellate Tribunal] shall be such as may be prescribed:
Provided that neither the salary and allowances nor the other terms and conditions of service
of the Presiding Officer of the Tribunal or the Chairperson of an Appellate Tribunal shall be
varied to his disadvantage after appointment.

14. Filling up of vacancies.—If, for any reason other than temporary absence, any vacancy occurs
in the officer of [the Presiding Officer of a Tribunal or the Chairperson of an Appellate
Tribunal], then the Central Government shall appoint another person in accordance with the
provisions of this Act to fill the vacancy and the proceedings may be continued before the
Tribunal or the Appellate Tribunal from the stage at which the vacancy is filled.

15. Resignation and removal.—(1) [The Presiding Officer of a Tribunal or the Chairperson of an
Appellate Tribunal] may, by notice in writing under his hand addressed to the Central
Government, resign his office:
Provided that the Presiding Officer of a Tribunal or the Chairperson of an Appellate Tribunal]
shall, unless he is permitted by the Central Government to relinquish his office sooner,
continue to hold office until the expiry of three months from the date of receipt of such notice
or until a person duly appointed as his successor enters upon his office or until the expiry of
his term of officer, whichever is the earliest.
(2) [The Presiding Officer of a Tribunal or the Chairperson of an Appellate Tribunal] shall not be
removed from his office except by an order made by Central Government on the ground of by
the inquiry,— proved misbehaviour or incapacity after inquiry
(a) in the case of the Presiding Officer of a Tribunal, made by a Judge of a High Court;
(b) in the case of the Chairperson of an Appellate Tribunal], made by a Judge of the Supreme
Court,
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 in which [the Presiding Officer of a Tribunal or the Chairperson of an Appellate Tribunal] has
been informed of the charges against him and given a reasonable opportunity of being heard
in respect of these charges:
Provided that the Central Government, during the pendency of the inquiry against the
Presiding Officer or a Chairperson, as the case may be, may, after consulting the
Chairperson of the Selection Committee constituted for selection of Presiding Officer or
Chairperson, pass an order suspending the Presiding Officer or Chairperson, if it is
satisfied that he should cease to discharge his functions as a Presiding officer or
Chairperson, as the case may be.
(3) The Central Government may, by rules, regulate the procedure for the investigation of
misbehaviour or incapacity of the Presiding Officer of a Tribunal or the Chairperson of an
Appellate Tribunal.

15A. Qualifications, terms and conditions of service of Chairperson.--Notwithstanding anything

contained in this Act, the qualifications, appointment, term of office, salaries and allowances,
resignation, removal and the terms and conditions of service of the Chairperson of the Appellate
Tribunal appointed after the commencement of Part XIV of Chapter VI of the Finance Act, 2017,
shall be governed by the provisions of section 184 of that Act:
Provided that the Chairperson appointed before the commencement of Chapter VI of the Finance
Act, 2017, shall continue to be governed by the provisions of this Act, and the rules made
thereunder as if the provisions 84 of the Finance Act, 2017 had not come into force.]

16. Orders constituting Tribunal or an Appellate Tribunal to be final and not to invalidate its
proceedings.—No order of the Central Government any person as [the Presiding Officer of a
Tribunal or Chairperson of an Appellate Tribunal] shall be called in question in any manner, and
no act or proceeding before a Tribunal or an Appellate Tribunal shall be called in question in
any manner on the ground merely of any defect in the constitution of a Tribunal or an Appellate
Tribunal.

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 Bibliography

1. Bare Act, The Recovery of Debts and Bankruptcy Act, 1993

2. blog.ipleaders.in
3. papers.ssrn.com

4. https://www.indianeconomy.net/splclassroom/what-are-debt-recovery-tribunals-drts/
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