How to File a Debt Recovery Application Before the DRT in India: Jurisdiction, Fees, and Procedure Under the RDDBFI Act

How to File a Debt Recovery Application Before the DRT in India

When borrowers default on loans, banks and financial institutions in India have a specialised forum for recovering their dues: the Debt Recovery Tribunal (DRT). Established under the Recovery of Debts and Bankruptcy Act, 1993 (commonly known as the RDDBFI Act), DRTs provide an expedited mechanism for debt recovery that bypasses the delays of ordinary civil courts. This guide explains the complete process of filing an Original Application (OA) before the DRT, including jurisdiction, fee structure, procedural requirements, and the appeal process.

Who Can File Before the DRT?

Only banks and financial institutions can file an Original Application before the DRT. Individual lenders, non-banking entities (unless notified as financial institutions), and private moneylenders cannot use this forum. The applicant must be a bank as defined under the Banking Regulation Act, 1949, or a financial institution notified by the Central Government under the RDDBFI Act. The defendant (respondent) is the borrower, guarantor, or any person against whom recovery is sought. This forum is distinct from civil courts and the NCLT proceedings for company restoration, which address corporate insolvency matters.

Jurisdictional Threshold and Territorial Jurisdiction

The DRT has jurisdiction only when the amount of debt due is Rs 20 lakh or more (this threshold was raised from Rs 10 lakh by amendment). For debts below Rs 20 lakh, the bank must approach the ordinary civil court. Territorial jurisdiction is determined by the location where the cause of action arose, wholly or in part, or where the defendant resides, carries on business, or personally works for gain, or where the branch of the bank that sanctioned the loan is situated. If multiple DRTs have jurisdiction, the applicant bank may file before any one of them.

Step 1: Preparing the Original Application

Under Section 19 of the RDDBFI Act read with Rule 4 of the DRT (Procedure) Rules, 1993, the Original Application must be prepared as a paper book. The application should contain the following: (1) the name and address of the applicant bank and its authorised officer; (2) the name and address of the defendant borrower, guarantor, or other person from whom recovery is sought; (3) the facts giving rise to the application, narrating the loan transaction, the default, and the amount outstanding including principal, interest, and costs; (4) the relief claimed, specifying the exact amount with a breakup; (5) a list of documents relied upon, annexed as exhibits; (6) an affidavit verifying the application. The application must be filed in two sets along with self-addressed stamped envelopes for service of notice on the respondents.

Step 2: Fee Calculation and Payment

The filing fee for an Original Application before the DRT is structured in slabs based on the amount of debt claimed. For amounts up to Rs 10 lakh, the fee is 1% of the debt, subject to a minimum of Rs 12,000. For amounts between Rs 10 lakh and Rs 20 lakh, the fee is Rs 12,000 plus 0.75% of the amount exceeding Rs 10 lakh. For amounts above Rs 20 lakh, the fee is Rs 19,500 plus 0.5% of the amount exceeding Rs 20 lakh, subject to a maximum cap of Rs 1,50,000. The fee must be paid by way of a demand draft drawn in favour of the Registrar of the concerned DRT.

Step 3: Filing the Application with the DRT Registrar

The completed Original Application along with the filing fee must be submitted to the Registrar of the DRT having jurisdiction. The Registrar examines the application for completeness and compliance with procedural requirements. If defects are found, the Registrar may return the application with a note specifying the defects and allowing time for rectification. Once accepted, the Registrar assigns a case number and lists the matter for hearing. Notice is then issued to the defendant by registered post, speed post, or courier, directing them to file a Written Statement within 30 days. Similar procedural discipline applies when filing a complaint with the Electricity Ombudsman or other specialised tribunals.

The Hearing and Adjudication Process

After the defendant files the Written Statement (or the time for filing expires), the DRT proceeds with the hearing. The Presiding Officer may attempt mediation or settlement between the parties. If no settlement is reached, the matter proceeds to trial. Both parties lead evidence, including documentary evidence and oral testimony. The DRT follows a summary procedure and is not bound by the strict rules of the Code of Civil Procedure, though it must follow principles of natural justice. The Act mandates that the DRT must endeavour to dispose of the application within six months from the date of receipt, though extensions are permissible for reasons to be recorded in writing. The Supreme Court's stance on AI-generated fake judgments underscores the importance of authentic documentation in all tribunal proceedings.

Recovery Certificate and Enforcement

Upon passing a favourable order, the DRT issues a Recovery Certificate to the applicant bank specifying the amount due and the person from whom it is recoverable. The Recovery Certificate is sent to the Recovery Officer attached to the DRT. The Recovery Officer has wide powers of enforcement, including: attachment and sale of movable and immovable property of the defendant; appointment of a receiver; arrest and detention of the judgment debtor in civil prison; and attachment of debts, shares, and other securities belonging to the defendant. These powers mirror those available under the Code of Civil Procedure for execution of decrees. For borrowers, understanding how deemed conveyance proceedings work can be relevant when property is subject to attachment.

Appeal to the DRAT

Any person aggrieved by an order of the DRT may file an appeal before the Debt Recovery Appellate Tribunal (DRAT) within 45 days of the date on which the order was received. However, the appeal comes with a significant condition: the defendant must deposit 50% of the amount of debt due as determined by the DRT as a precondition for the appeal being entertained. The DRAT may, for reasons to be recorded, reduce this deposit, but it cannot waive it entirely. The DRAT Chairperson hears the appeal and may confirm, modify, or set aside the DRT's order. A further challenge lies by way of a writ petition before the High Court or a special leave petition before the Supreme Court. The Bombay High Court's observations on legislative delays highlight how systemic issues affect tribunals and courts alike.

Interaction with SARFAESI Act Proceedings

Banks often invoke the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 alongside or before filing before the DRT. Under SARFAESI, secured creditors can take possession of and sell secured assets without court intervention. A borrower aggrieved by SARFAESI action may file an application before the DRT under Section 17 of the SARFAESI Act. It is important to understand that DRT proceedings under the RDDBFI Act and SARFAESI proceedings under the SARFAESI Act are parallel remedies; a bank can pursue both simultaneously. The filing of an OA does not preclude SARFAESI action, and vice versa.

Practical Considerations and Common Pitfalls

Several practical points merit attention. First, ensure that the loan account is properly classified as a Non-Performing Asset (NPA) before filing, as premature filing can be challenged. Second, recall notices under Section 13(2) of SARFAESI, if issued, should be consistent with the claim in the OA. Third, calculate the outstanding amount carefully, including contractual interest up to the date of filing, and claim future interest as well. Fourth, if the defendant is a company undergoing insolvency proceedings, the moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 will stay the DRT proceedings. Fifth, the bank's authorised officer must hold a valid power of attorney; challenges to authority are a common defence strategy. Understanding how customs broker licensing and other regulatory processes work in India provides broader context for navigating specialised tribunals.

Key Takeaways

Filing a debt recovery application before the DRT requires the debt to exceed Rs 20 lakh, proper documentation as a paper book, and payment of the prescribed fee. The DRT provides a faster resolution than civil courts, with a statutory target of six months. Enforcement is through the Recovery Officer with powers of attachment, sale, and arrest. Appeals to the DRAT require a 50% deposit. For institutions navigating the broader regulatory landscape, familiarity with processes like trust registration and crop insurance claims can provide useful parallels for understanding specialised regulatory filings in India.