Debts Recovery Appellate Tribunal in India: Jurisdiction, Powers, and Contemporary Challenges

Debts Recovery Appellate Tribunal in India: Jurisdiction, Powers, and Contemporary Challenges

1. Introduction

The Debts Recovery Appellate Tribunal (“DRAT”) occupies a pivotal place in India’s credit-enforcement architecture. Constituted under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (“RDB Act”), it serves as the appellate forum against orders of the Debts Recovery Tribunals (“DRTs”) and, by statutory assimilation, against securitisation applications decided under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act”). In the backdrop of burgeoning non-performing assets (“NPAs”), Parliament envisaged DRATs as specialised, swift and expert adjudicatory bodies. Yet, questions concerning their jurisdictional contours, standards of appellate review, pre-deposit requirements, and interaction with constitutional courts continue to generate jurisprudential debate. This article critically analyses those dimensions, integrating leading authorities and statutory provisions.

2. Legislative Framework

2.1 Recovery of Debts Due to Banks and Financial Institutions Act, 1993

Sections 17–20 of the RDB Act constitute a self-contained code for original and appellate debt recovery proceedings. While DRTs exercise “original” jurisdiction under Section 17, Section 20 accords a right of appeal to DRAT, subject to the monetary threshold of ₹20 lakhs (Rule 8, Debts Recovery Appellate Tribunal (Procedure) Rules, 1994) and to a mandatory pre-deposit of 50 % of the debt determined, with discretionary waiver down to 25 % (Section 21). Section 34 confers overriding effect on the Act, and Section 18 bars civil-court jurisdiction save for writ supervision by High Courts and the Supreme Court.

2.2 SARFAESI Act, 2002

Sections 17 and 18 of the SARFAESI Act graft the same institutional hierarchy—DRT as the forum for securitisation applications and DRAT as the appellate body, the latter again fettered by a 50 % pre-deposit (waivable to 25 %). The Supreme Court has repeatedly emphasised that these specialised remedies must ordinarily be exhausted before invoking writ jurisdiction (United Bank of India v. Satyawati Tondon[9]).

3. Constitutional Validity and Institutional Competence

The leading decision Union of India v. Delhi High Court Bar Association[3] upheld the constitutionality of the RDB Act, recognising Parliament’s competence under Entry 45, List I. The Court dispelled apprehensions regarding tribunalisation of civil adjudication, noting the presence of legally-trained presiding officers and an appellate tier (DRAT) that preserves judicial independence. This pronouncement continues to form the bedrock for subsequent legislative amendments enlarging DRAT’s remit.

4. Jurisdictional Contours of DRAT

4.1 Subject-Matter Jurisdiction

  • Appeals against DRT orders: Section 20(1) RDB Act confers a broad appellate jurisdiction extending to “any order” of DRTs—including interlocutory and final orders (Central Bank of India v. Kurian Babu[16]).
  • Securitisation Appeals: By force of Section 18 SARFAESI Act, the same appellate mechanism governs challenges to DRT orders under Section 17.
  • Exclusions: Consent orders and matters where an alternative statutory appeal lies (e.g., Section 30 appeals from Recovery Officers to DRT) fall outside DRAT’s purview.

4.2 Territorial and Pecuniary Reach

The Act prescribes five DRATs with defined territorial zones; pecuniary limits are co-terminous with the parent DRT’s jurisdiction. Notably, Allahabad Bank v. Canara Bank[4] underscored DRAT’s exclusive authority even vis-à-vis Company Courts in winding-up proceedings, owing to Section 34’s overriding effect.

4.3 Interlocutory Powers

In ICICI v. Grapco Industries[5], the Supreme Court affirmed that tribunals possess inherent powers to grant ad-interim and ex-parte reliefs where statutorily necessary to protect the subject-matter of debt recovery, provided principles of natural justice are observed. By parity of reasoning, DRAT is empowered to issue protective orders pending appeal, though such discretion must be sparingly exercised to avoid derailing expeditious disposal (Standard Chartered Bank v. Dharminder Bhohi[6]).

5. Pre-Deposit under Section 21: Judicial Approaches

The mandatory statutory pre-deposit presents a recurrent litigative flashpoint. The Supreme Court has treated Section 21 as a “jurisdictional bar” limiting DRAT’s power to entertain an appeal unless the appellant deposits 50 % (Dynamic Logistics v. ICICI Bank[11]). While DRAT may waive up to 25 %, a wholesale waiver is ultra vires (Bank of Baroda v. Parasaadilal[14]). High Court decisions occasionally carve out exceptions—MS Yuvraj Eco Tourism[13] distinguished cases where the impugned order does not “determine the debt” and hence Section 21 may not apply. Nonetheless, the stronger current of authority discourages liberal dilution, reaffirming the provision’s deterrent objective against frivolous appeals.

6. Standard and Scope of Appellate Review

The RDB Act is silent on the standard of review; judicial practice indicates that DRAT functions as a plenary appellate body, re-appraising facts and law. However, the Supreme Court in KSL & Industries Ltd. v. Arihant Threads Ltd.[18] cautioned that the tribunal must respect the Act’s ethos of expedition—extensive re-trial or remand is permissible only where grave procedural irregularity is shown. In securitisation matters, DRAT must also consider the limited defences available to borrowers post-possession (Standard Chartered Bank v. V. Noble Kumar[7]).

7. Interaction with High Courts: Writ Jurisdiction and Supervisory Control

High Courts retain writ and supervisory jurisdiction under Articles 226/227. Yet, the Supreme Court has consistently deprecated routine interference with DRAT’s orders, reiterating the doctrine of alternative remedy (Authorised Officer, State Bank of Travancore v. Mathew K.C.; Satyawati Tondon[9]). Interference is reserved for cases of patent lack of jurisdiction, violation of natural justice, or manifest illegality.

8. Delays and Systemic Challenges

Empirical data presented in Centre for Public Interest Litigation v. HUDCO[10] revealed pendency of over 70,000 cases involving approximately ₹5 lakh crore before DRTs/DRATs, many exceeding a decade, notwithstanding the statutory mandate of 180 days (Section 19(24) RDB Act). Causes include inadequate bench strength, frequent adjournments, paucity of infrastructural resources, and appeals stalling execution (Standard Chartered Bank v. Dharminder Bhohi[6]). The 2016 and 2021 amendments sought to address delays through e-filing, summary procedures, and stricter timelines, but administrative implementation remains uneven.

9. Critical Evaluation

  • Effectiveness: DRATs have undeniably expedited debt recovery compared to civil courts; recovery figures of ₹70,725 crore till 2015 attest to tangible gains[10].
  • Access to Justice: The high pre-deposit threshold, while necessary to deter dilatory tactics, may disproportionately burden small borrowers or guarantors. A calibrated approach—such as graded deposits linked to financial capacity—merits legislative consideration.
  • Consistency in Jurisprudence: Divergent High Court rulings on the scope of waiver (Srishti Arogyadham, We Build) foster uncertainty. A clarificatory constitutional bench decision or statutory amendment could ensure uniformity.
  • Institutional Strengthening: Filling vacancies, investing in digital infrastructure, and introducing specialised benches (e.g., for securitisation, insolvency interface) would bolster efficiency.
  • Overlap with Insolvency and Bankruptcy Code, 2016 (“IBC”): With creditors increasingly invoking IBC, the relative relevance of DRAT may wane for large exposures; harmonised protocols to prevent forum shopping are imperative.

10. Conclusion

The DRAT system represents a crucial pillar in India’s multi-tiered debt recovery edifice, balancing expeditious creditor enforcement with borrower safeguards. Judicial pronouncements—from Delhi High Court Bar Association to Dharminder Bhohi—have largely upheld its constitutional legitimacy while calibrating procedural rigour. Contemporary challenges of delay, inconsistent waiver practice, and evolving insolvency jurisprudence call for targeted reforms rather than wholesale overhaul. Strengthening DRATs through resource augmentation, jurisprudential clarity, and integration with digital processes will ensure they continue to serve the statutory purpose envisaged by Parliament: swift, specialised, and just recovery of financial assets.

Footnotes

  1. Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (as amended).
  2. Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
  3. Union of India v. Delhi High Court Bar Association & Ors., (2002) 4 SCC 275.
  4. Allahabad Bank v. Canara Bank & Anr., (2000) 4 SCC 406.
  5. Industrial Credit and Investment Corporation of India Ltd. v. Grapco Industries Ltd., (1999) 4 SCC 710.
  6. Standard Chartered Bank v. Dharminder Bhohi & Ors., (2013) 15 SCC 341.
  7. Standard Chartered Bank v. V. Noble Kumar & Ors., (2013) 9 SCC 620.
  8. Transcore v. Union of India & Anr., (2008) 1 SCC 125.
  9. United Bank of India v. Satyawati Tondon & Ors., (2010) 8 SCC 110.
  10. Centre for Public Interest Litigation v. Housing & Urban Development Corporation Ltd., (2017) 9 SCC 9.
  11. Dynamic Logistics (P) Ltd. v. ICICI Bank Ltd. & Ors., (2005) 7 SCC 20.
  12. We Build (P) Ltd. v. State Bank of India, 2021 SCC OnLine Ker 4559.
  13. MS Yuvraj Eco Tourism Pvt. Ltd. v. Debts Recovery Appellate Tribunal, Allahabad, 2024 SCC OnLine Utt 12.
  14. Bank of Baroda v. Parasaadilal Tursiram Sheetgrah Pvt. Ltd., 2022 SCC OnLine SC 1006.
  15. Poonam Garg v. State Bank of Patiala & Anr., 2014 SCC OnLine Del 1503.
  16. Central Bank of India v. Kurian Babu & Ors., 2004 SCC OnLine Bom 922.
  17. Marathwada Gramin Bank v. Maharashtra State Co-operative Bank Ltd. & Ors., 2006 SCC OnLine Bom 118.
  18. KSL & Industries Ltd. v. Arihant Threads Ltd. & Ors., (2014) 16 SCC 735.
  19. Ritesh Oil Mills (P) Ltd. v. Dena Bank & Ors., 2016 SCC OnLine Guj 784.
  20. Hanu Reddy Realty India (P) Ltd. v. Jignesh & Ors., 2008 SCC OnLine Mad 1098.