India: Presentation On Recovery Process & Enforcement Of Security Interest In India

Last Updated: 14 September 2017
Article by SNG & Partners




Indian Legal system encompasses varied legal provisions for recovery of debts by the Banks and Financial Institutions as follows :-

  • Summary suits under Order XXXVII of the Code of Civil Procedure, 1908.
  • Ordinary suits for recovery, under Civil Law.
  • Original Applications to be filed by Banks and Financial Institutions before Debt Recovery Tribunal for debt not less than Rs. 10 lakhs, under Recovery of Bank Due to Banks & Financial Institutions Act, 1993 (DRT Act).
  • Action under Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 (Securitisation Act).
  • Arbitration proceedings under Arbitration & Conciliation Act 1996, for recovery of outstanding amount as under Arbitration Agreement / clause in the loan documents, in cases where the Recovery of Debts due to Banks and Financial Institutions Act, 1993 is not applicable.
  • Initiation of criminal action in addition to civil proceedings for prosecution and punishment as per the Indian Penal Code and other laws where debt is also tainted with fraud, cheating, misfeasance etc.
  • Filing of criminal complaint under Section 138 of Negotiable Instruments Act, 1881 for dishonor of any cheque issued by borrower to the bank in discharge of legally enforceable liability.


Amount to be recovered


Does not exceed Rs. 10,00,000/-
  1. Filing simple suit for recovery before Civil Court.
  2. Filing of summary suit under Order XXXVII of CPC, 1908.
  3. Filing suit for foreclosure of mortgage.
  4. Arbitration proceedings if arbitration agreement exists.
Exceeds Rs. 1,00,000/- In case the "Security Interest" has been created in specific movable / immovable property provisions of the Securitization Act may be invoked to repossess the mortgaged property, without intervention of the court, and sell the same, provided the account has been classified as NPA.
Exceeds Rs. 10,00,000/- Original application is to be filed before the DRT for recovery of dues. Bank can simultaneously initiate proceedings under Securitization Act as well. Civil court / Arbitrator will not have jurisdiction to entertain such claim.


Debts Recovery Tribunals (DRT) and Debts Recovery Appellate Tribunals (DRAT) have been constituted under the provisions of the DRT Act for establishment of Tribunals for expeditious adjudication and recovery of debts due to Banks and Financial Institutions and for matters connected therewith.

DRT has also been given the power to adjudicate the applications filed by the Borrower/Mortgagor against the action of the Secured Creditor initiated under the Securitization Act


The Central Government by notification has established Tribunals known as Debts Recovery Tribunals (DRT) to exercise the jurisdiction, power and authority confers under the Act at:

Mumbai, Delhi, Kolkata, Chennai,
Bangalore, Allahabad, Ahmedabad, Aurangabad,
Chandigarh, Madurai, Coimbatore, Cuttack,
Orissa, Patna, Bihar, Ernakulam,
Guwahati, Hyderabad, Vishakhapatnam, Jabalpur,
Jaipur, Lucknow, Nagpur, Ranchi

Establishment of DRATs

In exercise of powers, the Central Government has established DRAT at places :-

  • Allahabad – Jurisdiction over DRTs functioning at Allahabad, Lucknow and Jabalpur.
  • Chennai – Jurisdiction over DRTs functioning at Bangalore, Chennai, Coimbatore, Hyderabad, Vishakhapatnam and Ernakulam.
  • Delhi – Jurisdiction over DRTs functioning at Delhi, Chandigarh, Jaipur.
  • Kolkata – Jurisdiction over DRTs functioning at Cuttack, Guwahati, Patna, Kolkata and Ranchi.
  • Mumbai – Jurisdiction over DRTs functioning at Ahmedabad, Aurangabad, Mumbai, Nagpur and Pune.

Composition of DRT and DRAT

DRT is presided over by a Presiding Officer, who is qualified to be a District Judge, and is appointed by notification by Central Government.

DRAT is presided over by a Chairperson, who is qualified for appointment or who has been a Judge of a High Court, or has been member of the Indian Legal Services who has held the post of Grade I of such services for at least three years.

The Recovery Of Debts Due To Banks And Financial Institutions Act, 1993

Applicability (DRT Act)

  • The Act applies to whole of India except State of Jammu & Kashmir.
  • The provisions of Act applies where the amount of debt due is not less than Rs. 10,00,000/-.
  • Original Application for recovery of Debts can be filed only by Banks and Financial Institutions.

Applications to be made to DRT under DRT Act

  • Only Banks and Financial Institutions defined under the DRT Act, (which includes Public Financial Institutions within the meaning of Section 4A of the Companies Act, 1956, Securitization company / Reconstruction company under the Securitization Act), can file an application before the DRT. Normal fees, based on amount claimed in O.A., has been fixed as court fee which does not exceed Rs. 1.50 lakhs.
  • Summary procedure is adopted by the DRTs for adjudication of dispute. Evidence is taken on affidavit and cross examination is not permitted except in few deserving cases.
  • The defendants can file counter claim or claim of set off against the claimed amount.
  • The final order is passed by the Tribunal directing the borrowers to pay the amount. In case, the borrower does not pay the ordered amount, recovery certificate is ordered to be issued against the borrower which is then executed by Recovery Officer of the DRT.

Powers of DRT

DRT has power to:

  • summoning and enforcing the attendance of any person and examining him on oath;
  • requiring the discovery and production of documents;
  • receiving evidence on affidavits;
  • issuing commissions for the examination of witnesses or documents;
  • reviewing its decisions;
  • dismissing an application for default or deciding it ex-parte.
  • make interim order by way of injunction, stay or attachment against the defendant to debar from transferring, alienating or otherwise dealing with the property or asset without permission of Tribunal.
  • direct the defendants to provide security sufficient to satisfy the debt.

Willful disobedience of powers of Tribunal are punishable under Contempt of Court Act.

Appeal against the order of DRT

Any person aggrieved on account of order passed by DRT may file an appeal before DRAT.

However, the DRAT does not entertain the appeal unless the Appellant deposits with the Appellate Authority, 75% of the amount or such other lesser amount as directed by DRAT.

Overriding Effect

Provisions of the DRT Act has overriding effect over any other law for the time being enforced except :

  1. IFCI Act
  2. State Financial Corporation Act,
  3. Unit Trust of India Act,
  4. Financial Reconstruction Bank of India Act,
  5. Sick Industrial Companies (Special Provisions) Act and
  6. Small Industries Development Bank of India Act.
  7. The Industrial Reconstruction Bank of India Act, 1984

Applicability of Securitization Act

  • The Act applies to whole of India.
  • The provisions of the Act shall apply to Security Interest created in favour of Secured Creditor, except on :-

    1. A lien on any goods, money or security given by or under the Indian Contract Act, 1872 or the State of Goods Act, 1932 or any other law for the time being in force;
    2. A pledge or movables within a meaning of Section 172 of Indian Contract Act.
    3. Creation of any security in any aircraft as defined in clause (1) of Section 2 of Aircraft Act, 1934.
    4. Creation of security interest in any vessel as defined in clause (55) of Section 3 of the Merchant Shipping Act, 1958.
    5. Any conditional sale, hire purchase or lease or any other contract in which no security interest has been created.
    6. Any rights of unpaid seller under Section 47 of the Sale of Goods Act, 1932.
    7. Any property not liable to attachment (excluding the properties specifically charged with the debt recoverable under this Act) or sale under the first proviso to sub section (1) of Section 60 of the Code of Civil Procedure, 1908.
    8. Any security interest for securing repayment of any financial asset not exceeding one lakh rupees.
    9. Any security interest in agricultural land.
    10. Any case in which the amount due is less than twenty per cent of the principal amount and interest thereon.

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