The Recovery Of Debts And Bankruptcy Act, 1993

Summary of the Recovery of Debts Due to (Banks and Financial Institutions) Act, 1993
1. Objective
The Act was enacted to provide for the speedy adjudication and recovery of debts due to banks and financial institutions by establishing Debts Recovery Tribunals (DRTs) and Debts Recovery Appellate Tribunals (DRATs). Before this Act, banks had to approach ordinary civil courts, resulting in prolonged delays in debt recovery.
2. Scope and Application
• Applies throughout India.
• Covers debts owed to banks and financial institutions above the minimum monetary threshold prescribed by the Central Government.
• Initially called the Recovery of Debts Due to Banks and Financial Institutions Act, 1993; renamed as the Recovery of Debts and Bankruptcy Act, 1993 by the Insolvency and Bankruptcy Code, 2016.
3. Establishment of Tribunals
(a) Debts Recovery Tribunal (DRT)
• Established by the Central Government.
• Headed by a Presiding Officer.
• Has exclusive jurisdiction over applications by banks and financial institutions for recovery of debts.
(b) Debts Recovery Appellate Tribunal (DRAT)
• Hears appeals against orders of DRTs.
• Headed by a Chairperson.
4. Jurisdiction of DRT
The DRT has the power to:
• Entertain applications from banks and financial institutions for recovery of debts.
• Determine the amount due.
• Issue recovery certificates.
• Exercise powers similar to those of a civil court in relation to summoning witnesses, receiving evidence, and enforcing attendance.
5. Recovery Officer
After the DRT determines the amount payable, a Recovery Officer executes the recovery certificate and may recover the amount by:
• Attachment and sale of movable or immovable property.
• Arrest and detention of the debtor (where permitted by law).
• Appointment of a receiver.
• Other modes prescribed under the Act.
6. Appeals
• Any person aggrieved by an order of the DRT may appeal to the DRAT.
• Appeals must generally be filed within the prescribed limitation period.
• The Act also contains provisions regarding pre-deposit requirements, subject to statutory conditions and discretion available under the Act.
7. Powers of the Tribunal
The DRT has powers to:
• Summon and examine witnesses.
• Receive evidence on affidavit.
• Compel production of documents.
• Review its own orders in specified circumstances.
• Grant interim orders, injunctions, and appoint receivers where necessary.

Legislative History:

The Recovery Of Debts And Bankruptcy Act, 1993

Act Title The Recovery of Debts and Bankruptcy Act, 1993 (Originally enacted as The Recovery of Debts Due to Banks and Financial Institutions Act, 1993)

Act Number 51 of 1993

Act ID (India Code) 199351

Presidential Assent Date August 27, 1993

Enforcement Date June 24, 1993

Nodal Ministry Ministry of Finance

Precedent & Historical Rationale

1. Severe Delays in Debt Recovery:

o Prior to 1993, banks and financial institutions recovered public dues through conventional civil courts, which suffered from chronic delays, extensive backlogs, and complex procedural bottlenecks.

2. Blocked Capital and Financial Stability:

o A significant portion of public sector funds remained locked up in protracted litigation, severely hampering the recycling of capital, affecting bank profitability, and necessitating a specialized, fast-track adjudication mechanism tailored for financial recovery.

Parliamentary Trajectory & Enactment

• Formulation: Drafted by the Ministry of Finance to establish specialized Debt Recovery Tribunals (DRTs) and Debt Recovery Appellate Tribunals (DRATs) outside the ordinary civil court hierarchy.

• Parliamentary Passage: Introduced, deliberated, and passed by both Houses of Parliament (Lok Sabha and Rajya Sabha) during the Monsoon Session of 1993.

• Presidential Assent: Received Presidential Assent on August 27, 1993.

• Enforcement: Enforced on June 24, 1993.

• Source: Official Records of Parliament, India Code, and Ministry of Finance (Department of Financial Services).