Which DRT Has Jurisdiction Over a Recovery Case?

A Debts Recovery Tribunal can entertain a lender's recovery application only where two conditions are met together. The debt must not fall below the pecuniary floor fixed under Section 1(4) of the Recovery of Debts and Bankruptcy Act 1993 — twenty lakh rupees, as notified — and the Tribunal must be one that Section 19(1) connects to the dispute, which it does on four alternative grounds: the branch maintaining the account in which the debt is outstanding, where the defendant or each defendant resides or carries on business, where any one of several defendants does so, and where the cause of action wholly or in part arises. Where more than one Tribunal answers that description the choice belongs to the applicant, and a clause in the loan documentation cannot enlarge the list.

As an Advocate practising at the Delhi High Court and Senior Partner at Unified Chambers And Associates, I see the jurisdiction point taken more often as an afterthought than as a filing decision. It deserves to be the first. The forum settles which Recovery Officer executes the certificate and whether the borrower's parallel challenge lands before the same Tribunal or a different one.

What is the minimum amount for a DRT recovery case?

Section 1(4) provides that the Act shall not apply where the amount of debt due to any bank or financial institution, or to a consortium of them, is less than ten lakh rupees, or such other amount, being not less than one lakh rupees, as the Central Government may by notification specify. Ten lakh is the statutory default; the Central Government exercised the notification power by S.O. 4312(E) of 6 September 2018 and raised the operative floor to twenty lakh rupees, the figure a registry applies today. A later notification of 2024 adjusted only the transitional wording of that notification, not the figure.

Four consequences follow.

The floor attaches to the debt, not to the relief. "Debt" is defined to be inclusive of interest, so a principal of eighteen lakh rupees with contractual interest carrying the claimed amount past twenty lakh is within reach — provided the interest is claimed as due and supported by the statement of account.

A consortium is measured in aggregate. Section 1(4) speaks of the amount due to a bank or financial institution *or to a consortium*, so lenders whose individual exposures sit below the threshold are not shut out; Section 19(2) lets a lender with a claim against the same person join an application already filed, at any stage before final order.

Splitting a claim to manufacture or defeat the threshold invites objection. Section 19(25) empowers the Tribunal to give directions necessary to prevent abuse of its process.

Pecuniary jurisdiction cannot be conferred by consent. Parties may waive an objection to the place of suing; they cannot agree a tribunal into a subject matter the legislature has withheld from it. An order made without it is open to challenge as a nullity, however late the point is taken.

Below the threshold the lender is back in the ordinary machinery: a civil suit, a summary suit under Order XXXVII on a written contract, or SARFAESI enforcement where the exposure is secured. Three thresholds are routinely confused: twenty lakh rupees under the 1993 Act; one lakh rupees, being the figure a financial asset must exceed before the SARFAESI Act applies to the security interest securing it, alongside Section 31's exclusion of any case where the amount due is less than twenty per cent of the principal amount and interest thereon; and the one crore rupees notified as the minimum default for an application under the Insolvency and Bankruptcy Code 2016.

Who can apply, and what counts as a "debt"?

Section 17 confers authority to entertain applications *from banks and financial institutions* for recovery of *debts due to* them. Both halves of that phrase are contestable.

Section 2(g) defines "debt" as any liability, inclusive of interest, claimed as due from any person by a bank, a financial institution or a consortium during the course of any business activity undertaken under any law for the time being in force, in cash or otherwise, whether secured or unsecured, or assigned, or whether payable under a decree or order of any civil court or any arbitration award or otherwise or under a mortgage, and subsisting on, and legally recoverable on, the date of the application. It was later widened to take in debt securities left unpaid after a ninety-day notice from the debenture trustee.

Three features repay attention. "Assigned" puts an assignee inside the definition, which is how an asset reconstruction company proceeds on the original lender's claim. "Payable under a decree or an arbitration award" means an existing decree or award held by a bank can itself be the debt claimed — an under-used route where a lender holds an unexecuted decree. And "legally recoverable on the date of the application" builds limitation into the description of the claim, so it is not merely a defence to be pleaded and answered.

On the applicant side, "bank" takes in a banking company, a corresponding new bank, the State Bank of India and its subsidiary banks, a regional rural bank and, since the 2012 amendment, a multi-State co-operative bank. "Financial institution" is a narrower gate: a public financial institution, an institution notified by the Central Government for the purposes of this Act, an asset reconstruction company registered under Section 3 of the SARFAESI Act, and a registered debenture trustee for secured debt securities.

That produces the commonest standing objection here. A non-banking financial company is not a bank, and is not a financial institution merely because it lends — it qualifies only if notified for the purposes of this Act. Notification under Section 2(1)(m) of the SARFAESI Act, which permits an NBFC to enforce security out of court, is a separate exercise under a separate statute and does not carry over. An unnotified NBFC is left with the civil court, arbitration, or SARFAESI enforcement — and if the borrower challenges that enforcement it reaches the DRT anyway, as respondent. Documentation expectations for institutional lenders are on the page for banks, NBFCs and ARCs.

Which DRT is territorially competent under Section 19(1)?

Each Tribunal is established by notification under Section 3, and the same notification specifies the areas within which it may exercise jurisdiction; where several sit at one station, allocation among them is administrative, and the forums in which the chambers appears are listed separately. Within that map, Section 19(1) supplies the connecting factors. An application may be made to the Tribunal within whose local limits:

1. the branch or any other office of the bank or financial institution is maintaining an account in which the debt claimed is outstanding, for the time being;

2. the defendant, or each of the defendants where there are more than one, at the time of making the application, actually and voluntarily resides, carries on business, or personally works for gain;

3. any of the defendants, where there are more than one, at the time of making the application, does so; or

4. the cause of action, wholly or in part, arises.

Four working rules follow.

The grounds are alternatives, not a hierarchy. If two Tribunals are competent, both are, and the election is the applicant's to make on commercial grounds.

Time is fixed at filing. Grounds 2 and 3 both say "at the time of making the application": a defendant who relocates afterwards does not divest the Tribunal, and one who relocated before cannot be pinned to a former address.

There is no leave requirement on the "any of the defendants" ground. This departs from the Civil Procedure Code, where suing at the residence of one of several defendants needs the leave of the court or the acquiescence of the others. A guarantor resident in one city can therefore anchor an application against the borrower company and every co-guarantor elsewhere — often the cleanest route to a particular forum.

The branch ground follows the account. Ground 1 refers to the branch maintaining the account "for the time being", so moving a stressed account to a centralised recovery branch can move the available forum with it. Lenders that centralise recovery are centralising jurisdiction; borrowers should check when the account moved.

As to the cause of action, the usual connecting facts are where the sanction was communicated and the documents executed, the place of disbursement, the contractual place of repayment, where the security was created and, for immovable security, where it lies, the place of default, and where the demand notice was served. "Wholly or in part" is a low bar — one material fact suffices — but a fact merely incidental to the transaction does not join the cause of action because it happened somewhere convenient.

What does "carries on business" mean for a company defendant?

The registered office is the obvious answer and rarely the only one. Because Section 19(1) borrows the vocabulary of the Civil Procedure Code, the approach taken there guides the analysis: a corporation carries on business at its sole or principal office and, for a cause of action arising where it also has a subordinate office, at that place too. A branch at which the facility was negotiated and operated is a strong candidate; a warehouse unconnected with the loan is not. For an individual, "actually and voluntarily resides" is a question of fact, not of the address on the loan file.

A worked example

A term loan of INR 6.2 crore has gone bad. The borrower is a private limited company with its registered office at Jaipur and its plant at Bhiwadi in Rajasthan. Two directors have given personal guarantees, one at Gurugram and one at Delhi. The facility was sanctioned at the lender's Delhi branch and disbursed into a Delhi account, since moved to its stressed-assets branch at Delhi. The security is a mortgage over the Bhiwadi land.

Delhi is available on three independent grounds — a forum that survives the loss of any one connecting fact. The choice is still not automatic: execution is easier where the assets are, since the Recovery Officer of the issuing Tribunal acts on the recovery certificate; and a parallel SARFAESI enforcement may put the borrower's securitisation application before a different Tribunal under the separate rule in that statute.

Does the jurisdiction clause in the loan agreement decide the forum?

Most facility documents contain one, and most are misread by both sides. Section 28 of the Indian Contract Act 1872 voids an agreement absolutely restricting a party from enforcing rights through the ordinary tribunals, but a clause that merely selects among independently competent forums is not an absolute restriction. Two propositions then decide almost every argument on the point.

First, a clause cannot create jurisdiction the statute has not given. If no ground in Section 19(1) connects the dispute to a Tribunal, the parties cannot agree it into competence. Consent supplies no connecting factor.

Second, a clause cannot displace the Tribunal in favour of a civil court. Many loan agreements give the courts at a named city exclusive jurisdiction. Above the threshold that cannot operate as written, because Section 18 provides that no court or other authority shall exercise jurisdiction in relation to the matters specified in Section 17, excepting only the Supreme Court and a High Court exercising jurisdiction under Articles 226 and 227 of the Constitution.

What remains is whether a clause can confine the lender's choice *among* the competent Tribunals. There are arguments each way, and the answer turns on wording. Most institutional documentation avoids the question: the clause is non-exclusive, expressed to operate for the lender's benefit and without prejudice to its right to proceed before any other competent forum — reserving the statutory election rather than surrendering it. A mutual exclusive submission to one named place is a different instrument.

An arbitration clause raises a related question. The position generally taken in recovery practice is that the 1993 Act is a special enactment with its own complete procedure, so a bank's Original Application is not liable to be sent to arbitration on the strength of a clause in the documentation — a point to check against the current position before relying on it either way. Enforcing an award is a separate subject, taken up in the note on Section 36.

What happens if the application goes to the wrong Tribunal?

The two defects behave differently.

A territorial defect is ordinarily curable. Section 22 provides that the Tribunal is not bound by the procedure laid down in the Civil Procedure Code but is guided by the principles of natural justice, subject to the other provisions of the Act and the rules, with power to regulate its own procedure. Where an application is presented before a Tribunal that no Section 19(1) ground connects to the dispute, the ordinary course is a return for presentation before the proper Tribunal rather than a dismissal on merits. The claim survives; what is lost is time. Limitation keeps running, and an applicant wanting the wasted period excluded must plead Section 14 of the Limitation Act 1963, which requires the earlier proceeding to have been prosecuted with due diligence and in good faith before a forum unable to entertain it.

A pecuniary or subject-matter defect is not. If the debt is below the notified floor, or the applicant is neither a bank nor a notified financial institution, no participation by the defendant validates the proceeding.

Two mechanisms sit beyond return. Under Section 17A the Chairperson of an Appellate Tribunal exercises general superintendence and control over the Tribunals under his jurisdiction and may, on the application of any party or on his own motion after notice to the parties and hearing them, transfer a case pending before one Tribunal for disposal to another — the route for consolidating an Original Application with a securitisation application filed elsewhere. Whether that power reaches across the boundary of two Appellate Tribunals is not obvious on the text. Section 31 separately transfers to a Tribunal, on its establishment, suits then pending before a court whose cause of action would fall within its jurisdiction.

A jurisdictional objection is a plea of fact and must be pleaded as one — where the defendant actually resided and carried on business at the filing date, where the account was maintained, which pleaded facts of the cause of action are denied. It belongs in the written statement and should be pressed at the first hearing.

How is this different from the forum for a Section 17 SARFAESI application?

The same Tribunal hears both, which is exactly why they are conflated. Different statutes, different rules.

Two differences matter most. The twenty lakh floor does not travel — it limits the 1993 Act, not the SARFAESI Act — so a borrower with a secured exposure of eight lakh rupees may bring a securitisation application before the very Tribunal that could not have entertained a recovery application on that debt. And the deposit conditions are structurally opposite: a higher percentage that can be waived entirely, against a lower percentage with a floor, as worked through in the note on the Section 18 pre-deposit, and the filing sequence in the Section 17 timeline.

Insolvency moves the forum again. Once a corporate insolvency resolution process is admitted, an Original Application can be neither instituted nor continued against the corporate debtor: the Section 14 moratorium is expressed to prohibit the institution of suits and the continuation of pending suits or proceedings against the corporate debtor in any court of law, tribunal, arbitration panel or other authority — wording that takes in a Debts Recovery Tribunal. A proviso to Section 19(1) permits the applicant, with the Tribunal's permission, to withdraw the application in order to proceed under the Code — a forum election, not a housekeeping step. In personal insolvency the traffic runs the other way, the Tribunal itself being the adjudicating authority for individuals and firms absent a corporate process, as set out in the note on the Section 95 personal-guarantor process.

Why limitation belongs in the jurisdiction enquiry

Because Section 2(g) defines a debt as one "legally recoverable on the date of the application", a time-barred claim is not merely met by a defence — it fails to answer the description of what the Tribunal was set up to recover. That is why the point belongs with forum selection rather than after it. Section 24 applies the Limitation Act 1963, as far as may be, to an application made to a Tribunal, and which Article governs is less straightforward than it sounds. A simple money claim is ordinarily approached on the three-year residuary period for applications; a claim to enforce money charged upon immovable property attracts the Schedule's twelve-year period, so one facility, part unsecured and part secured, can carry both. An acknowledgment of liability in writing signed before the period expires gives a fresh start to time, as does a part payment recorded in a signed writing — which is why it matters whether a proposal made during a one-time settlement was worded as an acknowledgment.

A jurisdiction checklist before filing

1. Compute the debt due as on the filing date, inclusive of interest, and confirm it clears the floor — checking the current notified figure.

2. Confirm the applicant's status: anything other than a bank must be a public financial institution, an institution notified under this Act, a registered asset reconstruction company, or a qualifying debenture trustee.

3. Where several lenders are exposed, choose between a consortium application and joinder under Section 19(2), testing the aggregate against the threshold.

4. Identify every Section 19(1) ground the facts support, and plead the primary and fallback grounds in the application.

5. Fix the residence and place of business of each defendant, guarantors included, as at the filing date, and keep the proof.

6. Confirm which branch maintains the account, and when it moved to a recovery branch.

7. Read the jurisdiction clause: exclusive or not, for whose benefit, and whether it names a court Section 18 puts out of reach.

8. Test limitation against the correct Article for each component, pleading acknowledgments and part payments with dates.

9. Ask where execution will happen, and whether insolvency is pending or a securitisation application likely elsewhere.

10. Confirm the fee slab and form with the registry; a fee or format defect returns the application and consumes limitation.

The wider procedure — filing, service, written statements, interim attachment and the appellate route — is in the guide to how the Debt Recovery Tribunal works, and secured-creditor enforcement in the note on the SARFAESI Act. For the vocabulary used above see the glossary; the practice area is described under debt recovery.

This article is general information on the law as it stands and is not legal advice; whether a Tribunal has jurisdiction over a particular account depends on the documents, the parties and the facts pleaded. Queries may be directed through the contact page.