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Kerala High Court: Only DRTs can adjudicate debt disputes of more than ₹10 lakh

KC Gopakumar Kochi | Updated on July 28, 2019 Published on July 28, 2019

The Kerala High Court has held that adjudication of debt disputes involving more than ₹10 lakh can only be done by the Debt Recovery Tribunal (DRT) under the Recovery of Debts and Bankruptcy Act, 1993 (RDBA Act) and not by the District Collector under the Revenue Recovery Act.

Justice Devan Ramachandran made the observation while disposing of a batch of writ petitions challenging the revenue recovery proceedings initiated by banks against borrowers and guarantors under the RR Act.

The court said Section 17 of the RDBA Act made it unambiguous that any adjudication for recovery of a debt of more than ₹10 lakh could not be done by any other person or institution or entity other than the DRT, constituted under the RBDA ACT.. The court further said this was further cemented through provisions of Section 18 of the Act, which barred jurisdiction being exercised in such matters by any other person or authority. These provisions then got bolstered by the mandate of Section 19 of the RDBA Act that every bank or financial institution that seeks to recover a debt of more than ₹10 lakh from any person, would mandatory have to make an application to the DRT and no other entity. Besides, Section 34 of the RDBA Act expressly excluded the jurisdiction of every other court except the high court and supreme court.

The court added that the case of the SARFAESI Act stood on a different pedestal because this was a special Act, brought in subsequent to the RDBA Act which intended to provide a special mechanism for recovering debts through methods specified therein.

The court, while directing the revenue authorities to cease all further action, gave full liberty to banks to invoke and pursue remedies under the RDBA Act. It also held that they certainly were entitled to invoke the provisions of SARFAESI Act.

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Published on July 28, 2019
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