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Section 3: Establishment of Debts Recovery Tribunal

Recovery of Debts and Bankruptcy Act, 1993 • Official Statutory Text & Practice Guide

Statutory Regulation
Legal Standard
Competent Court / Tribunal
Act 1993
Section 2 All 37 Sections of Recovery of Debts and Bankruptcy Act, 1993 Section 4

Legal Commentary & Landmark Judgments: Section 3

Section 3 empowers the Central Government to establish, by official notification, one or more Debts Recovery Tribunals (DRTs) and specify the precise territorial and geographical jurisdiction exercised by each Tribunal.

  • Statutory Establishment by Notification: The Central Government is vested with exclusive delegated authority under Section 3(1) to establish one or more Debts Recovery Tribunals across India to exercise jurisdiction, powers, and authority conferred by or under the Act.
  • Territorial and Geographical Demarcation: Sub-section (2) mandates that the Central Government specify in the notification the local limits of the area to which the jurisdiction of each Tribunal extends, enabling the creation of multi-district or multi-state operational zones.
  • Establishment of Additional Benches: Empowers the Central Government to establish additional Tribunals or Benches to decongest existing dockets, ensure speedy recovery of public dues, and guarantee institutional proximity for litigants.
Key Landmark Precedents:
  • Union of India v. Delhi High Court Bar Association (2002) 4 SCC 275: The Supreme Court held that the establishment of DRTs under Section 3 does not violate the basic structure of the Constitution or judicial independence, provided adequate administrative infrastructure and appellate oversight through DRATs are ensured.
  • Standard Chartered Bank v. Dharminder Bhohi (2013) 15 SCC 341: The Supreme Court established that a Tribunal created under Section 3 is a creature of statute with jurisdiction strictly circumscribed by the four corners of the Act; it possesses no inherent common law or equitable jurisdiction akin to Section 151 of the Code of Civil Procedure.
  • Pegasus Assets Reconstruction P. Ltd. v. Haryana Concast Ltd. (2016) 4 SCC 47: The Supreme Court ruled that the DRT established under Section 3 exercises exclusive statutory machinery for recovery that prevails over company court proceedings under the Companies Act in respect of secured debts.
Courtroom Practice & Strategic Litigation Guidance:

When framing an Original Application (OA), cross-check the official gazette notifications issued under Section 3(2) defining the DRT's territorial reach against the location of the lending branch, the place where the loan agreement was executed, and the defendant's residence or place of business under Section 19(1). Object to territorial forum shopping at the preliminary stage by filing an application questioning subject-matter or territorial competence.

Section 2 All 37 Sections of Recovery of Debts and Bankruptcy Act, 1993 Section 4