DRT vs Civil Court: Where Does a Recovery Case Go?

A Jabalpur trading firm funds its expansion twice over. A bank lends Rs 70 lakh against a mortgage of the godown. A raw material supplier extends Rs 35 lakh on running account, backed by nothing more than invoices and a couple of cheques. The firm stops paying both in the same month. Six weeks later the bank’s papers arrive from the Debts Recovery Tribunal and the supplier’s papers arrive from the District Court, and the partners cannot understand why the same default has produced two different forums.

The DRT vs civil court question is not decided by the size of the dispute, the kind of security, or which forum either side prefers. It is decided by two facts and one question about relief: who the lender is, how much is claimed, and what the applicant is actually asking for. Get those three right and the forum picks itself.

The short answer

The DRT vs civil court line is drawn by statute, not by preference. A Debt Recovery Tribunal can entertain a recovery claim only when both of these are true:

• the applicant is a bank, a notified financial institution, a consortium of them, or an asset reconstruction company that has acquired the debt, and
• the debt claimed is Rs 20 lakh or more.

Where both are satisfied, the DRT is not merely an option. Section 18 of the Recovery of Debts and Bankruptcy Act 1993 takes the matter away from the civil court entirely, leaving only the High Court and the Supreme Court under Articles 226 and 227 of the Constitution. Where either test fails, the civil court is the only place to go.

Test one: who is the lender

This is where most confusion starts. The RDB Act is a statute for institutional lending, not for money owed generally.

Inside the Act: scheduled and nationalised banks, co-operative banks to the extent they are covered, financial institutions notified under Section 2(h) of the Act, and asset reconstruction companies that have taken over a loan by assignment. The Central Government has power to notify further classes of institutions, and has used it, so a housing finance company or a large NBFC may qualify depending on the notification it relies on. Ask which one before conceding the point.

Outside the Act: an individual lender, a moneylender, a supplier selling on credit, a company recovering an inter-corporate deposit, a landlord chasing arrears. None of them can file in a DRT even for Rs 5 crore. Their remedy is a civil suit, a summary suit under Order XXXVII of the Code of Civil Procedure where the claim rests on a written contract or a negotiable instrument, or arbitration if the contract provides for it. That work sits within our litigation and arbitration practice.

Test two: how much is claimed

The floor was Rs 10 lakh from 1993 until a Central Government notification in 2018 raised it to Rs 20 lakh. Below that line, a bank has to sue in the ordinary civil court like anyone else, subject to that court’s own pecuniary limits.

The figure that counts is the debt due as claimed, principal with interest and permissible charges, on the date of filing. Banks sometimes split or aggregate accounts to sit on the convenient side of the line, and a borrower is entitled to test the arithmetic. If the claim has been inflated past Rs 20 lakh by charges the sanction letter never authorised, the objection is worth taking, because it goes to jurisdiction and not merely to quantum.

Test three: what is being asked for

Even between the same parties, different reliefs travel to different forums.

The claim	Where it goes	Governing provision
Bank recovering Rs 20 lakh or more	DRT, by Original Application	Section 19, RDB Act
Bank recovering less than Rs 20 lakh	Civil court	Ordinary civil jurisdiction
Any private party recovering money	Civil court or arbitration	CPC, Order XXXVII, or the arbitration clause
Borrower challenging possession or auction under SARFAESI	DRT, whatever the amount	Section 17, SARFAESI Act
Borrower’s grievance about the loan account, against a bank suing him	Counterclaim inside the DRT case	Sections 19(6) to 19(11), RDB Act
Dispute over title to the mortgaged property, between private parties	Civil court	CPC
Corporate default of Rs 1 crore or more	NCLT	Sections 7 and 9, IBC 2016

What still belongs in the civil court

The bar under Section 18 of the RDB Act and Section 34 of the SARFAESI Act is wide, but it is not unlimited. Matters that ordinarily remain with the civil court include:

• Title and partition disputes. If a co-owner says the mortgaged property was never the borrower’s alone to charge, that is a title question. It is decided in a civil suit, not by a tribunal, and it can run alongside the recovery proceeding rather than inside it.
• Claims by third parties who are strangers to the loan. A buyer under an unregistered agreement, a tenant with a dispute unrelated to the enforcement, an heir contesting a will.
• Suits against a lender that is not a bank. A borrower’s claim against a private financier for accounts and damages goes to the civil court.
• Contractual claims unconnected with the recovery, for instance a claim on a separate supply contract with the same institution.

Where a claim is really an attempt to stall a lawful recovery dressed up as a title suit, courts see through it, and the plaint is liable to be rejected. The distinction is worth taking seriously before filing rather than after.

The borrower’s side of the counter

One asymmetry in the RDB Act catches borrowers off guard. A borrower cannot originate a case in the DRT. There is no equivalent of a plaint for him.

What he has instead are two routes. If the bank has already filed an Original Application, he can file a set-off and a counterclaim in the same proceeding, and the tribunal will adjudicate it along with the bank’s claim. If the bank has taken a SARFAESI measure, he can file an application under Section 17, and there the Rs 20 lakh floor has no application at all. What that application can achieve, and how quickly it has to be filed, is set out in our note on stopping a bank auction.

A borrower who has neither an OA to counterclaim in nor a Section 17 measure to challenge, but who genuinely has a money claim against the bank, is in the narrowest position. The safer course, where the bank’s recovery is imminent, is usually to wait for the OA and counterclaim rather than start a civil suit that may be met with a jurisdictional objection.

What filing in the wrong forum costs

The cost is not just the court fee. It is time, and time in recovery litigation is limitation.

The Limitation Act 1963 gives three years for an ordinary money claim, running from default, with a longer period where the claim is to recover money charged on immovable property. Section 14 of the Limitation Act allows the exclusion of time spent prosecuting a proceeding in good faith in a court that lacked jurisdiction, but it is not a safety net you should plan around. The applicant has to show good faith and due diligence, and that the earlier proceeding failed for want of jurisdiction or a like cause. Arguing about it consumes a hearing or three.

There is a second cost specific to banks. A civil suit filed where the DRT has exclusive jurisdiction can be transferred, but the file rarely arrives clean, and interim orders obtained in the wrong forum are open to attack.

Practical pointers before you file

1. Fix the applicant’s status in writing. For a notified lender, get the notification number into the pleading.
2. Compute the claim as on the date of filing, with a breakup that survives scrutiny. Jurisdiction is tested on the claim as made.
3. Check whether SARFAESI is running in parallel. A bank can pursue an Original Application and SARFAESI enforcement at the same time without abandoning either, which surprises borrowers who assume one must be withdrawn.
4. Look for an arbitration clause in facility documents with non-bank lenders. It often overrides the civil suit route.
5. Do not treat the High Court as a shortcut. Where a statutory remedy before the DRT exists, a writ petition is ordinarily declined, and the time lost is time the recovery clock keeps running.

Change any one of those three facts, the lender, the amount or the relief, and the DRT vs civil court answer changes with it. We act on both sides of these matters before DRT Jabalpur, the DRAT and the district courts, and forum is the first thing we settle on a new file. The background on the tribunal itself is in our explainer on what the Debt Recovery Tribunal does, and our banking work is described on our DRT and debt recovery page.

This article is general information about the law and not legal advice on any specific matter. Jurisdiction turns on the documents in a particular file, including the sanction letter, the security documents and the account statement. If you are deciding where a recovery case should be filed or defended, please use our contact page to discuss your own facts.