Taxation as an Invisible Controller: Examining The Hidden Power of the Tax State in India

Abstract

Recovery of bank loans is important for maintaining the stability and effective functioning of the Indian financial system. When borrowers fail to discharge their financial obligations, banks and financial institutions require legal mechanisms to recover outstanding amounts. Two principal statutory mechanisms are the Recovery of Debts and Bankruptcy Act, 1993 (RDB Act) and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The RDB Act provides a specialised adjudicatory system through Debts Recovery Tribunals (DRTs) and Debts Recovery Appellate Tribunals (DRATs). SARFAESI, in contrast, permits secured creditors to enforce security interests through a statutory procedure without initially approaching a civil court. Borrowers are nevertheless given statutory remedies to challenge unlawful recovery measures. In Transcore v. Union of India, the Supreme Court recognised that remedies under the RDB Act and SARFAESI Act can operate alongside each other in appropriate circumstances.