Isabella Mariam

The High Court of Judicature for Rajasthan, Single Bench of Justice Anoop Kumar Dhand, has held that the Debts Recovery Tribunal exceeded its jurisdiction by entertaining a miscellaneous application seeking extension of repayment time after final adjudication of the matter. The Court quashed the Tribunal’s order that had granted further opportunity to the borrowers for repayment. It directed that once a consent recovery certificate was issued, the Tribunal became functus officio, and no subsequent modification or rescheduling could be entertained. The writ petition was allowed, and the impugned order was set aside with consequences to follow.

The matter originated from proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, initiated by the petitioner bank against the borrowers due to default in repayment. During these proceedings, a One Time Settlement (OTS) was reached, leading to disposal of the securitisation application by the Debts Recovery Tribunal (DRT) on 28 January 2016, with specified terms and conditions for repayment.

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Under the OTS, the respondents were required to repay the balance amount on or before 31 March 2018. However, the respondents sought extensions by communicating with the petitioner bank. The bank entertained the request and granted time until 30 June 2018. Following this, an amended consent recovery certificate was issued on 30 March 2016.

When the respondents failed to comply, the petitioner bank considered the OTS frustrated and proceeded to recover the balance. The respondents then submitted a miscellaneous application before the DRT seeking modification of the orders dated 28 January 2016 and 30 March 2016. The DRT entertained the application and granted them twelve more months to repay, leading to the current writ petition.

The petitioner argued that the DRT lacked jurisdiction to extend repayment timelines after disposal of the securitisation application. Reliance was placed on Section 62 of the Indian Contract Act, 1872, and the Supreme Court judgment in Assistant Commissioner of State Tax v. Commercial Steel Limited, 2022 (16) SCC 447. It was submitted that once the consent decree was passed, the Tribunal could not extend repayment or modify terms.

The petitioner further contended that subsequent developments, including proceedings before the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code (IBC), 2016, made continuation of the DRT order untenable.

On the other hand, respondents Nos. 2 and 3 argued that the OTS was frustrated by the petitioner’s conduct. They stated that eleven plots were held, of which six were sold, with part repayment made, while delays occurred due to the petitioner bank’s failure to allow inspection of original documents. They asserted that their application before the DRT was valid under Section 19(25) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, which allows the Tribunal to issue orders to secure ends of justice.

The respondents also argued that the impugned order was appealable before the Debts Recovery Appellate Tribunal (DRAT), and the petitioner should have pursued that remedy instead of approaching the High Court. Reliance was placed on several Supreme Court precedents, including Punjab National Bank v. O.C. Krishnan (2001), K. Sreedhar v. Raus Constructions Pvt. Ltd. (AIR 2023 SC 306), and Ajanta LLP v. Casio Keisanki Kabushiki Kaisha (2022).

Respondent No. 1, through counsel, submitted that subsequent to the interim order, proceedings under the IBC had been initiated, and a Corporate Insolvency Resolution Process (CIRP) plan was formulated under Section 17 of the IBC. It was argued that promoters had been suspended from their positions, and no further interference was warranted.

Justice Anoop Kumar Dhand examined the record and observed: “Perusal of the record indicates that the OTS/settlement took place between the parties and based on the same, the DRT passed compromise-cum-consent decree certificate vide order dated 28.01.2016, specifying certain terms and conditions for repayment of the balance borrowed amount by the respondents on or before 31.03.2018.”

The Court noted that subsequent correspondences and communications were made by respondents, expressing their inability to comply, leading to amendment of the consent decree by order dated 30 March 2016. However, when the respondents again failed to comply, the OTS was treated as frustrated.

On the maintainability of the writ, the Court stated: “On many occasions, the Hon’ble Apex Court has held that the writ petition under Article 226 of the Constitution of India can be instituted and would be maintainable before the High Court even if there exists an alternative remedy. The alternative remedy is not an absolute bar on the maintainability of a writ petition under Article 226 of the Constitution of India, if the case falls under the exceptional circumstances i.e. where the DRT has exceeded in exercising its jurisdiction.”

Citing PHR Invent Educational Society v. UCO Bank (2024) 6 SCC 579, the Court recorded: “The High Court can entertain a petition against the order passed by the DRT, if the DRT has acted in defiance of the fundamental principles of the judicial procedure.”

Regarding the jurisdiction of the DRT, the Court observed: “In the instant case, the DRT exceeded its jurisdiction while entertaining the misc. application, submitted by the respondents and granting them further opportunity to repay the borrowed amount. The aforesaid order was passed by the DRT contrary to the earlier orders dated 28.01.2016 and 30.03.2016.”

The Court also referred to Jaipur Vidyut Vitran Nigam Ltd. v. Adani Power Rajasthan Ltd. (2024 SCC Online SC 313), stating: “Any attempt to file misc. application for clarification, modification or recall, in order to seek a substantive modification of the judgment of the Court is an attempt to change the norms of the original order and such an attempt is not permissible in a misc. application.”

Justice Dhand elaborated: “Hence, it is clear that the DRT became functus officio after passing the Consent Recovery and the Amended Consent Recovery Certificate dated 28.01.2016 and 31.03.2016 respectively and thereafter, nothing further remained with the DRT to re-decide/re-consider or revise on the same subject matter, unless there is a legal provision to do so.”

Citing State Bank of India v. Arvindra Electronics Pvt. Ltd. (2023) 1 SCC 540, the Court quoted: “Directing the Bank to reschedule the payment under OTS would tantamount to modification of the contract which can be done by mutual consent under Section 62 of the Indian Contract Act. By the impugned judgment and order rescheduling the payment under the OTS Scheme and granting extension of time would tantamount to rewriting the contract which is not permissible while exercising the powers under Article 226 of the Constitution of India.”

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The Court also referred to Bijnor Urban Cooperative Bank Ltd. v. Meenal Agarwal (2023) 2 SCC 805, wherein it was held: “No writ of mandamus can be issued by the High Court in exercise of powers under Article 226 of the Constitution of India, directing a financial institution/bank to positively grant the benefit of OTS to a borrower. The grant of benefit under the OTS is always subject to the eligibility criteria mentioned under the OTS Scheme and the guidelines issued from time to time.”

The Court concluded that the DRT’s order extending repayment time was without jurisdiction and unsustainable.

Justice Dhand, delivering the final directive, held: “Once the Hon’ble Apex Court has held that even this Court has no such power to rewrite the terms and conditions of the OTS/settlement, then certainly the DRT lacked jurisdiction to modify the terms of the consent recovery certificate. Hence, DRT has committed an error in entertaining the misc. application submitted by the respondents. Therefore, under such circumstances, the impugned order is not sustainable in the eyes of law and the same is liable to be and is hereby quashed and set aside.”

The Court further directed: “The present writ petition accordingly stands allowed. Consequences to follow. Stay application and all pending application(s), if any, also stand disposed of.”

Advocates Representing the Parties

For the Petitioners: Mr. Shivangshu Naval, Ms. Akanksha Naval

For the Respondents: Ms. Anita Agarwal, Mr. Laxmi Kant, Mr. Vibhanshu Sharma, Ms. Kalpana, Mr. Amol Viyas

Case Title: Bank of Baroda v. U.N. Automobiles Pvt. Ltd. & Ors.

Case Number: S.B. Civil Writ Petition No. 8690/2023

Bench: Justice Anoop Kumar Dhand