The Debt Recovery Tribunal has limited jurisdiction and cannot adjudicate complex issues like fraud and fabrication without a full trial.

ORDER :

KRISHNA S. DIXIT, J.

This petition by the guarantor-cum-surety of the subject loan, seeks to lay a challenge to the order dated 18^th April 2024, whereby the Debt Recovery Appellate Tribunal at Chennai has negatived his Miscellaneous Appeal No.40 of 2023. Petitioner has also sought for the quashment of Debt Recovery Tribunal’s order dated 28^th June 2023, whereby his Application No.724 of 2022, seeking stay of all further proceedings in respondent’s Original Application No.73 of 2025, has been negatived.

2. Sri.Madhukar Deshpande, learned Counsel appearing for the petitioner argues that although his client was admittedly a guarantor having executed mortgage for securing the repayment of initial debt, his client's liability by virtue of suretyship, would stand discharged, absolutely because of, (a) Novatio inasmuch as new transaction has been brought about by executing a whole lot of new loan documents; and (b) there is fraud & fabrication of documents perpetrated by the principal borrower hand-in-glove with the officials of the respondent. He cites the decision of Apex Court in the case of S.P. CHANGALVARAYA NAIDU (DEAD) BY LRs v. JAGANNATH (DEAD) BY  LRs, [(1994)1 SCC 1] in support of his contention that all transactions stand voided by virtue of fraud & fabrication.

2.1 Secondly, Mr.Deshpande submits that his Civil Suit in OS No.688 of 2019 founded on fraud & fabrication is pending and that the respondent herein also happens to be one of the defendants to the same; the respondent’s application filed under Order VII Rule 11(d) of the Code of Civil Procedure was favoured by the Civil Court vide order dated 04^th January 2020 and the suit was dismissed; the same was put to challenge in RFA No.421 of 2020, which came to be allowed by a Learned Single Judge of this Court vide judgment dated 15.02.2022 and dismissal order having been set at naught, suit is restored to the trial Court for trial & disposal; that the order of this court would bind the respondent as well; that the debt recovery Tribunal being a creature of Law, has only been conferred with limited jurisdiction and it tries the causes in a summary way; therefore, it has no power to try the complex issues of fraud & fabrication. In support of his position, he relies upon certain rulings.

2.2 After service of notice, the respondent-Asset Reconstruction Company has entered caveat through its Senior Panel Counsel, who vehemently opposes the petition making submission in justification of the impugned orders of Debt Recovery Tribunal and Debt Recovery Appellate Tribunal. He refutes the submission of learned Counsel for the petitioner contending that the DRT functions under the provisions of the Recovery of Debts and Bankruptcy Act , 1993; it has all powers which Civil Courts do possess; even the contentions of novatio, limitation and ‘fraud & fabrication’ can also be duly adjudicated upon. Therefore, petitioner is not justified in seeking to stall the DRT proceedings with one or the other pretext. He also highlights the likely consequences of allowing the borrowers & sureties to approach the Civil Court to litigate on issues of the kind and thereby interdicting the speedier loan recovery, which the 1993 Act intends. He also adds that the subject suit is essentially founded on the lack of jurisdiction of Tribunals constituted under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act , 2002 as distinguished from those constituted under the 1993 Act. In support of his contention, he too banks upon certain rulings.

3. Having heard the learned Counsel for the parties and having perused the petition papers, we are inclined to grant a limited indulgence as under and for the following reasons:

3.1 Initially, Term Loan of Rs.1.30 crore along with Rs.3.00 crore Open Cash Credit limit was availed in the year 2010. Subsequently, on 14^th July 2011, the Open Cash Credit Limit came to be enhanced to Rs.7.50 crore and the repayment of the entire