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KARNATAKA HIGH COURT
Vikramjit Sen C.J. and
Mrs. B.V. Nagarathna, J.
Super Sales Corporation —Petitioners
versus
D.R.T., Bangalore (DB) —Respondents
Writ Petition No. 14711 of 2003
Decided on 8.10.2012
For the Petitioners:Sriyuths N. Devhadass, Senior Counsel along with M. Veerabhadraiah and M.R. Rajagopal, Advocates.
For the Respondents:Sriyuths A.G. Holla, Senior Advocate for K. Shashi Kiran Shetty, H.J. Krishnamurthy, K. T. Vasudeva Iyengar and Smt. S. Susheela for M/s. Gururaj Joshi and Company, Advocates.
Headnote:Recovery of Debts Due to Banks and Financial Institutions Act, 1993—Section 27—Whether DRT has jurisdiction under Section 27 to withdraw the Certificate of Recovery at the instance of a third party— Having regard to object of the Act and its sweeping provisions, DRT has jurisdiction to deal with all matters pertaining to “third party debt orders” or garnishee proceedings as contemplated in Section 28 of the Act—A third party would have the right to seek a remedy in the matter of recovery of a debt under Section 28 of the Act by invoking an appropriate provisions of the Act—Any denial of a remedy to a third party before the DRT would lead an incongruous situation where before a Civil Court or any other forum, the Recovery Officer of the DRT apart from the bank or financial institution would have to be arraigned as respondents by the third party and matters relating to recovery of debts by banks and financial institutions would be adjudicated upon thereby demanding the authority of the DRT to exclusively deal with such matters such an intendment of the Parliament is not envisaged under the Act—The Act being a self-contained code for the recovery of debts to banks and financial institutions all matters relating to the recovery of debts have to be dealt with by the DRT or DRAT in appeal otherwise there would be vesting of jurisdiction in an authority not contemplated under the Act— The same would also be contrary to the intention of Section 18 of the Act which divests or bars jurisdiction of all Courts or authorities in the matter of recovery of debt to banks or financial institution—Hence the contention that because there is no privity of contact between a bank or financial institution on the one hand and the third party on the other hand, the DRT would have no jurisdiction to entertain an application filed by a third party seeking relief in the matter of recovery of debt after the issuance of a Recovery Certificate held incorrect—Writ petition dismissed. (Paras 54, 67))
In this writ petition, the petitioners have assailed the order dated. 25.3.2003 passed in M.A. No. 55 of 2003 (Annexure-Q) by the Debt Recovery Appellate Tribunal (hereinafter referred to as ‘DRAT’ for the sake of convenience). By the said order DRAT directed the respondent/Bank to receive the balance amount of Rs. 63,00,000 and release the title deeds related to the scheduled property to the 3rd respondent- institution which was to discharge the entire amount due to the Bank. The 3rd respondent-institution was directed to deposit before the Debt Recovery Tribunal (hereinafter referred to as “DRT”), at Bangalore, a sum of Rs. 20,00,000 due to the borrower within two weeks from the date of the impugned order with a further direction to the Presiding Officer DRT to return the said amount to the borrower i.e., the petitioners herein. It was also declared that if the amount due to the Bank was paid the recovery certificate was discharged. DRT, Bangalore was directed to issue a sale certificate in favour of the 3rd respondent herein on being satisfied that it had discharged the entire loan liability to the Bank i.e., on receipt of Rs. 63,01,825 and also making deposit of Rs. 20,00,000 due to the petitioner herein before the DRT.
2. The relevant facts are that the 1st petitioner is a firm consisting of five partners. The 2nd petitioner is the exclusive owner of the property which is the subjectmatter of the Order. That the 2nd respondent Bank, is a nationalised Bank, and had sanctioned credit facility limit of Rs. 50,00,000 to the 1st petitioner firm on 5.1.1988, Bill Purchase Discount facility limit of Rs. 5,00,000 dated 23.5.1988 and Cash Credit facility limit of Rs. 15,00,000 were accorded and the immovable property comprised in Sy. No. 43/1, of Jakkasandra Village, Koramangala, Bangalore, measuring about 1 Acre 13 guntas (hereinafter referred to as “Scheduled property”) was furnished as collateral security for the loan borrowed by the 1st petitioner-firm by the 2nd petitioner as a guarantor. Since the 1st petitioner committed default in repayment of the said loan, the Bank had instituted a dispute before the Debt Recovery Tribunal, Bangalore (hereinafter referred to as ‘DRT’) in O.A. No. 1260 of 1996. In the said application the Bank sought for a decree by way of grant of Certificate of Recovery of the amount which was due in favour of the 1st petitioner. The DRT passed an Order dated 31.8.1998. Pursuant there to a Recovery Certificate was issued in favour of the Bank for recovery of Rs. 1.13 crores. It appears that in the meanwhile the Reserve Bank of India had promulgated certain guidelines and norms regulating non-performance accounts known as “One-Time Settlement Scheme” in Banking business. The case of the petitioner was considered by the Bank and sanction was accorded under One-Time Settlement Scheme and accordingly a sum of Rs. 49,00,000, was accepted as a full and final settlement, payable by the 1st petitioner-firm to the 2nd respondent-Bank under certain terms and conditions. This acceptance by the Bank was intimated to the petitioner-firm on 31.8.2000.
3. The 1st petitioner however failed to comply with the instructions of the Bank which ultimately led to the issuance of a proclamation for the sale of the schedule property by the Bank on 26.12.2000. The proclamation was assailed by the petitioners in W.P. No. 4212 of 2001 in which an interim order staying the sale subject to deposit of Rs. 30,00,000 on or before 15.2.2001 was granted by this Court with a direction to the Bank to reconsider its earlier decision pertaining to One-Time Settlement as requested by the petitioner. Later on, the said writ petition came to be disposed of relying upon a decision in connected matters.
4. In the meanwhile on behalf of the 1st petitioner one more writ petition was filed in W.P. No. 26266 of 2001 but same came to be dismissed on 29.10.2001 and against that an appeal was filed. The 3rd respondent herein, had filed an applicat
