The main legal point established in the judgment is that the DRT had the power to regulate its own procedure, including using rules of the CPC, and that the DRT and the High Court could not be considered courts of concurrent jurisdiction. The judgment also highlighted the possibility of transferring civil court proceedings to the DRT as a counterclaim.

S. Ravindra Bhat, J.

1. This is a writ petition challenging the order of the Debts Recovery Appellate Tribunal (DRAT) dated 22.9.2011 which upholds an order of the Debt Recovery Tribunal (DRT), which found Section 10 of the Code of Civil Procedure (“CPC”) to be applicable to the DRT proceedings, on account of an earlier proceeding being instituted before the High Court, invoking its original civil jurisdiction.

2. The brief facts are that the petitioner bank and the respondent company (hereafter “the borrower”) entered into transactions under which, the latter defaulted on its obligations. The borrower filed a suit before this Court on 27.10.2009 claiming that its transactions with the bank were based on speculative and wagering agreements and thus were unenforceable, illegal and contrary to public policy. It sought injunction against the petitioner bank from enforcing the demand against it (the borrower). This Court refused to grant any ad interim injunction.

3. The petitioner bank later filed an original application before the Debt Recovery Tribunal under Section 19 of the Recovery of Debts due to Banks and Financial Institutions Act (“Recovery Act”), seeking to enforce a demand for 19,15,22,110/- with an interest at the rate of 7% p.a. w.e.f. 22.1.2010. The borrower filed a written statement in the proceedings as well as an application under Section 10 of the CPC, seeking a stay of the proceedings in the O.A. The ground urged was that a prior suit had been filed before this Court, involving the same issues, under the same cause title, and between the same parties. The DRT allowed the application on 1.6.2011, and stayed proceedings before it on the ground that a superior forum with jurisdiction should hear the matter. The Bank’s appeal from this order was dismissed by the DRAT on 22.9.2011.

4. The order of the DRAT, in relevant part, reads:

“12. Keeping in view the aforesaid essence of the matter this has already been considered by the Tribunal that the matter substantially in issue in both the suits with regard to the validity of the documents whether the documents as such have validly been executed and are also valid in the eyes of law. These are the relevant considerations and the matter in issue is directly and substantially is the same in the previously instituted suit and the O.A. which was filed later on and merely because certain matters which are incidental and collateral in issue that will not be decisive[sic] …

13. On the basis of the aforesaid now the question remains that even assuming that Section 10 as such may not have any application to the proceedings taken up in the RDBFI Act, 1993 but where by virtue of sub-section (1) of Section 22 it is directed that the Tribunal including the Appellate Tribunal shall not be bound by the procedure as contemplated in the CPC but will be guided by the principles of natural justice. As I have held earlier that the object behind Section 10 if it is taken into account and the borrower being defendant before the DRT has already taken steps to file civil suit then under these circumstances the principles of natural justice are to be applied to stay the suit to avoid the conflicting judgments by two courts and also to save the time of the courts to examine the witnesses. The policy behind Section 10 is based upon the public policy.

14. …Section 10 applies only where, on the final decision being reached in the previous suit, such decision would operate as res judicata in the subsequent suit. In the instant case, the reliefs in the two suits were different and so were the causes of action. The object of Section 10 is to prevent courts of concurrent jurisdiction from simultaneously entertaining and adjudicating upon two parallel litigations in respect of the same cause of action, the same subject matter and the same relief. Applying the said test as I have already held earlier that the judgment in a previous suit with reference to the valid execution of the documents and ri