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DRAT Mumbai

DRAT Mumbai was eastablished vide GSR No: 654(E) 17-7-1994. The territorial jusrisdiction of the Hon`ble Tribunal covers Ahmedabad, Aurangabad, Mumbai-1, Mumbai-2, Mumbai-3, Nagpur and Pune.

Hon'ble Justice Allah Raham

Hon'ble Justice Raham is Chairperson of Debts Recovery Appellate Tribunal (DRAT) Mumbai


NEWS

Bank tries to sell off non existent property.

What was being said time and again but never really reported is now out in the open. A case has been reported where the Bank Of India has secured an Order from DRT Mumbai for the sale of a flat the does exist at all! When confronted, the bank officer is reported to have told the bidders that the successful bidder would be given “symbolic” possession of the property. It is for the successful bidder to create the property!

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Auction purchasers beware -Auction Notice under SRFAESI Act should contain mandatory details

Those looking for great buys at the auctions being conducted by Banks and FIs should be careful about the auction notices. The auction notice issued under SRFAESI Act requires certain mandatory information. These are crucial to the very notice itself. Non inclusion of the data in the notice is fatal to the auction itself.

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MORE ON DRT PROCEEDINGS
  1. DRT Pune orders arrest for enforcing orders.
  1. CMM need not hear the owner of asset.
  1. Can there be pre-deposit even if no debt has been determined?
  1. Bank Officers should carefully examine the title deeds being deposited by borrowers :: DRT-2 Chennai.
  1. Non compliance with illegal orders is not contempt.
  1. Bank must produce original title deed for claiming equitable mortgage on the property.
  1. Debts Recovery Tribunals cannot use their discretionary powers to reduce interest pendende lite.
  1. Merely denying banks accounts is of no use
  1. DRTs can fix rate of interest.
  1. Borrower is deemed to have signed the documents after reading and understanding the document.
  1. Bank is entitled to claim only agreed rate of interest.
  1. Financial jurisdiction of DRT does not change with the change of amount adjudicated.
  1. Where the bank has suppressed material evidence it is not entitled for any relief
  1. Allegations of embezzlement should not be made loosely
  1. Presence of a Notary Public is satisfactory
  1. AP High Court admits PIL against Presiding Officer DRT Hyderabad.
  1. Decks cleared for proceedings against former PO DRT Ahmedabad.
  1. Limitation for enforcing foreign judgments is three years.
  1. The DRT must adjudicate the claim of the applicant only.
  1. Limitation for enforcing foreign judgments before DRTs is 3 years.
  1. Employee-Directors cum guarantors are liable for repayment of the whole of the loan amount
  1. DRTs cannot adjudicate any claim of the bank.
  1. Third parties do not have a locus standi to meddle into disputes between a Bank and its borrowers.
  1. Agreement necessary for arbitration of case between AMC and Bank
  1. DRAT can modify rate of interest pendent elite
  1. In case of Frauds DRTs must help in punishing the culprits.
  1. Auction purchasers beware -Auction Notice under SRFAESI Act should contain mandatory details
  1. Every act of Bank under SRFAESI Act gives raise to an fresh cause of action.
  1. Recovery Officer cannot impound passport.
  1. Guarantors are co-extensively responsible.
  1. Objection cannot be raised for the first time before DRAT.
  1. Litigant cannot be made to suffer due to negligence of his counsel.
  1. Guarantors have no say to seek priority of recovery.
  1. When documents are challenged, DRT must seek expert evidence.
  1. Don’t go for fishing expedition in DRAT.
  1. In BIFR proceedings, Guarantors cannot seek better protection than the principle borrower.
  1. Guarantors are not protected under provisions of SICA
  1. To challenge an Auction – follow the procedure
  1. A compromise deed should be a proper document
  1. A few transactions does not convert a NPA into PA
  1. DRAT Allahabad :: Unless stated, all RBI Circulars are enforceable.
  1. When jurisdiction is challenged, the same should be decided first.
  1. Unless rejected, the proposal submitted by the borrower is deemed to be under consideration of the Bank.
  1. Conscious absenteeism from proceeding before DRT uncondonable
  1. A few transactions does not convert a NPA into PA
  1. When the borrower does not deserve even sympathy
  1. Indian Evidence Act not applicable to DRTs
  1. DRTs fume at pleas for cross examination as delaying tactic.
  1. Commissioners are to protect interests of secured creditors
  1. Uncontested claim of a Bank results in full amount being decreed.
  1. Auctions below upset price are not permitted.
  1. Basic right of borrowers under SRFAESIA- to file a representation against seizure notice.
  1. First right of a defendant under SRFAESIA- to be replied to by the Bank.
  1. Banks can club all their claims against a person in a single application before the DRT.
  1. Debt Recovery Tribunal ( DRT ) need not frame issues for cases before them.
  1. Jurisdiction of High Courts over DRATs depends on the cause of action
  1. The Debt Recovery Tribunals should hear the parties.
  1. Adjournments before DRTs should be a rarity.
  1. DRTs cannot be expected to grant adjournments merely for the asking.
  1. Has the Government unjustly sided the banks with SRFAESIA ?
  1. MARDIA ne SRFAESIA ko Mardia ?
  1. Auction & Sale of Properties by Public Financial Instititutions should be in the best interest of the Institution.
  1. Receivers who do not act in the best interest of the properties placed in their hands can be prosecuted.
  1. Recovery Officer of a DRT is bound by Schedule II of the Income Tax Act
  1. The Recovery Officer of a DRT cannot arrest a lady defaulter.
  1. Powers of DRTs are limited where Companies are under liquidation.
  1. The DRT Commissioner has right of way over the Official Liquidator
  1. Plural remedies no longer applicable even to pending proceedings
  1. Multiple transactions does not amount to plural remedies
  1. Consumer Court are not forums over DRTs
  1. Proceedings can go on in Consumer Court as well as in DRT
  1. Tribunals cannot pass Garnishee orders on parties who do not have dispute with the Banks
  1. Auction of properties, should be above board.
  1. SRFAESI - needs securitisation
  1. Jurisdiction Issue should be settled first
  1. Banking Ombudsman & DRT Act are different and Exclusive – Proceedings between two parties based on the same facts can go on simultaneously before the two forums.
  1. Tribunals are important mechanism for the administration of justice -SC
  1. Cross Examination of Witnesses in Tribunal not compulsory
  1. DRATs are under jurisdiction of multiple High Courts
  1. Writ Petition is not maintainable against initiation of proceedings u/s 13(2) of the SRFAESI Act.
  1. Claim against the principal borrower need not be crystallized for proceeding against the guarantor.
  1. When sick, talk to your bank.
  1. If there is no mention of the rate of interest in either the Loan Agreement or in the Promissory Note, then interest at 18% pa should be charged .
  1. Supreme Court reduces interest rate for litigation periods.
  1. Compromise must be given effect to if the borrower was made to act on it.
  1. A contract between a Bank and Borrower has to be enforced.
  1. Stay of recovery proceedings does not mean putting borrower back into possession of the assets.
  1. Without pre-deposit an appeal cannot be entertained : SC
  1. Can recovery proceedings be taken against a company which is before BIFR?
  1. Banks cannot recklessly exercise their powers under SRFAESI Act.
  1. Dues of a Government company are not dues of the Government.
  1. Liberal construction should be granted to beneficial statues: SC.
  1. There is no need to invoke SRFAESI Act if the Bank’s money can be recovered equally fast
  1. Auction of assets behind the back of Official Liquidator is fatal to an auction.
  1. SFC cannot proceed against the guarantors directly.
  1. Agricultural land cannot form security for SRFAESI Act.
  1. Guarantor wholly responsible for the due discharge of the loan: SC
  1. A Borrower has no say in the sale of NPAs.
  1. Employee Directors could become vicariously responsible for company loans
  1. Kerala High Court’s fresh approach on Securitisation proceedings.
  1. SC larger bench to decide on loans against leased Govt. land.
  1. Cannot take Bank’s money and go away.
  1. From debt to death - Recovery goons beat borrower to death.
  1. Admitted amount can be recovered without waiting for the Recovery Certificate.
  1. Disputes between Crown and Secured claimants needs adjudication.
  1. No harm if DRT accepts 2nd statement of defense in transferred matters.
  1. Revenue Recovery Act can be invoked to execute decrees: Kerala High Court
  1. A pending EP no bar to proceedings under SRFAESI Act
  1. A sad commentary on the functioning of the Debts Recovery Tribunal.
  1. Kolkata High Court strikes down willful defaulter tag
  1. OTS scheme can be directed where borrower is sincere.
  1. Co-op Banks out of DRT net
  1. High Court is not the Right Forum to challenge proceedings under SRFAESI Act.
  1. Re-auction is the only remedy for Irregular Auction.
  1. Recoveries can be made in terms of contract between the parties.
  1. An irregular auction cannot be sustained.
  1. Latches – detrimental to auction
  1. Asset can be sold below the Reserve price also.
  1. Sale below reserve price is not illegal.
  1. Should Recovery Proceedings by Banks need monitering?
  1. Debts Recovery Tribunal cannot ask the lessee to pay more than the indenture amount.
  1. Arraign all the parties to secure full justice.
  1. DRT cannot ask the lessee to pay more than the indenture amount.
  1. Appeal to DRT under SRFAESI Act to be charged as per DRT Rules:: SC
  1. What should lthe limitation be for filing recovery claims?
  1. Civil Courts cannot grant injunctions against Banks :: SC
  1. Borrowers free to pursue against the Lenders: SC
  1. Borrowers can pursue independent actions against the Lenders: SC
  1. Courts take a dim view of delaying tactics
  1. Costing of suits – Court fees should not be included.
  1. Proceedings before DRT is no bar for other proceedings to go on
  1. When setting aside a auction – sale, grant of interest to auction purchaser is the discretion of the Court.
  1. Hammer the best price out of auctions.
  1. SFC can initiate action till the assets are free.
  1. Lease hold land are not good titles of owner ship of land. Lending agencies should be careful.
  1. Recovery Officer cannot decide the properties to be attached and sold.
  1. Recovery Officer cannot attach State Funds with the RBI.
  1. Unreasonable delay in return of documents is a deficiency of service
  1. OTS is available only to pending cases.
  1. All that glitters is not diamonds. IT Department learns !
  1. No need to transfer a case to Debts Recovery Tribunal where a particular case was decreed before the issue of notification under the RDB Act
  1. No special clauses for tenants in DRT Act
  1. Guarantors can peruse Appellate Remedies on their own
  1. Workmen’s Dues before Debt Recovery Tribunal
  1. Death of a borrower will not effect proceedings intiated under SRFAESIA
  1. The Debt Recovery Tribunal cannot re-open, or re-examine, or re-call an order already passed by the High Court earlier.
  1. Small industrialists miss out CGTSI benefits due to poor awareness.
  1. Strong message from DRT Mumbai - Exercise Powers with Responsibility.
  1. Contempt proceedings - Limitation starts from the day the contemptuous act became known.
  1. Notice under SRFAESIA is of crucial importance.
  1. Limitation starts on the day the loan recall notice is issued.
  1. Civil Courts loose jurisdiction if value of Execution Petition reaches Rs. 10 lakhs.
  1. Tribunals should be slow & cautious while granting ad-interim ex-parte orders.
  1. Proceedings under SRFAESIA cannot take place when BIFR is seized of the issue.
  1. Jurisdiction of a Recovery Officer - cannot transgress that of the DRT.
  1. Mardia Hearing Starts – ex-parte stay given
  1. Workmen’s Dues before Debt Recovery Tribunal
  1. Where Claim is not opposed - no need to appoint a Receiver
  1. Claim will be decreed where defence admits the loan amount -
Do You Know, the Tribunals held that
Pre suit amount attracts interest at RBI rates.
Court fees cannot form part of suit amount.
voluntary insurance premia paid by the bank cannot form the suit amount and levied on the borrower.
Every bank is expected to take a minimum amount of due diligence to check for frauds and forgery. Not discharging its role in checking the instrument and holding the presenting bank only for it is not acceptable.
Where contributory negligence has been established the other party cannot be held accountable.
For enforcing the recovery of dues ordered by a foreign Court, the period of limitation would be 3 years only as per Article 101 of the Limitation Act.
The limitation starts from the date of judgement and is not extendable based on any activity between the judgment creditor and judgment debtor.
The extended period of 12 years under Article 136 of the Limitation Act would be available only if the DRT had passed an judgment/ decree earlier and is required to be enforced.
The DRT should not dismiss the suit as a whole on the grounds of limitation. Where personal liability is barred by limitation then mortgage decree should be explored.
Mere enhancement of the loan amounts does not make the guarantee void. Guarantee remains valid for the original contracted amount.
It cannot be accepted that an educated and learned person would sign blank documents.
Even though alternative remedy is available, the High Court can admit an Writ Petition due to exigencies of the situation .
Where the factum of loan is admitted, minor discrepancies does not absolve the responsibility to repay the debt.
Unless it can be shown that there has been material difference to the defence due to the denial of the facility of cross examining the witnesses, there is no need to interfere with the orders of the Debt Recovery Tribunal (DRT ).
Opportunity should be given to the parties to cure the defect, before dismissing an application for default
As member of consortium of lenders the bank was bound by the CDR scheme formulated for the revival of the borrower company.
Individual banks cannot be allowed to institute their own recovery proceedings as the CDR scheme will become ineffectual and the company will never be able to be revived.
The DRTs and DRATs have the power to fix rate of interest for the period when the case was instituted till its payment.
A property purchased subsequent to mortgage, by what ever mode of documentation, would only be with the prior charge. The submission that reasonable care was taken and property purchased in good faith for valuable consideration has no legal basis.
Where the parties stood as guarantors separately and collectively for different transactions, then liability of each guarantor should be worked out individually as well as collectively.
Where breach of any provision or RBI’s instruction is cited as a ground for opposing creation of the security, the onus is on the borrower to prove it.
If there is any irregularity in the creation of the security, it would not vitiate the security itself.
Where the conduct of the guarantor/ defendant has been such as to make the bank believe that the security is for the due repayment of the loan, and the guarantor did nothing to dispel the belief, and on the contrary did deposit the security with the bank, it is presumed that the security is for the due repayment of the loan.
Notice under SRFAESI Act is to be given only to the borrower and not a guarantor.
When an legal hire claims rights/ privileges available to the original deceased person under a particular Act, then he must comply with other mandatory provisions under that Act.
The secured creditor can choose against whom to proceed. He can proceed only against the principal borrower or only against the guarantors, or only against some of the guarantors.
However, if the principal borrower is discharged, so are the guarantors.
Where the appeal is against an order of the DRT rejecting an prayer for cross examination of a witnesses, there is no question of pre-deposit of debt claimed by the bank.
The provision relating to pre-deposit of debt would be attracted only when an order of determination of liability is challenged.
It would not be proper to strike off the name of a defendant merely on the submission that no cause of action has been made out against him.
Whether any cause of action is made out against a defendant or not can only be established by way of proper trial.
Where the balance of convenience is in favour of secured creditor, and the DRT is satisfied with the existence of a situation of possible impairment to the secured assets, it can order appointment of a Receiver.
Where the intention of the borrower is not to pay the secured creditor, the DRT can order appointment of Receiver/ Commissioner to protect the interests of the secured creditor.
A person claiming to be a tenant of the borrower must get a suitable order from the court of competent jurisdiction and not seek an order from the DRT.
The DRT and the Recovery Officer do not have any powers under the RDDBI Act to decide tenancy and ownership issues.
Right of possession of auction purchaser should be insisted first and the object should move the appropriate court for
Resjudicata will not be attracted if the footing on which the appeal has been preferred are different even though the impugned order may be the same.
Courts are there to render justice and an appeal should not be thrown out on technical grounds like delay, if the delay is other wise non intentional.
A pedantic view on seeking every day’s explanation should not be taken.
Stakes for crown debts can be laid before the Recovery Officer only at the time of recovery of dues.
Where the bank has failed to produce proof to substantiate its stand, or oppose the submissions made by the borrower, then the submissions made by the borrower has to be accepted.
If a particular piece of evidence or document is not available on the date of argument, time should be sought to produce the same. Not seeking time to produce the same leads to the presumption that the document/ evidence does not exist.
SRFAESI Act does not prohibit a banker from splitting up the securities for the purpose of sales.
A borrower should not be made to suffer multiple litigations just because the bank decides to split up securities and take out separate proceedings.
Where the borrower has not denied his liabilities to the bank, but only the extend of his liabilities, no harm would be committed if the sale of the security is confirmed. The borrower can peruse his remedies before the DRT.
Delays in filing of appeal by Government Units is result of the procedures that they have to follow and not because there are latches.
Delay can be condoned if the explanation is reasonable and there have been no latches.
For seeking cross examination of a witness, reasons must be stated.
Where the Applications before the DRT is a simple money suit and not suit for redemption or foreclosure of mortgage within the meaning of Section 16 read with Order XXXIV of the Code of Civil Procedure it is not necessary to institute the case before the DRT having jurisdiction over the property.
A DRT will get jurisdiction to entertain an application even if part of the cause of action has arisen within its territorial jurisdiction.
Even though the defendants and the suit property are situated under the jurisdiction of a DRT different from the one where the case has been instituted, the claim application would still be maintainable as part of the cause of action which has arisen under the jurisdiction of the first Tribunal gives it the necessary jurisdiction.
DRAT has the powers to waive off pre deposit of 75% of the debt amount.
Depending upon the facts of the case, ends of justice would be met if pre deposit of a nominal amount is ordered.
Jurisdiction of DRT to hear a claim application has to be decided when a suit arising from the same cause of action is pending a civil court.
Publication of Notices in a News Paper as the only step taken to serve notices is not a good service, particularly when addresses of the defendants were known to the Bank.
Whether the News paper in which summons were published has a good circulation in the area where the defendants reside is a point that should be kept in mind for considering due service.
DRT must base its decision on judicious considerations only and not on presumptions and conjectures.
Where the document produced by the defendant is challenged and denigrated as being forged, views of expert should be taken rather than accept what the bank says.
Where the borrow who has not filed his written statement for prolonged period, and when cornered alleges that he has not been supplied with a copy of paper book is not a diligent litigant. He cannot be allowed to burden and inconvenience the Bank.
Documents produced before the DRT should be sufficiently stamped and duly registered. If they are under stamped and un registered they cannot be considered.
Unless specifically revoked by an fresh order of AAFIR, all orders issued by the BIFR would be in force.
Where the BIFR has given consent to a Bank to proceed against a borrower, no fresh consent is required to continue the proceedings when the borrower files an appeal to the AAFIR.
Serving a proper notice on the borrower/ defendant/ guarantor is mandatory pre condition for proceeding under SRFAESI Act.
Service cannot be deemed to have been done where the notice was returned as “unclaimed”.
Limitation of 45 days envisaged in s. 13(4) of the SRFAESI Act is in respect of each of the actions undertaken by the Bank and not just notice.
DRTs jurisdiction to examine proceedings under SRFAESI Act extends right upto the final stage. The DRT can set aside the sale at any stage of the proceedings.
Where the instrument presented by a account holder turns out to be forged, the account holder cannot be proceeded against unless they have got themselves unduly enriched.
The amount under a forged document /instrument cannot be treated as ‘debt’ within the meaning of RDB Act.
Where the main borrower does not contest the claim of the bank it amounts to admittance to the claim of the bank.
Guarantor's defence is limited where the main borrower has admitted to the claim of the bank.
If the records of the DRT are not complete, the DRAT is left with not alternative but to remand the case bank to DRT for necessary compliance.
When defendants deny their signatures, it is for the courts to take a decision whether an expert advise should be taken in the matter.
When experts differ in their opinion, the courts must form their opinion.
The courts cannot compare signatures themselves.
When parties disagree with an opinion, they must take immediate steps in the matter.
Whether or not there has been misjoinder of parties can be decided only after pleadings have been completed.
It is not proper to order for deletion of names of parties even before they had filed their written statement of defenses.
Simultaneous proceedings under SRFAESI Act and RDBFI Act not permissible.
When an application is pending before DRT, the Bank cannot initiate proceedings under SRFAESI Act.
Bank has to first withdraw its case from the DRT before initiating case under the SRFAESI Act.
Where deposit of title deed is not established relief against the said property cannot be allowed.
Interest on penal interest cannot be allowed.
Where the rate of interest charged and periodicity of rests are not in accordance with the RBI guidelines, the DRT must determine the correct amount payable rather than dismissing the claim of the Bank.
Once the existence of a Power of Attorney is established presumption is that the same was subsisting on the date of getting the loan. Only contrary is required to be proved.
The original power of attorney will always be with the party. Therefore it is not correct to expect the Bank to produce the same.
It is for the defendant to produce the deed of cancellation of the power of attorney.
The duty is heavily cast upon the defendant alone to establish and prove that the loan was given by the bank after having full knowledge about the cancellation of power of attorney. Unless this burden is discharged the defendant wholly responsible for actions taken on the basis of the Power of Attorney executed.
Tribunal cannot give any direction to banks for settling the dues with the borrowers underbank.
If the Tribunal uses its discretion powers for slashing interest then it must be for sound reasons.
Where the borrower’s business has been closed down, and where there is no proof that the borrower has been engaged in any other business activity, and particularly where the borrowers have acknowledged their debts and sought waiver of penal interests it would be fit case to grant reduced rates of interests.
In garnishee orders directing tenant of the borrower to pay the rents directly to the bank, the tenant cannot be asked to pay anything more than the lease agreement between the borrower and the tenant.
Application u/s 31 of RDB Act does not require to hear the parties. It is execution of an order in which the parties have had their full say.
A Recovery Certificate u/s 31-A of the RDB Act is different from a Recovery Certificate u/s 19(22) of the same Act.
There is no need for the Bank to elect between RDDBFI Act and SRFAESI Act to proceed against the Borrower. It can invoke provisions of both the acts simultaneously.
There is no bar on a bank in proceeding against a Borrower under provisions of SRFAESI Act even as their application is pending before the DRT.
A Recovery Officer cannot pass an order which runs contrary to the order passed by the Presiding Officer of the Debts Recovery Tribunal.
The creditor bank can proceed against a company that has taken over a borrower company, and where the terms of take over have a specific covenant that the taking over entity would be responsible for the debts of the borrower company.
A claim arising out of an ‘recompense’ covenant in an OTS agreement is a “debt” within the meaning of the RDDBFI Act.
There is no bar on banks from inserting ‘recompense’ covenant in OTS deeds/ agreements.
Unless there is cogent reasons the Debts Recovery Tribunals cannot use their discretionary powers to reduce interest pendende lite.
Supreme Court’s decision in Ravindra’s case does not give Debts Recovery Tribunals blanket powers to reduce interest rates in each and every case.
As a thumb rule, in commercial transactions, contractual rates of interest should be granted unless there are other mitigating circumstances.
The actions of the Authorised officer under SRFAESI Act does not directly relate to debt but to asset. Therefore the DRT under whose jurisdiction the asset is located also has jurisdiction to hear the matter even though the loan account may be under the jurisdiction of another DRT.
Where two Banks claim charge on the same property, all things being equal, then the Bank that dealt with the borrower first in point of time will have first charge on the property.
Where two banks produce title deed to the one and the same property, and both claim that the title deed produced by them is original, then the onus is on the banks to establish that the title deed produced by them is original.
When a case is remanded back with directions, the directions have to be complied with scrupulously and unquestioningly.
Where the parties have joined issues and led evidence, the Recovery Officer has to investigate each of the issues.
The Recovery Officer cannot go into complicated issues of title of properties.
The powers of Recovery Officers are analogous with that of civil courts and he can investigate into the issues relating to title, possession and ownership.
Adjudication of civil courts prevails over that of the Recovery Officer. Hence it would be better if the Recovery Officer awaits the orders of the civil courts in such matters.
Where the borrower wishes to file an appeal against the auction of the assets, he must do so within 30 days of the auction after depositing the due amount.
It is incorrect to say that nothing survives in an appeal where the authorised officer has auctioned off the assets.
The SRFAESI Act allows the borrower to approach the DRT when the bank auctions off the security interests.
Amount resulting from fraud is also a debt. DRT has jurisdiction to adjudicate dues arising out of fraud. Where the fraud has resulted from contributory negligence, then both the parties should bear the loss.
A mortgagor falsely representing himself to be competent to mortgage an asset will be bound by the mortgage after he attains competency.
A possessory title can also be mortgaged.
The mortgage of a possessory title will get converted into equitable mortgage on the day the mortgagor gets title to the asset.
Parties must take care and circumspection in alleging bias against a Presiding Officer of DRT.
An order or judgment may be illegal or arbitrary, it may be good, bad or indifferent but that does not necessarily mean that it is tainted with bias.
There is no need for cross examination of witnesses where only points of law are to investigated.
Whether the larger or shorter limitation under mortgage decree or personal guarantee would be applicable is a question of fact and law which does not need cross examination of witnesses.
DRTs are not empowered to decide issues of right, title, mesne profits and other issues not covered under the RDB Act.
A compromise should be drafted properly in order to show that both the parties agreed to abide by it.
A compromise deed must bear the signature of both the parties to show that they had agreed to the terms and conditions therein.
Guarantors obligation to pay the bank is co-extensive with that of the principle borrowers.
The bank has every right to attach and appropriate guarantors amount kept in ‘no-lien’ account in the bank.
Those who don’t obey orders of the court do not deserve any sympathy.
Condonation of delay is a matter of discretion of the Court. Section 5 of the Limitation Act does not say that such discretion can be exercised only if the delay is within a certain limit. Length of delay is not the criterion. Acceptability of the explanation is the only criterion. Sometimes delay of the shortest range may be uncondonable due to want of acceptable explanation whereas in certain other cases, delay of a very long range can be condoned as the explanation thereof is satisfactory.
Once the lower Court accepts an explanation as sufficient to condone delays, the Superior Court should not disturb such finding, much less in revisional jurisdiction, unless the exercise of discretion was on wholly untenable grounds or arbitrary or perverse.
Prayer for appointment of Receiver cannot be dismissed if it involves important points. Where the applicant alleges forgery etc. and seeks stock taking of secured/hypothecated goods, it must be granted.
When an document is found to be inadequately stamped or not stamped the court is not bound to send document for impounding. It is for the party filing the document to request the document to send it for impounding.
There must be proper explanation as to how a document was traced and produced before the DRAT which could not be produced before the DRT.
DRT is to be guided by the principles of Natural Justice and not by strict provisions of CPC. Therefore DRT can allow the party to produce the original documents without following rigid CPC provisions.
Guidelines and instructions issued by the RBI are fully applicable to proceedings pending before the DRT.
Where the borrower has applied for settlement of loan account under the OTS Scheme of the RBI, it is the duty of the Bank to apply the guidelines and settle the account
Where more than one notification is simultaneously applicable, the one that is more beneficial to the borrower should be applied.
The bank is not eligible for any interim Recovery Certificate, where the borrower has already paid off the due amount as the guidelines.
Where the claim application goes uncontested, the Debts Recovery Tribunal will allow whole of the claim made by the Bank.
Unless stated specifically to the contrary, the liability of a guarantor is co-extensive with that of the principal borrower.
If the guarantee documents are silent, it is presumed that the guarantor’s liability is coextensive with that of the principal borrower.
No direction can be issued to financial institution to enter into an OTS with the borrower. The borrower cannot claim a vested right for OTS.
Guidelines issued by Reserve Bank of India on classifying accounts as NPA and on offering OTS are purely executive instructions having no statutory force. These instructions do not create any vested rights in favour of the borrowers.
The DRT can vary the payment schedules even in matters settled by way of compromise between the parties.
Extension of time for payment under compromise deed is not available merely for the asking.
Party seeking to vary payment schedules must produce adequate proofs of grave hardships that prevents them for adhering to the agreed schedule.
Unless the Circulars issued by the Reserve Bank of India specifically mentions that they are outside Sec. 21 or 35 of the Banking Regulation Act it must be construed to have been issued within four corners of the Banking Regulation Act.
A NPA cannot become a PA merely if a few transactions are carried out in it.
When the compromise settlement/proposal is with the Bank’s officials, and the proposals has not been turned down, it is deemed to be under consideration of the Bank.
When the Bank is put under moratorium the borrower is deprived from day to day operations of his accounts putting him to hardship. In such circumstances it is not open to bank to charge higher rate of interests for the period.
Judgment Creditor is entitled to interest pendent lite at the current market rates as well for standard costs. The rate of interest fixed should have judicial reasoning attached to it.
If despite repeated time being granted the bank is unable to clarify its position the appeal needs to be dismissed.
Dismissal of an appeal for not taking a stand and/or clarifying an position on a issue does not amount to dismissal for default and cannot be reviewed.
The interest capitalises on failure of the borrower to pay the same within stipulated period. Therefore, the said practice cannot be objected.
Bank's action in not granting the finance to the borrower is not justiciable before the DRT. It is for the financial institution to consider the request for loan on various factors.
The fresh set of documents cannot be said to be without consideration for the simple reason that promise to pay earlier debt or even a time barred debts can be a good consideration.
The RDDBFI Act, 1993 and the SRFAESI Act, 2002 are procedural laws. There cannot be election of remedies since the remedies are different. The bank is free to use both the remedies simultaneously or one after the another.
Unless an account is classified as NPA notice u/s 13(2) of the SRFAESI Act cannot be issued.
SRFAESI Notice u/s 13(2) cannot be issued on next day of the account being declared as NPA.
Bank cannot curtail drawing powers without intimation to the borrower. When no such letter/ intimation had been given it cannot be said that the account was irregular when it stood within the sanctioned drawing power.
Some isolated instances of over drawl cannot be termed as out of order account.
Auction purchasers are not required to make any pre-deposit of amount for filing appeal to the DRAT.
Pre-deposit for filing an appeal to DRAT is only from the borrowers and guarantors, and not from others.
Purchaser of mortgaged property does become a borrower or debtor of the Bank.
Had the bank taken even elementary precautions it could have detected that the documents being filed with it were forged and not the original.
By not getting the lien over the flat recorded with the Society’s Registers the bank has thrown the basic rules to be observed before making advance against the mortgage to the wind.
The bank is an unsecured creditor and cannot take over the flat under the SRFAESI Act. By taking over the flat it has done an illegal act and has to compensate the owner.
Security deposit made by the bank as license fee for premises taken on rent/lease does not come within the meaning of “debt” and cannot be heard by Debts Recovery Tribunal.
When the DRT has no jurisdiction to hear the case and has wrongly received the plain, the same must be returned to the applicant for being filed in the proper forum
DRTs have no jurisdiction to hear cases of car loan even though the loan might be between the same parties who are before the DRT in another case.
If the borrower shifts his residence, the onus is on the borrower to keep the bank informed about such shifting.
Even if there is any technical flaw in the service of the notice by the Tribunals the ex-parte judgment cannot be set aside when the appellants had full knowledge about the proceeding.
Parties before a DRT cannot seek cross examination of a witnesses as a matter of right.
Party seeking cross examination of a witness should prove to the DRT that there exists sufficient grounds for which cross examination is necessary
An application for cross examination should be filed only after pleadings are complete.
The DRT has to record reasons for its decision on the application seeking cross examination of witnesses.
Where an issue can be proved by alternative route, cross examination of witnesses can be denied.
Section 13(9) of SRFAESI Act can come into play only if there is a consortium lending.
For operation of S. 13(9) of the SRFAESI Act, there must be a common interest in the secured assets.
Only if there is a binding agreement between the secured creditors can there be consortium lending.
Mere exchange of letters between the secured creditors cannot be treated as a binding agreement between them
Where the parties merely contemplated execution of formal documents but the same was not done, would amount a case of an executory and not executed contract and executory contract cannot be enforced.
Service of a demand letter and its receipt by a person does not constitute a cause of action against the person.
A person cannot be arraigned as a defendant if the plaint/ bank does not allege the existence of any legal nexus between itself and that person.
Where a plain reading of a claim petition does not disclose any cause of action as against a person it would therefore be frivolous and a time wasting exercise to allow the claim petition to be prosecuted against that person.
If the Bank sends notices and summons to the address from where the borrower was corresponding then the service is proper.
The onus is on the borrower to keep the bank informed of the correct mailing address. The bank cannot be expected to know by itself the correct mailing address of the borrower other than one given by him.
Once it is found, that what the bank is claiming is not a debt due as defined in the RDB Act, the Tribunal is immediately denuded of its jurisdiction to decide such an issue.
Where the DRT has no jurisdiction, any adjudication or ascertainment of any amount due becomes a nullity.
For damages to come within the ambit of the term ‘debt’, it must have arisen during the course of business which the bank conducted with the respondent.
Unless and until the parties have consented to in writing, an Arbitrator cannot be asked to go into the dispute over an agreement between an Asset Reconstruction Company and the original secured creditor.
A deed of guarantee executed for the benefit of the principal debtor will stand good and can be enforced even though it might have been executed non – contemporaneously.
A guarantee agreement executed subsequent to the sanction of the loan is a valid contract if it was made for the benefit of the principal borrower.
It is not necessary for the guarantor to execute the guarantee documents on the same day or prior to the date of sanction of the loan.
Liability based upon the promissory note has to be claimed within a period of three years from date of execution.
Claim based on security can be claimed upto 12 years.
Where an document turns out to be forged, the entire proceedings become vitiated and reliance cannot be placed on the earlier document even though it was orginal.
Provision of Section 10 of the Code of Civil Procedure cannot be applied, and need not be applied to the proceedings before the DRT to stay the proceedings in Debts Recovery Tribunal on the basis that a previously instituted suit is pending before the Civil Court between the same parties.
Where the defendant has consented to defray the bank of all expenses in connection with the guarantee, the bank would be entitled to re-imbursements of expenses in connection with the guarantees irrespective of the reasons.
Where the Bank could not discharge its obligation due to a injunction/stay order brought in by the defendants, the defendants should reimburse the bank of the expenses.
As the provisions of SRFAESI Act are very harsh and stringed, they must be scrupulously followed in letter and sprit to protect the interests of the borrow.
It is mandatory for the Bank to publish the notice in two leading news papers of the locality, one of which should be in vernacular. Non publication of the notice as mandated vitiates proceedings initiated under the SRFAESI Act.
Additional evidence can be called upon only when primary evidence has already been laid. Where even primary evidence has not been brought on record there is no question of bringing in additional evidence.
The onus is on the guarantor/owner of the asset to establish and lead evidence that the asset standing in his name does not belong to him, but belongs to some body else.
Where the value of primary mortgaged asset is so low that it cannot satisfy the decree, there is no question of priority of satisfaction. The Recovery Officer must proceed against all the available assets simultaneously.
Law of limitation may harshly affect a particular party but it has to be applied with all its rigor when the statute so prescribes and the Courts have no power to extend the period of limitation on equitable grounds.
Reasons for delay has to be properly explained. Delay cannot be condoned just out of benevolence.
As a Rule, improper advice of advocate be accepted as a sufficient cause for delays.
There is no need to give any individual notice to the borrowers when the case was transferred to the DRTs with their knowledge.
Ex-parte order cannot be set aside where the borrowers did not participate in the proceedings despite being in the know of it.
Amounts misappropriated by fraud etc come within the meaning of “debt” defined in the RDDBI Act.
There is no need to issue any directions to the Bank to file original documents as the defendants who has misappropriated the funds wouldn’t have executed any.
Where the claim of the bank is based on frauds committed by the defendants, the defendant would be free to rebut claims of the banks with his own submissions.
The DRTs can correct any time mistakes which are clerical or arithmetical in nature, or those that arise from any accidental slip or omission.
Parties need pay any court fees for seeking rectification of errors committed by DRTs.
No limitation period is applicable for seeking rectification of errors committed by DRTs.
Where claim of the bank has not been disputed, DRTs can pass interim orders aimed at early recovery of the dues, even as the main application is pending.
Disposal of the main application is not mandatory for passing interim orders for the recovery of dues.
There is no bar on the DRTs in passing garnishee orders even as the original application of the bank is pending for adjudication.
A security on which ad-interim ex-parte restrain has been placed by the DRT belongs to the Bank. The Bank cannot be deprived of this on any ground unless it has been lifted by the DRT by an subsequent order.
The exparte order, unless set aside, is as valid as any other order.
The DRTs do not have the powers to determine any other issue other than adjudication of debt between the parties.
Where a financial institution terminated the lease deed and sought re-transfer of assets back to itself, the financial institution must seek appropriate civil remedies and not take recourse to the forum of DRTs.
The DRTs must not utilize the powers under Section 19 to determine civil disputes between the parties.
Where more than secured creditor lays claims to the same assets then any order passed by the DRT would effect the other creditors as well and they become interested parties to the case.
It is not necessary that unless an order is directed against him, another secured creditor cannot be affected.
An employee-director cum guarantor is responsible for dues of the company till the date of his resignation. He is not responsible for dues after his resignation.
Where a person has stood as a guarantor for the outstanding amounts of the borrowers, he is responsible for the full repayment of all the dues and just not limited to the extent of the assets mortgaged.
If some documents are there in the custody a party the same can be or should be considered for the proper adjudication of the case on the principle of natural justice.
Documents can be accepted at a later stage also during the pendency of the proceedings, if those documents are considered to be vital for the purpose of coming to the just decision in the litigation and for ends of justice
DRTs can fix rates of interest applicable for the litigation period. Unless the rate has been fixed arbitrarily there is no infirmity in such a order.
Creation of equitable mortgage with the deposit of title deed has to be a conscious and intentional act on the part of the owner of the asset which has to be unambiguously proved by the bank.
The power of attorney based on which an equitable mortgage is said to have been created is a vital document and should be produced by the bank in original.
Any act in excess of recitals in a Power of Attorney would be non enforceable as against the executor of the document.
The DRT must adjudicate the claim of the applicant only.
A claim by a defendant for payments arising out of the sale of hypothecated goods cannot be decided by the DRT.
Any claim over proceeds arising out of sale of goods hypothecated with the judgment creditor should be made before the Recovery Officer of the DRT.
Agreement of continuing guarantee does not increase the period of limitation available to the bank.
An agreement contrary to the provisions of the statue cannot be enforced even though the guarantor had voluntarily signed it.
There can be no estoppel against the statute.
The surety is discharged if there is any variation in the contract without surety’s consent.
Where the proceedings between the same parties based on the same cause of action has reached finality in a foreign court, the same would be hit by the principles of res-judicata in India.
An Indian Court can admit a case which has already been taken cognizance of by a foreign Court, provided the case is still pending in that foreign Court.
Where the bank has suppressed material evidence available on record, it is presumed to have done so deliberately.
Where suppression of material evidence is proved, then DRT is within its judicial discretion to dismiss the application.
Jurisdiction is an issue to be decided based upon pleadings. If according to pleadings the application comes within the jurisdiction of the DRT, then DRT will be within its rights to decide the case.
If the disputed amount falls less than Rs. 10 lakhs, the DRT will not loose jurisdiction of a case if the case originally was within the jurisdiction of the DRT.
The operation of an express provision of a section in a Statute cannot be restricted by the chapter heading.
The aid of chapter heading can only be taken into account where there is ambiguity in the provision of a section.
Where the owner ship of the property under auction is itself a contentious issue, it is just and obligatory for the Tribunal to determine this issue at the first instance and the sale should be conducted only after ascertaining that the property belongs to the debtor.
If the defendants do not appear and contest the case, they are placed ex-parte and the matter decided as per statement of accounts produced by the bank.
Bank is entitled to claim only agreed rate of interest. Penal rate etc. not agreed to with the borrower cannot be claimed.
Mere writing letters to the bank on the letter head of the company/ borrower does not make the signatory personally liable for repayment of the amounts mentioned in the letter.
Where the borrower has shown his sincerity in repayment of the loan amount, he cannot be branded as a willful defaulter.
Where the borrower is not a willful defaulter the court can use its discretionary powers. A lesser rate of interest can be awarded for the litigation period.
It is the responsibilities of both the parties to adhere to terms of compromise strictly.
Where the terms of compromise so provided that the capital will be defrayed first interest will be calculated on the monthly reducing balance only.
One DRT cannot stay the orders passed by another DRT.
When two banks claim one and the same property as their security, remedies have to be worked out either before the DRT or before the Recovery Officer.
For seeking amendments after commencement of trials, it should be shown that that inspite of due diligence amendment sought could not have been sought earlier.
Rulings can be cited at the time of arguments and need not be specifically placed in the pleadings.
Where the defendants have been set ex-parte, the DRT has to go by the books of accounts produced by the applicant.
Where the accounts have been filed in terms of Bankers books of Evidence Act, and the defendants have not rebutted it, Recovery Certificate will have to be issued in terms of the claim and evidence produced.
The CDR Committee is a high powered committee consisting of financial experts whose decision on revival of an industry cannot be interfered with by the Debts Recovery Tribunal.
All consortium members should respect the scheme formulated by the CDR committee as it is in the interest of all the members as well as the industry.
A member of the consortium cannot be allowed to scuttle the CDR scheme as interests of all other members would be put to jeopardy. Every member should make a honest attempt to revive the industry rather than demand that it be closed and the plant and machinery be sold off.
Bank in its usual course of business owed a fiduciary duty to its constituents, and to render every assistance to enhance the progress of trade, commerce and industry in the country.
The party too is equally responsible if it fails to ascertain as to why their counsel absented from the case.
A party cannot plead that it was unaware of the absence of its counsel for over long period of time. It should have ascertained the position.
An order restraining recovery proceedings against a Industrial Company issued by BIFR under provisions of SICA does not cover guarantors of the loans.
Banks are free to proceed against the guarantors of the loans to the company even though they cannot proceed against the company in terms of the stay granted by the BIFR u/s 22 of SICA.
Guarantor/ Certificate debtor cannot seek stay of recovery proceedings against a particular property until action against some other property has been completed.
The Recovery Officer of a DRT is not barred from proceeding against the house occupied by the Guarantor/ Certificate debtor.
The Recovery Officer of the DRT is not bound to investigate occupancy status of a house against which he desires to proceed.
Sufficient ground for setting aside ex-parte judgment is to be established by the person who claims that he had no knowledge of the proceedings which resulted in ex-parte judgment.
The appellant must file the affidavit of the person through whom he claims to have come to know about the ex-parte judgment.
An ex-parte judgment cannot be set aside where the facts and evidence clearly point that the defendant had knowledge of the case.
Where the auction-sale and subsequent confirmation and delivery of possession is carried on in such undue haste so as to preclude other serious contenders from making any effective bid leaves an impression that the entire auction process was carried on with an motive to benefit one particular person over other.
Reserve price is only an indicative price and the sale need not be confirmed at that price.
A confirmed sale should not be aside unless fraud or other grave malpractice is alleged.
Every auction participant /intending bidder is an interested party and has the right to question the process of auction.
Level playing field should be provided to every bidder
The DRATs have the powers to reduce or waive off the requirement of pre-deposit of a portion of the debt due before entertaining an appeal.
To waive off or reduce the amount of pre-deposit of debt, the Act requires the DRATs to record the reasons therefore.
It is the duty of appellant to satisfy the DRAT that he is unable to pay the pre-deposit of debt due, or certain other mitigating factors which requires the DRATs to exercise their discretion to reduce or waive off the requirement of pre-deposit.
Where the appellant does not show any grounds for reduction or waiver off the pre-deposit of debt due, the DRAT cannot suo-moto exercise its discretion in favour of the borrower.
In matters of abatement, unless any specific Regulations have been framed by the DRTs, the limitation would be 3 years.
Standard of limitation of 90 days for abatement is not applicable to DRTs.
The DRT has no jurisdiction to hear and deicide title to properties.
Where the DRT has already passed its final order, it cannot entertain any further applications in the case.
Where operative part of the compromise deed bears the signature of the parties it is deemed that same was signed after understanding its implications.
In a Original Application field before DRT by a Bank, an application by one defendant against another defendant should not be entertained by the DRT.
DRT is meant for expeditious adjudication of claims by banks. It is not meant to settle inter se disputes between the defendants or squabbles amongst themselves.
Where the bank supports the application of one set of defendants against the other, and objective is to safe guard the security, then such an application can still be considered.
An application for setting aside a sale filed beyond the mandatory 30 days period should not be admitted, particularly if it is not accompanied with the requisite deposits.
Sec. 29 of the RDDBFI Act grants some discretion to the Recovery Officer who may accept an belated application seeking setting aside a sale, provided such discretion even, if applicable, must be with adequate reasons.
Under the Income Tax Act the territorial jurisdiction of the auctioning officer is very limited where as under the RDDBFI Act the jurisdiction of the Recovery Officer is very wide. Therefore some discretion has been permitted to the Recovery Officer in accepting bid money and the balance money with modification of the rules and also with discretion of as far as practicable.
A cause action to approach the DRT may not arise on the mere issue of a notice u/s 13(2) of the SRFAESI Act.
Possession contemplated under Sec. 13 (4) (a) of the SRFAESI Act cannot be other than the actual possession i.e. physical possession of the property.
The period of limitation for filing an appeal to DRT starts from the date of actual possession and not symbolic possession
Handing over possession of property should be in accordance with the Proclamation of Sale. If the Proclamation of Sale stated that the land would be handed over "as is where is and whatever basis" then it is the onus of the auction purchaser to take over the property in what ever condition it is available.
The clause, "as is where is and whatever basis" is a sufficient notice to an intending purchaser both in law and otherwise of a possibility of the property being encumbered or defective. Having purchased the property in those circumstances the auction purchaser cannot seek to correct his possession.
When the bank has offered to sell the property on "as is where is and whatever basis" it cannot change it place the auction purchaser in possession of the property, if necessary with police help.
DRT cannot adjudicate the right and title of owners of the property. This dispute has to be settled in appropriate forum.
The DRT cannot adjudicate and decide disputes between the defendants.
Where the defendants do not show any plan for the repayment of the debts due to the Bank, appointment of Receiver is a necessity
A receiver with the assistance of a proper council may be in the interest of all the parties concerned.
The cost of servicing the office of the receiver will be borne by the applicant bank and debited to the account of the borrower.
The secured creditor is not obliged to first proceed against the principle borrower and only then proceed against the guarantor.
Where the affidavit filed by the bank officer has not been discredited, there is no need to call for an expert to examine documents claimed to have been before the deponent.
Tribunal’s powers u/s 19(25) of the RDDBFI Act can be invoked to establish right over a property wrongly or fraudently mortgaged to Bank.
A purchaser of mortgaged property does so along with the lien/charge of the mortgaged propertu.
Limitation for challenging an auction sale starts from the date of knowledge of the auction sale and not from the date of actual auction.
The borrower do not get any vested right by the Recovery Officer consigning a Recovery Proceedings to records till compliance by the bank.
The Recovery Officer is not expected to pass lengthy speaking orders though it would be proper to give reasoning for any order.
Only the owner of the asset can file an application for stay of Recovery Proceedings and not other borrowers/ defendants.
Challenging valuation of a property when the sale itself has been confirmed is in fructuous.
Auction sale should be challenged in terms of Rule 60/ 61 of the Second Schedule of the Income Tax Act. It should be filed before the Recovery Officer itself and not any where else.
A technical error in filing an appeal should not be allowed to come in the way of defeating justice itself.
Where the defendant has not admitted liability it is the duty of the bank to establish its claim by all documentary evidence.
The DRT cannot decree bank’s claim if no documentary proof was produced challenging an affidavit disclaiming any liability by the defendant.
Where the deed or assignment under which an substitution of an applicant is being sought is itself questioned, it will call for deduction of evidence.
Seeking cross examination is not a matter of right before the DRTs
The person seeking cross examination needs to establish that the same is essential to his defence.
Allegations that the blank documents were signed and handed over to the Bank official cannot be accepted. It is an attempt to delay the proceedings.
Banks should be allowed to cure procedural defects where no prejudice would be caused to the defendants.
Mere technical irregularity in procedures, which are curable, should not be allowed to defeat the claims of banks and public institutions.
An employee director standing as a guarantor is equally responsible for the due repayment of the loans taken by the principle borrower.
DRT is fully within its powers to seek full disclosures of personal assets of a guarantor.
Bank can take possession of only those goods that belongs to its borrower and have been hypothecated to it. It should not take into its possession goods of third party lying with the borrower.
Bank is responsible for the safe custody of the goods that it takes into its possession under the SRFAESI Act. The Bank will have to compensate the borrower/ owner of goods if the seized goods are lost.
The value of goods lost have to be established using realistic standards and not hypothetical values.
Brief:Banks cannot be directed to enter into One Time Settlement with the borrower.
Where the borrow has concealed facts from the DRT, sold of parts of the mortgaged properties without consent of the bank and generally bought time to delay repayment of debt is necessarily a willful defaulter.
There is a strong presumption that notices were properly served when all the defendants reside at one and the same address and one of them causes appearances and participates in the proceedings.
When all the defendants reside under the same roof and one of them participates in the proceedings, the presumption is that all the defendants were in know of the proceedings.
Even if the DRT has committed some technical irregularity in the proceedings, the same would not assist the defendants in restoring the application if the defendants had knowledge of the proceedings but willfully absented themselves from the proceedings.
An ex-parte decree can not be set aside on the ground of irregularity in the service of summons, if the defendant had knowledge of the proceedings
A representation under SRFAFESI Act should be made to the authorized officer.
Writing letter to some authority in the bank is not representation within the meaning of SRFAESI Act. It must be addressed to the authorized officer.
When the bank was not represented before the High Court, it was the duty of the guarantor to put the Bank on Notice about any orders that the High Court might have passed.
The nature of cross examination and the persons to be cross examined should be indicated in the application seeking cross examination of witnesses.
Where the right of a mortgagor to mortgage a property is challenged, and the person challenging the mortgage produces a claim anti dating the date of creating an mortgage, the Court must carefully examine the rival claims.
Where the mortgagor does not produce the original title deeds for creating equitable mortgage, it is for the Bank to ensure all possible precautions including issue of public notices inviting objections to creation of mortgage against the property, filing of police complaint as well taking encumbrance certificates.
A purchasers for value, who has taken all precautions that a prudent man can take before buying a property will have a right against any subsisting equitable mortagage which is not disclosed by the process of normal diligence.
Even though witnesses are rarely allowed to be cross examined in t he DRTs but where the need to cross examine exists then it must be allowed.
No need to make any pre-deposit in respect of appeals against Interlocutory and or Interim orders of the DRTs
The borrower must make a good case for seeking reduction of interest rates.
Banking charges cannot be waived off. They form part of the costing
DRT cannot pass an order unless specifically pressed for by the party
There is no need to approach the Appellate Tribunal for directions on evidence when the matter is pending before the Tribunal below and has been listed for evidence.
The defendants can argue on all the points before the Tribunal and seek all the documents that they want before the Tribunal itself.
In proceedings pending before DRTs Private parties cannot seek to be substituted for Banks & FIs
A plea for review cannot be taken up unless the first judicial orders was manifestly distorted.
Where there is discrepancy in the affidavit filed by the Bank’s witnesses then the borrower should be allowed to cross examine the witnesses to arrive at the truth.
Where the borrowers have denied the execution and existence of certain documents claimed by he bank then the borrowers should be allowed to cross examine the witnesses.
When the case is pending and the amount is yet to be determined by the Tribunal, there is no need to make any pre-deposit of amount.
Admission of debt need not necessarily be confined to Written Statement of defense. The admission of debt could be in any format and at any stage.
The Recovery Certificate must be closed once all the available assets have been disposed off and no assets remains to proceed against.
Where the appellants are resourceful, waiver of pre deposit cannot be allowed.
Where the signatures are disputed it is necessary to get them examined with the help of experts.
The judges must not venture to examine and compare the signatures between those of disputed and admitted ones.
When there is written contract between the bank the borrower, and the contract is not contrary to the provisions prescribed by they RBI, there is nothing wrong in charging interest at contractual rate of interest and compounding it at periodical rests.
Principles of promissory estoppel cannot be applied when there is one sided letters from the Borrower and the there no corresponding letter from the side of the Bank.
What was not pleaded before the DRT cannot be argued before the DRAT.
Where the party had been acting mischievously to evade the legal process, it deservers no sympathy at the hands of the Courts.
Poverty cannot be ground for not participating in the legal process. The party must seek legal assistance from the Court.
Limitation must be explained on day to day basis. Non explanation of delays in preferring appeal is fatal.
There is no need to appoint an Court Commissioner to go into the accounts submitted by the Bank. The defence can lead evidence to disprove the statement of accounts submitted by the Bank.
statement of accounts submitted by the Bank are open for correction and the defence can always point mistakes or other ineligible levies.
The SRFAESI Act makes it mandatory for separate notices to guarantors also.
Even though the man behind principle borrower and the guarantor company may be one and the same person, yet a separate notice to the guarantor is mandatory.
Where person is neither the principal borrower, nor a guarantor, nor is he a participant in the auction proceedings, he cannot be an interested party
Auction once made cannot be set aside lightly.
Non publication of the proclamation in the local language does not vitiate the auction sale if bidders have been present and the reserve price has been met.
Where the judgment debtor has not deposited the requisite amount, he cannot seek to set aide the sale already conducted.
Auction purchaser can take possession of the property subject to any subsisting tenancy.
A tenant cannot be dispossessed by the use of force. He can be dispossessed only by the due process of law.
The auction purchaser can take only symbolic possession of the asset and not actual possession where tenants are living.
Appeals can be filed against Interlocutory Orders of the DRTs.
Whether or not cross examination should be permitted is the subjective satisfaction of the Presiding Officer alone. Provisions of Sections 60, 137, 138 of Evidence Act are not applicable.
Grounds must be shown which are proper and justifiable to the satisfaction of the DRT so that it can permit cross-examination.
When dismissing an application seeking to cross examine Bank’s witness and then to file an counter affidavit, the DRT must give an opportunity to the borrowers to file a counter.
Where the appeal is likely to be disposed off quickly the proceedings of the Recovery Officer can be stayed. In addition, the amount already deposited can be treated as sufficient pre-deposit of debt.
Mere confirmation of auction cannot be challenged without challenging the auction – sale conducted by the Recovery Officer.
Confirmation of auction sale can be challenged provided an application u/S 60 or 61 of the II Schedule of the IT Act had been filed before the Recovery Officer of the DRT.
The debtor should deposit the amounts before the Recovery Officer instead of depositing it at the Bank and seeking cancellation of the auction.
Where the guarantor apprehends connivance between the bank and other defendants, the correct course of action would be make it as his defence before the DRT and seek discharge.
Forum of DRT and DRAT cannot be used to settle grievance between guarantors and other co-defendants.
The RDDBFI Act and the SRAFESI Act are two independents Acts and filing of appeal is governed by the provisions in the respective Acts.
Where there reasons for delay has not been satisfactorily explained the prayer for condonation for delay is liable to be rejected.
Under the SRFAESI Act the DRATs do not have any power to extend the period of limitation for filing an appeal against the order of the DRT.
In BIFR proceedings, stay is not automatic. It has to be granted.
When there is no stay orders from the BIFR, DRT can continue with the proceedings.
Where the bank has filed an application before the BIFR seeking permission to proceed against the borrower-company, and the same is pending, the DRT cannot proceed in such matters.
DRTs can proceed to hear cases against companies where there is no specific stay order granted by the BIFR.
O.T.S. means in simplicitor, is inclusive of all costs and claims.
Unless specifically stated, the party is not required to pay anything extra over and above the agreed amount.
Person claiming to be bonafide purchaser without notice should substantiate his stand.
A person claiming himself to be a bonafide purchaser without notice, and who had also been arraigned as an defendant before the DRT, must necessarily make pre-deposit of debt for filing an appeal.
Where the borrower/ judgment debtor has deliberately delayed and dragged the case, they must suffer its consequence.
No procedural arguments can be entertained from a borrower who has resiled from the compromise /settlement entered into earlier.
An appeal against proceedings under SRFAESI Act can be filed by any person. He need not be owner of the asset.
The orders passed by the CMM are not justifiable. DRT cannot adjudicate upon an order made by the CMM under the SRFAESI Act.
Mortgaged property in the hands of legal hires would be liable to discharge the debt burden unless the inheritors can show that they have any independent claim to the property other than inheritance.
Where the notice u/s 13(2) is based on dues in a single account, there is no need to give break up of amount due.
When challenging a auction sale conducted under SRFAESI Act the allegation should be specific and pointed. A general allegation cannot be elaborated during arugment.
A person claiming tenancy must back it up with proper document to show tenant – owner relationship in the premises.
Possession should be backed by legal right. Being in possession would not be sufficient to clothe a person with any legal right to prevent take over of the mortgaged property by the secured creditors.
The Recovery Officer cannot go behind the Recovery Certificate and pass orders. If a property is shown in the Recovery Certificate as mortgaged, then the Recovery Officer has no option but to proceed against the property.
The remedy for party who claims that his assets/ property has been wrongly arraigned in the Recovery Certificate is to file an appeal to the DRT u/S 19(25) of the DRT Act.
Where title deed has not been deposited by the owner of the property, the onus is on the bank to prove that it was meant to used as a security.
The Evidence Act is not applicable to proceedings before the Debts Recovery Tribunals. No order/ judgment of the DRT can be set aside for not following the Indian Evidence Act if Principles of Natural Justice was other wise followed.
Tribunals as a rule are required to follow only Principles of Natural justice.
A stranger’s evidence to a document has no meaning.
When owner ship and title of a secured property are disputed, the DRT must give a finding as to whether the borrower /guarantor has any interest in the asset.
‘Will’ of the mortgagor cannot change the character of mortgage.
Mere intention to participate at an auction does not give a person the locus standi to become an intervener or an interested party.
No legal injury can be claimed if the Bank refuses to answer questions on the status of the property put up for auctions.
Bank has to explain why it deviated from its normal practice of accepting written guarantees and accepted an oral guarantee before the obligation can be fastened on the guarantor.
Bank as suitor has to establish its claim through documentary evidence. Claim cannot be held to have been proved in the absence of proper documentary evidence.
Unless the prior auction is set aside, a new auction purchaser cannot enter the pricture.
Unless the previous auction purchaser is put on Notice, negotiations with new or subsequent offer cannot be carried on.
DRT is not bound by the code of civil procedure, but by Principles of Natural Justice.
For reasons to be recorded, a DRT can condone delay in filing written statement of defence even beyond 90 days of service of summons.
Suitable costs should be imposed on the Party seeking condonation of delay to deter seeking condonation just for the asking, and to compensate the other party for the inconvenience caused.
Issuance of notice to a dead person is a nullity, even if the notice was delivered at the correct address and to the legal heir of the addressee.
All actions taken in pursuance of the notice to a dead person, including auction of the secured assets is a nullity and has to be set aside.
DRAT is an appellate authority constituted to hear appeals against orders passed by DRTs. They have no original jurisdiction to hear and pass orders for the first time.
A party who has not participated in the proceedings before the Recovery Officer or the DRT cannot come before DRAT for the first time.
In compliance with the terms of Bank-Guarantee given by it, a bank has to make payments on due dates or on demand irrespective of the fact whether or not the unit to which it has issued guarantee exists or not, or has been taken over by another entity on the day the bank is required to make the payment.
Where an industrial unit has been taken over by a new entity, and the terms of take over required the new unit to be bound by all the terms of contract entered into by the old unit, the new unit must indemnify the bank for all the payments made by it under an guarantee given to the old unit.
Where in compliance with the agreement with the former borrower the Bank is required to make some payments, it is bound to recover it from the person who takes over the business of the borrower, lock stock and barrel.
Where the Bank is not interested in a property, it is not open for one defendant, to seek directions from the DRT, against another defendant not to dispose of the property.
Where the main appeal is still pending before the DRT, and the DRT is yet to adjudicate the claim, there is no question of any pre-deposit of debt by an appellant even though he might have admitted his liabiltiy.
There is no need to seek external assistance to interpret a provision which is plain, simple and straight forward in nature.
If the books of accounts maintained by the Bank in the normal course of banking shows financial transaction it is sufficient proof of disbursal of monies.
Banks can bring in additional documents at a latter stage of the hearing in support of their application for a Recovery Certificate.
Right to file an appeal under a statute has to be circumscribed by the conditions attached for filing such an appeal.
Pre-deposit of 75% of the debt determined by the DRT is a condition of appeal which must be as a matter of norm, and any deviation should only be an exception.
Borrowers seeking waiver of pre-deposit of debt must annex proper documents in support of their inability to pay the amount.
Where the documents filed by the bank appear to be in order and are supported by the affidavit of the Bank Officer, then the claim against the borrower is proved.
It is not necessary that to be enforceable a mortgage deed should be a registered document.
Mortgage by deposit of title deed need not be by a registered document.
The liability of sureties/ guarantors is co-extensive with that of the principal debtors.
A surety /guarantor cannot insist that a Bank should proceed against the principal debtor or any particular debtor before proceeding against himself.
Bank is free to proceed against any of the defendants/ judgement debtors of its choice.
Bank is free to drop proceedings against any of the defendants at its discretion.
Application by parties seeking to implead themselves before the DRT in order to establish their share in the family property is not maintainable.
appellants, to decide the share before D.R.T. is not at all sustainable.
It is true that only the court that passes an order can examine it and set it aside. But after the RDBI Act came into existence the civil courts cannot examine an order if the suit amount is more than Rs. 10 lakhs. Hence DRT will have to examine such decrees.
DRT is empowered to examine a decree passed by a civil court, and if necessary, set it aside on merits.
If the borrower was dead on the date of paper publication it cannot be construed as Notice either on the borrower on the legal heirs.
Amounts paid to a borrower on forged Demand Drafts is an ‘debt’ within the meaning of RDB Act.
Even though the Bank’s own employee had forged the Demand Drafts and benefited from it, the borrower into whose account the amount were transferred has to repay the bank.
Pendency of criminal complaints against the forger of Demand Drafts has nothing to do with proceedings before the DRT.
Where the guarantor has revoked his guarantee by a letter, his liability cannot be more than six months from the date of revocation of his guarantee.
Where there is substitution of contract the original guarantor is absolved of his liabilities.
The limitation for filing an claim against a guarantor who has resigned/ revoked his guarantee is 3 years from the date the revocation comes into effect.
The Recovery Officer has no powers to investigate and adjudicate upon the correctness of a Recovery Certificate issued by the Presiding Officer of a Debts Recovery Tribunal.
The Presiding Officer of a Debts Recovery Tribunal cannot delegate any powers to the Recovery Officer to go into the competency of the bank to seek a Recovery Certificate.
Once a Recovery Certificate is issued, the Recovery Officer is bound to proceed to recover the amounts in terms of the Recovery Certificate.
Under SRFAESI Act banks can proceed even against properties that are in the custody of the Recovery Officer.
The aim of imposition of costs is to defray the opposite party of the expenses incurred due to delays or vexatious litigations of another party.
It is not proper for the DRT to direct that costs be deposited with itself.
The Debts Recovery Tribunals can exercise judicial discretion to grant such rates of interest as it may think meets the ends of justice. Penal rate of interest can be granted only if there has been malafide intention on the part of the borrower in delaying the payment.
The party breaching a compromise cannot claim benefit of any clause under it.
When compromise is challenged all aspects including jurisdiction of the court recording the compromise must be examined.
Whether the loan granted was adequate or not, and, or timely is a matter between the banker and the borrower. It is for the borrower to convince the bank about the need for more funds as well as safety of the funds.
DRTs have to go by the contracts reduced to writing between the parties.
Where the contract between the parties empower the secured to recall the loan facilities at any time, then it is for the borrower to convince the bank about its financial stability.
The DRTs have the powers to fix rate of interest during the period the case was pending before it and till the time of collection of the suit amount
Merely denying applicant bank’s statement of accounts does not serve any purpose. The defendants should produce their alternative account statement before the DRTs.
No irregularity is committed if the bank enhances credit limit even after issuing loan recall notices.
Allegation of signing of blank documents is a mere sham and no one can believe.
DRT can f ix rates of interest on the lower side than contractual rates.
If a Bank issues a S. 13(2) SRFAESI Notice and latter withdraws it before the DRT, it liable to bear the costs and other expenses incurred by the borrower in defending /challenging the Notice
There is nothing wrong in setting aside an ex-parte order if the counsels had reported no instructions but the parties were otherwise not negligent.
When goods are pledged with the Bank, and it is in their lock and key, it is the responsibility of the Bank for its safe custody.
Any allegation of fraud, forgery, replacement of pledged goods should be backed by police case and necessary action.
Where there is no allegation of locks and seals being broken, and the keys were in the custody of the Bank, the presumption is that the goods pledged were what they were purported to be.
The bank does not need to take a permission from the Companies Court to proceed against a company.
Unless there is a specific order u/s 446 of the Companies Act, there is no bar operating against a bank from initiating a proceedings against a company before the DRT.
There is no need to seek BIFR’s permission to proceed against a company when the matter is not all pending before it.
Where BIFR has specifically permitted the lenders to continue with the proceeding instituted against the principal borrower, the guarantors cannot seek a stay on the proceedings against them. The liability of the guarantors are co-extensive vis-a-vis principal borrower.
When a person signs and delivers a blank document, it is presumed that he intended that the document be filed up latter.
A suit based on signed promissory note can be decreed irrespective of any submissions to the contrary its execution was irregular.
The pendency of criminal proceedings under the NI Act cannot be a bar for proceedings before the DRT.
There is no correlation between a civil and a criminal proceedings. Proceedings before DRT is civil proceedings whereas one before the CMM is criminal proceedings.
The borrower would not be prejudiced in the criminal proceedings against him by the progress of the proceedings before the DRT.
The ex-parte order need not be set aside where the defendant/ borrower had full knowledge of the proceedings before the DRT but did not deliberately participate in the proceedings.
The right of redemption of property is available only upto the point of issue of sale. Once a sale has been conducted the option of redemption is no longer open to owners.
If the auction sale is set aside on merits, the option to redeem the property becomes once again available to the owners.
A sale certificate need not be registered as provisions of the Registration Act.
A cooperative Bank is a Bank within the meaning of SRFAESI Act.
Provisions of the SRFAESI Act are available to Cooperative Banks.
The onus is on the appellant seeking waiver of pre-deposit of debt due to establish his in ability to make the deposit.
The DRAT cannot grant waiver from pre-deposit of debt due if the appellant has not lead any evidence, or annexed any document in support of his plea.
Written arguments are meant to assist the Courts in taking a decision. They cannot be a substitute for pleadings. What has not been prayed for in the pleading cannot be admitted through written arguments.
Every figure introduced in support of counter claim should be supported by facts and should be authenticated properly.
Were rebate is to be claimed from Government authorities, it is the onus of the borrower to produce the necessary documents before the authorities and claim the rebate. The bank cannot be held responsible in case the borrower does not make claim the rebates.
If the borrower gets rebate etc from the Government, it is the onus of the borrower to correctly report receipt such.
A secured property being ancestral does not make any difference to the security and/or the mortgage. If the act of the borrower was intended to create a mortgage for securing a loan, then the mortgage is valid.
Unless a mortgage deed is discharged it cannot be said to have been satisfied and/or lapsed by mere signing of a new documents.
'Ever greening of account' by itself is not void or voidable.
The allegation that the Bank had got the security documents executed blank, by playing fraud cannot be believed by DRT unless it is backed with adequate particulars of fraud. Inaction on the part of the borrower in not challenging the alleged fraud after its disclosure also goes against him.
When the authority of the signatory is challenged the bank should produce proof in support of the authority of the signatory. If the same is not produced then the action of seizure of the assets under SRFAESI Act cannot be upheld.
Cause of action for the borrower arises on the issue of the notice u/s 13(4). The borrower need not wait until physical or symbolic possession is taken over by the Secured creditor.
Where the Bank did not oppose the facts mentioned in the application when it was filed before the DRT, they can oppose it before the DRAT for the first time.
An borrower should not be made to suffer because of the omissions and commissions of his counsel.
Where a borrower has been less vigilant than he has been, ends of justice will be met if some exemplary costs are imposed but he should be allowed to present his side of the case before the DRT.
When party to the proceedings dies and if cause of action survives, legal representatives and heirs of the deceased are to be brought on record within a period of 90 days. If that is not done the suit automatically abates.
Where one of legal representatives of the deceased borrower is already a party to the case then the case will not abate. Other legal representatives will be covered under Art 137 of the limitation Act and not under 120 and 121 of the Limitation Act.
First appeal to DRT under SRFAESI Act is treated as an application and as such there is no provision for condonation of delay in such matters.
Set off for the period spend in perusing remedies before the High court cannot be granted in matters relating to first appeal under SRFAESI Act.
Where the Bank had acted merely as a collecting agent and not as LC issuing bank, it is not responsible for non receipt of payments from over-seas buyers. Unless the Bank had acted negligently or irresponsibly it cannot be help responsible for non receipt of payments.
Borrowers must pay the contractual rate of interest even though it may be excessive.
There is no reason to disbelieve the valuation report unless it can be shown that the valuation arrived at was erroneous and the property fetched higher prices.
Workmen’s dues have superior claims over all other claimants- secured or unsecured. Therefore refund of excess amounts lying with the Court cannot be sought unless it is established that workmen’s dues have been satisfied.
When a Registered post is returned with the remark “unclaimed” the presumption drawn, unless rebutted is that the notice has been served on the addressee.
Seeking condonation of delay is not a matter of right. Every day’s delay has to be explained.
Where a litigant sleeps over each of the opportunities that came to his way to agitate against the order, but approaches the court only when execution proceedings have commenced, does so only with the malafide intention of delaying the proceedings.
Where an application raises a mixed question of law and facts it cannot be dismissed merely as not being the right stage. The parties should be permitted to lead evidences and file their replies.
Where a question of limitation is raised the parties should be given a opportunity to lead evidence and submit replies thereto.
When a case is remanded back to the DRT on a limited issue, the parties cannot raise new or additional or any other ground other than for what it has been remanded back.
Only the applicant can change/amend the pleadings.
Where the SFC has taken over the industrial concern and become its ‘deemed owner’, the cause title must suitably amended to reflect the current status of the principal borrower.
Mere acceptance of a conditional cheque for lesser amount does not make the acceptor bound by the conditions stipulated in the letter forwarding the cheque.
A smaller payment by the debtor would be towards discharge of the larger amount due rather extinction of the balance amount due.
In an appeal against a purely interlocutory order in a pending proceeding before the D.R.T., then fees as prescribed under Rule 8 (2) of the D.R.A.T. (Procedure)Rules is inapplicable. The fees payable in the Memo of Appeal against an interlocutory order shall be the fee prescribed for the purpose of application before the D.R.Ts. and D.R.A.Ts. i.e. Rs. 10/- before amendment and Rs. 250/- after amendment.
An Garnishee order should be sought only if the security available is not sufficient to meet the requirement of loan repayment.
The application seeking an Garnishee Order must have all the ingredients mentioned in Order XXXIX, Rules 1 and 2 of the CPC.
When siphoning of funds is alleged, it must be explained what is going to happen to the funds.
Use of funds, as and when it becomes available, in the business of the borrower, does not amount to siphoning off of funds.
Recovery Officer does not have powers to restrict the movement of any debtor. The Recovery Officer cannot order impounding of any debtor’s passport.
The Recovery Officer can demand reasonable security for the debtor to be present before him when ever required.
When the order is set aside, then action initiated for non compliance of that order automatically seizes to have any effect.
Condonation of Delay cannot be as a matter of right.
Delay has to be satisfactorily explained while seeking its condonation.
Where the relation ship between a bank and its borrower is also that of tenant and owner, and the disputes relates to both - payment of rents as well as repayment of loan- the two issues are intricately intertwined and has to be balanced.
The D.R.T. lacks jurisdiction to adjudicate rent disputes and Court of Small Causes lacks jurisdiction to try the claim of banks. Each issue has to be decided in accordance with law in the forums designated for them.
The DRT has to rightly defer execution of its orders till outcome of decision in matters relating to payment of rents by the bank to the defendant are decided in the civil courts.
Even though no Recovery Certificate has been issued, the Presiding Officer can order sale of properties as long as the amount recovered is within the liability admitted by the borrower, particularly when the decree of compromise has not been complied with.
Section 19(18)(e) of the RDB Act read with Rule 12 (5) of the Debts Recovery Tribunal (Procedure) Rules, 1993 permits the Presiding Officer to order sale of properties under jurisdiction of another DRT as well as during pendency of an application.
The whole motto behind the enactment of the RDDBFI Act is to recover the public money and in such process of recovery, principle of natural justice and equity should prevail. As such admitted amounts can be recovered without having to wait for the entire proceedings to end.
Such sale process has not gone beyond the admitted dues of the bank. In that case the appellants are just buying time and creating troubles to satisfy even the admitted dues of the respondent-bank. Thus I do not find any force in this appeal, hence the same is rejected.
A person claiming to have singed loan/ guarantee documents cannot claim himself to be a stranger to the borrower- bank transaction even though he might singed only blank documents.
Where the bank is unable to produce the original title deed of a property, then it has no claim or lien over the property as equitable mortgage.
DRAT can consider the over all condition of the borrower and reduce the amount of pre-deposit for making an appeal
The Tribunal is empowered to decide the application of the banks and financial institution on the basis of affidavits.
The Presiding Officer can himself compare and examine the admitted and questioned signatures.
The prayer seeking to bring legal hires on record includes prayer for setting aside abatement. There is no need to make a specific request /prayer seeking to aside abatement of a case.
Bringing legal hires on record at any stage of the proceedings is good for the case.
Prayers for condonation of delays in brining Legal Hires and Legal representatives on record should be liberally constructed.
Where proceedings u/s 13(4) of the SRFAESI Act initiated by the Bank has been set aside, costs should have been permitted.
It is not fair to require the borrower to pay court fees every time he has to challenge every act of the Bank.
There is no provision for refund of costs under the RDDBFI Act.
If cross examination is required by either of the parties and the witnesses can be produced, then the evidence should not be relied on the basis of affidavit alone.
Even though a partnership firm does not have a legal entity, the assets brought in by the partners becomes the property of the partnership firm and cannot be attached for the individual dues of a partner.
The property of a firm has to be first utilized for discharging the debts of the firm and only if there is any surplus share of each partners shall be made in payment of their personal debts.
Bank is not entitled to attach properties /share of an individual in a partnership firm.
Where it appears to the Tribunal that the borrower has no intention of paying up the dues then it would be normal to seek details of assets on affidavit.
Third parties do not have a locus standi to meddle into disputes between a Bank and its borrowers.
Unless tenancy is properly proved a person cannot be heard about his alleged rights in a mortgaged property.
Where a order is passed at the request of the parties, then it is not open for the party to challenge it once again.
Original guarantor stands relieved of his liabilities once the bank accepts substitute guarantor in his place, whether or not a formal letter is issued.
Purchasing of a property when the original documents are lying with the bank clearly shows that acquirers of the property are either in collusion with the borrower or were plainly negligent in not verifying whether the property is free from all mortgages and charges.
Even tenants cannot claim any protection in respect of assets taken over bank under SRFAESI Act.
A stranger to the dispute between Bank and borrower has no locus standi to question the legality and/or validity of proceedings initiated by the bank.
Where the allegations is based on theft of title deeds and forgery of signatures then the culprits should not go unpunished. FIR should also have been lodged. Even DRTs should help identify the culprits.
Sale of a property after issue of the Recovery Certificate shows malafide intention on the part of the judgment debtor.
Amount recorded in the Sale deed does not depict the true worth of the property. The judgment debtor must pay the estimated true market value of the property.
Advanced age is no ground for seeking withdrawl of Arrest Warrant.
Bank is required to produce statement of account as per Supreme Court’s decision in Ravindra’s case.
If the recital says so, the bank cannot change rate of interest chargeable without intimating the borrower.
Where the Bank failed to produce a statement of account as directed, or could not controvert the one produced by the defendant, then the one produced by the defendant has to be accepted.
The DRT has discretion to fix a rate of interest in the interest of justice.
Once the court comes to the conclusion that the price offered is adequate, no subsequent higher offer can constitute a valid ground for refusing confirmation of the sale.
If court auction sales are permitted to be set aside on higher offers being made subsequent to the auction, there will be no certainty about the auction and it will prejudice the very system of court auctions.
Bald assertion that some procedure was not followed cannot be accepted in the face of other evidences. The allegations have to be substantiated.
When the original title deeds to an asset were lying with the bank, the purchaser’s right to the asset is subject to the mortgage of the bank. It is incumbent on an asset purchaser to have scrutinized the original title deeds before making the payments.
Guarantor’s responsibility is coterminous with that of the main borrower. Bank cannot discharge a guarantor midway
A borrower who does not come to the court with clean hands is not entitled for any discretionary reliefs.
Pre-deposit of 75% of the debt determined by the DRT is the norm and any deviation there from should only be an exception and not a rule.
Borrower seeking exemption or wavier from pre-depositing of debts due must produce full proofs of its resources and balance sheet to support its claim
Provisions of CPC are applicable in matters of Review before the DRT.
There can be no appeal against an order of rejection of Review. However three can be an appeal against order for grant of Review.
There is no need to issue any fresh notice to the parties on cases being transferred to DRTs from other courts.
The Legal Representatives cannot dispute asset valuation if the principle defendant and not raised the issue.
The precondition for seeking setting aside an auction sale is pre-deposit of the debt amount.
A execution Proceeding cannot abate by reason of non bringing of Legal Representatives on record.
Suit for declaration, injunction and specific performance arising out of debt cannot be entertained and decided by the Tribunal constituted under RDDBFI Act.
Suit for damages cannot be transferred to the DRT.
Proceedings before DRT cannot be stayed because of pending Civil and Criminal Cases against the bank filed by the borrower.
A mortgagor simpliciter is responsible only to the extent of the mortgage. He cannot be held personally liable for the dues.
When an error in statement of accounts is found, the amount cannot be simply deducted. The source of the error has to be traced, and there after the accounts has to be recalculated after deducting interest on the said amount.
The DRT can fix rates of interest where the bank documents are at variance on the issue.
Where loan has been sanctioned against pledged articles, the bank has to first proceed against the pledged articles, and only thereafter against the guarantors/ mortgagors.
Where no action has been taken against pledged articles the bank is duty bound to explain it.
Where an allegation has not been denied, it is to be construed as true and it is the discretion of the DRT to admit any evidence to the contrary or not.
Substitution of original secured creditor by an assignee is permissible under SRFAESI Act.
When original title deed is handed over to the bank, signatures put on stamp papers, and more signatures put on various other documents the presumption is that the signatory did all this with the knowledge and intention for creating a mortgage, even if the signatory was illiterate. Filing of FIR after 4 years does not help the matter.
An opportunity should be given to the parties produce documents relevant to the case.
Merely being a widow is no ground to seek exemption from pre-deposit of debt due
Claim based on a insurance policy is a not a debt and cannot be agitated before the DRT.
The DRT has the power to fix rates of interest on debts determined as due.
Applications seeking amendments to written statement of defence cannot be allowed when the matter is ready for trial.
Counter claim cannot be allowed once evidences have been filed.
The correct time to seek copies of statement of account is at the threshold stage itself, and not when the case is going up for trial.
Belated seeking of fresh documents and raising of fresh grounds is an attempt to only delay the proceedings.
When a Bank substitutes a contract with a new one, the old one need not be enforced.
Gurantors appearing in the old contract but not appearing in the new contract are not liable to answer Bank's claim.
Where the bills of exchange have been discounted by the drawer, and are latter dishonored by the drawee, the bank is entitled to recover the amount from the drawer.
It is not the responsibility of the Bank to recover the amount from the drawee.
Where responsible Officers of the Bank have vouchsafed that original document are not available, and have satisfactorily explained the reasons for it, secondary evidences can be permitted.
Mere permission to introduce secondary evidence does not mean that they have been admitted as proved. They need to be proved in the first instance and then examined by the Presiding Officer of the Debts Recovery Tribunal.
Once the representation reaches the bank, it is for the bank to make arrangements that it goes to the correct person within the bank and the representation is disposed of as per the provisions of SRFAESI Act. It is not correct for the bank to say that since the representation was addressed to the wrong person it was not considered.
A compromise agreement has to be followed in toto. Once any provision thereof is violated, the whole compromise falls flat.
The onus is on the borrower to bring on record the nature of prejudice caused to them by the appointment of a Receiver by the DRT, which they must discharge. The DRT cannot take upon itself to speak for the borrower.
The liability of the guarantors is just not limited by the provisions of the Contract Act. It has to be read along with the deed of guarantee. Where the guarantors have waived off their rights under the Act the bank would within its right to ask for proceeding personally against the guarantors.
DRTs can issue a Recovery Certificate for the Recovery of the debt determined by the civil courts upto 12 from the date of the decree.
The limitation available to seek execution of a decree is 12 years from the date of final decree.
Where there is specific article applicable to a situation, there is no need for the DRTs to apply the residuary article.
The DRTs have power to entertain applications and condone delay if they are otherwise satisfied with the reasons for delay.
On and from the appointed date, all cases pending before the civil courts are deemed to have been transferred to Debts Recovery Tribunals.
The transfer of cases to the Debt Recovery Tribunal is automatic. It is a duty cast on the civil courts to transfer the cases to Debts Recovery Tribunal.
The Bank or the parties are not required to move any application seeking to transfer the cases to Debts Recovery Tribunal.
On and from the appointed day, the civil Courts loose all jurisdiction to hear and pass orders on Bank suits involving claims of Rs. 10 lakhs and above.
No appeal can lie against an order of DRT restoring an application. A Review is the only remedy.
Review can be maintained only if some new facts have come to light which were not known at the time of arguments despite due diligence, or some evidence could not be produced, or due to some mistake or error apparent on the face of record or for any other sufficient reason.
As the guidelines issued by the RBI are under the Banking Regulations Act they some binding effect on the financial institutions. Violations of these guidelines gives some right to the borrowers.
It is true that a rehabilitation package depends upon a number of factors. But a Bank cannot sit over the package endlessly without taking any decision.
Deposit of margin money is only after sanction of rehabilitation package. Where no rehabilitation package was sanctioned, there was no question of deposit of margin money.
Where the Bank endlessly kept the borrower waiting in expectation of the rehabilitation package which it did not sanction, the Bank must suffer its consequences.
The Presiding Officer does not have powers to fix rates of interest for periods before the date on which an application is field in the DRT.
Where the Bank has not filed separate statement of accounts in respect of interest and capital portion, any amount deposited should be construed to have been deposited in respect of the claim amount and shall be deductible from the capital portion.
Non disbursal of the sanctioned amount and non cooperative attitude of the Bank towards the borrowers can be ground for reduction of interest, but it cannot be a ground for reduction of claim amount.
When seeking production of a witness for cross examination the defendants are not required to disclose their defence by giving preview of their questions to the applicant Bank's witness by providing him with ready questions.
No prejudice would be caused to the Bank if its officers are cross examined at the stand, and if the Bank's dealings are indeed transparent, then there is nothing to be worried about that any adverse outcome from such cross examination.
If the Tribunal desires that a particular point is required to be clarified then for that limited purpose, the party should be allowed to cross examine the witness to remove ambiguity which has cropped up in the pleadings.
Directions for compliance issued by the DRT must be scrupulously followed.
The submission that some confusion lead to non compliance with the directions of the DRT cannot be accepted, particularly when the counsel was present when the directions were issued.
A Bank guarantee is an independent contract between a Bank and its party and the Courts should refrain from going into the terms of the contract.
Once the terms of the contract are met, the bank guarantee is enforceable. No additional act has to be performed by the parties outside the contract.
A decree passed by a civil court for the recovery of debts by a bank can be admitted by the DRT if the gross amount, including interests and costs to be recovered comes within the financial jurisdiction of the DRT.
Interests can be allowed from the date of the suit till the date of realization and not from any earlier date.
Though the Tribunal has powers to summon and enforce the attendance of any witness and examining him on oath, but the Act does not contain any provision which makes it mandatory for the witness to be examined before the Tribunal.
The RDDBFI Act is a latter Act and thus prevails over the Companies Act. The former is a special Act whereas the latter is a general Act.
The Bank cannot be faulted for non disbursal for the complete sanctioned funds where there is evident waste, non utilization and mis-utilization of sanctioned funds.
Personal liability cannot be fastened on a person for merely using Company’s letter heads to correspond with the bank in respect of company’s loan account/ dues. Corresponding with the bank as Managing Director of the company does make a person personally liable for the dues of the company.
Where the company/borrower has been closed for long, but the borrowers went out of the way to raise as much funds as possible to repay the dues, such a borrower is not a willful defaulter. No interest or costs can be allowed in respect of such a account.
If uncontested, the Debts Recovery Tribunal will allow whole of the claim of the bank.
The legal heirs cannot be discharged of their liabilities merely because they have relinquished their share in the assets/ properties of their predecessor-in-interest.
If the trust itself resolves to stand as a guarantor and deposits the title deeds for creation of equitable mortgage, the mortgage cannot be assailed on the ground that the land belongs to a trust.
Capitalisation of periodically charged interest is permissible under law.
For arriving at financial jurisdiction of a DRT the averments made in the plaint have to been seen and not what is the defense.
The bank is entitled to claim interest for the period from the date the account is declared as NPA till the date of filing of the suit.
During trial the defense is free to raise objections on bank’s claim and only amounts proved as due would be allowed.
Every act of Bank under SRFAESI Act gives raise to an cause of action to the borrower to file an appeal to the Tribunal. The limitation starts from the date of raise cause of action and not from just date of possession or notice. A borrower may not be aggrieved by the Notice of possession but may be aggrieved by the valuation, or auction notice etc.
The publication of possession notice in newspapers subsequent to date of possession s not does not suffer from any illegality or infirmity.
The auction notice should mandatorily contain the details mentioned in the Rules. Absence of details makes the notice invalid.
If notice is held to be illegal then auction pursuant to the notice cannot be sustained and has to fall through.
Once possession of the secured asset is taken over by the bank restoring it back to the borrower does not arise till pendency of appeal. Only after adjudication of appeal can be decided whether possession can be restored back to the borrower.
Non-production of sanction letter does not effect the claim of the bank.
Some minor contradiction in the dates and place of submission of title deeds does not effect claim over the properties as long as the Bank produces the documents from its custody. These contradiction in the witnesses may be due to lapse of time.
Take over and sale of hypothecated goods by the secured creditors through public auction or by private contract is not opposed to public policy. Seizure, of goods by hypothecate exercising right under the clause is not unlawful.
The guarantor has no right to restrain a bank from proceedings against his properties until remedies against the principle debtor has been exhausted.
The liability of the guarantor is coextensive with that of the principle borrower.
The DRT and DRAT have right to stipulate the rate of interest in the interest of justice.
Mere signatures on revival letters without corresponding documents to show liability to repay the loan cannot fasten claim on a person.
Persons against whom no demand notice was sent cannot be arraigned as defendant before the DRT.
Where the ex-parte decree is set aside, and the auction purchaser turns out be the judgment/decree holder himself, then the property can be restored back to the judgment debtor.
An auction purchaser has to seek possession of the property within one year of confirmation of the sale. Thereafter he has to move a suit seeking possession of the property.
Where the auction purchasers were in the know of the proceedings and pending litigations, they cannot be said to be bonafide purchasers without knowledge.
Where the auction purchasers participated in the auction when the case was still pending, they had purchased the property subject to the outcome of the case. No special protection can be given to such auction purchasers.
For challenging any auction sale it is necessary to make the auction purchasers a party to the case.
An auction sale cannot be challenged behind the back of auction purchaser. Auction purchaser has vested right in the property purchased by him.
Not mentioning the date on which the account was declared as NPA is not fatal to the Notice issued u/s 13(2) of the SRFAESI Act, particularly when the defendants were in the know of it.
Mentioning the date on which the account has been declared as NPA is not mandatory for the issue of a notice u/s 13(2) of the SRFAESI Act.
Due process of law means that there is a fair trial. No one should be condemned without being heard.
The continuing guarantee is a guarantee which extends to a series of transactions.
A continuing guarantee may at any time be revoked by the surety, as to future transactions, by notice to the creditor.
When there is no revocation of the continuing guarantee, then it is in full force till discharge of the debt
When a person signs and gives a blank document to another person, the presumption is that he gave it to the other person to fill it up and use it in the manner intended to be.
A person signing and giving a blank document to another person is responsible for all the entries made in that document and due payment of the amounts mentioned in that document.
Minor errors or calculation mistakes in the accounts furnished by the Bank does not invite criminal proceedings and/or negation of the entire claim amounts.
An application for interim order can be filed either before the Presiding Officer or Recovery Officer of the DRT or before the DRAT.
The order passed on the interim application, if taken in appeal, cannot be subjected to payment of court-fee on ad-volerem basis.
An appeal can be quantified in terms of money only if the final order passed by the DRT is challenged.
Regular appeal is one which is filed against the final order, and a Miscellaneous Application is one which is filed against any interim order.
Fee to be charged on any Miscellaneous application is Rs. 250/- only.
Recovery Officer can appoint a Receiver for physically taking over and managing the secured property.
When a case has been heard and disposed of by higher forums the DRT cannot pass any other order much less a conditional stay order.
When a matter has already been taken to higher forum and decided, it is not open to the party to go the lower forum and file a fresh application on the same issue.
A Recovery Officer cannot examine an issue and pass a fresh order when he has already decided the issue on merits and had sought report on the existence of the machineries on the site.
Agreement between borrower and banker cannot bind third parties having dealings with the borrower.
A bank cannot take advantage of some defect or lapse in following some procedure between a borrower and third parties.
Where the defendants repeatedly seek time on one pretext or another it is a clear case of attempt to delay the proceedings.
Where the borrower applied for a certified copy of the order but did not complete the process of taking its delivery for a considerable length of time shows deliberate attempt to delay the proceedings.
DRT need allow prayer for cross examination of bank’s witnesses unless there are specific issues or points on which cross examination is to be conducted.
For transfer and clubbing of two cases not only the parties have to be same, but even the documents and securities have also to be identical.
Where two cases are based on separate documents and totally separate cause of actions, and there is no pari-pasu charges either they cannot be clubbed together.
It is the duty of the bank to see that the amounts being released by it are being utilized for the purpose for which they are being released.
Bank can legitimately stop releasing of further loan amount if it comes to the conclusion that amounts being disbursed are not being utilized for the purposes for which they are released.
Counter claim, based on loss suffered due to non release of full loan amount should be made within three years of date of release of loan amount.
The party too is equally responsible if it fails to ascertain as to why their counsel absented from the case.
A party cannot plead that it was unaware of the absence of its counsel for over long period of time. It should have ascertained the position.
Once a Recovery Certificate has been issued the DRT can recall, modify and amend it in accordance with the Sections 26 and 27 of the RDDBFI Act.
The One Time Settlement Scheme formulated by the Reserve Bank of India can only be implemented in accordance with the procedure prescribed in it only and DRT cannot enforce it on the Bank.
It is not open for the DRT to impose its compromise formula on the bank when it is unwilling to accept it.
Presence of a officer from the judiciary when breaking open seals etc would be ideal. But presence of a notary public also satisfactory.
Notary public is a senior officer with some magisterial powers and his presence during opening/ breaking up of seals is satisfactory.
Where the defendant persistently avoided being present at the time of opening of seals, only adverse inference can be drawn.
Allegations of embezzlement of hypothecated /seized goods should be backed up with adequate proof. Simple allegations cannot be accepted against officers who are not expected to do such specialized criminal acts.
Where the bank agrees to the change in the management of the borrower company and further seeks fresh set of guarantee documents from the new management, the earlier directors would deemed to have been discharged of their guarantees.
Where the bank alters surety terms without the consent of guarantors the signatories are immediately discharged of their liabilities under the earlier guarantees.
Where the guarantee documents were signed in their capacity as directors of the company and not in their personal capacity, the same cannot be enforced after resignation of the executors from the post of directors.
Seizure of assets in excess of requirement for the recovery of the amount due is violation of the provisions of the SRFAESI Act.
Only so much portion of the secured assets should be attached or seized as is sufficient to recover the dues.
Mindless exercise of powers under SRFAESI Act creates panic amongst borrowers and calls for penal action against the officers.
The Recovery Officer cannot order seizure of assets not mentioned in the Recovery Certificate.
Individual properties of a defendant cannot be attached when the Recovery Certificate was issued against him as a Kartha of a HUF.
Liability under a ‘Letter of Comfort’ would depend upon the nature of language used in the document.
If in the ‘Letter of Comfort’ the signatory unequivocally binds himself for the due repayments of the debts of the borrower, and the parties have acted upon it for a considerable period of time, and have expended large sums of money based on it, then he becomes a guarantor to the loans.
Whether or not the liability of a guarantor can be fastened under a letter of comfort will have to decided by the Debts Recovery Tribunal based on evidence led by the parties.
Execution of a guarantee should be a conscious act to stand as a surety and not merely signing of a document. Where a signatory establishes that he merely signed a document with the intention not to part with it, but by some fraudulent means it was used as a instrument of guarantee then it is no deed of guarantee.
Where a person signs a guarantee deed as a director of the borrower company he cannot be held personally liable for the dues of the company. His liability cannot exceed his share in the company.
A purchaser of mortgaged property for value without notice would still be subject to earlier mortgage to bank.
Revocation of a continuing guarantee cannot absolve the executor of the past liability. It can at best absolve him of future liabilities.
Claims under a continuing guarantee cannot be hit by limitation if the account is live and the guarantor has not refused to discharge his obligations.
An issue once decided, even if it is through an Interlocutory Application, would be hit by Res-judicata and cannot be raised in next appeal.
The embargo of 60 days under S. 13(2) of the SRFAESI Act before proceeding to take any action is mandatory. Any premature action would render the notice illegal.
In case of continuing guarantee, the limitation starts from day the demand was raised by the bank.
In case of continuing guarantee the limitation does not commence so long as the account is live and there is no refusal on the part of the guarantor to carry out the obligation.
A continuing guarantee can be revoked at any time as to future transactions.
Proceedings before DRT do not come within the meaning of the term ‘suit’ mentioned under SICA.
Guarantors cannot take benefit of S. 22 of SICA.
No presumption exists under law to presume that notice has been served on the defendants when the summons are returned with the remarks “left”.
Even if a presumption of deemed service is drawn, it is a rebuttal one.
Substituted service by way of paper publication should be in a widely circulated paper.
It is not unreasonable to grant an inspection for the second time, particularly when the last one was conducted some five years ago.
Though the borrower cannot be permitted inspect accounts all NPAs accounts maintained by the Bank, he can however be allowed to inspect his own accounts.
Where the parties are involved in more than one application, prayer made in one application cannot be made applicable in another application.
Knowledge of one of the partners about the proceedings is construed as knowledge of all the partners.
Negotiations for compromise settlement cannot extend limitation.
Decision Dated 31-07-2006 R.A. NO. 522 OF 2005, DECIDED ON 31st JULY, 2006 by Debts Recovery Appellate Tribunal, Allahabad
Where an auction sale is to be assailed the first thing to be done is to file an application before the Recovery Officer under S. 60 or 61 of the II Schedule to the Income Tax Act. Only when some order has been passed by the RO on this application can an appeal be filed to the Presiding Officer.
Provision of Section 30 of the RDDBFI Act can be resorted to only if there is some order of the Recovery Officer which needs to be considered by the Presiding Officer. Suo-moto appeal against some activity of the Recovery Officer is not maintainable.
Unless and until there is some order passed by the Recovery Officer no appeal against his activities can be filed.
It is in the interest of lessees claiming through the original defendant to participate in the proceedings before the DRT and establish that they have no liability towards the defendant or the claiming bank.
If the lessees claim they are not liable either to the original defendant or the claiming bank then they must establish their defense before the DRT rather than seeking premature release from the case.
Where a person has any interest in a property under attachment or sale, or the property is under his possession, which should not be liable under recovery process, the person should file is objections before the Recovery Officer.
The Recovery Officer is competent to go into and decide all questions raised in respect of the property, including questions regarding right, title or interest in the property, notwithstanding provisions of any other law to the contrary.
An application /appeal against proceedings of the Recovery Officer is maintainable only after the applicant has filed his objections before the Recovery Officer.
Interim orders are not binding, and the final orders could be contrary to the interim orders, even though they may have been confirmed by the higher Courts.
In the absence of a contract to the contrary, in case of dishonour by the drawee or the acceptor of bills of exchange the drawer is liable to compensate the holder of a bill.
Where a transaction between the same parties is contained in more than one document, all the documents must be read and interpreted together and they have the same legal effect for all purposes as if they are part of one document.
The word “without recourse” cannot be read into a LC or Bill of Exchange unless it is there.
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