2019 (11) TMI 1741 - HC - Companies Law

Recovery of debts - quadripartite agreement - It was alleged in the application that without a prior written approval from the petitioner bank, the defendant/opposite party no.6 surreptitiously sold and transferred the property-in-question to an undisclosed third party purchaser behind the back of the petitioner - HELD THAT - Admittedly the Debt Recovery Tribunal derives its power from the statute and the powers and procedures have been prescribed under Sections 17 and 19 of the said Act. Prima facie it is found that Section 19 (25) cannot be interpreted, to mean that the Tribunal had the power to decide on issues beyond what had fallen for adjudication under Section 17 of the said Act. It is also seen that the Tribunal had disposed of the application filed by the opposite party no. 6 by passing an order in the nature of a final relief thereby treating the letter dated February 2, 2016 as withdrawn. It is also true that the application filed by the opposite party no. 6 praying for deletion of its name with a further prayer for cancellation of the letter dated February 2, 2016 upon securing the amount has been disposed of, which means that the question whether the tribunal had the authority to cancel and/or treat that letter as withdrawn was no more left for adjudication. This point was overlooked by the learned appellate tribunal. Let this matter be listed in the daily supplementary list on November 29, 2019.

Summary

Issues:
1. Jurisdiction of Debts Recovery Tribunal-III and Debts Recovery Appellate Tribunal.
2. Alleged breach of quadripartite agreement by opposite party No.6.
3. Validity of order treating the complaint letter as withdrawn.
4. Interpretation of powers under Sections 17 and 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.

Jurisdiction of Debts Recovery Tribunal-III and Debts Recovery Appellate Tribunal:
The case involved a revisional application filed by a Bank against an order passed by the Debts Recovery Appellate Tribunal, arising from an order by the Debts Recovery Tribunal-III. The petitioner argued that the tribunals exceeded their jurisdiction by directing the withdrawal of a complaint letter, contending that the power of the Tribunal was confined to the provisions of Section 17 of the said Act. The petitioner emphasized that the Tribunal's jurisdiction was limited to entertaining and deciding applications for recovery of dues of banks and financial institutions. The petitioner relied on legal precedents to support the argument that the Tribunal had overstepped its authority by passing the order treating the complaint letter as withdrawn.

Alleged breach of quadripartite agreement by opposite party No.6:
The petitioner alleged that the opposite party No.6 breached a quadripartite agreement by selling the mortgaged property without the petitioner's consent. The loan was granted for the specific purpose of purchasing the property from the opposite party No.6. The petitioner contended that the opposite party had no authority to sell the property to any other person without the petitioner's written consent. The petitioner filed a complaint alleging fraud and unauthorized sale of the property, leading to legal proceedings and the subsequent application before the Debts Recovery Tribunal-III.

Validity of order treating the complaint letter as withdrawn:
The main grievance of the petitioner was against the order treating a complaint letter as withdrawn by the Debts Recovery Tribunal-III, which was upheld by the Appellate Tribunal. The petitioner argued that such a directive was beyond the Tribunal's scope and not supported by the legal provisions. The opposite party No.6 contended that the letter was not issued in accordance with RBI guidelines, and no opportunity of hearing was provided to rebut the allegations of fraud. Legal precedents were cited to support the argument that without a proper hearing and a finding of guilt, the letter should not have been treated as withdrawn.

Interpretation of powers under Sections 17 and 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993:
The Court analyzed the powers and procedures prescribed under Sections 17 and 19 of the said Act concerning the jurisdiction of the Debts Recovery Tribunal. The Court noted that Section 19(25) could not be interpreted to allow the Tribunal to decide on issues beyond the scope of Section 17. It was observed that the Tribunal had disposed of the application by treating the letter as withdrawn, indicating a final relief granted to the opposite party No.6. The Court highlighted that the Appellate Tribunal overlooked the fact that the question of authority to cancel or treat the letter as withdrawn was no longer up for adjudication. The Court granted a stay on the portion of the order treating the letter as withdrawn for a specified period.

In conclusion, the judgment delves into the jurisdictional boundaries of the Debts Recovery Tribunal and the Appellate Tribunal, the alleged breach of agreements, the validity of orders issued, and the interpretation of statutory powers under the relevant Act. The detailed analysis provided insights into the legal arguments presented by both parties and the Court's observations on the application of law in the given circumstances.