[RDB Act] Bombay High Court Upholds Transfer Of Recovery Suit From Commercial Court To DRT, Says S.31 Must Be Given Purposive Interpretation

The Bombay High Court has held that Section 31 of the Recovery of Debts and Bankruptcy Act, 1993 (RDB Act) must be given a purposive interpretation to ensure that recovery proceedings by banks fall within the exclusive jurisdiction of the Debts Recovery Tribunal (DRT), even if the suit was not originally within its jurisdiction at the time of filing. The Court ruled that when a non-banking lender merges with a bank during the pendency of a recovery suit, the matter must be transferred to DRT, given Sections 17 and 18 of the RDB Act.Justice Rohit W. Joshi was hearing a writ petition challenging the Commercial Court's order transferring a recovery suit from HDFC Limited (later amalgamated with HDFC Bank Ltd.) to the DRT. HDFC Ltd. had filed the suit in 2007 for the recovery of over ₹3.14 crore. After its amalgamation with HDFC Bank in 2023, the bank sought a transfer to DRT under Sections 17 and 18 of the RDB Act.The petitioner argued that DRT had no jurisdiction as the loan was advanced by a non-bank, that under Section 31, only suits within DRT's jurisdiction at the time of filing could be transferred, and that amalgamation should not affect jurisdiction.The Court rejected these contentions, holding that purposive interpretation should be adopted while interpreting Section 31 and Section 31 must submit to a mandate of Section 18 read with Sections 17, 2(d) and 19 of the Act. The Court conceded that a literal meaning of Section 31 will imply that a suit can be transferred to DRT only when a suit is filed in a Court before the establishment of DRT and the cause of action in suit is such that had DRT been in existence on the date of institution of suit. However, the court emphasised that Section 31 cannot be interpreted in a vacuum. It observed:“… Section 31 cannot be interpreted in a vacuum. It has to be read with other provisions of the Act, particularly, Sections 17 and 18, which confer jurisdiction upon DRT and bar jurisdiction of all Courts with respect to matters which fall within the jurisdiction of DRT.”The Court said that Section 31 is procedural and it reinforces the mandatory nature of Section 18 by emphasising that the bar under Section 18 is absolute and on and from the appointed day, no Court other than DRT shall have jurisdiction to deal with any matter which falls under the jurisdiction of DRT. It observed: “Section 31 must submit to a mandate of Section 18 read with Sections 17, 2(d) and 19 of the Act. It will be appropriate to honour the scheme of the Act, which clearly bars jurisdiction of all Courts to exercise jurisdiction with respect to matters which fall within the jurisdiction of DRT by directing that the suit must be transferred to DRT, although strictly speaking present case is not squarely covered by Section 31 of the RDB Act.”Hence, the Court held that having regard to the mandate of Section 18, it will be appropriate to resort to purposive interpretation while dealing with Section 31. Sections 17 and 18 are substantive provisions, and Section 31 is a provision dealing with procedure. Accordingly, the Court dismissed the writ petition and upheld the transfer to DRT, holding that DRT will have jurisdiction to entertain and decide the suit, and the jurisdiction of other Courts will be barred in view of Section 18 of the RDB Act.Case Title: Ashwini Trading Co. v. Housing Bank Ltd. & Ors. [WRIT PETITION NO. 7008 OF 2024]Click Here To Read/Download Order

[RDB Act] Bombay High Court Upholds Transfer Of Recovery Suit From Commercial Court To DRT, Says S.31 Must Be Given Purposive Interpretation

Saksham Vaishya

Tags