'Debt Recovery Appellate Tribunal Is Not Mere Adjudicatory Body; Can Set Aside Default Orders To Do Complete Justice': Patna HC

The Patna High Court has held that dismissal of an appeal for non-compliance with the pre-deposit requirement under Section 21 of the Recovery of Debts and Bankruptcy Act, 1993 is procedural in nature and does not extinguish the statutory right of appeal, affirming the power of the Debts Recovery Appellate Tribunal (DRAT) to recall such orders.A Division Bench of Justice Sudhir Singh and Justice Sunil Dutta Mishra was hearing a Letters Patent Appeal challenging the judgment dated 04.09.2024 passed by a learned Single Judge, which had set aside the DRAT's order restoring an appeal after more than eight years. The dispute arose from recovery proceedings initiated by the respondent bank after the appellants' loan account was declared a non-performing asset. The Debt Recovery Tribunal (DRT), Patna, allowed the bank's claim and issued a recovery certificate. The appellants' subsequent appeal before the DRAT was dismissed in 2015 for non-compliance with the mandatory pre-deposit requirement under Section 21 of the Act.After several years, the appellants deposited more than 50% of the decretal amount in 2023 and sought restoration of the appeal. The DRAT allowed the restoration application. However, this order was set aside by the Single Judge, holding that the Tribunal lacked jurisdiction to recall its earlier order after such a long lapse of time.Before the High Court, the appellants argued that the requirement of pre-deposit had been complied with and that the Tribunal possessed the power to recall its orders under Section 22(2) of the Act. The bank, on the other hand, contended that the proceedings had attained finality and could not be reopened after such delay.The Court framed the issue as whether the DRAT had the jurisdiction to recall an order dismissing an appeal for non-compliance of pre-deposit, and whether such dismissal attained finality. Answering both in favour of the appellants, the Court held that Section 22(2) confers wide powers on the Tribunal akin to those of a civil court, including the power to review and recall its orders. The Court observed:“A plain and purposive reading of the aforesaid provision makes it abundantly clear that the Tribunal and the Appellate Tribunal are not mere adjudicatory bodies with limited jurisdiction, but are vested with substantive powers akin to those of a Civil Court, including the power to review their own decisions and to set aside orders passed for default. The legislative intent behind incorporating such provisions is to ensure that procedural lapses do not result in irreparable prejudice and that matters are, as far as possible, decided on merits.”The Court further clarified that dismissal for non-compliance of pre-deposit is not an adjudication on merits, but a procedural consequence. It held:“Once such dismissal falls within the category contemplated under Section 22(2)(g), the Tribunal cannot be said to be denuded of its jurisdiction to recall or set aside the same. The reasoning adopted by the learned Single judge, that there exists no provision for recall or that the Tribunal becomes functus officio, overlooks this express statutory conferment of power under Section 22(2). The doctrine of finality, though significant, cannot be applied in a manner so as to render a statutory provision otiose.”Interpreting Section 21, the Court noted that while an appeal “shall not be entertained” without pre-deposit, the provision does not prescribe any limitation period nor does it mandate automatic or irreversible dismissal. Accordingly, once the appellants complied with the pre-deposit requirement, the DRAT was within its jurisdiction to restore the appeal.Setting aside the judgment of the Single Judge, the Court upheld the DRAT's order restoring the appeal.Case Title: M/s Tirupati Storage and Allied Pvt. Ltd. v. UCO Bank, Frazer Road Branch, Patna.Case No.: Letters Patent Appeal No. 1093 of 2024 (in C.W.J.C. No. 1388 of 2024).Appearance: Mr. Deo Prakash Singh, Mr. Pankaj Kumar, and Ms. Nishu Kumari appeared for the Appellants. Mr. Ranjeet Kumar Pandey appeared for the Bank. Mrs. Radhika Kumari appeared for the Union of India.Click Here To Read/Download Order

'Debt Recovery Appellate Tribunal Is Not Mere Adjudicatory Body; Can Set Aside Default Orders To Do Complete Justice': Patna HC

Rushil Batra

Tags