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Debt Recovery Tribunal Can't Go Beyond Reliefs Sought For By A Party: Gujarat High Court
PRIYANKA PREET
5 July 2022 11:15 AM GMT
The Gujarat High Court has made it clear that a Debt Recovery Tribunal cannot go beyond and grant prayers that are not even sought for by a party before it.While hearing a petition filed by the original defendant against the impugned order in favour of original applicant (respondent herein), Justice Vaibhavi D Nanavati observed,"The submissions advanced by Mr. Asthavadi, the...
The Gujarat High Court has made it clear that a Debt Recovery Tribunal cannot go beyond and grant prayers that are not even sought for by a party before it.
While hearing a petition filed by the original defendant against the impugned order in favour of original applicant (respondent herein), Justice Vaibhavi D Nanavati observed,
"The submissions advanced by Mr. Asthavadi, the learned advocate appearing for the writ-applicant requires consideration as can be seen from the above prayers there is no such prayer as prayed for by the respondent No.1 as granted by the DRTII. It appears that DRT-II has erred in granting the prayer which was not prayed for even by the respondent No.1...Accordingly this Court is inclined to modify the order dated 27.06.2014."
The DRT had directed that the Respondent Company should have first charge over the property over which the second charge was created by a mortgage with the Gujarat State Financial Corporation.
The High Court thought it fit to exercise its extraordinary jurisdiction under Article 226 while opining that this relief was granted by the DRT-II even though it was not prayed for by the Company.
The Bench was hearing a writ-application by the Gujarat State Financial Corporation wherein the impugned order was sought to be quashed to extent of direction no. 2 and therefore, its implementation and execution be stayed in the interest of justice.
The Writ-Applicant was a loanee of M/S Jalan Forging Ltd (in liquidation) since it had extended financial assistance of INR 48 lacs to the company in liquidation in 1992. However, the company in liquidation failed to repay the dues and approached BIFR and AAIFR for the revival of the unit but it was decided that the company be wound up. The aforesaid orders were forwarded to the Guj HC and the company in 2006. The Bank of Baroda had originally extended financial assistance to the company in liquidation. However, later, the debt was assigned to Respondent No. 1 Company. Meanwhile, Respondent Nos. 2 to 4 in their personal capacity had provided a corporate guarantee in favour of the company in liquidation for credits facilities amounting to INR 340 lacs.
The instant application was filed by the Corporation because it was contested that the property in question had been sold by the Official Liquidator and the claim of having the first charge over the property by the Corporation was pending with the Official Liquidator. However, DRT-II, vide the impugned order, had allowed the application of Respondent No.1 by affirming that the Company had the first charge over the property and the second charge lay with the Corporation. It was averred by the Corporation that such a direction would cause irreparable loss to the Corporation as the claim of the Writ-Applicant was still pending before the Official Liquidator.
The primary observation of the Bench was that the relief granted vide Direction 2 was not sought for by the Respondent. Reference was made to the prayers mentioned by Respondent No. 1 in the Original Application to inter alia, issue recovery certificate in favour of the Applicant Bank and against Respondent No. 1-4 and directed the officer to attach all movable properties, goods, machineries belonging to the Respondents. Thus, there was no prayer for declaring the first charge over the property by the Company.
By placing reliance on a catena of judgements such as Whirlpool Corporation vs. Registrar of Trade Marks, Mumbai and Ors., (1998) 8 SCC 1, the High Court concluded that courts have a discretion under Article 226 to entertain or not entertain a writ petition. However, jurisdiction under Article 226 is exercised where there is a violation in the principles of natural justice or fundamental rights.
Keeping in view these precedents, the Court felt inclined to modify the impugned order and therefore, quashed the direction.
Case Title: GUJARAT STATE FINANCIAL CORPORATION LTD v/s INDIA SME ASSETS RECONSTRUCTION COMPANY LIMITED & 8 other(s)
Case No.: C/SCA/19590/2015
Citation: 2022 LiveLaw (Guj) 256
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