DRAT disposes of HUDCO appeals citing finality of Recovery Certificate, Directs Recovery Officer to proceed based on Crystallized Debt [Read Order]

In a recent case, the Debt Recovery Appellate Tribunal (DRAT), Kolkata, disposed of two appeals filed by Housing and Urban Development Corporation Ltd. (HUDCO) by upholding the finality of recovery certificate and directed the Recovery Officer to proceed with recovery proceedings based on the crystallized debt amount of Rs. 148.08 crores with pendente lite and future interest @ 16.50% simple.

The appeal was a challenge against an order of the DRT-III Delhi dated 06.06.2025, which had directed HUDCO to file revised statements of account and ordered the Recovery Officer to hear the matter de novo. The case originated from an Original Application filed by HUDCO in 2002, which was decreed by DRT-II Delhi in 2008 for recovery of Rs. 148.08 crores with interest.

The, Respondents namely Maharaji Educational Trust, Dr. P. Mahalingam, Mrs. P. Kuilambal are the borrowers of the Appellants who have created security interest in the secured assets. Loan account became irregular and recovery proceedings were initiated by the Appellants.

The applicant financial institution is further allowed to recover its dues from sale of all movable machinery, equipment, furniture, fittings, book debts, monies, receivables etc, of the defendant’s property within the revenue limits or at any other place and al/ other persona/ properties/assets of these defendants or as per the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.

In case, the defendants fail to pay the amount within the stipulated time, the Recovery Certificate shall be issued against them and the same be sent to the Ids Recovery Officer and he shall proceed in accordance with law after obtaining the statement of account showing the exact amount due and payable by the defendants on the date of issuance of Notice of Demand under Rule 2 of the Il Schedule of Income Tax Act.. Parties to appear before Ids Recovery Officer on 04.08.2008. A copy of this final order and recovery certificate be sent to al/ the concerned parties free of cost by registered post.

Challenging the impugned judgment and order, Appeal No. 120 of 2008 was filed by the defendants namely Maharaji Educational Trust and Dr. P. Mahalingam. An Appeal No. 124 of 2008 was filed by the HUDCO. Miscellaneous Appeal No. 35 of 2010 was filed by HIJDCO. Miscellaneous Case 476 of 2009 and 477 of 2009 were also filed by the HUDCO before the DRAT Delhi.

Subsequent there to, the Recovery Certificate was issued and was revised on 22.03.2011. The Recovery Officer passed an order whereby it was held that the Recovery Officer is bound by the RecoveryCertificate issued by the DRT in the proceedings under Section 19 of the Recovery of Debts and Bankruptcy Act. It is beyond the jurisdiction of the Recovery Officer to enter into the arena of dispute with regard to the calculation of the amount prior to filing of the Original Application as the liabilities stand adjudicated and the Recovery Certificate clearly stipulates that the amount to be recovered is Rs. 148.08 crores plus pendentelite and future interest @16.50% simple. Accordingly, the Recovery Officer cannot go beyond the Recovery Certificate.

The Application filed by the CD seeking directions against the CHFI to provide a statement of account from the date of first disbursal of the loan amount appeared to have become infructuous by the CHFI filing the statement of account. Accordingly, the same was dismissed. This order of the Recovery Officer was not challenged by the Certificate Debtor before the Appellate forum or any other forum and attained finality.

The Tribunal, vide its order dated 18.09.2025, held that, the Recovery Officer is bound by the Recovery Certificate and cannot go beyond its terms and the debtors' previous withdrawal of objections to recast statements in 2011 operates as res judicata. The tribunal found that the debt amount had been crystallized by the DRT and confirmed by DRAT in 2010 and HUDCO had complied with the Delhi High Court's direction regarding the debtors' representation dated 14.08.2018.

Justice Anil Kumar Srivastava, Chairperson directed that the Recovery Officer should calculate the current interest, deduct any payments made, and proceed with recovery expeditiously in this 23-year-old matter. The Tribunal found that the DRT had erred in issuing directions beyond the scope of the Recovery Certificate and that such directions impliedly nullified its own findings.

The DRAT disposed of both appeals with the observation that the Recovery Officer should make all efforts to complete the recovery proceedings as expeditiously as possible, since the matter has been pending for over two decades.

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