DRT Cannot Bypass DRAT & High Court Directions: DRAT Sets Aside Order, Directs Adjudication of Counter-Claim of Company [Read Order]

The Debts Recovery Appellate Tribunal (DRAT), Kolkata, has set aside an order of the Debts Recovery Tribunal (DRT) holding that DRT cannot bypass orders and is bound by the directions of DRAT, especially when affirmed by the High Court.

The dispute originated from an Original Application filed by the State Bank of India against Doon Valley Rice Limited. The loan was later assigned to Kotak Mahindra Bank. The DRT initially decided the matter in 2011 in favour of the secured creditor. Doon Valley Rice Limited had filed a counter-claim, which the DRT refused to entertain.

On appeal, DRAT Delhi in April 2015 remanded the matter back to the DRT, directing it to adjudicate the counter-claim on merits. The Tribunal also asked the DRT to consider whether the bank had complied with directions regarding refund or adjustment of debited amounts and to examine the effect of non-production of investigation reports.

State Bank of India challenged the DRAT order before the Punjab & Haryana High Court. In August 2017, the High Court upheld the DRAT’s directions, clarifying that the remand did not imply any merit in the counter-claim but required the DRT to adjudicate it within three months.

Despite these clear directions, Kotak Mahindra Bank filed an application before the DRT-II, Chandigarh, under Section 19(11) of the Recovery of Debts andBankruptcy Act, 1993, seeking dismissal of the counter-claim. On 21 November 2017, the DRT allowed the application, holding that the counter-claim was not maintainable and directed the appellant to move the civil court.

Doon Valley Rice Limited challenged this order before DRAT, arguing that it was passed ex parte without serving a copy of the application or allowing opposing it. The company contended that once DRAT Delhi’s order had been affirmed by the High Court, the DRT had no jurisdiction to dismiss the counter-claim.

Justice Anil Kumar Srivastava ( Chairperson ) observed that DRTs are bound to follow the directions of the Appellate Tribunal, particularly when affirmed by the High Court. If the bank was aggrieved, it should have approached the Supreme Court. Since no such appeal was filed, the DRAT’s order attained finality.

The Tribunal held that DRT-II’s order bypassing the appellate directions was without jurisdiction and suffered from material irregularities. It also noted that the order was passed without hearing the appellant, violating principles of natural justice.

On the issue of Section 19(11), the Tribunal clarified that while the DRT may consider such applications, it cannot disregard or override binding appellate directions. The proper course was to adjudicate the counter-claim in accordance with DRAT Delhi’s 2015 order.

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