Case Note & Summary
The petitioners, M/s. SSA Constructions (a partnership firm) and its managing partner, obtained loan facilities from Andhra Bank (Respondent No. 1). The bank filed Original Application No. 963/2011 before the Debt Recovery Tribunal (DRT), Bangalore, for recovery of the debt. During the proceedings, the petitioners filed I.A. No. 674/2014 seeking to include the properties of Respondent Nos. 2 and 3 (Mrs. Devireddy Bujamma and Mrs. D. Anusha Reddy) in the recovery certificate, alleging that the properties were fraudulently transferred to them. The DRT dismissed the application on 22.05.2015, holding that it had no jurisdiction to include properties of persons who were not parties to the original application or guarantors. Aggrieved, the petitioners filed the present writ petition under Articles 226 and 227 of the Constitution of India. The High Court examined the scope of Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDB Act), which governs the procedure for recovery of debts. The court noted that the DRT's jurisdiction is limited to adjudicating disputes between the bank and the borrower/guarantor and does not extend to third parties who are not parties to the original application. The court held that if the petitioners believe that the properties were fraudulently transferred, their remedy lies before the civil court, not the DRT. The writ petition was dismissed, and the DRT's order was upheld.
Headnote
A) Debt Recovery - Jurisdiction of DRT - Inclusion of Third-Party Properties - Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 - The petitioners sought inclusion of properties of Respondent Nos. 2 and 3 in the recovery certificate, alleging fraudulent transfer. The DRT dismissed the application, and the High Court upheld the dismissal, holding that the DRT has no jurisdiction to include properties of persons who are not parties to the original application or guarantors. The remedy for setting aside fraudulent transfers lies before the civil court. (Paras 3-5)
Issue of Consideration
Whether the Debt Recovery Tribunal (DRT) has the jurisdiction to include properties of persons who are not parties to the original application or guarantors in a recovery certificate under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.
Final Decision
Writ petition dismissed. The order of the DRT dated 22.05.2015 is upheld. The petitioners are at liberty to pursue their remedy before the civil court.
Law Points
- DRT jurisdiction limited to parties and guarantors
- Section 19 of RDB Act does not empower inclusion of third-party properties
- remedy for fraudulent transfer lies before civil court
