Case Note & Summary
The Bombay High Court disposed of two writ petitions arising from a common order of the Debt Recovery Appellate Tribunal (DRAT) dated 26 April 2024. The dispute involved HDFC Bank Limited (HDFC), Bank of Bahrain & Kuwait B.S.C. (BBK), and Ashima Limited (Ashima). Ashima held a current account with HDFC and, to secure facilities granted by BBK, executed a no-lien account with HDFC. HDFC filed an original application before the Debt Recovery Tribunal (DRT) claiming that the amount in the no-lien account constituted a 'debt' under Section 2(g) of the Recovery of Debts and Bankruptcy Act, 1993. The DRT, by order dated 26 October 2005, held that HDFC's claim constituted a 'debt'. BBK and Ashima appealed to the DRAT, but later withdrew the appeals with liberty to raise all contentions. The DRAT, by order dated 11 July 2014, allowed the withdrawal and directed the DRT to consider the matter on merits. The DRT thereafter, by order dated 30 June 2017, allowed HDFC's original application. HDFC recovered Rs.20.70 crores in execution. BBK and Ashima again appealed to the DRAT. The DRAT, by the impugned order dated 26 April 2024, set aside the DRT's order dated 30 June 2017 and remanded the matter to the DRT for fresh adjudication, without deciding the issue of whether HDFC's claim constitutes a 'debt' under Section 2(g) of the Act. HDFC challenged this remand order in Writ Petition No.9344 of 2024, seeking a declaration that its claim constitutes a 'debt' and for quashing of the impugned order. BBK, in Writ Petition No.12708 of 2024, sought modification of the impugned order to direct HDFC to release the amount of Rs.20,70,44,806.75/- along with accrued interest. The court held that the DRAT failed to exercise its jurisdiction by not deciding the jurisdictional issue of whether HDFC's claim constitutes a 'debt' under Section 2(g) of the Act. The court found that the remand was not justified as there were no seriously disputed questions of fact and the entire material was before the DRAT. The court also held that upon setting aside the DRT's order dated 30 June 2017, the DRAT ought to have directed restoration of the amount recovered by HDFC. Accordingly, the court set aside the impugned order and directed the DRAT to decide the appeals afresh, including the issue of whether HDFC's claim constitutes a 'debt' under Section 2(g) of the Act, and also to consider the issue of restoration of the amount to BBK.
Headnote
A) Debt Recovery - Definition of Debt - Section 2(g) of the Recovery of Debts and Bankruptcy Act, 1993 - The DRAT failed to decide whether HDFC's claim constitutes a 'debt' under Section 2(g) of the Act, which was a jurisdictional issue. The DRAT's order remanding the matter to the DRT without deciding this issue amounted to failure to exercise jurisdiction. (Paras 4, 7, 14-16)
B) Remand - Principles of Remand - The DRAT's remand order was not justified as there were no seriously disputed questions of fact and the entire material was before the DRAT. The settled principles regarding remand were not followed. (Paras 8, 14-16)
C) Debt Recovery - Finality of DRT Order - Withdrawal of Appeal - The DRT's order dated 26 October 2005 holding that HDFC's claim constitutes a 'debt' under Section 2(g) of the Act attained finality as the respondents withdrew their appeals. However, the DRAT's subsequent order dated 11 July 2014 allowed withdrawal with liberty to raise all contentions, including jurisdiction. (Paras 7, 9, 14-16)
D) Debt Recovery - Restoration of Amount - Upon setting aside of the DRT's order dated 30 June 2017, the DRAT ought to have directed restoration of the amount of Rs.20,70,44,806.75/- recovered by HDFC in execution. The DRAT's failure to do so was an error. (Paras 11, 17-18)
Issue of Consideration
Whether the Debt Recovery Appellate Tribunal (DRAT) erred in remanding the matter to the Debt Recovery Tribunal (DRT) without deciding the issue of whether HDFC Bank's claim constitutes a 'debt' under Section 2(g) of the Recovery of Debts and Bankruptcy Act, 1993, and whether the DRAT should have directed restoration of amounts recovered in execution of the DRT order.
Final Decision
The court allowed Writ Petition No.9344 of 2024 filed by HDFC Bank Limited and partly allowed Writ Petition No.12708 of 2024 filed by Bank of Bahrain & Kuwait B.S.C. The impugned order of the DRAT dated 26 April 2024 was set aside. The DRAT was directed to decide the appeals afresh, including the issue of whether HDFC's claim constitutes a 'debt' under Section 2(g) of the Recovery of Debts and Bankruptcy Act, 1993, and also to consider the issue of restoration of the amount of Rs.20,70,44,806.75/- to BBK. The court held that the DRAT failed to exercise its jurisdiction by not deciding the jurisdictional issue and that the remand was not justified.
Law Points
- Remand principles
- Failure to exercise jurisdiction
- Debt definition under Section 2(g) of RDB Act
- Finality of DRT orders upon withdrawal of appeal
- Restoration of amounts upon setting aside of decree
Case Details
2025 LawText (BOM) (02) 299
Writ Petition No.9344 of 2024 and Writ Petition No.12708 of 2024
M.S. Sonak, Jitendra Jain
Virag Tulzapurkar, Sameer Pandit, Sarrah Khambati (for HDFC); Birendra Saraf, Rajeev Pandey, Madhur Rai, Sachin Kanse (for BBK); Veerendra Tulzapurkar, Shivam Bhagwati, Mufaddal Peparwala (for Ashima)
HDFC Bank Limited (in WP-9344/2024); Bank of Bahrain & Kuwait B.S.C. (in WP-12708/2024)
Bank of Bahrain & Kuwait B.S.C. and Ashima Limited (in WP-9344/2024); HDFC Bank Limited and Ashima Limited (in WP-12708/2024)
Subscribe to unlock Case Details (Citation, Judge, Date & more)
Subscribe Now
Nature of Litigation
Writ petitions challenging the order of the Debt Recovery Appellate Tribunal (DRAT) remanding the matter to the Debt Recovery Tribunal (DRT) and seeking restoration of amounts recovered in execution.
Remedy Sought
HDFC sought quashing of the DRAT's remand order and a declaration that its claim constitutes a 'debt' under Section 2(g) of the Recovery of Debts and Bankruptcy Act, 1993. BBK sought modification of the DRAT's order to direct HDFC to release the amount of Rs.20,70,44,806.75/- along with accrued interest.
Filing Reason
The DRAT set aside the DRT's order dated 30 June 2017 and remanded the matter without deciding the jurisdictional issue of whether HDFC's claim constitutes a 'debt' under Section 2(g) of the Act, and without directing restoration of amounts recovered by HDFC in execution.
Previous Decisions
DRT order dated 26 October 2005 held that HDFC's claim constitutes a 'debt' under Section 2(g) of the Act. Appeals against this order were withdrawn with liberty to raise all contentions. DRT order dated 30 June 2017 allowed HDFC's original application. DRAT order dated 26 April 2024 set aside the DRT order and remanded the matter.
Issues
Whether the DRAT erred in remanding the matter to the DRT without deciding the issue of whether HDFC's claim constitutes a 'debt' under Section 2(g) of the Recovery of Debts and Bankruptcy Act, 1993.
Whether the DRAT ought to have directed restoration of the amount of Rs.20,70,44,806.75/- recovered by HDFC in execution of the DRT order dated 30 June 2017.
Submissions/Arguments
HDFC argued that the DRT's finding that its claim constitutes a 'debt' under Section 2(g) of the Act attained finality as the respondents withdrew their appeals. The DRAT failed to exercise jurisdiction by not deciding this issue and remanding the matter without justification.
BBK argued that the withdrawal of appeals was with liberty to raise all contentions, including jurisdiction. The DRAT's remand was proper as the issue of jurisdiction had to be decided by some forum. BBK also argued that upon setting aside the DRT order, the DRAT should have directed restoration of the amount recovered by HDFC.
Ashima supported BBK's submissions and argued that the remand order was within the DRAT's discretion and not perverse.
Ratio Decidendi
The DRAT, as an appellate authority, is duty-bound to decide all issues arising in the appeal, including jurisdictional issues. Remand to the lower tribunal is not justified when the appellate tribunal can decide the issue on the material available. Upon setting aside a decree, the appellate tribunal must consider restoration of amounts recovered in execution to prevent unjust enrichment.
Judgment Excerpts
The learned counsel for the parties agree that both these Petitions can be disposed of by a common order.
In Writ Petition No.9344 of 2024, the Petitioner – HDFC Bank Limited (HDFC), vide prayer clause (a) challenges Debt Recovery Appellate Tribunal’s common order dated 26 April 2024 (Impugned Order) disposing of Appeal Nos. 2 of 2018 and 32 of 2018.
Mr. Virag Tulzapurkar, learned Senior Advocate for the HDFC, submitted that the Respondents’ Appeals against Debts Recovery Tribunal’s (“DRT”) order dated 26 October 2005 (Exhibit K) were withdrawn by the Respondents. Therefore, the finding in DRT’s order dated 26 October 2005 that the HDFC’s claim constituted a “debt” under Section 2(g) of the said Act attained finality.
Dr Birendra Saraf, learned Senior Advocate for BBK, tendered a copy of the purshis in Miscellaneous Appeal No. 89 of 2006 and submitted that leave was sought to withdraw the Appeal with liberty to raise all contentions, including the contention of jurisdiction as to whether the HDFC’s claim constituted a debt before the DRT.
The second Respondent - Ashima Limited (“Ashima”) held a current account with HDFC at its branch office at Nariman Point, Mumbai. To secure certain facilities granted by BBK, Ashima, on 29 ...
Procedural History
Ashima held a current account with HDFC. To secure facilities from BBK, Ashima executed a no-lien account with HDFC. HDFC filed an original application before DRT claiming the amount as a 'debt'. DRT by order dated 26 October 2005 held that HDFC's claim constitutes a 'debt'. BBK and Ashima appealed to DRAT but withdrew the appeals with liberty to raise all contentions. DRAT by order dated 11 July 2014 allowed withdrawal and directed DRT to consider the matter on merits. DRT by order dated 30 June 2017 allowed HDFC's original application. HDFC recovered Rs.20.70 crores in execution. BBK and Ashima appealed to DRAT. DRAT by order dated 26 April 2024 set aside the DRT order and remanded the matter. HDFC filed WP-9344/2024 challenging the remand order. BBK filed WP-12708/2024 seeking restoration of the amount. The High Court disposed of both petitions by common judgment on 20 February 2025.
Acts & Sections
- Recovery of Debts and Bankruptcy Act, 1993: Section 2(g)
