Case Note & Summary
The dispute arose from recovery proceedings initiated by Punjab National Bank against a partnership firm, Vardhaman Enterprise, and its partners. The petitioners, Smt. Urmiladevi Mahavirprasad Jain and Shri. Pannalal Moolchand Jain, were 40% partners in the firm, while respondent No.3, Smt. Renudevi Arunkumar Jain, held the remaining 60% partnership interest. The firm had obtained a loan from the bank in 2015, and the petitioners and respondent No.3 had executed deeds of guarantee and mortgage. In October 2019, the account was declared a non-performing asset, and the bank issued a notice under Section 13(2) of the SARFAESI Act, followed by Original Application No. 7 of 2020 for recovery of Rs.3,99,91,884. Internal disputes between the partners led respondent No.3 to refuse to join the petitioners in discharging the dues. The petitioners filed S.A. No. 36 of 2020, and respondent No.3 filed S.A. No. 52 of 2020 before the Debt Recovery Tribunal-I at Ahmedabad. In July 2020, the petitioners offered Rs.1,60,00,000 as full and final settlement for themselves, and the bank accepted the proposal through two sanction letters dated 18/07/2020 and 20/07/2020. The sanction letters expressly stated that the bank would withdraw the DRT suit against the petitioners only and continue recovery against the remaining obligants. The petitioners paid the full amount, and the bank issued no-due certificates dated 29/07/2020 and 04/08/2020, followed by registered release deeds on 29/07/2020 and 05/08/2020. The petitioners sold one property on 10/08/2020, and their S.A. No. 36 of 2020 was disposed of on 14/09/2022. Despite the settlement, the bank did not withdraw OA No. 7 of 2020 against the petitioners. The DRT-I Ahmedabad allowed the OA on 30/08/2023, holding all defendants including the petitioners and respondent No.3 liable for Rs.2,39,91,884. The petitioners challenged this order before the Gujarat High Court, which dismissed their Special Civil Application on 04/01/2024 due to availability of alternative remedy before DRAT. The subsequent LPA was disposed of on 09/02/2024 directing DRAT to decide all issues independently. The petitioners then filed an appeal before DRAT, Mumbai, with an application for waiver of pre-deposit under Section 21 of the RDB Act. DRAT passed the impugned order on 09/07/2024 directing a deposit of Rs.60 lakhs in two instalments, and on 24/07/2024 dismissed the appeal for non-compliance. The petitioners filed the present writ petition under Article 226 of the Constitution of India. The High Court considered the jurisdictional objection raised by the bank. It held that since the impugned order was passed by DRAT, Mumbai, which is within the territorial jurisdiction of the Bombay High Court, part of the cause of action arose within its jurisdiction. The court applied the principle of forum conveniens and held the petition maintainable, noting that the bank had participated in proceedings before DRAT without objecting to jurisdiction and could not now object to the High Court's jurisdiction. The court also observed that the bank had not explained why it failed to withdraw OA No. 7 of 2020 despite the settlement and no-due certificates. It further noted that DRAT itself had recorded important issues regarding mortgage release and discharge of guarantors under Section 135 of the Contract Act. The available text does not include the final operative order, but the court's reasoning indicates serious concerns about the bank's conduct and the need for appellate consideration on merits.
Headnote
A) Constitutional Law - Writ Jurisdiction - Territorial Jurisdiction of High Court - Constitution of India, Article 226 - The High Court held that it had jurisdiction to entertain a writ petition against an order of DRAT, Mumbai because the appellate tribunal is situated within its territorial jurisdiction, so part of cause of action arises there. The court applied the principle of forum conveniens and rejected the bank's objection to jurisdiction after it had participated in proceedings before DRAT without raising the objection. Held that the petition is maintainable before the Bombay High Court (Paras 6-7). B) Banking and Insolvency - Recovery of Debts - Pre-deposit under Section 21 RDB Act - Recovery of Debts and Bankruptcy Act, 1993, Section 21 - The DRAT directed petitioners to deposit Rs.60 lakhs in two instalments as pre-deposit for their appeal, and dismissed the appeal on non-compliance. Petitioners argued that Rs.1.60 crore already paid under a settlement with the bank should be treated as pre-deposit. The court noted that DRAT itself recorded important issues regarding mortgage release and discharge of guarantors, and that the bank had not explained why it failed to withdraw OA No.7 of 2020 despite settlement. Held that these serious questions warranted appellate consideration rather than mechanical dismissal on pre-deposit grounds (Paras 8-10). C) Contract and Partnership - Settlement and Discharge - Discharge of Guarantors and Partners - Indian Contract Act, 1872, Section 135; Partnership Act, 1932, Sections 25, 45, 49 - The bank issued no-due certificates and registered release deeds after receiving Rs.1.60 crore from petitioners but later contended that settlement was only against personal guarantees and that petitioners remained liable as partners. The court observed that the bank's stand pitched respondent No.3 against petitioners and that the bank conveniently relied on the settlement only for its benefit. Held that the bank's failure to withdraw the original application against petitioners after accepting settlement raised prima facie issues of breach of promise and natural justice (Paras 8-10).
Issue of Consideration
Whether Bombay High Court has territorial jurisdiction to entertain writ petition against DRAT Mumbai order; whether payment of Rs.1,60,00,000 made under settlement with bank can be treated as pre-deposit under Section 21 RDB Act or whether further deposit of Rs.60 lakhs is mandatory; whether DRAT's order dismissing appeal for non-deposit is sustainable given bank's failure to withdraw OA despite settlement and no-due certificates
Final Decision
Not mentioned (final operative order not included in the provided excerpt; the court held it has jurisdiction and noted serious issues but did not state final directions).
Law Points
- Writ jurisdiction under Article 226 extends to decisions of DRAT located within High Court's territorial jurisdiction
- doctrine of forum conveniens
- pre-deposit under Section 21 RDB Act is mandatory
- bank's failure to withdraw OA after settlement and no-due certificates may violate natural justice
- settlement terms must be honoured
- partners may be liable jointly and severally under Partnership Act before settlement
