High Court of Karnataka Hears Writ Petition by Ex-Employee Challenging DRT Proceedings for Recovery of Alleged Loss Due to Misconduct. The Core Issue Is Whether Such Loss Constitutes a 'Debt' Within the Meaning of Section 2(g) of Recovery of Debts and Bankruptcy Act, 1993.

Writ petition under Articles 226 and 227 of Constitution of India seeking quashing of proceedings before Debts Recovery Tribunal in O.A.No.487/2014 and direction to return original title deeds.

Petitioner seeks quashing of entire proceedings in O.A.487/2014 pending before DRT-I, Bengaluru; and direction to Bank to hand over original title deeds of the schedule property.

The Bank initiated O.A. before DRT seeking recovery of alleged financial loss of Rs.2,36,24,032/- from petitioner due to his misconduct as Branch Manager; petitioner contends DRT lacks jurisdiction as the claim does not constitute a 'debt' under the RDB Act.

Petitioner was compulsorily retired from Bank service on 02-04-2011; appeal and review dismissed; writ petition No.28289/2013 challenging compulsory retirement and forfeiture of gratuity pending before same court. Tribunal admitted O.A. and granted attachment of petitioner’s property despite objections on jurisdiction.

Whether the act of the petitioner, in discharge of his official duty, on disbursement of loans and those loans becoming non-performing assets at a later point in time, would amount to a debt under the Recovery of Debts and Bankruptcy Act, 1993 or under the SARFAESI Act against the petitioner, for initiation of proceedings before the Tribunal?

Petitioner contended that DRT lacks jurisdiction as the loss caused by employee during discharge of duties is not a ‘debt’; petitioner is not a borrower; relied on Eureka Forbes, Oriental Bank of Commerce, HDFC Bank, Amit H. Jhaveri. Respondent argued that petitioner’s acts caused huge loss to Bank; loans became sticky without adequate security; justified invoking DRT under Section 19; relied on Division Bench in Srinivasa Desai v. Canara Bank.

The petitioner is before this Court calling in question proceedings before the Debts Recovery Tribunal-I at Bengaluru in O.A.No.487 of 2014 initiated by the respondent/Indian Bank invoking the provisions of The Recovery of Debts and Bankruptcy Act, 1993 and SARFAESI Act. The Bank sanctions loan of Rs.4,72,348/- to the petitioner by creating an equitable mortgage over the aforesaid site on 05-10-1999. The petitioner finding shortage of funds while constructing the house applies for additional loan of Rs.2,50,000/- which is also sanctioned on 31-10-2001. On 22-12-2011 the petitioner cleared the entire loan that he had availed of along with interest to its last pie. The Bank, contrary to the agreement entered into while creating the mortgage, did not return the documents of the property to the petitioner. The Bank invokes the jurisdiction of the Tribunal by filing original application under Section 19 of the Act in O.A.No.487 of 2014 seeking issuance of a recovery certificate against the petitioner and a direction to pay a sum of Rs.2,36,24,032/- together with interest which was the alleged financial loss suffered by the respondent/Bank on account of alleged acts of the petitioner in disbursement of loans in his official capacity.

Petitioner joined Indian Bank as Clerk in 1980; promoted to Junior Management Grade Scale-I in 1985, Middle Management Grade Scale-II in 1996, and Middle Management Grade Scale-III in 2005. Posted as Branch Manager, Shivajinagar Branch. Disciplinary proceedings initiated against petitioner for alleged irregularities in loan disbursement; penalty of compulsory retirement imposed on 02-04-2011. Appeal and review dismissed. Petitioner filed Writ Petition No. 28289 of 2013 challenging the disciplinary orders, pending consideration. During service, petitioner availed housing loan of Rs.4,72,348/- on 05-10-1999 and additional loan of Rs.2,50,000/- on 31-10-2001, secured by equitable mortgage. Entire loan repaid by 22-12-2011, but Bank did not return title deeds. Bank filed O.A.No.487/2014 before DRT-I, Bengaluru under Section 19 of Recovery of Debts and Bankruptcy Act, 1993, seeking recovery of Rs.2,36,24,032/- alleged financial loss due to petitioner’s misconduct. DRT admitted application and attached petitioner’s property. Petitioner filed objections challenging jurisdiction; DRT proceeded. Hence, petitioner filed this writ petition seeking quashing of DRT proceedings and return of documents.

• Recovery of Debts and Bankruptcy Act, 1993: 2(g), 19
• Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002:
• Indian Bank Officer Employees (Discipline and Appeal) Regulations, 1976: 4(h)
• Constitution of India: Article 226, 227