Case Note & Summary
The petitioner, Dr. Sudhakar Borkar, was a guarantor to a loan taken by respondent No.5 (M/s R & S Enterprises) from respondent No.1 (State Bank of India). The borrower defaulted, and the bank filed Special Civil Suit No.639 of 1991 for recovery of Rs.10,51,759/- against both the borrower and the guarantor. The suit was decreed ex parte against both defendants. The bank then filed execution proceedings before the Debts Recovery Tribunal (DRT) under Section 31A of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDB Act), seeking a recovery certificate. The DRT issued a recovery certificate without issuing any notice to the petitioner or the borrower. The petitioner challenged this before the Debt Recovery Appellate Tribunal (DRAT), which dismissed his appeal, holding that notice under Section 31A is not mandatory. Aggrieved, the petitioner filed the present writ petition. The legal issue was whether the DRT must serve notice on judgment debtors before proceeding under Section 31A. The court analyzed Section 31A, which allows a decree holder to apply to the Tribunal for recovery of a decree passed by a civil court. The court noted that the Tribunal must satisfy itself that the decree is executable and determine the amount due, which requires hearing the judgment debtors. The court held that notice is mandatory to comply with principles of natural justice, especially where the decree was ex parte. The court set aside the DRAT's order and the recovery certificate, and remanded the matter to the DRT for fresh consideration after issuing notice to the petitioner and the borrower.
Headnote
A) Banking Law - Recovery of Debts - Section 31A of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 - Notice to Judgment Debtors - The court considered whether the Debts Recovery Tribunal must serve notice on judgment debtors before proceeding under Section 31A for recovery of a decree passed by a civil court. The court held that notice is mandatory to afford an opportunity of hearing, as the Tribunal is required to satisfy itself that the decree is executable and to determine the amount due. Failure to issue notice violates principles of natural justice. (Paras 1, 6-10) B) Banking Law - Guarantor's Liability - Section 31A of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 - Ex Parte Decree - The petitioner, a guarantor, was not served with notice of the execution proceedings under Section 31A, despite the decree being ex parte against him. The court held that the guarantor must be heard before the Tribunal issues a recovery certificate, as his liability and the amount due are to be determined afresh. (Paras 3, 8-10) C) Banking Law - Execution of Decree - Section 31A of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 - Transfer of Decree to Tribunal - The court clarified that Section 31A does not provide for automatic execution of a civil court decree by the Tribunal; the decree holder must file an application, and the Tribunal must issue notice to the judgment debtors, consider objections, and then issue a recovery certificate. (Paras 6-9)
Issue of Consideration
Whether it is necessary for the Debts Recovery Tribunal to serve a notice of proceedings under Section 31A of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 on the judgment debtors/defendants before issuing a recovery certificate.
Final Decision
The court allowed the writ petition, set aside the order of the DRAT and the recovery certificate issued by the DRT, and remanded the matter to the DRT for fresh consideration after issuing notice to the petitioner and the borrower.
Law Points
- Notice to judgment debtors is mandatory under Section 31A of the Recovery of Debts Due to Banks and Financial Institutions Act
- 1993
- even if the decree was passed ex parte
- failure to serve notice vitiates the execution proceedings
- the Tribunal must ensure compliance with principles of natural justice before issuing recovery certificates.
