BANKING LAW ASSIGNMENT

SOME JUDICIAL DECISIONS ON DEBT RECOVERY TRIBUNAL

Delhi High Court in Cofex Exports Ltd. vs. Canara Bank AIR 1997 Delhi 355

In this case court opined that opined that Debt Recovery Tribunal is not a court but is a Tribunal
having been created by a statute vested with a special jurisdiction to try only applications by
banks or financial institutions to recover any debt. Although having regard to the provisions
contained in clauses (a) to (b) of sub-section (2) of Section 22 of the Act it had all the trappings
of a court but it was held not to be a court as such. It was held by the Supreme Court in the
judgment of Ranjan Chemicals Ltd that a court has the power in an appropriate case to transfer a
suit for being tried by the DRT.

Industrial Credit and Investment Corporation of India Ltd v. Srinivas Agencies

In this case court decided on the issue of whether leave should be granted by the Company Court
to continue proceedings in other civil courts and whether all proceedings should be transferred to
the Company Court. Section 18 of the Act has barred the jurisdiction of other courts, except the
writ power of the higher courts, in relation to the matters specified in section 17 the same being
recovery of debts due to such institutions. The court was of the view that the approach to be
adopted by the Company court does not deserve to be put in a straightjacket formula. The
discretion to be exercised has to depend on the facts and circumstances of each case. While
exercising this power, the Company Court should also bear in mind the rationale behind the
enactment of the Act.

Industrial Credit and Investment Corporation of India Ltd v. Vanjinad Leathers AIR 1997
Ker 273. The court opined that Section 18 of the Act creates a bar on jurisdiction of other
authorities and courts except the Supreme Court and High Courts under Articles 226 and 227 of
the Constitution. The court also stated that the Act and the Companies Act is special legislation.

However since the Act was enacted after the Companies Act, 1956, the Parliament would have
certainly in mind the provisions in the earlier special law namely the Companies Act. Therefore
the latter special law will prevail over the former.

Allahabad Bank v. Canara Bank AIR 2000 SC 1535

A lot of issues came for discussion in this case. 4 The issues included jurisdiction of the tribunal
and the Recovery Officer under the Act, need for the leave of the Company Court, power of the
Company court to stay proceedings under the Act, whether banks filing for recovery can
appropriate the entire sales proceeds realized except to the limited extent restricted under section
529A of the Companies Act, position of secured creditors who participate in the winding up
proceeds and those who opt to stand outside the winding up proceedings. The jurisdiction of the
tribunal with respect to adjudication was held to be exclusive. The court observed that basically
the tribunal is to adjudicate the liability of the defendant and then it has to issue a certificate
under Section 19(22) of the Act, which was recently amended by Ordinance 1 of 2000. Under
Section 18 of the Act, the jurisdiction of other courts (except that of the Supreme Court and High
Courts under Articles 226 or 227 is completely ousted and the power to adjudicate is exclusively
vested in the DRT.