1998 (1) TMI 393 - HC - Companies Law

High Court overturns DRT orders for lack of jurisdiction and procedural errors.

The High Court of Calcutta set aside the orders passed by the Debt Recovery Tribunal (DRT) due to lack of jurisdiction to issue ad interim orders, ... Debt Recovery Tribunal - Powers of Issues Involved:1. Jurisdiction and authority of the Debt Recovery Tribunal (DRT) to pass ad interim orders.2. Compliance with procedural rules under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.3. Application of principles of natural justice.4. Validity of ex parte orders and requirement of notice.5. Specificity and reasoning in judicial orders.Detailed Analysis:1. Jurisdiction and Authority of the Debt Recovery Tribunal (DRT) to Pass Ad Interim Orders:The central issue revolves around whether the DRT has the jurisdiction to pass ad interim orders under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. The petitioners argued that the DRT lacks the authority to issue such orders, as the statute does not explicitly confer this power. The Court examined Section 19 of the Act, particularly subsections (4) and (6). Section 19(6) allows the Tribunal to make interim orders by way of injunction or stay but does not explicitly mention ad interim orders. The Court concluded that the DRT, being a statutory body, cannot assume powers beyond what is explicitly granted by the statute. Therefore, the DRT does not have the jurisdiction to pass ad interim orders, and any such orders are beyond its authority.2. Compliance with Procedural Rules:The Court scrutinized the procedural compliance under the Debt Recovery Tribunal (Procedure) Rules, 1993. Rule 4 prescribes the format for applications under Section 19(1) of the Act. The Court noted that the form does not include any provision for ad interim prayers, which indicates that such orders are not contemplated within the procedural framework. The omission of any column for ad interim orders in the prescribed form under Rule 4 was seen as significant, suggesting that the legislature did not intend to empower the DRT to issue such orders. The Court emphasized the mandatory nature of procedural compliance, stating that any deviation from the prescribed form would render the application procedurally irregular.3. Application of Principles of Natural Justice:The Court highlighted the importance of adhering to the principles of natural justice, which require that no party should be condemned unheard. Section 22 of the Act mandates that the DRT must observe the principles of natural justice. The Court found that the issuance of ex parte ad interim orders without notice to the affected parties contravenes these principles. The Court referred to several Supreme Court judgments, emphasizing that natural justice requires notice and an opportunity to be heard before any adverse order is passed. The Court rejected the argument that post-decisional hearing could suffice, noting that once a decision is taken, there is a tendency to uphold it, making post-decisional hearings ineffective.4. Validity of Ex Parte Orders and Requirement of Notice:The Court examined the validity of ex parte orders issued by the DRT. It referred to the Supreme Court's criteria for granting ex parte injunctions, which include considerations such as irreparable harm, balance of convenience, and utmost good faith. The Court found that the DRT's orders did not meet these criteria, as they were passed without proper notice and without recording reasons. The Court emphasized that ex parte orders should only be granted in exceptional circumstances and must be backed by specific reasons, which were absent in the impugned orders.5. Specificity and Reasoning in Judicial Orders:The Court criticized the DRT's orders for lacking specificity and reasoning. It noted that the orders were mechanical and stereotyped, with no reference to the particular features or pleadings of each case. The orders were found to be devoid of the necessary reasoning that should underpin judicial decisions. The Court stressed that any order, especially those with civil consequences, must be reasoned and should reflect an application of mind to the specific facts and circumstances of the case. The absence of such reasoning rendered the orders unsustainable.Conclusion:The High Court of Calcutta set aside the impugned orders passed by the DRT on the grounds of lack of jurisdiction to issue ad interim orders, non-compliance with procedural rules, violation of principles of natural justice, and absence of specific reasoning in the orders. The Court emphasized the need for the DRT to operate within the bounds of its statutory authority and to ensure that its orders are reasoned and comply with procedural and natural justice requirements.