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of <h1>High Court rules on recovery proceedings under Recovery of Debts Act, emphasizes fair trial and restrains bank</h1> The High Court addressed the validity of recovery proceedings initiated by a bank under the Recovery of Debts due to Banks and Financial Institutions Act, ... Aggrieved by an recovery order of Debt Recovery Appellate Tribunal (DRAT) - Fraudulent Transaction - Petitioner was not the party to the proceedings under the DRT - Held that:- In the present case the suit filed by the Petitioner, initially decided the threshold issue of maintainability. The court held in favour of the petitioner and proceeded to entertain the suit. Further proceedings before the DRT and DRAT, however continued. In these circumstances, the recovery proceedings could not be interdicted. It is also a matter of record that the suit has reached an advanced stage of the proceedings; issues have been framed and the parties have to lead evidence. If at this stage, the Bank is allowed to proceed against the property and ultimately the petitioner’s pleas succeed, he would have been prejudiced irrevocably. As against this, the bank is in possession of the suit property and is also the decree holder to the tune of ₹ 35,62,112/-. If the mortgage transaction is held to be genuine, it would be free to proceed against it. The proceedings under Article 226 of the Constitution of India are discretionary and meant to reach out wherever the justice of the case demands a particular direction. The courts have discretion to issue such orders ex debito justitiae. Next, there must be ever present to the mind the fact that our laws of procedure are grounded on a principle of natural justice which requires that men should not be condemned unheard, that decisions should not be reached behind their backs, that proceedings that affect their lives and property should not continue in their absence and that they should not be precluded from participating in them. Of course, there must be exceptions and where they are clearly defined they must be given effect to. But taken by and large, and subject to that proviso, our laws of procedure should be construed, wherever that is reasonably possible, in the light of that principle. Therefore, on a balance of the equities, we are of the opinion that the recovery proceedings should not go on till the suit is decided finally one way or the other. The respondent/Bank is hereby restrained from proceeding further the recovery of the amounts stated, due claimed against the petitioner till final judgment is delivered. - Decided in favour of appellant. Issues:1. Validity of recovery proceedings initiated by a bank under the Recovery of Debts due to Banks and Financial Institutions Act, 1993.2. Allegations of fraudulent transaction and equitable mortgage.3. Jurisdiction of Debt Recovery Tribunal (DRT) and Debt Recovery Appellate Tribunal (DRAT) in staying recovery proceedings.4. Applicability of Civil Court jurisdiction in cases of alleged fraud in mortgage transactions.5. Balance of equities between the bank's right to recover dues and the petitioner's claim of being a victim of fraud.Issue 1: Validity of Recovery Proceedings:The respondent bank initiated recovery proceedings under the Recovery of Debts due to Banks and Financial Institutions Act, 1993, claiming an equitable mortgage created by the petitioner. The Debt Recovery Tribunal (DRT) decreed the bank's claim, making the borrower the judgment debtor. The petitioner, not a party to these proceedings, later filed a suit for recovery of possession, alleging the sale deed forming the mortgage was fraudulent and a nullity.Issue 2: Allegations of Fraudulent Transaction:The petitioner contended that the sale deed relied upon by the bank for the mortgage was fraudulent, leading to the initiation of recovery proceedings. The petitioner approached the Civil Court, which entertained the suit, framing issues for trial. The petitioner consistently claimed to be a victim of fraud, seeking to stay the recovery proceedings, which were declined by the DRT and DRAT.Issue 3: Jurisdiction of DRT and DRAT:The DRT and DRAT declined to stay the recovery proceedings, emphasizing the bank's interest in realizing dues if the mortgage was genuine. The court highlighted the petitioner's approach at all stages and the bank's contention that new facts were raised in the court proceedings, not brought before the DRT or DRAT.Issue 4: Civil Court Jurisdiction in Fraudulent Transactions:The court referred to precedents like Mardia Chemical Ltd. vs. Union of India and Nahar Industrial Enterprises Ltd v. Hongkong Shanghai Banking Corpn, allowing civil suits in cases of alleged fraud despite SARFAESI restrictions. The court acknowledged the petitioner's suit's advanced stage and the need to balance the bank's right to recover dues with the petitioner's claim of fraud.Issue 5: Balance of Equities:Considering the principles of natural justice and the need for a fair trial, the court directed the Additional District Judge to expedite the civil suit's final decision within six months. The bank was restrained from further recovery proceedings against the petitioner until the suit's final judgment, allowing it to proceed based on the DRT's decision against the original borrower.In summary, the High Court addressed the validity of recovery proceedings, allegations of fraudulent transactions, jurisdiction of DRT and DRAT, applicability of Civil Court jurisdiction in fraud cases, and the balance of equities between the bank's recovery rights and the petitioner's fraud claims. The court emphasized fair trial principles, directing expedited resolution of the civil suit and restraining further recovery actions until a final judgment is delivered.
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