Bombay High Court: DRT Has Exclusive Jurisdiction Over Recovery Suits After NBFC-Bank Amalgamation, Purposive Interpretation of S.31 Applied
- REEDLAW
- 4 minutes ago
- 3 min read
REEDLAW Legal News Network reports: In a pivotal ruling, the Bombay High Court affirmed that, following the amalgamation of a non-banking financial company with a bank, all pending recovery proceedings fall exclusively within the jurisdiction of the Debts Recovery Tribunal (DRT) under Sections 17 and 18 of the RDB Act. The Court further adopted a purposive interpretation of Section 31, concluding that the term “debt” under Section 2(g) extends to liabilities pursued by the amalgamated bank, even if the debt was not originally advanced by it, thereby mandating the transfer of such proceedings from civil or commercial courts to the DRT.
The Bombay High Court Single-Judge Bench of Justice Rohit W. Joshi, while adjudicating a writ petition, held that upon the amalgamation of a non-banking financial company with a bank, all pending recovery suits fall within the exclusive jurisdiction of the DRT. By applying a purposive interpretation to Section 31, the Court determined that the statutory definition of “debt” under Section 2(g) encompasses obligations claimed by the amalgamated bank, regardless of their origin, thus necessitating the transfer of such matters from civil or commercial courts to the DRT.
The Bombay High Court, while examining a petition challenging the order of the District Judge transferring a recovery suit from the Commercial Court to the Debts Recovery Tribunal (DRT), held that the DRT had exclusive jurisdiction to entertain such matters after the amalgamation of a non-banking financial company (NBFC) with a bank. The petition arose from a commercial suit originally instituted by an NBFC to recover dues from the defendants. During the pendency of the suit, the NBFC was amalgamated with a bank pursuant to statutory approval. The District Judge, relying on the provisions of the Recovery of Debts and Bankruptcy Act, 1993 (RDB Act), ordered the transfer of the suit to the DRT, prompting the challenge before the High Court.
The Court observed that the amalgamation resulted in the bank stepping into the shoes of the NBFC as its successor-in-interest, thereby inheriting all its assets, liabilities, and pending legal proceedings. Referring to the definition of “debt” under Section 2(g) of the RDB Act, the Bench held that the dues claimed in the suit qualified as a “debt” recoverable under the Act, even though they were originally advanced by the NBFC and not by the bank itself. This interpretation, the Court noted, was necessary to ensure that the legislative objective of vesting exclusive jurisdiction in the DRT for recovery matters involving banks and financial institutions was not defeated.
Applying a purposive interpretation to Section 31 of the RDB Act, the Court clarified that the provision mandates the transfer of all pending suits and proceedings to the DRT where the claim falls within its jurisdiction. It further held that Sections 17 and 18 of the Act explicitly oust the jurisdiction of civil and commercial courts in respect of matters within the domain of the DRT. Since the bank, post-amalgamation, was entitled to pursue the claim, the pending suit necessarily had to be transferred to the DRT for adjudication in accordance with law.
Accordingly, the High Court upheld the order of the District Judge, confirming that recovery suits post NBFC–bank amalgamation must be adjudicated by the DRT. The decision reinforced the principle that statutory provisions must be interpreted purposively to further the intent of Parliament, particularly when dealing with jurisdictional issues affecting specialised tribunals such as the DRT.
Mr. S.P. Shah, Advocate, represented the Appellant.
Mr. S.V. Adwant a/w Mr. H.S. Adwant and Mr. Aarya Deshpande, Advocates, appeared for the Respondent No. 1.
This is premium content available to our subscribers.
To access the full content related to this article — including the complete judgment, detailed legal analysis, ratio decidendi, headnotes, cited case laws, and updates on relevant statutes and notifications — we invite you to subscribe to REEDLAW’s premium research platform.
Click here to Subscribe and unlock exclusive access to structured legal analysis, judicial summaries, and a comprehensive legal research database.
Already a subscriber? Click the link below to access the full document and linked case laws.
REEDLAW Legal Research & Analysis is India’s most trusted legal publishing and research platform, empowering legal professionals with structured judicial insights and authoritative legal intelligence since 1985.
Our comprehensive legal intelligence platform covers Corporate Insolvency, Bankruptcy, SARFAESI, Company Law, Contract, MSMEs, Arbitration, Debt Recovery, and Commercial Laws. Through curated journals — IBC Reporter and Bank CLR — and an advanced digital database, REEDLAW simplifies complex legal research for professionals, institutions, and academia across India.