DRAT Empowered to Reduce Interest Granted by DRT under Section 19(20): Rajasthan High Court
- REEDLAW
- 2 days ago
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REEDLAW Legal News Network reports: In a notable judgment, the Rajasthan High Court affirmed that the Debts Recovery Appellate Tribunal (DRAT) possesses the discretionary authority to determine or reduce the rate of interest awarded by the Debts Recovery Tribunal under Section 19(20) of the Recovery of Debts and Bankruptcy Act, 1993. The Court observed that such discretion, when exercised with reason and within the statutory framework, is not amenable to interference under writ jurisdiction.
The Rajasthan High Court Single-Judge Bench of Justice Anoop Kumar Dhand, while adjudicating a Writ Petition, held that under Section 19(20) of the Recovery of Debts and Bankruptcy Act, 1993, the Debts Recovery Appellate Tribunal possesses discretionary power to determine or reduce the rate of interest as deemed just and equitable, and such a reasoned exercise of discretion is not open to interference in writ jurisdiction.
The Petitioner had approached the High Court by filing a writ petition challenging the order dated 30 March 2000 passed by the Debts Recovery Appellate Tribunal, Mumbai, which had modified the earlier order dated 16 October 1998 of the Debts Recovery Tribunal, Jaipur. The DRT had originally directed the Respondents to pay a sum of ₹44,64,029.14 along with interest at 15% per annum with quarterly compounding. The DRAT, while upholding the recovery direction, reduced the rate of interest to 12% per annum simple from the date of filing of the suit till payment.
The Petitioner contended that the DRAT lacked jurisdiction to alter the contractual rate of interest as agreed under the loan agreement. It was argued that the DRAT’s interference with the DRT’s order was contrary to the terms and conditions of the contract and violative of Section 19(20) of the Recovery of Debts and Bankruptcy Act, 1993. The Petitioner urged that the DRAT’s modification of the interest rate amounted to exceeding its jurisdiction and, therefore, warranted interference by the High Court.
The Respondents opposed the petition, submitting that Section 19(20) of the Act conferred discretion upon the Tribunal and the Appellate Tribunal to determine the rate of interest as deemed just and equitable. Reliance was placed upon the Constitutional Bench decision of the Supreme Court in State Bank of India v. Sarathi Textiles & Others and State Bank of India v. Material Marketing Company & Others, which clarified that the Tribunal possessed discretion to award interest as it considered appropriate in the ends of justice. It was further contended that the DRAT had exercised its discretion judiciously after considering six mitigating circumstances presented by the Respondents, including delayed and lesser disbursement of the loan amount, partial repayment, adverse business conditions, substantial deposits made, and the disallowance of penal interest.
The High Court, upon examining the material on record and the orders of both tribunals, found that the DRAT had exercised its discretion under Section 19(20) in accordance with law and supported by the Supreme Court’s authoritative pronouncement. The Court held that there was no error or illegality in the DRAT’s order warranting interference under writ jurisdiction.
Accordingly, the High Court dismissed the writ petition, holding that it lacked merit. The Court directed the Petitioner to release the mortgaged documents to the Respondents forthwith, without any further delay.
Mr. Ajay Shukla, with Mr. Raghav Sharma, Advocates, represented the Petitioner.
Mr. Arvind Gupta, with Mr. Sohan Sharma, Advocates, appeared for the Respondent.
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