DRT Has No Jurisdiction To Consider And Decide A Case Whether A Guarantor Is Stand Discharged As Envisaged Under Sections 133 And 135 Of The Indian Contract Act

A three judge bench of Hon’ble Supreme Court in Mardia Chemicals Ltd. & Ors vs U.O.I. & Ors (AIR 2004 SC 2371; Date of Judgment: 08/04/2004) has observed as follows.

“53. We also find it appropriate to mention at this stage that in reply to submission made by Shri Dholakia on behalf of the guarantors that even though a guarantor may stand discharged as envisaged under Sections 133 and 135 of the Indian Contract Act e.g., where any variance in terms of the contract has been made without his consent, then too guarantor may be proceeded against and he will have no right to raise an objection, before measures have been taken against him under Section 13(4) of the Act nor he could approach the civil court.  It is submitted by the respondent in such cases civil court may have jurisdiction to entertain the case as character as a guarantor itself is denied. “(emphasis supplied)

Thus. in the year 2004 replica watches, Hon’ble Supreme Court mentioned that to consider and decide a case whether a guarantor is stand discharged as envisaged under Sections 133 and 135 of the Indian Contract Act, a civil court will have jurisdiction to entertain the case as character as a guarantor itself is denied in the Securitisation Act. By necessary implication, it can be safely understood that DRT has no jurisdiction to consider and decide a case whether a guarantor is stand discharged as envisaged under Sections 133 and 135 of the Indian Contract Act.

Further, hon’ble Supreme Court in Nahar Industrial Enterprises Ltd vs Hongkong & Shanghai Banking Corp. {2009 (8) SCC 646; 2009 (2) DRTC 273 (SC); Decided on 29 July, 2009} observed that:

“The Tribunal was constituted with a specific purpose as is evident from its statement of objects. The preamble of the DRT Act also is a pointer to that too. We have also noticed the scheme of the Act. It has a limited jurisdiction. Under the DRT Act, as it originally stood, did not even have any power to entertain a claim of set off or counter-claim. No independent proceedings can be initiated before it by a debtor. A debtor under the common law of contract as also in terms of the loan agreement may have an independent right. No forum has been created for endorsement of that right. It was held by hon’ble Supreme Court that the Tribunal, therefore, would not be a Civil Court." (emphasis supplied)

Further, Section 22 of the DRT Act provides that the Tribunal shall not be bound by the procedure laid down by the Code of Civil Procedure, 1908, therefore, DRT is not obliged to undertake a full-fledged trial in terms of the provisions of the Code of Civil Procedure and/or the Evidence Act. Therefore, the Guarantor would be deprived of his right in relation to the procedural mechanism as contained in the Code as also the Evidence Act. Also, before the Tribunal no declaratory relief of discharge from liability can be sought for by the Guarantor.

Thus, Hon’ble Supreme Court held that if the Tribunal was to be treated to be a civil court, the debtor or even a third party must have an independent right to approach it without having to wait for the Bank or Financial Institution to approach it first. The Tribunal was constituted with a specific purpose as is evident from its statement of objects. It has a limited jurisdiction. No independent proceedings can be initiated before it by a debtor. A debtor under the common law of contract as also in terms of the loan agreement may have an independent right. No forum has been created for endorsement of that right. It was held by hon’ble Supreme Court that the Tribunal, therefore, would not be a Civil Court. Also, before the Tribunal no declaratory relief of discharge from liability can be sought for by the Guarantor.

DRT Has No Jurisdiction

























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