DRT Is Repeating The History And Has Unfairly Usurped Jurisdiction To Enforce Personal Guarantee Against The Guarantor

1.         As discussed in another article elsewhere, it is evident that the State Financial Corporations in the past unfairly usurped and widened the scope and width of its authority to cover the surety under Section 31 of SFC Act up to and until 1975 till passing of a contrary judgment by the Allahabad High Court in Munnalal Gupta v. Uttar Pradesh Financial Corporation and Another, A.I.R. 1975 Allahabad 416, and also under Section 29 of SFC Act up to and until 2008 till passing of a contrary judgment by the Supreme Court in Karnataka State Financial Corporation Vs N. Narasimahaiah & Ors {2008 AIR 1797, 2008 (5) SCC 176; Decided on 13/03/2008}.

2.         Now, unfortunately, the Debts Recovery Tribunals are repeating the history and have unfairly usurped and widened the scope and width of its jurisdiction to enforce personal guarantee against the guarantor and are issuing the Certificate of Recovery also against the Guarantor, without exception, in a routine manner, under section 19 of the DRT Act, which is absolutely without jurisdiction. As per Black’s Law Dictionary, Ninth Edition, at page 608, “enforcement” means the act or process of compelling compliance with a law, mandate, command, decree or agreement.  It is pertinent to note here that such issue of Certificate of Recovery against the Guarantor is itself a declaratory relief namely “compelling compliance with the personal guarantee agreement”. However, vide 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}, admittedly no such declaratory relief can be granted by the Tribunal, because as detailed in another article elsewhere, DRT is not a court having appropriate jurisdiction.   

3.         In Dhulabhai v. State of M.P. [(1968) 3 SCR 662] a five judge Constitution Bench of hon’ble Supreme Court has opined:-“The result of this inquiry into the diverse views expressed in this Court may be stated as follows:

 

“(1)   Where  the statute gives a finality  to the orders of the special tribunals the  Civil Court’s  jurisdiction  must  be  held  to be excluded if  there is adequate remedy to do what  the Civil Courts would normally do in  a  suit….”  

 

However, as detailed above, in the scheme of the DRT Act there is no adequate remedy to do what the Civil Courts would normally do in a suit, namely that the Guarantor may be discharged under Section 133 or 134 or 135 or 139 of the Indian Contract Act, 1872. However, vide Bombay High Court in State Bank of India vs Sagar & Others {Civil Revision Application No.33 of 2010, Nagpur Bench, Decided on 11 February, 2011} the real test would be to find out whether the DRT under Section 17 of the Act is empowered to hold an enquiry regarding liability of a guarantor for payment of dues and further to grant the relief of his discharge from liability as provided in Sections 133, 134, 135 and 139 of the Contract Act, if a case is made out. However, vide Supreme Court in Nahar Industrial Enterprises case (supra), admittedly no such declaratory relief of discharge of the Guarantor from liability can be granted by the DRT, because as detailed above, DRT is not a court having appropriate jurisdiction. By necessary implication, the logical conclusion is that the Tribunal shall have no jurisdiction to proceed for enforcement of the guarantee against the Guarantor.

DRT Has No Jurisdiction

























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