Can a debtor make a proposal of settlement before DRT ? Does DRT have the power to entertain such a proposal like the High Court does in WP? Does DRT have the power to entertain such proposal and direct bank to enter into a settlement with the debtor?

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The following are the Case Laws answering these questions: 

1. Standard Chartered Bank v. Dharminder Bhohi (Supreme Court of India) | 13-09-2013

In this case Supreme Court observed as follows:-

“27. The aforesaid provision makes it quite clear that the tribunal has been given power under the statute to pass such other orders and give such directions to give effect to its orders or to prevent abuse of its process or to secure the ends of justice. Thus, the tribunal is required to function within the statutory parameters. The tribunal does not have any inherent powers and it is limpid that Section 19(25) confers limited powers. In this context, we may refer to a three- Judge Bench decision in Upper Doab Sugar Mills Ltd. v. Shahdara (Delhi) Saharanpur Light Rly. Co. Ltd. wherein it has been held that when the tribunal has not been conferred with the jurisdiction to direct for refund, it cannot do so. The said principle has been followed in Union of India v. Orient Paper and Industries Limited.”

2. M/s. Satnam Agri Products Ltd. & Others v. Union of India & Others (High Court Of Delhi) | 10-12-2014

In this case, a direction was sought by petitioner before DRT in Section 17 to issue any direction to the creditor bank to consider the rehabilitation or settlement proposal, if any submitted by the borrower, On which High court of Delhi observed as follows:-

“20. Though we entertain doubt as to the correctness of the view of the two Division Benches of this Court, being of the opinion that expanding the scope of a proceeding under Section 17 of the Securitization Act to the same extent as a proceeding under the DRT Act would to a large extent nullify the very purpose of enactment of the Securitization Act, we do not feel the need to refer the said aspect for consideration by the Full Bench inasmuch as we are of the view that even if DRT in a Section 17 proceeding under the Securitization Act were to have the jurisdiction to adjudicate the debt, still it would not have the jurisdiction to issue a direction as sought by the petitioners, to the creditor bank to consider a proposal for rehabilitation / settlement.

21. It may also be added that DRT being a statutory Tribunal can perform only such functions as the Statute provides. From a reading of the Securitization Act, we are unable to find any provision empowering DRT, in a proceeding under Section 17, to issue any such direction to the creditor Bank/Financial Institution to consider the proposal for rehabilitation.”

3. Messrs Eminent Agencies & Another v. Bank of Baroda & Others (High Court of Judicature At Bombay) | 17-10-2015

In this case, Petitioners on 24th May, 2010 filed Miscellaneous Application No.101 of 2010 under Section 19(25) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short, “the RDDB Act, 1993”) before the DRT inter alia praying that the Respondent Bank be ordered and directed to accept the balance OTS amount of Rs 64.50 lakh together with interest at the rate of 10% p. a. from 16th February, 2009 or such other rate as the DRT deems fit. The Bombay High court after observing that O.A. was already decided observed as follows:-

“17. Before parting, we must mention here that we seriously doubt whether the DRT had jurisdiction to entertain the prayer sought for by the Petitioners in Miscellaneous Application No.101 of 2010. In the said Application, the Petitioners, in effect sought enforcement of the settlement proposal dated 19th December, 2008. In view of the fact that the DRT had already decreed the Original Application filed by the Respondent Bank, it had become functus officio and therefore we seriously doubt that at the instance of the debtor such a Misc Application seeking enforcement of the settlement proposal dated 19th December, 2008 could have been entertained by the DRT under section 19(25) of the RDDB Act, 1993. However, since this issue was neither argued nor raised by the parties, we leave this point open to be considered in an appropriate case.”

4. State Bank of India v. Mcleod and Co. Ltd. and Ors (Debts Recovery Tribunal At Kolkata)| 03-08-2005

In this case, applicant bank refused to accept the settlement proposal as it was not covered by RBI guidelines, Debt recovery tribunal observed that it would not be equitable and just to accept the proposal of compromise under Section 19(25) of the RDDBFI Act and held as follows:

“17. It is obvious from the above quoted submission of the certificate holder Bank that the proposed compromise is not covered by the R.B.I, guidelines. Furthermore, the learned Recovery Officer has clarified in his reference vide order No. 34 dated 28th February, 2005 that the proposed compromise settlement has been approved at an amount less than the amount of certificate. Keeping in view the above circumstances where the certificate holder Bank has expressed its inability to accept the compromise proposal being contrary to the guidelines and keeping in view the ratio decidendi of the Civil Appeal No. 4929/2004 (arising out of SLP(C) No. 17147/03) as quoted above, it would not be equitable and just to accept the proposal of compromise under Section 19(25) of the RDDBFI Act. In case the compromise proposal is granted beyond what has been declined to be granted by the Bank it would not be an equitable settlement of claims. The requirement settlement of claim is the settlement between the parties by any lawful agreement of compromise. In case the settlement is against the policy of the

R.B.I. which is not acceptable to the certificate holder Bank it would be imposition of the settlement and not an equitable and agreeable settlement between the parties which cannot be accepted in the interest of justice.”

5. Neeraj Syal and Ors v. State Bank of India (High Court of Delhi)| 4-11-2019

By Highlighting the erroneous act of DRT on not accepting the settlement reached by the parties, even if both continued to stand by the settlement which they considered binding on themselves, High court of Delhi observed as follows:-

“18. This Court has heard the submissions of learned counsel for the parties. The failure to take on record the settlement arrived at between the parties by the DRT or the DRAT was the subject matter of Satish Chander Gupta (supra) where this Court inter alia observed as under:

“The DRAT is no one to decide as to at what value the bank should settle its dues with the borrower especially when the bank has Managers who have acted in pursuance to authorization in their favour and after due consideration of the proposal of the petitioners.”

19. Later in Harpreet Kaur v. M/s. Fullerton India Credit Company Limited (supra), again in the context of the failure of the DRT to take on record a settlement, it was again held:

“Even otherwise, as observed by a Division Bench of this Court in the said order dated 19.4.2010, extracted hereinabove, the parties to a proceedings are at liberty; at any stage thereof, to arrive at an amicable settlement in relation to the subject matter of the dispute, and it does not lie in the mouth of the judicial authority to obstruct or impede the amicable settlement on a ground which is not sustainable in law. The learned DRAT, as observed in the said order dated 19.4.2010, is not some kind of Ombudsman/Auditor of the Bank; to scrutinise the settlement arrived at between the bank and the borrower, as it is not within the scope and ambit of its jurisdiction or function. It is reiterated that the learned DRAT cannot arrogate to itself the power to determine the value at which the Bank should settle its dues with the borrower, especially when it does not any involve public money.”

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