DRAT Has No Inherent Power To Take Suo Motu Cognizance In Public Interest, Reiterates Delhi HC [Read Order]

The Delhi High Court has expressed “surprise” over the Debts Recovery Appellate Tribunal (DRAT) exercising suo motu powers in public interest despite clear pronouncements of the Supreme Court that it has no such inherent power.

A bench of Chief Justice Rajendra Menon and Justice V Kameswar Rao reiterated that the DRAT does not have any inherent power to take suo motu action in public interest.

It said so while quashing a July 24 show cause notice issued by DRAT to Padam Singhee and others when they approached it in a challenge to the Debts Recovery Tribunal’s (DRT) order asking them not to leave the country without its permission.

Genesis of the case

Ms/ Edelweiss Asset Reconstruction Company Ltd had filed an original application against the respondent No.1 Ms/ SVOGL Oil Gas and Energy Ltd and the petitioners before the DRT and the same is pending adjudication.

On August 18, 2017, the DRT issued notice on this application and also directed the petitioners to take its prior permission before leaving the country. On November 3, 2017, the petitioners filed an appeal, being against this order.

Petitioner’s counsel senior advocate Rajeeve Mehra told the court that DRAT disposed of the appeal on November 15, 2017, when the petitioners said they will approach DRT with an application for recalling of the direction dated August 18, 2017.

The DRAT had then observed that if the petitioners move any application for recalling of direction dated August 18, 2017, the application shall be dealt with in accordance with law uninfluenced by the filing of the appeal. Accordingly, the petitioners approached the DRT for the vacation of order dated August 18, 2017, to the extent that it directed them to take its prior permission before leaving the country.

The DRT, on April 28, 2018, held that this application for vacation of the order would be decided at the stage of final arguments.

This order was also challenged before DRAT.

Mehra stated that the DRAT, rather than deciding the appeal, directed the petitioners to show cause as to why appropriate orders under Sections 19(13)(A) and 19(18)(25) of the Recovery of Debts and Bankruptcy Act, 1993 (Act of 1993), including the appointment of receiver for the assets, be not passed and further directed the petitioners to furnish details of their bank accounts and restrained them from operating any of their bank accounts.

Despite the petitioners submitting a reply to the show cause notice and their list of bank accounts with a prayer for vacation of the interim order restraining them from operating their bank accounts, the DRAT did not vacate the stay.

Thereafter, despite the petitioners withdrawing the appeal against the DRT order, the DRAT continued its proceedings with respect to the show cause notice issued by it in July.

Mehra submitted before the high court that the DRAT took the entire appeal to a different turn whereby the issue, which falls for consideration in the appeal, i.e., whether the DRT was justified in restraining the petitioners from travelling abroad, has been relegated to the background.

What the high court said…

 “It is surprising despite clear pronouncements of the Supreme Court and this Court, the DRAT still proceeded to exercise its so called “suo moto power” in public interest,” said the high court.

“The DRAT exercises its appellate jurisdiction, because of the appeal filed under Section 20. On the withdrawal of the appeal by the petitioners, the DRAT had become functus officio,” it held.

Referring to the judgment of the Supreme Court in the case of Ajay Mohan and Ors. v. H.N. Rai and Ors., wherein it was held that once an appeal is permitted to be withdrawn, the court becomes functus officio, the high court said, “The said proposition of law squarely applies to the appeal/ proceedings before the DRAT. It could not have initiated and/or continued the proceedings between the parties when the proceedings cease to exist.”

The bench also was surprised that contrary to its own view in case titled Bhangoo & Company v. Mittal & Garg Enterprises & Anr., wherein DRAT had held that the tribunal cannot exercise suo moto powers interfering with the action resulting in prejudice being caused to the appellant before it in that case, DRAT has exercised power which it did not possess.

“Even if the DRAT was to disagree with its earlier view, propriety demands the DRAT to refer the issue to a larger bench (if permissible) for fresh consideration,” it said.

Reading from the apex court’s decision in the case of Standard Chartered Bank v. Dharminder Bhohi and Ors., the high court culled out these important points:

(1) The Tribunal / DRAT does not have inherent powers and even Section 19 (25) confers limited powers.

(2) The power of the Tribunal / DRAT under Section 19(25) is limited to pass such other orders and give such directions to give effect to the orders or to prevent abuse of its process or to secure the ends of justice.

(3) Courts established by the State are entrusted with the State’s inherent judicial power for the administration of justice in general. The Tribunal / DRAT having been established under a statute to adjudicate upon disputes arising under the said statute or disputes of a specialised nature by regulating the procedure, applying the provisions of CPC only where it is required.

(4) The Tribunal / DRAT are required to function within the statutory parameters.

(5) The Tribunal /DRAT has been conferred jurisdiction by special statute to exercise a particular power in a particular manner as provided under the Act.

(6) The Tribunal / DRAT is required to decide the lis that come within their domain.

The high court has now asked DRT to decide on the petitioner ’s plea for vacation of order putting restriction on foreign travel in accordance with law.

Petitioners were represented by Senior Advocate Rajeeve Mehra assisted by Ashish Virmani, Niti Sachar and Himanshu Dhuper Advocates