DRT | Effect & Operation Of Any Interim Order Passed Is Wiped Out At The Passing Of Final Order: Allahabad High Court

The Allahabad High Court held that the effect and operation of any interim order passed is wiped out at the passing of the final order.

The bench comprising Justice Piyush Agrawal held that “once an appeal was dismissed as withdrawn, the interim order, if any, passed thereon automatically merges with the final order.”

The Court relied on State of U.P. v. Prem Chopra wherein the Supreme Court held that where stay is granted vide an interim order and the petition is ultimately dismissed, the interim order is merged with the final order. It was held that beneficiary of the interim order must pay interest upon the vacation of the interim order on the amount withheld or not paid due to the interim order.

Factual Background

M/s Durga Rice & Dall Mills (respondent company) had taken loan from Banaras State Bank Limited (which subsequently merged with the Bank of Baroad). When respondent company defaulted in repaying the loan amount, proceedings were instituted in Debt Recovery Tribunal, Jabalpur under Section 19 of the Recovery of Debts Due to Banks & Financial Institution Act, 1993 for recovering of Rs. 38,36,871/- together with cost and pendente lite interest.

DRT ruled in favor of the Bank and held that Bank was also entitled to recover interest @ 18.5% per annum with quarterly rest from 22.03.1999 till the date of realization of the decretal amount. The respondent company was restrained from dealing with the movable and immovable property mortgaged with the Bank.

Subsequently, the borrower filed an application under Section 22(2)(g) for restoration of the original case. Section 22(2)(g) empowers the DRT/ DRAT to set aside any order passed ex-parte or an order for dismissal in default. The application was dismissed, and the borrower approached the DRAT wherein proceedings were stayed vide an interim order.

Meanwhile, prior to passing of the interim order, the auction sale had been conducted. Since the interim order was informed to the Recovery Officer, the auction was confirmed which was challenged under Section 30 (Appeal against the order of Recovery Officer) of the Act on grounds that the ownership and title was not ascertained before disposing of the properties.

Petitioner, auction purchaser, contended that appeal against the order of the Recovery officer was not maintainable as even though the entire auction and attachment process was within the knowledge of the borrower, no objections were raised by him. However, the DRT set aside the entire auction proceedings. Consequently, the auction purchaser approached the High Court.

Counsel for petitioner submits that the appeal preferred before the DRT was not maintainable as order of attachment, proclamation of sale, auction proceedings and sale of immovable properties were not challenged prior to challenging the order of the Recovery Officer confirming the sale. It was argued that the mandatory pre-deposit requirement was not fulfilled by the respondent-borrower while filing the appeal.

Further, it was argued that the Recovery of Debts Due to Banks & Financial Institution Act, 1993 does not empower the DRT to grant any relief any relief that has not been claimed. It was submitted that petitioner being a bonafide purchaser was being made to suffer on account of the mistakes of the borrower.

It was argued that once the appeal in which interim order was passed was dismissed as withdrawn, the interim order stood merged with the final order. Once the appeal was dismissed, it was argued that the auction ought not to be set aside. Lastly, it was submitted that the Bank cannot unilaterally enter into compromise with the judgment debtor after the action has been finalized.

High Court Verdict

The Court observed that no prayer for setting aside the auction proceedings was made at any stage before the DRT. The Court held that since the mandatory pre-deposit requirement was not fulfilled, the appeal ought to not to have been entertained.

The Court held that since no relief against the auction proceedings was claimed, the same could not have been granted by the DRT. The Court relied on Bharat Amratlal Kothari Vs. Dosukhan Samadkhan Sindhi wherein the Supreme Court held that petitioner must pray for all the reliefs that he seeks from the Court. It was held that a Court cannot grant a relief which has not been prayed for in the petition.

“Once the relief for setting aside the auction proceedings was not made, the Tribunal had neither any jurisdiction, nor authorized under the Act to go beyond the same.”

Applying the doctrine of merger, the Court held that once an appeal is dismissed as withdrawn, any interim order passed in merged with the final order of dismissal.

“Once the effect and operation of the interim order wipes out on final order being passed thereon, all consequential proceeding goes. This vital aspect of the matter was brought to the notice of the Tribunal, but in stead of taking note of the said fact, the appeal of the petitioner was dismissed on that ground, which cannot be permissible in law.”

Accordingly, the writ petition was allowed and the order of the DRT setting aside the auction was set aside.

Case Title: Ram Avtar v. M/s Durga Rice & Dall Mills & 5 Others. [WRIT - C No. - 68334 of 2005]

Counsel for Petitioner: Shreya Gupta, Ravi Anand Agarwal

Counsel for Respondent: Pradeep Kumar Sharma, Ashok Kumar Pal

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