'Rather Remarkable': Madras High Court Sets Aside DRT Order Virtually Facilitating Flight Of Loan Defaulter

"The Tribunal appears to have gone out of its way to facilitate the first respondent's departure from this country," the Madras High Court recently commented on a 'rather remarkable' order passed by the Debt Recovery Tribunal paving way for foreign travel of a loan defaulter.

The Bench of Chief Justice Sanjib Banerjee and Justice P.D Audikesavalu while dealing with writ petition filed by the State Bank of India against the order of DRT-II at Chennai, further remarked,

"short of booking a ticket and reserving the hotel, the directions in the impugned order have done everything else to facilitate the flight of a person who is at the helm of several business entities which have defaulted in making repayments to their bankers."

The Court thus set aside the impugned order in its entirety.

The Petitioner-bank had moved the High Court, pointing that Tribunal had on the one hand refused to take up an application filed by the Respondent seeking to modify its order dated January 25, 2020, restricting his foreign travel. However, on the other hand, in its order dated November 1, which was impugned herein, the Tribunal had issued detailed directions facilitating Respondent's foreign trip.

"What is evident is that since the first respondent herein was in control of certain companies or business entities which owe a huge amount to the petitioning bank herein, the relevant DRT, in effect, restrained the first respondent from leaving the country without substantial repayments being made...the Tribunal declined to take up the application pertaining to the modification, as would be evident from the order impugned herein, but the effect of the impugned directions amounts to the complete vacating of the order dated January 25, 2020," the Court recorded in its order.

Significantly, the Respondent had filed two interim applications at DRT; one for modification of the 25 January order, and another for cancelling the lookout notice, purportedly issued against him (though not served upon him).

The Court noted that the DRT refused to interfere with the 25 January order. However, it agreed to look into the matter of lookout notice that might impede the respondent's foreign visit.

"If two applications were carried by the same applicant, the two should have been clubbed together to be heard or one could have been heard ahead of the other; but, when it was specifically recorded that the other application would not be taken up, it was not open to the Tribunal to virtually allow the other application by a side-wind while dealing with an application pertaining to a lookout notice that remained undated in the affidavit and no copy whereof was produced by the applicant," the Court ruled.

It further remarked that a lookout notice, seemingly imaginary in this case, could not be interdicted by the DRT.

It observed,

"It is possible that there is a lookout notice. If such lookout notice exists, the first respondent will be well within his rights to challenge the same in accordance with law before the appropriate forum; but, such appropriate forum could not have been the DRT II, Chennai, in the event the lookout notice has been issued by the Union Ministry of Home or authorised by such Ministry to be issued." 

 Finally, the Court granted liberty to the respondent to seek directions from the Tribunal on its application seeking modification of the 25 January order.

In case such application is taken up, the Tribunal has been directed to give the petitioning bank an opportunity for being heard. Upon a request made, the respondent is also entitled to receive a copy of any lookout notice issued against him by the Home Ministry, the court noted in its order. 

SBI was represented by Sr Counsel Somayaji and Advocates Vipin Warrier and Vidyalakshmi.