Bombay High Court passes suo motu directions after all five DRATs rendered non-functional due to vacancies

The Bombay High Court invoked its suo motu powers to pass directions to aid litigants who were left without appellate remedy, due to vacancies in Debt Recovery Appellate Tribunal (DRAT) in Mumbai rendering it non-functional..A Bench of Chief Justice Dipankar Datta and MS Karnik felt “constrained to invoke suo-motu powers” because despite being ready to approach the DRAT (Mumbai) for consideration of their grievances, “litigants were either left without appellate remedy or forced to take the risk of approaching this Court under Articles 226 and 227 of the Constitution of India for a judicial review of the orders passed by the DRTs”.Interestingly, the Court in its order also observed that all five DRATs in the country have been rendered non-functional due to vacancies. .The Court noted that an amendment to the special statutes of Recovery of Debts and Bankruptcy Act and Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, provided for a speedy disposal of appeals within a period of 180 days.Instead of exploring the appellate remedy provided under the special statutes governing the debt recovery tribunals, the litigants were being compelled to approach the court of judicial review which does not have powers as wide as appellate remedy, the Bench said..While the Bench welcomed the intention of the legislature to have expeditious disposal of applications, they expressed that practically closing the remedy of appeal by not appointing chairpersons to DRATs ought to be frowned upon by the courts..“It is beyond comprehension as to why only “various adjournments and prolonged hearings” are cited as reasons for non-disposal of recovery applications within the statutory time limit. Vacancies in the offices of the DRTs and the DRATs contribute equally, if not more, to delayed disposal of recovery applications as well as appeals from orders of such disposal,” the order stated..The Bench was hearing two writ petitions.One was filed by Bank of Bahrain & Kuwait seeking an order to the Central government to appoint a chairperson for the DRAT (M). In the alternative, the bank prayed for directions that any other DRAT be directed to hear its appeal.The other was filed by MSTC Ltd., a Government of India enterprise seeking stay on the recovery proceedings or in the alternative to call for record and proceedings instituted before the DRAT.The reason triggering both the writs, the Bench reasoned, was common - “the office of the Chairperson of the DRAT(M) has been lying vacant since September 15, 2021”..When the pleas were heard on November 18, 2021, the Bench had raised their concern about an important office lying vacant thereby increasing the burden of the High Court. It had, therefore, called for report from the Ministry of Finance.The instructions as received from the Department of Financial Services, Ministry of Finance, were placed before the Bench which remarked that the “situation is distressing, to say the least”.The report stated that there are five DRATs all over India. As on November 29, 2021, not a single DRAT was functional. The only functional DRAT at Allahabad also became non-functional from November 28, 2021 after the incumbent chairperson demitted office“The net result of such vacancies is that the rights of parties having access to justice by approaching DRATs is abrogated,” the Bench recorded..The Bench opined that allowing recovery processes to continue without providing an effective remedy of appeal, particularly when the SARFAESI Act empowers secured creditors to take possession of secured assets without orders of Court, would result in desecration of the legal system..Despite fervent appeal from the Centre to avoid any order of restraint, the Bench passed the following directions:If any party seeks to challenge an order of DRT within Maharashtra, the litigant shall be at liberty to present an appeal before the DRAT(M) together with the requisite fees irrespective of the issue of limitation.However after the appeal is preferred the order under challenge would remain stayed from the time the appellant makes a pre-deposit of at least 25% of the debt due as claimed by the secured creditors or determined by the DRT, whichever is less.Once such pre-deposit is made, any party in whose favour the DRT order has been passed shall remain injuncted from taking any action adverse to the interest of the appellant.Such pre- deposit shall be without prejudice to the rights and contentions of the parties in the appeal before the DRAT(M). This arrangement shall continue till January 4, 2022 for the present.This direction will not apply to parties who have not preferred an appeal..Advocate Madhur Rai instructed by PRS Legal appeared for the Bank of Bahrain. Senior Advocate Birendra Saraf with Advocates Rohit Gupta, Amit Jajoo and Sushmita Gandhi, Anamika and Darpan Bhatia instructed by Indus Law appeared for MSTC Ltd. Additional Solicitor General Anil Singh with Advocates DP Singh and Pranav Thackur appeared for Union of India..[Read order]