Hon'ble High Court, Andhra Pradesh vide order dated February 26, 2009 in W.P. No. 3715 of 2009 has clarified the position with regard to the applicability of Caveat Application in DRT proceedings. In this case, the petitioner filed Writ Petition before the Hon'ble High Court, Andhra Pradesh contending that they had filed caveat petition under Section 148-A of the Code of Civil Procedure, 1908 (CPC) before Debt Recovery Tribunal, Hyderabad but it was not entertained by the Tribunal. It was further contended that several borrower and guarantors, jointly and severally, or through third parties approached the Tribunal by filing Appeal (securitization application) under Sec. 17 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 and obtained ex-parte stay order and as a result, they could not proceed further for recovery of the amount till the stay order is actually vacated.
While dealing with the question whether Debt Recovery Tribunal (DRT) should entertain the caveat application(s) filed by the Banks and financial Institutions having regard to the Sec. 22(1) of DRT Act, 1993 which, inter-alia, provides that the Tribunal shall not be bound by the procedure laid down by CPC but shall be guided by the principal of natural justice, it was held by Hon'ble High Court, Andhra Pradesh that "We, therefore, do not think as if that the Tribunal has no power to accept the caveat petition and in fact, the same would be in furtherance of ensuring principles of natural justice and no prejudice would be cause to the other side if the caveat petition is accepted. The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 as well as Recovery of Debts Due to Banks & Financial Institutions Act, 1993 are enacted for the purpose of ensuring speedy recovery of the amounts by the banks & financial institutions and if such banks and Institutions come forward in advance by accepting notice of any such proceedings being filed by the borrowers or guarantors or third parties, there is no reason why the respondents - tribunal should not entertain the caveat petition filed on their behalf..."
Although the judgment is of Andhra Pradesh High Court and is binding only on the Courts/ DRTs in the State of Andhra Pradesh, however, it will have persuasive value for the Courts / DRTs in other states and can be useful, particularly in the cases where Banks and Financial Institutions are contemplating or have taken over the assets of the borrower / third parties under the provisions of SARFAESI Act, to pre-empt any attempt by the borrower / third parties for obtaining any ex-parte stay order from DRT against the Banks and Financial Institutions.
