DRAT upheld the limited scope of attachment orders, restricted creditor entitlements to the specified amount, and affirmed the principles of finality in recovery actions under the Recovery of Debts and Bankruptcy Act.
Debts Recovery Appellate Tribunal (DRAT), Allahabad Bench of Justice R.D. Khare (Chairperson) reviewed an appeal filed by the Creditor-bank and held that once the maximum specified amount under an attachment order is satisfied, no further recovery claims can be pursued against the guarantor’s accounts, especially when the creditor has already received its pro rata share from the winding-up proceedings, reaffirming the principles of finality in recovery actions under the Recovery of Debts and Bankruptcy Act, 1993.
The Debts Recovery Appellate Tribunal (DRAT) dealt with an appeal filed under Section 20 of the Recovery of Debts and Bankruptcy Act, 1993, challenging the dismissal of an earlier appeal under Section 30 of the Act. The case arose from a protracted series of financial transactions, legal proceedings, and recovery efforts linked to the credit facilities granted to the borrower company, which was subsequently declared sick and subjected to winding-up proceedings by the Allahabad High Court. The appellant-Bank, having acquired the debt from the original creditor, pursued recovery through an original application and subsequent attachment proceedings against the guarantor, the State of Uttar Pradesh.
The appellant-Bank's claim revolved around the contention that its security interest in the debtor’s assets was not relinquished during the winding-up proceedings, and that the guarantor’s liability remained intact despite the distribution of proceeds from the auction of secured assets. The Recovery Officer’s attachment of the guarantor's bank accounts led to the release of Rs. 83.48 crores to the appellant, which was challenged as insufficient to satisfy the recovery certificate issued earlier. The appellant also contested the interpretation that the attachment order covered only a specified sum and claimed entitlement to further recovery.
The DRAT affirmed the orders of the Recovery Officer and the Tribunal below, noting that the attachment order explicitly mentioned a maximum amount, which had been satisfied and released. The tribunal found no basis for the appellant's claim that the guarantor's accounts remained under attachment beyond the stated amount. Furthermore, it observed that the order of the High Court in the winding-up proceedings did not support the appellant's assertion of additional recoveries. The appellant's challenge to the recovery proceedings and the claim of misinterpretation of prior orders were deemed unsustainable.
The DRAT concluded that the appellant bank had received its pro rata share from the winding-up proceedings and the attached amount from the guarantor's accounts. With no evidence of continuing attachment or misapplication of relevant legal provisions, the tribunal upheld the impugned orders, dismissing the appeal. This judgment reaffirms the principles governing attachment proceedings, creditor entitlements, and the finality of recovery actions under the Recovery of Debts and Bankruptcy Act.
Mr. O.P. Mishra along with Mr. Sandeep Arora, Advocates represented the Appellant.
Mr. D. N. Awasthi, Advocate appeared for Respondent No. 1.
Mr. Ramesh Kumar, Advocate holding the brief of Mr. Maneesh Mehrotra, Advocate for Respondent No. 7.
None of the present for Respondent No. 3 to Respondent No. 6 were treated as Ex-parte.
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