DRTs Cannot Pass Recovery Orders Mechanically After Striking Off Defence: Punjab & Haryana High Court Quashes DRAT Circular Directing Automatic Decrees
Case Name: Shri Shri Ram Gupta and Others v. Debt Recovery Appellate Tribunal and Others; M/s Triveni Knits Pvt. Ltd. and Others v. Debt Recovery Tribunal and Others
Date of Judgment: 06 March 2026
Citation: CWP-26365-2019 and CWP-25611-2022
Bench: Chief Justice Sheel Nagu and Justice Sanjiv Berry
Held: The Punjab & Haryana High Court held that Debt Recovery Tribunals cannot mechanically allow bank recovery applications merely because the defendant’s defence has been struck off or the defendant has been proceeded ex parte. Even in such cases, the bank must still prove its claim on merits. The Court quashed the DRAT Delhi order dated 24.07.2019 which had directed DRTs to straightaway allow recovery applications once the defence of borrowers was struck off.
Summary: The High Court decided two connected writ petitions challenging the legality of the order dated 24.07.2019 passed by the Debt Recovery Appellate Tribunal (DRAT), Delhi in M/s Shakti Bhog Snacks Limited v. Corporation Bank & Others. The impugned order had been circulated to all Debt Recovery Tribunals directing that once the defence of a borrower was struck off, the tribunal should not adjourn the matter and should straightaway allow the bank’s Original Application for recovery.
In the first petition, the bank had filed an Original Application before DRT-III Chandigarh for recovery of its dues. The defendants were directed to file their written statement by 07.06.2019. However, on that date the Presiding Officer was unavailable and the matter was adjourned to 02.08.2019. The defendants filed their written statement on 01.08.2019, i.e., before the next date fixed. Despite this, the tribunal refused to take the written statement on record, struck off the defence and proceeded to decide the recovery application relying upon the DRAT circular.
In the second petition, the defendants were proceeded ex parte by the DRT within minutes of the court commencing proceedings even though the case was listed later in the cause list. Relying on the same DRAT directions, the tribunal fixed the case for judgment without requiring the bank to lead evidence or prove its claim.
The petitioners argued that the DRAT directions were contrary to the statutory scheme of the Recovery of Debts and Bankruptcy Act, 1993 and the settled principles of civil procedure. They contended that even where the defence of a defendant is struck off, the tribunal must still examine the bank’s claim and ensure that it is legally proved before passing a recovery order.
The High Court examined Section 19 of the Recovery of Debts and Bankruptcy Act, 1993 and observed that after expiry of the time for filing written statement, the tribunal must still fix a date for admission or denial of documents and proceed with adjudication in accordance with law. The tribunal cannot bypass these statutory steps merely on the basis of administrative directions issued by the DRAT.
The Court relied on several Supreme Court judgments including Salem Advocate Bar Association v. Union of India, Kailash v. Nanhku, and C.N. Ramappa Gowda v. C.C. Chandregowda. These decisions clarify that procedural timelines for filing written statements are directory and not mandatory, and that even in the absence of a written statement the court must still examine the plaintiff’s case and ensure that the claim is proved.
The Court held that the approach suggested by the DRAT allowing recovery applications straightaway once defence is struck off violates the principles of natural justice and encourages mechanical disposal of cases. Such an approach could result in recovery orders being passed without proper scrutiny of the bank’s claim, leading to unnecessary litigation and appeals.
The Court further observed that the impugned directions had resulted in arbitrary outcomes in the present cases, including refusal to accept a written statement filed before the next date of hearing and proceeding ex parte within minutes of the court commencing proceedings.
Decision: The High Court allowed both writ petitions and quashed the DRAT Delhi order dated 24.07.2019. The Court held that Debt Recovery Tribunals must independently examine the merits of recovery claims and cannot automatically allow bank applications merely because the borrower’s defence has been struck off or the defendant has been proceeded ex parte.