Rajasthan High Court Upholds DRAT's Discretion in Reducing Interest Rate in Bank of India Case
Court Affirms Tribunal's Authority to Modify Interest Rates Citing Mitigating Circumstances and Precedent
In a significant judgment, the Rajasthan High Court has upheld the discretion exercised by the Debt Recovery Appellate Tribunal (DRAT) in reducing the interest rate on a loan dispute involving the Bank of India and Paras Talkies, Hiran Magri. The decision reaffirms the tribunal's authority under Section 19(20) of the Recovery of Debts and Bankruptcy Act, 1993, to adjust interest rates based on mitigating circumstances.
The case, adjudicated by Justice Anoop Kumar Dhand, revolved around a writ petition filed by the Bank of India challenging the DRAT's decision to lower the interest rate from 15% per annum with quarterly compounding to 12% per annum simple interest. The original order by the Debt Recovery Tribunal (DRT) had mandated the higher interest rate, which the DRAT subsequently modified, prompting the bank to seek judicial review.
Counsel for the petitioner argued that the DRAT had overstepped its jurisdiction by altering the agreed-upon terms of the loan contract, which stipulated a 15% interest rate. They contended that this was contrary to the provisions of the Recovery of Debts and Bankruptcy Act and warranted intervention by the High Court.
In defense, the respondents' counsel cited the tribunal's discretionary power under Section 19(20) of the Act, highlighting six mitigating circumstances that justified the reduction. These included delayed and lesser disbursement of funds, part payment of the loan despite completion of the building, increased competition due to alternative entertainment sources, substantial deposits made by the respondents, and the disallowance of penal interest by the presiding officer.
The court, after examining the arguments and the legal framework, concluded that the DRAT had acted within its statutory rights and supported its decision with a precedent from the Supreme Court in the case of State Bank of India v. M/s Sarathi Textiles, 2009 (16) SCC 328. The Supreme Court had previously affirmed that tribunals possess the authority to adjust interest rates in the interest of justice.
Justice Dhand emphasized that the DRAT's decision was well-founded on both statutory and judicial grounds, and thus, the High Court found no basis to interfere with the order. Consequently, the writ petition was dismissed, and the bank was directed to release the mortgaged documents to the respondents without delay.
The judgment underscores the legal principle that tribunals hold discretionary powers to ensure fair and just outcomes, reinforcing the importance of judicial discretion in financial disputes.
Bottom Line:
Discretion under Section 19(20) of the Recovery of Debts and Bankruptcy Act, 1993, allows the Debt Recovery Appellate Tribunal to modify the rate of interest considering mitigating circumstances.
Statutory provision(s): Recovery of Debts and Bankruptcy Act, 1993, Section 19(20)
Bank of India v. Paras Talkies, Hiran Magri, (Rajasthan)(Jaipur Bench) : Law Finder Doc id # 2786333
