RDB Act Section 20 | Fraud Allegations Must Be Raised Before DRAT, Not High Court: Kerala HC

The Kerala High Court has dismissed a writ petition challenging orders passed by the Debt Recovery Tribunal, Ernakulam, holding that allegations of fraud and collusion cannot bypass the statutory appeal mechanism under the Recovery of Debts and Bankruptcy Act, 1993. The Court reiterated that when an efficacious alternative remedy exists, writ jurisdiction under Article 226 should not be invoked to adjudicate disputed questions of fact, particularly those requiring elaborate evidence. The judgment underscores the exclusivity of the DRT-DRAT hierarchy in debt recovery matters and the limitations of constitutional remedies in such disputes.

Background & Facts

The Dispute

The petitioner, Shoba Vasanth, along with her sisters, created an equitable mortgage on 18.11.1983 by depositing original title deeds of three parcels of agricultural land (totaling 11 acres and 31 guntas in Survey Nos. 46, 53, 54, and 55, Premavathipet Village, Hyderabad) with the 1st respondent (Indian Overseas Bank) to secure credit facilities availed by the KJP Group of Companies. The mortgage was created to secure loans taken by the borrowing entities of the group, engaged in cashew export business.

Key Facts

• 18.11.1983: Equitable mortgage created by deposit of title deeds.
• 20.03.1990: Compromise decree passed in seven suits instituted by the Bank due to default in repayment.
• 1998-2001: Bank filed seven original applications before the Debt Recovery Tribunal (DRT), Ernakulam, seeking recovery certificates. Recovery certificates (Exts.P2 to P8) were issued, and the mortgaged properties were brought to sale.
• 28.06.1985: Unregistered agreement for sale (Ext.P9) executed with Sri. Kantilal Sugandhi, later terminated.
• 2004: Kantilal Sugandhi and Dileep Kumar filed claim petitions before the Recovery Officer, DRT, asserting rights over the mortgaged properties based on sale deeds (Exts.P12 to P14) allegedly executed by the petitioner’s Power of Attorney holder. The Bank opposed these claims.
• 23.03.2004: Recovery Officer dismissed the claim petitions (Ext.P19).
• 2004: Respondents 7 to 10 filed W.P.(C) No. 10270/2004 challenging the proclamation of sale, which was dismissed on 15.06.2004. Subsequent appeals (W.A. No. 1662/2004) and challenges before the DRT were also dismissed.
• 2004-2005: Civil proceedings (O.S. No. 84/2004) instituted before the Additional District Court, Ranga Reddy District, decreeing title and possession in favor of respondents 7 to 14. The petitioner was not served notice in the suit or the appeal (A.S. No. 25/2006) before the High Court of Telangana.
• 28.03.2024: Respondents 7 to 10 submitted a settlement proposal to the Bank.
• 29.04.2024: Bank issued Ext.P33 sanction letter accepting ₹26,32,70,423 as full and final settlement.
• 30.04.2024: Bank issued Ext.P34 No Due Certificate.
• 03.05.2024: Bank issued Ext.P35 Closure-cum-No Dues Certificate.
• 16.07.2024: High Court of Telangana permitted withdrawal of A.S. No. 25/2006 (Ext.P38).
• 24.10.2025: Petitioner filed Ext.P39 before the DRT seeking details of the outstanding amount and restraint on release of title deeds.
• 01.01.2026: DRT allowed M.A. Nos. 216/2025 to 222/2025, recalling recovery certificates (Exts.P45 to P51) and closing execution proceedings.
• 06.01.2026: Recovery Officer returned recovery certificates to the Registry and lifted attachments.

Procedural History

• 1998-2001: Bank filed O.As. before DRT; recovery certificates issued (Exts.P2 to P8).
• 2004: Claim petitions filed by Kantilal Sugandhi and Dileep Kumar dismissed (Ext.P19).
• 2004: W.P.(C) No. 10270/2004 dismissed; W.A. No. 1662/2004 also dismissed.
• 2004-2005: O.S. No. 84/2004 decreed; A.S. No. 25/2006 filed before High Court of Telangana.
• 2024: Settlement reached; Bank issued sanction letter (Ext.P33), No Due Certificate (Ext.P34), and Closure Certificate (Ext.P35).
• 16.07.2024: High Court permitted withdrawal of A.S. No. 25/2006.
• 2025: Petitioner filed Ext.P39 before DRT.
• 01.01.2026: DRT allowed M.As., recalling recovery certificates (Exts.P45 to P51).
• 06.01.2026: Execution proceedings closed.
• 2026: Present writ petition filed.

Relief Sought

The petitioner sought the following reliefs:

1. Quashing of Exts.P45 to P51 orders passed by the DRT recalling recovery certificates.
2. Quashing of consequential proceedings dated 06.01.2026 closing execution proceedings.
3. Quashing of Ext.P33 sanction letter, Ext.P34 No Due Certificate, and Ext.P35 Closure Certificate.
4. Declaration that the judgment and decree in O.S. No. 84/2004 and the judgment in A.S. No. 25/2006 are void and non est.
5. Restoration of D.R.C. Nos. 115/2001, 134/2000, and 137/2000 to 141/2000 to the Recovery Officer’s file.
6. Restraint on the Bank from releasing or dealing with the original title deeds.
7. Direction to the Central Bureau of Investigation (CBI) to investigate alleged fraud and collusion.

The Legal Issue

The central question was whether a writ petition under Article 226 of the Constitution of India is maintainable to challenge orders passed by the Debt Recovery Tribunal (DRT) when:

1. The petitioner alleges fraud and collusion in the settlement and recall of recovery certificates.
2. The petitioner seeks declaration of a civil court decree and a High Court judgment as void and non est.
3. The Recovery of Debts and Bankruptcy Act, 1993 provides an alternative remedy by way of appeal to the Debt Recovery Appellate Tribunal (DRAT).

Arguments Presented

For the Petitioner

1. The entire sequence of events - from the institution of the civil suit to the withdrawal of the appeal, private settlement, and recall of recovery certificates - was a product of fraud and collusion between the respondents to defeat the petitioner’s lawful rights over the mortgaged property.
2. The civil court, whose jurisdiction is expressly ousted under the RDB Act, proceeded to decree the suit against the petitioner, rendering the decree void ab initio as per State of West Bengal v. Jai Hind Private Limited.
3. The petitioner was not served notice in the civil suit or the appeal, and the decree/judgment was passed without affording an opportunity of hearing, making them void and non est.
4. The DRT, after becoming functus officio, had no jurisdiction to recall the recovery certificates (Exts.P45 to P51).
5. The Appellate Tribunal (DRAT) cannot decide disputed questions of fact, including allegations of fraud and collusion, which can only be adjudicated by a civil court under Section 9 of the Code of Civil Procedure, 1908.
6. Relied on Bank of Rajasthan Limited v. VCK Shares and Stock Broking Services Limited to argue that the petitioner lacks an efficacious remedy before the DRAT.

For the Respondents (7 to 14)

1. The petitioner has an efficacious alternative remedy by way of appeal before the DRAT to challenge Exts.P45 to P51 orders, and thus, the writ petition should not be entertained.
2. In O.S. No. 84/2004, the civil court declared title and possession in favor of respondents 7 to 14, and the petitioner, despite being a party, did not contest the proceedings.
3. The petitioner did not challenge the decree in O.S. No. 84/2004 or the judgment in A.S. No. 25/2006, which has attained finality.
4. The High Court, under Article 226, cannot declare a judgment passed by a Division Bench of another High Court or a civil court decree as void, non est, or nullity.

The Court's Analysis

The Court undertook a detailed analysis of the rival submissions and the statutory framework under the Recovery of Debts and Bankruptcy Act, 1993 (RDB Act):

1. Alternative Remedy and Jurisdictional Bar:

   • The Court noted that the petitioner has an efficacious alternative remedy under Section 20 of the RDB Act, which provides for an appeal to the DRAT against orders passed by the DRT.
   • The Court relied on Punjab National Bank v. O.C. Krishnan and others, wherein the Supreme Court held that the RDB Act provides a complete hierarchy of remedies, including the remedy of appeal under Section 20, and that the fast-track mechanism under the Act cannot be derailed by resorting to proceedings under Article 226/227 or by instituting a civil suit.
   • The Court further relied on South Indian Bank Limited v. Naveen Mathew Philip, which reaffirmed that High Courts must not entertain petitions under Article 226 challenging orders passed by the DRT when an alternative remedy exists.

   "The RDB Act provides a complete hierarchy of remedies, including the remedy of appeal under Section 20 and that the fast track mechanism contemplated under the Statute cannot be permitted to be derailed by resorting either to the proceedings under Article 226/227 of the Constitution of India or by instituting a civil suit, the jurisdiction of which stands expressly barred."

2. Fraud and Collusion Allegations:

   • The Court observed that the petitioner’s allegations - including fraud, suppression of material facts, unauthorized appearance of counsel, and collusion - are disputed questions of fact that require elaborate evidence.
   • Such questions cannot be adjudicated in proceedings under Article 226, which are summary in nature and not equipped to handle complex factual disputes.
   • The Court held that the appropriate forum for agitating these grievances is the DRAT or a civil court, not a writ petition.

3. Declaration of Judgments as Void:

   • The Court held that it cannot grant relief seeking declaration of the judgment in O.S. No. 84/2004 and the judgment in A.S. No. 25/2006 as void, non est, or nullity under Article 226.
   • The judgment in O.S. No. 84/2004 was passed on merits, and the petitioner, despite being a party, remained ex-parte and did not challenge the decree.
   • The judgment in A.S. No. 25/2006 was passed after hearing the petitioner, and it has attained finality as it was not challenged.

   "This Court, under Article 226 of the Constitution of India, cannot grant such a relief to the petitioner. It is to be taken note that O.S. No. 84/2004 has been decreed against the petitioner, who had remained ex-parte in the proceedings and that a declaration of title in favour of respondents 7 to 14 has been granted by that Court, by passing a judgment on merits."

The Verdict

The writ petition was dismissed without prejudice to the petitioner’s right to approach the appropriate forum (DRAT or civil court) for relief. The Court held:

1. The petitioner has an efficacious alternative remedy under Section 20 of the RDB Act to challenge Exts.P45 to P51 orders before the DRAT.
2. The High Court cannot adjudicate disputed questions of fact, including allegations of fraud and collusion, in proceedings under Article 226.
3. The Court cannot declare the judgments in O.S. No. 84/2004 and A.S. No. 25/2006 as void or nullity under Article 226.
4. The petitioner’s grievances must be agitated before the DRAT or a civil court, as the RDB Act provides a complete hierarchy of remedies.

What This Means For Similar Cases

Exclusivity of DRT-DRAT Hierarchy

• The judgment reaffirms that the RDB Act establishes an exclusive and self-contained hierarchy for debt recovery disputes, comprising the DRT and DRAT.
• High Courts must refrain from entertaining writ petitions challenging DRT orders when an alternative remedy exists under Section 20 of the RDB Act.
• Practitioners should exhaust statutory remedies before approaching constitutional courts, as bypassing the DRAT hierarchy may lead to dismissal on maintainability grounds.

Fraud Allegations Require Evidence

• Allegations of fraud, collusion, or suppression of material facts cannot be adjudicated in summary proceedings under Article 226.
• Such disputes involve complex questions of fact that require elaborate evidence, which can only be addressed by the DRAT or a civil court.
• Parties must frame their pleadings carefully and be prepared to substantiate fraud allegations with concrete evidence before the appropriate forum.

Limitations of Writ Jurisdiction

• Article 226 is not a substitute for statutory appeals, particularly when the statute provides a complete remedy.
• Courts will not entertain writ petitions seeking declaration of judgments/decrees as void when the aggrieved party has failed to challenge the same at the appropriate stage.
• Practitioners must ensure proper service of notice and participation in proceedings to avoid being non-suited on grounds of ex-parte decrees or finality of judgments.