Civil Court Jurisdiction To Interfere With DRT Proceedings Is Absolutely Barred Even For Third Parties: Madras High Court

"The statutory bar is, therefore, absolute in its operation and is not confined only to proceedings initiated by Banks or Financial Institutions." Madras High Court, in a significant ruling, held that the jurisdiction of civil courts to entertain suits challenging proceedings under the Recovery of Debts and Bankruptcy Act, 1993, is absolutely barred, even when the suit is filed by a third party or a subsequent mortgagee.

A bench of Dr. Justice A.D. Maria Clete observed that once the relief sought relates to the validity of recovery proceedings and the measures taken pursuant thereto, the statutory bar is clearly attracted, irrespective of the plaintiff's identity.

BACKGROUND OF THE CASE

The appellant, claiming to be a subsequent registered mortgagee, instituted a civil suit seeking to declare the recovery proceedings, the resulting auction sale, and the Recovery Certificate issued by the Debt Recovery Tribunal (DRT) in favour of Punjab National Bank as null and void. The bank and the auction purchaser filed applications seeking rejection of the plaint under Order VII Rule 11(a) and (d) of the Code of Civil Procedure, 1908. The trial court allowed the applications and rejected the plaint on the grounds of statutory bar and limitation, prompting the present appeals before the High Court.

LEGAL ISSUES

The primary question before the court was whether a civil suit challenging DRT proceedings and auction sales is maintainable when filed by an individual third party, in light of the statutory bar under Section 18 of the Recovery of Debts and Bankruptcy Act, 1993. The court was also called upon to determine whether the suit was ex facie barred by limitation under Article 58 of the Limitation Act, 1963, and whether the litigation amounted to an abuse of the process of law.

COURT'S OBSERVATIONS

The court commenced its analysis by rejecting the plaintiff's contention that the bar under Section 18 of the Recovery of Debts and Bankruptcy Act, 1993, only applies to applications filed by banks and financial institutions. Relying on the Supreme Court's definitive judgments in United Bank of India v. Satyawati Tondon and Jagdish Singh v. Heeralal, the court emphasized that any challenge to measures taken regarding secured assets falls exclusively within the DRT's domain. The bench noted that the reliefs sought by the plaintiff directly challenged the DRT's order, the Recovery Certificate, and the auction sale, all of which are integral parts of statutory recovery proceedings. "Once it is found that the subject matter of the suit falls within the ambit of Section 17, the bar under Section 18 operates with full force. The exclusion of the jurisdiction of the civil Court extends to all persons, including borrowers, guarantors, purchasers, and subsequent mortgagees, and is not confined only to Banks or Financial Institutions."

Turning to the issue of limitation, the court observed that a suit seeking declaratory relief is governed by Article 58 of the Limitation Act, 1963, which prescribes a strict three-year period from the date the right to sue first accrues. The court pointed out that the plaintiff explicitly admitted to having knowledge of the DRT proceedings and the Recovery Certificate as early as 2009, having filed an application before the Recovery Officer at that time, yet chose to institute the present suit only in 2016. Dismissing the plaintiff's creative argument that his physical possession of the original title deeds constituted a "continuing cause of action" under Section 22 of the Limitation Act, the court clarified that statutory recovery actions cannot be classified as continuing torts. "In the present case, the acts complained of, namely, the execution of the mortgage, issuance of the Recovery Certificate, conduct of the auction sale, and confirmation of the sale, are all completed events. Therefore, the doctrine of continuing cause of action has no application to the facts of the present case."

"He cannot now be permitted to reagitate the very same issues under the guise of a fresh suit. Such an attempt... amounts to a clear abuse of process of law."

Addressing the defendants' plea to reject the plaint on the ground of res judicata, the court faithfully applied the Supreme Court's mandate in Srihari Hanumandas Totala v. Hemant Vithal Kamat, holding that the plea of res judicata cannot form the basis for rejecting a plaint under Order VII Rule 11 of the CPC. However, the court took strong exception to the plaintiff's underlying conduct and the vexatious nature of the litigation. The bench observed that the original guarantor had previously failed up to the Supreme Court in a civil suit filed on identical grounds, and the present plaintiff had similarly failed in independent applications before both the DRT and the Debt Recovery Appellate Tribunal (DRAT). Characterizing the current litigation as wholly derivative of the guarantor's exhausted rights, the court concluded that the suit was a blatant misuse of the judicial machinery. "When the third defendant had already failed in her challenge, and the findings rendered therein have attained finality up to the Hon’ble Supreme Court, and when the present plaintiff had also challenged the very same proceedings before the Debt Recovery Tribunal and failed, he cannot now be permitted to reagitate the very same issues under the guise of a fresh suit. Such an attempt, in the considered view of this Court, amounts to a clear abuse of process of law, and the present suit is vexatious in nature."

The High Court ultimately dismissed both appeals with costs, confirming the trial court's fair and decretal orders rejecting the plaint. The judgment firmly reinforces the exclusive jurisdiction of debt recovery tribunals and penalizes litigative attempts to bypass statutory mechanisms through disguised civil suits.

Date of Decision: 24 March 2026