While agreeing with the findings of the Rajasthan High Court, the Kerala High Court held that the Recovery of Debts and Bankruptcy Act, 1993 shall not apply where the amount of debt due to the bank or financial institution or to a consortium of banks or financial institutions is less than rupees twenty lakhs.

The High Court, therefore, declared that since the pecuniary jurisdiction of Debt Recovery Tribunal under the Recovery of Debts and Bankruptcy Act, 1993 is enhanced to Rs.20 lakhs and above as per Ext.P4 notification issued by the Central Government invoking the powers under sub-section (4) of Section 1 of 1993 Act, the bar of jurisdiction under Section 18 of the said Act does not apply to recovery actions initiated under the Kerala Revenue Recovery Act, 1968 by the Banks and Financial Institutions for recovery of debts due to it where the amounts sought to be recovered are below Rupees twenty lakhs.

A Single Judge Bench of Justice P. V. Kunhikrishnan observed that “As per Ext.P4 notification, issued by the Government of India in exercise of the powers conferred under sub section (4) of Section 1 to the Act, 1993, it is declared that the act shall not apply where the amounts of debts due to any bank or financial institution or to a consortium of banks or financial institutions is less than twenty lakh rupees”.

Advocate Mohan Jacob George appeared for the Petitioner, whereas Advocate B. S. Syamantak appeared for the Respondent.

The brief facts of the case were that the petitioner, a banking company, was aggrieved by a Circular issued by the District Collector, directing the revenue officials not to initiate revenue recovery proceedings for loans wherein the amount defaulted was more than ten lakhs. According to the petitioner, the said circular was issued on a miscomprehension of law and pointed that after the notification issued by the Central Government invoking the powers under Section 1(4) of Recovery of Debts and Bankruptcy Act, 1993, the power of Debt Recovery Tribunal to entertain an application is only when the amount is more than twenty lakhs, whereas up to twenty lakhs, the bank is entitled to recover the same under Revenue Recovery Act.

After considering the submission, the Bench referred to the Notification issued by the Union Government as per 1993 Act, whereby it was declared that the said 1993 Act shall not apply where the amounts of debts due to any bank or financial institution or to a consortium of banks or financial institutions is less than twenty lakh rupees.

The Bench also referred to the decision of Rajasthan High Court whereby it had confirmed the reasoning of the Central Government for raising the threshold limit often lakh rupees to twenty lakh rupees, by holding that “The notification issued by the Central Government raising the limit of ten to twenty lakh rupees is therefore intended to achieve the object with which the Tribunals were set up as would be evident from the statement of objects and reasons as also preamble of the Act of 1993”.

The Bench therefore disposed of the petition observing that the stay on the impugned Notification has already been vacated.

Cause Title: The Federal Bank Ltd. v. State of Kerala and Ors. [Neutral citation: 2023/ KER/ 50134]

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Kerala High CourtJustice P.V. Kunhikrishnan

Pankaj Bajpai