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Indian Bank v. Manilal Govindji Khona

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 1416 of 2015)Decided 3 Feb 2015
Civil Appeal No. 1416 of 2015
Justice V. Gopala Gowda · Justice C. Nagappan

Background

Indian Bank had obtained a consent decree against the respondent in 1996 in a recovery suit before the Bombay High Court, and later had the mortgaged property sold in a court-ordered public auction in 2000, with the Bank itself buying the property. Years later, after the Debts Recovery Tribunal (DRT) was set up, the respondent challenged the validity of that sale, including filing an application (with a delay of 23 days) to reopen the matter; the DRT and the Debt Recovery Appellate Tribunal (DRAT) both rejected his plea as time-barred. The Bombay High Court then set aside those rejections and sent the matter back to the DRT to be decided afresh.

Decision Breakdown

The Supreme Court held that once the DRT was established in 1999, the Bank's recovery suit and the related execution proceedings stood automatically transferred to the DRT by operation of law (Section 31 of the DRT Act), so the High Court's 1999 order directing the Court Receiver to auction the property was void for want of jurisdiction, and a decree or sale carried out without jurisdiction is a nullity that can be challenged at any time, including at the execution stage. Since the order being challenged was void ab initio, the ordinary limitation-period objections raised by the Bank did not apply, and the High Court was right to send the respondent's application back to the DRT for a fresh decision on its merits. The Court therefore dismissed the Bank's appeal (with costs of Rs.1,00,000), while directing that status quo on the property be maintained until the DRT decides the respondent's application.

Lesson Learnt

An order or sale made by a court that lacked jurisdiction over the matter at the time is legally void and can be challenged at any stage, even years later: ordinary limitation-period defences do not protect such a void order.

Official source (sci.gov.in)View Judgment (PDF)

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