DRAT Has Discretion To Reduce Interest Granted By DRT In Favour Of Secured Creditor: Rajasthan High Court

The Rajasthan High Court held that the DRAT had discretion under Section 19(20) of the Recovery of Debts and Bankruptcy Act, 1993, to reduce the interest rate awarded by the DRT in favour of the secured creditor.

The bench of Justice Anoop Kumar Dhand was hearing a challenge against the order of the DRAT by which the order passed by DRT was modified to the extent of reducing the interest rate from 15% per annum to 12% per annum simple.

Respondent had borrowed money from the Bank of India (petitioner) which remained unpaid, and as per the terms and conditions of the loan agreement, a suit for recovery was filed. DRT decreed this suit in favour of the petitioner, directing the respondent to repay with an interest at the rate of 15% per annum.

However, in an appeal before the DRAT by the respondent, this order was modified, and the interest rate was reduced to 12% per annum with simple interest from the date of filing of the suit till its actual payment.

It was argued by the petitioner that DRAT had no jurisdiction to exercise such discretion since the same was contrary to the terms and conditions of the loan agreement, and also against the provision of Section 19(20) of the Act.

On the contrary, the respondents submitted that Section 19(20) of the Act conferred such discretion on the DRAT to award interest on the application filed, as it deemed fit in the ends of justice.

Hence, in light of the provision as well as the constitutional bench decisions of Supreme Court in State Bank of India vs. M/s Sarathi Textiles and Others and State Bank of India vs. M/s Material Marketing Company & Others, DRAT was right in exercising that discretion.

After hearing the contentions, the Court perused the records and highlighted the circumstances taken into account by the DRAT to reach the decision. It was held that in light of Section 19(20) and the constitutional bench decisions by the Supreme Court, DRAT had the jurisdiction to exercise the discretion. And no error was committed in reducing the interest.

Accordingly, the petition was dismissed.

Title: Bank of India v Paras Talkies & Ors.

Citation: 2025 LiveLaw (Raj) 330

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