Punjab and Haryana High Court: While hearing a petition filed under Articles 226 and 227 of the Constitution seeking to set aside an order passed by the Debt Recovery Appellate Tribunal (‘DRAT’), the Division Bench of Sheel Nagu, CJ. and Sanjiv Berry*, J. held that the security deposit in a landlord-tenant relationship could not be termed as banking transaction within the meaning of Section 2(g) of the Recovery of Debts due to the Banks and Financial Institution Act, 1993 (‘RDDBFI Act’) defining the word “debt”.
Background
In the present case, the petitioner leased the premises to the respondent-Bank under a lease agreement, along with a deposit agreement and a Supplementary Deposit Agreement, creating a lessor-lessee relationship. Subsequently, a supplementary lease agreement and a fresh/renewed indenture of lease were executed.
In September 2012, the Bank issued a termination notice of tenancy. In October 2012, the petitioner replied, stating that possession should be handed over only after clearance of water and electricity dues and restoration of the premises to its original condition as in 2002. In November 2012, the Bank informed the petitioner that it had vacated the premises and asked the petitioner to take over the possession.
Thereafter, disputes arose between them, and a rent petition was filed before the Rent Controller, wherein provisional rent was assessed and later withdrawn. The petitioner then filed a civil suit for recovery of Rs. 1,27,96,137 towards arrears of rent. After adjusting the security amount, the suit was decreed by the Civil Judge (Senior Division).
The respondent-Bank filed an appeal which was dismissed by the Additional Sessions Judge, affirming the decree. Thereafter, a Regular Second Appeal filed by the respondent-Bank was allowed, but the petitioner’s Special Leave Petition against the same was dismissed by the Supreme Court. Meanwhile, the respondent-Bank’s application before the DRT was dismissed, and its appeal before the DRAT was disposed of.
Aggrieved, the petitioner filed a Civil Writ Petition in which stay was granted, and then he approached the High Court by the present petition.
Analysis and Decision
The Court stated that the issue involved in the case at hand was whether the amount of refundable security retained by the landlord would constitute a debt within the meaning of Section 2(g) of the RDDBFI Act so as to give a right to tenant Bank to maintain the proceedings under Section 19 of the RDDBFI Act for recovery of debt security.
The Court stated that the answer to the said issue, which arose in the present petition as to whether the security deposit fell within the definition of ‘debt’ to make original application before the DRT maintainable under the RDDBFI Act was negative because the security deposit in a landlord tenant relationship could not be termed as Banking transaction within the meaning of Section 2(g) of the RDDBFI Act.
In the present case, the petitioner happened to be the landlord of the premises which was leased out to the respondents Bank and there was unpaid security deposits for the purpose, had the petitioner been a third party who had given its premises on lease to respondents, who in turn had hypothecated the goods to the Bank then such unpaid security deposit would have come within the purview of Section 2(g) of the RDDBFI Act.
The Court further stated that there existed the relationship of landlord and tenant between the parties, and therefore the unpaid security deposits for the purpose of lease in a tenancy does not in any manner fall within the definition of Banking transactions or for that matter, a ‘debt’ within the parameters assigned by the RDDBFI Act. Thus, the application filed by the respondent-Bank claiming the said security amount to be ‘debt’ due and recoverable by the bank by approaching the DRT was manifestly wrong and incorrect approach.
Once such security deposit does not fall within the purview of Section 2(g) of the RDDBFI Act, the Tribunal would have no jurisdiction, as per Section 17 of the Recovery of Debts Act itself. Thus, the DRT had no jurisdiction to entertain any such application or proceedings in the given case.
Hence, the Court disposed of the petition by setting aside the order passed by the DRAT as well as the order passed by the DRT, as both orders were not sustainable.
[Sajiv Kumar Jain v. HDFC Bank Ltd., CWP No. 38893 of 2025), decided on 24-12-2025]
*Judgement authored by Justice Sanjiv Berry
Advocates who appeared in this case :
For the Petitioner: Alok Mittal and Shubham Thakur, Advocates
For the Respondent: Narender Hooda, Senior Advocate, Rishab Rai Jain and Naveen Sharma, Advocates