VBC 1 wp4020.11-8.6 IN THE HIGH COURT OF JUDICATURE AT BOMBAY APPELLATE SIDE WRIT PETITION NO.4020 OF 2011 M/s.Maveriek Knitts Pvt.Ltd & Anr. ..Petitioners. versus Union Bank of India & Anr. ..Respondents. ..... Mr.V.Shekhar, Senior Advocate with Mr.Siddhanath Murarka and Mr.Abhigya i/b. Mr.S.N.Raj, Sushil Shukla and Mr.Aditya Khanna for the Petitioners. Mr.Harinder Toor i/b. Mr.Nainesh Amin for the Respondents. ..... CORAM : DR.D.Y.CHANDRACHUD & ANOOP V. MOHTA , JJ. June 8, 2011. P.C. : This Petition under Article 226 of the Constitution is directed against an order passed by the Debts Recovery Appellate Tribunal on an application for waiver of pre-deposit. The First Respondent issued a notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 on 10 September 2007. The amount claimed in the notice is Rs.4.78 crores. Against the notice of possession that was issued by the Bank, the Petitioners filed an application under Section 17 before the Debts Recovery VBC 2 wp4020.11-8.6 Tribunal. The application was dismissed on 27 January 2011. Against the dismissal of the application, an appeal has been filed before the Appellate Tribunal in which an application for waiver of pre-deposit was filed. The Appellate Tribunal has directed the Petitioners to deposit an amount of Rs.2 crores, out of which an amount of Rs.50 lakhs was directed to be deposited on or before 30 March 2011 and the balance by 2 May 2011. The Tribunal directed that in the meantime, the status quo shall be maintained in respect of the secured assets, but in default, the interim order shall stand vacated. -2. In support of the plea of financial hardship, an additional affidavit has been filed in support of the Petition on 8 June 2011. From a perusal of the annexures to the affidavit, it appears that for the Financial Year ending on 31 March 2009, the First Petitioner had a loss of Rs.3.47 cores. A prima facie case of financial hardship is made out. The Appellate Tribunal, in the course of paragraph 2 of its order, had recorded the submission of the Petitioners that the net-worth of the Company has been totally eroded and had turned negative as in March 2009. VBC 3 wp4020.11-8.6 -3. While exercising the jurisdiction of this Court under Article 226 of the Constitution, the Court must be guided by the discipline of legislation enacted by the Parliament. Under the proviso to sub-section (1) of Section 18 of the Securitization Act, no appeal can be entertained by the Appellate Tribunal unless the borrower has deposited fifty per cent of the amount of debt due from him, as claimed by the secured creditor or determined by the Debts Recovery Tribunal whichever is less. The Appellate Tribunal is empowered, for reasons to be recorded in writing, to reduce the amount to not less than twenty-five per cent of the debt referred to in the second proviso. Having regard to the judgment of the Supreme Court in Narayan Chandra Ghosh vs. Uco Bank,1 the Appellate Tribunal can, at the highest, for reasons to be recorded, reduce the amount of deposit of fifty per cent to an amount not less than twenty-five per cent of the debt referred to in the second proviso to sub-section (1) of Section 18. There is an absolute bar to the entertainment of the appeal under Section 18 unless the condition precedent as stipulated is fulfilled. 1 (2011) 4 SCC 548 VBC 4 wp4020.11-8.6 -4. Prima facie, at this stage, on the material disclosed in the additional affidavit, the Petitioners have demonstrated financial hardship. The Appellate Tribunal has merely adverted to the rival submissions of the Petitioners and the First Respondent. After referring to those submissions, the Appellate Tribunal proceeded to pass an order of pre-deposit in the amount of Rs.2 crores, stating that it had taken into account the facts and circumstances. Reading the order of the Appellate Tribunal, it is evident that the Tribunal has not even indicated prima facie its reasons in support of the order. In this view of the matter, we would have been inclined to set aside the impugned order and to remit the proceedings for fresh consideration before the Appellate Tribunal. However, in order to obviate any delay and a fresh round of proceedings, both the Learned Counsel have urged their submissions on the quantum of pre-deposit before this Court. For the reasons which we have already indicated, we are of the view that the Petitioners have demonstrated prima facie a case of financial hardship which would warrant a modification of the quantum of deposit ordered by the Appellate Tribunal. Since the amount of the debt has not been quantified by the Tribunal, the VBC 5 wp4020.11-8.6 quantum of deposit would have to be computed with reference to the amount claimed in the notice issued by the secured creditors under Section 13(2). Having regard to the fact that the amount which is claimed in the notice under Section 13(2) was Rs. 4,78,19,937.16, it would be appropriate and proper to modify the order of the Appellate Tribunal by directing the Petitioners to deposit twenty-five per cent of the aforesaid amount. The Petitioners shall accordingly deposit an amount of Rs.20 lakhs on or before 30 June 2011, while the balance shall be deposited in instalments each of Rs.30 lakhs on or before 18 July 2011 and 18 August 2011, while the balance shall be deposited on or before 15 September 2011. The order passed by the Appellate Tribunal shall stand modified in the aforesaid terms. 5. In the event that there is any default in the payment of any instalments or a part thereof, the necessary consequences as envisaged in law shall ensue. Counsel appearing on behalf of the Petitioners has stated on the instructions of the Second Petitioner, who is personally present before the Court that the Petitioners agree and undertake to deposit the aforesaid amount in accordance VBC 6 wp4020.11-8.6 with the time schedule prescribed. 6, The Appellate Tribunal had, by its impugned order, directed that in the meantime, pending compliance of the order of deposit, within the time schedule laid down, status quo shall be maintained in respect of the secured assets. The Tribunal clarified that in case there was a default of payment of any of the instalments, the interim order shall stand vacated automatically. In view of the fact that the order passed by the Appellate Tribunal has been modified by the present order, there shall be a direction to the effect that during the period prescribed for effecting compliance the status quo shall be maintained in respect of the secured assets. This would be subject to the clarification that in case there is a default in the payment of any of the instalments or part thereof, the interim protection shall stand vacated automatically without further reference to the Court. The appeal before the Appellate Tribunal shall stand restored conditional on the directions contained in this order being complied with. VBC 7 wp4020.11-8.6 6. The Petition is accordingly disposed of. No order as to costs. ( Dr.D.Y.Chandrachud, J.) ( Anoop V. Mohta, J.)