Pre-deposition of appeals is mandatory before DRAT: Supreme Court of India

dated 16.07.2019 passed in W.P.(C) No.7530 of 2019 whereby the High Court of Delhi has permitted the short) without pre­deposit of a portion of the debt determined to be due as provided under Section 21 of Act’ for short). The appellant Bank claiming to be aggrieved by the said order is before this Court in the first instance had through the order dated 22.11.2019 directed the respondents No.1 and 2 to deposit an within a period of 8 weeks. In the said order it was indicated that the further proceedings in the appeal the respondents No.1 and 2 whichever is earlier. The the respondents No.1 and 2. The appellant Bank passed by this Court has filed the accompanying and 2. In that background since both these matters pertain to the same issue they are taken up together that the respondent No.3 namely Hindon River Mills re­payment of the dues and the account having been classified as non­performing asset was thereafter auctioned by respondent No.6­IFCI Ltd. wherein the appellant herein was the successful bidder and accordingly the unpaid debt and non­performing asset was assigned in their favour. The assignment as made was assailed by the respondents No. 1 to 3 before the dismissed and the SLP(C) No. 35004 of 2011 filed was settlement which was entered into between the parties the same being repaid on or before 31.07.2012. The the terms of settlement and the re­payment was not made. The appellant Bank therefore instituted recovery proceedings by filing an application before the Debts Recovery Tribunal New Delhi in O.A No.281 of 2015. In the said proceedings the appellant the settlement wherein the outstanding amount was frozen had not been availed within the time frame Accordingly the sum of Rs. 572 18 77 112 ­(Rupees Five Hundred Seventy­Two Crores Eighteen Lakhs Seventy­ Seven Thousand and One Hundred Twelve) which was due as on 31.12.2014 along with interest and other O.A.No.281 of 2015 before the DRT the respondent No.7 National Highways Authority of India acquired a portion of the mortgaged property belonging to respondent No.3 and deposited the compensation amount of Rs.62 31 87 312 ­(Rupees Sixty­Two Crores Thirty­One Lakhs Eighty­Seven Thousand and Three Hundred Twelve) before the DRT The compensation was thereafter enhanced by the sum of Rs.72 96 12 827 ­(Rupees Seventy­Two Crores Ninety­Six Lakhs Twelve Thousand and Eight­Hundred Twenty­Seven) was deposited. Thus in all a sum of Rs.152 81 07 159 ­(Rupees One Hundred Fifty­Two Crores Eighty­One Lakhs Seven Thousand and One was deposited on behalf of respondent No.3 relating to the mortgaged property which was credited to the the said order as against the claim the DRT had limited at 9% per annum till the realisation on reducing would be payable after taking into consideration the amount of Rs.152 81 07 159 ­(Rupees One Hundred to 3 claiming to be aggrieved by the order dated loan transaction and the quantum of recovery thereof etc. which is the matter arising in the appeal before and 2 herein before the DRAT. In that regard the and also taking into consideration that the amount of Rs.152 81 07 159 ­(Rupees One Hundred Fifty­Two Crores Eighty­One Lakhs Seven Thousand and One had in that context noted that the balance of the debt due works out to Rs.68 18 92 841 ­arrived at the conclusion that the It is in that view the appellant Bank claiming to be appellant Mr. Mukul Rohtagi and Mr. Ritin Rai learned Senior Advocates for the respondents and perused the As seen though the sequence which led to the matter relating to pre­deposit of the debt due in an appeal before the DRAT. In order to address the said to a bank or a financial institution or a Appellate Tribunal unless such person has deposited with the Appellate Tribunal as against the decretal amount No.1 and 2 to waive the entire pre deposit unless the High Court had rendered a categorical finding that the and there was no debt due which in any event was beyond the scope of consideration in a petition of the present nature. On the other hand as stated the DRAT the amount credited as compensation and having further Therefore in the facts and circumstances arising herein when further amount is due and payable in DRT in favour of the appellant Bank the High Court entirety nor can it exercise discretion which is against debt due would be permissible but not entire waiver would be against the statutory provisions and therefore not sustainable in law. The order of the High Court is analogous provision contained in Section 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 avail the remedy of appeal has expressed a similar opinion in the case of Narayan Chandra Ghosh vs UCO Bank and Others 4 SCC 548 which reads Section 18(1 right on a person aggrieved by any order made by the Debts Recovery Tribunal under Section 17 of the Act to prefer an appeal to the Appellate Tribunal. However the right conferred under subject to the condition laid down in the second proviso thereto. The second proviso postulates that no appeal shall be entertained unless the borrower has deposited with the Appellate Tribunal fifty as claimed by the secured creditors or proviso to the sub­section the Appellate Tribunal has the power to reduce the amount for the reasons to be recorded in of the debt referred to in the second proviso Thus there is an absolute bar to entertainment of an appeal under 18 of the Act unless the condition precedent makes with the Appellate Tribunal a pre­ provision cannot be entertained by the It is well­settled that when a Statute to unreasonable restrictions rendering the right almost illusory. Bearing in mind the object of the Act the conditions hedged in the said proviso cannot be said to be of pre­deposit under sub­section of Section 18 of the Act the be deposited by the borrower is computed either with reference to the debt due from him as claimed by the secured creditors or as determined by the Debts Recovery Tribunal whichever is less. Obviously where by the Debts Recovery Tribunal the borrower while preferring appeal would be from him as claimed by the secured creditors. Therefore the condition of pre­ Tribunal was beyond the provisions of the provisos to the said Section. At best the Appellate Tribunal could have after recording the reasons reduced the amount less than twenty­five per cent of the debt referred to in the second proviso. We are convinced that the order of the Appellate Tribunal entertaining appellant s appeal unsustainable and therefore the decision of the High Court in setting aside the same enter into that aspect of the matter since the actual However for the present we would take note of the amount as indicated in the order dated 27.02.2019 passed by the DRAT. Hence for the purpose of taken at Rs.68 18 92 841 ­ and prosecute the Appeal No.311 of 2018 subject to such deposit being The Contempt Petition No.569 of 2020 is iv) Pending application if any shall stand

Summary: If anybody waives off the pre-deposition of appeals before the Debt Recovery Appellate Tribunal (DRAT) u/s 21 of the Recovery of Debts and Bankruptcy Act, it will be considered impermissible by the authorities. Supreme Court of India gave the judgment in the case of Kotak Mahindra Bank vs.Ambuj A. Kasliwal &amp; Ors [Civil Appeal no. 538 of 2021] stating the above-cited reasons; presided over by the bench of Hon’ble Chief Justice S.A Bobde, Justice AS Bopanna, and Justice V.Ramasubramanian. In the instant case, the Apex Court was dealing with the matter involving the parties where the High Court had permitted the respondents to prosecute the appeals before the DRAT without the pre-deposition of a portion of the debt determined to be due which was provided u/s 21 of the Recovery of Debts and Bankruptcy Act. The present case involved the fact that Hindon River Mills Ltd.(Respondent)  had availed financial assistance from the IFCI Ltd. with the help of other respondents acting as personal guarantors for the same. The respondents defaulted in payment of the dues and therefore the non-performing assets were auctioned by IFCI Ltd which was successfully assigned in the favor of the appellant bank (Bidder). Again because of the non-payment of the dues, the appellant bank had instituted recovery proceedings by filing an application before the Debts Recovery Appellate Tribunal in which they claimed that the respondents would be liable to pay the entire outstanding since the benefit of the settlement wherein the outstanding amount was frozen had not been availed within the time frame. Accordingly, the sum of Rs. 572,18,77,112 which was due as of 31.12.2014   along with interest and other charges was claimed before the DRAT. In the High Court, the respondents were permitted to prosecute the appeal without the pre-deposit before DART, and hence, the appeal was filed by the Kotak Mahindra Bank in the Apex Court. The Supreme Court observed the facts and came to a conclusion of setting aside the High Court judgment by stating that “ A perusal of the provision which employs the phrase “an appeal shall not be entertained” indicates that it injects the Appellate Tribunal from entertaining an appeal by a person from whom the amount of debt is due to the Bank unless such person has deposited with the Appellate Tribunal, 50% of the amount of the debt so due from hum as determined by the Tribunal u/s 19 of the Act. It however grants the discretion to the Appellate tribunal to reduce the amount to be recorded in writing, but such reduction will not be less than 25% of the amount of such debt which is due.”