- JUDGEMENT SUMMARY: Kotak Mahindra Bank Pvt. Ltd. v. Ambuj A. Kasliwal & Ors.: Entire waiver of pre-deposit impermissible to file appeal before DRAT
- DATE: 16th February, 2021
JUDGES:
- S.A. Bobde
- A.S. Boppnna
- V. Ramasubramanian
PARTIES: Kotak Mahindra Bank Pvt. Ltd. (APPELLANT) | Ambuj A. Kasliwal & Ors. (RESPONDENT)
SUBJECT
In the following judgement, the Supreme Court of India is dealing with section 21 of Recovery of Debt and Bankruptcy Act which deals with deposit of amount of due debt for filing appeal before DRAT. The question before the court was of the extent to which pre-deposit is to be ordered .
AN OVERVIEW
The court in the present case is hearing an appeal against the High Court decision which had permitted the appeal before DRAT without pre-deposit.
Hindon River Mills Ltd.(respondent no. 3), availed some financial assistance from IFCI Ltd., for which respondent no. 1 and 2 offered guarantee, but respondent no. 1 and 3 defaulted at repayment of dues.
On account of non-payment of debt, IFCI auctioned the account and the appellant bank being the successful bidder was assigned the unpaid debt and non-performing assets in their favour.
A settlement was entered between the parties according to which respondent no. 1 and 3 agreed to repay a sum of Rs. 145 crores with 15% interest per annum before 31/7/2012. The conditioned of this settlement were not adhered to by the respondents, after which an application was filed before DRT, New Delhi. The bank contended that respondent no. 1 and 3 were liable to pay outstanding amount which was frozen and had not been availed within the time frame after the settlement.
The respondent contended that NHAI acquired major portion of the mortgage property from respondent no. 3 and deposited Rs. 62,31,87,312 compensation before DRT. The compensation thereafter enhanced by the district magistrate to approximately Rs. 72,96,12,872 were also deposited. On total, Rs. 152,81,07,189 were deposited on behalf of respondent no. 3.
DRT observed that the debt due was 68,18,92,841 and directed to deposit 50% of the said amount to be deposited.
The High Court setting aside this order stated that merely because the amount of Rs.152,81,07,159/- was received by the respondent-bank before passing of the final judgment, and not thereafter, would make no difference while considering the aspect of pre-deposit that the debtor, or the guarantor would have to deposit and held the appeal to be heard by DRAT without any further deposit.
IMPORTANT PROVISIONS
RECOVERY OF DEBTS AND BANKRUPTCY ACT
Section 17: Jurisdiction, powers and authority of Tribunals.—
(1) A Tribunal shall exercise, on and from the appointed day, the jurisdiction, powers and authority to entertain and decide applications from the banks and financial institutions for recovery of debts due to such banks and financial institutions.
(2) An Appellate Tribunal shall exercise, on and from the appointed day, the jurisdiction, powers and authority to entertain appeals against any order made, or deemed to have been made, by a Tribunal under this Act.
Section 18(1): Bar of Jurisdiction: On and from the appointed day, no court or other authority shall have, or be entitled to exercise, any jurisdiction, powers or authority (except the Supreme Court, and a High Court exercising jurisdiction under articles 226 and 227 of the Constitution) in relation to the matters specified in section 17.
Section 21: Deposit of amount of debt due, on filing appeal: Where an appeal is preferred by any person from whom the amount of debt is due to a bank or a financial institution or a consortium of banks or financial institutions, such appeal shall not be entertained by the Appellate Tribunal unless such person has deposited with the Appellate Tribunal fifty percent of the amount of debt so due from him as determined by the Tribunal under section 19: Provided that the Appellate Tribunal may, for reasons to be recorded in writing, waive or reduce the amount which shall not be less than 25% of the amount of debt due to be deposited under this section.
ISSUES
The key issue before the court were-
Whether the orders passed by DRAT by and High Court were correct?
Whether it is mandatory to deposit 50% of the due amount for filing appeal before DRAT?
ANALYSIS OF THE JUDGEMENT
While dealing with the first issue the Supreme Court observed that the High Court’s decision was based on the view that the benefit of the receipt of Rs.152,81,07,159 as against the decretal amount cannot be denied though it was received before final judgement. Such conclusion cannot tilt the balance in favour respondent in any condition unless there was no due debt.
The Supreme Court observed that when according to certificate issued by DRT the amount is still due and payable, the High Court does not have the power to waive the pre-deposit entirely against the mandatory requirements of the statutes and held that 50% decretal amount is mandatory to be deposited before DRAT.
However, the court also considered the contention of the respondents that that the pre-deposit would be burdensome when entire compensation amount is deposited and major portion of due debt is discharged and referred to section 21.
The court observed that a complete waiver would be against the statutory provisions but in the present circumstances it would be appropriate to permit a pre-deposit of 25%.
Thus, the appeal was partly granted.
CONCLUSION
The Recovery of Debts and Bankruptcy Act aims at providing the proper adjudication for the recovery of the debts that are due to be deposited at to banks and other financial institutions.
Within the past few years we have seen number of fraud and bankruptcy in which the banks have cheated. As a country, we are moving towards self reliant India policy in which banks and financial institutions play a very important in financing small businesses.
But in the course of providing financial assistance, these institutions are being defrauded. These issues hamper the economy and the interest of the generally public as well and to prevent these situations RDB Act was framed.
It will not be wrong to say that the decision of mandatory pre-deposit is in the interest of the people because the loss suffered by bank is not its personal loss but of the general public as well.
50% pre-deposit makes sure that no frivolous appeal is filed, but the 25% waiver in certain situation ensures that none will be denied of his right to appeal merely on the account of financial hardship.
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