Supreme Court declines Permitting Total waiver of Pre-deposit Rule in Filing Appeals before DRAT

Supreme Court declines Permitting Total waiver of Pre-deposit Rule in Filing Appeals before DRAT

The Supreme Court of India (SC) in the case of Kotak Mahindra Bank Pvt. Ltd. (Appellants) v. Ambuj A. Kasliwal and Ors. (Respondents), clarified that total waiver of pre-deposit rule in filing appeals before the Debt Recovery Appellate Tribunal (DRAT) is not permissible.

Chief Justice S.A. Bobde alongwith Justices A.S. Bopanna, and V. Ramasubramanian considered the issue of the correctness of the order passed by the DRAT and the Delhi High Court, in the matter relating to pre-deposit before the DRAT.

The Apex Court partly allowed the appeal while setting aside the order passed by the Delhi High Court (HC). The SC opined that the HC had proceeded at a tangent while adverting to the aspect of recovery made towards the loan amount from the land acquisition compensation payable to the respondent.

It also modified the order passed by the DRAT, Delhi, and permitted the respondents 1 and 2 to deposit 25 percent of Rs. 68,18,92,841/- by way of pre-deposit and prosecute its appeal, subject to such deposit being made within 8 weeks, failing which the appeal shall not subsist in the eye of law.

The Court held that as per the 'pre-deposit rule' the Appellate Tribunal is restrained from entertaining an appeal filed by a person from whom the amount of debt is due to the Bank unless such person has deposited 50 percent of the amount of debt due as determined by the Tribunal.

The SC ruled that DRAT has the discretion to reduce the amount that is to be deposited, for reasons to be recorded in writing, but it cannot be less than 25 percent of the amount of such debt which is due.

The factual background of the case is that respondent 3, the Hindon River Mills Ltd. had availed financial assistance from the respondent-IFCI Ltd. Respondents 1 and 2 had offered their guarantee in respect of the said financial assistance.

The respondents 1 to 3 had defaulted in re-payment of the dues and the account having been classified as a non-performing asset was thereafter auctioned by the respondent- IFCI Ltd wherein the appellant herein was the successful bidder and accordingly, the unpaid debt-non-performing asset was assigned in their favor.

It was challenged by the Respondents 1 to 3 before the HC in a writ petition which was dismissed and as a result, a Special Leave Petition was filed and in the said proceedings the settlement, which was entered into between the parties was recorded and disposed of. The respondents 1 to 3 stated to have not adhered to the terms of the settlement and there-payment was not made.

The appellant-Bank instituted recovery proceedings by applying the DRT, New Delhi. It had claimed Rs 572,18,77,112, which was due to it, as of 31 December 2014 along with interest and other charges.

Subsequently, a portion of the mortgaged property was acquired from the respondent- Hindon River Mills by the National Highway Authority, and its compensation amounting to Rs 152, 81, 07,159/- was deposited on behalf of the Mill and that was credited to the account of the Mill.

The Debt Recovery Tribunal (DRT) considered the claim application and ordered the issue of a recovery certificate. It limited the decretal amount to Rs 145 crores with future interest at 9 percent pa till realization.

The respondents sought a waiver of pre-deposit and projected the case to indicate that the recovery certificate ordered by the DRT is for Rs 145 crore with interest at 9 percent per annum. The amount realized by the Bank from the compensation amount payable to respondent No. 3 is Rs 152, 81, 07,159 and there was no debt due.

The DRAT in its order directed the pre-deposit of 50 percent of the amount and it had taken note of the fact that if the decretal amount as ordered by the DRT is taken into consideration and the amount received by the Bank towards the compensation amount is credited, the balance of the decretal amount payable by the respondents 1 to 3 would work out to Rs 68, 18, 92,841/-.

Hence, the correctness of the actual amount that was due was the matter for calculation for pre-deposit if the decree/ recovery certificate issued by the DRT was to be taken into consideration.

The matter was listed before the Top Court and it stated that a total waiver would be against the statutory provisions. It took into consideration the instant matter wherein the issue was regarding the actual amount due that is to be considered by the DRAT, noticing the fact the DRT has taken into consideration the earlier settlement and has accordingly decreed the claim to that extent.

The Court considered the facts and circumstances of this case and modified the order of the DRAT and directed a pre-deposit of 25 percent of Rs 68.18, 92, 841/-.