Supreme Court fixed goalpost for debt recovery

Supreme Court fixed goalpost for debt recovery

A borrower henceforth will have to deposit outstanding debt before appeals can be heard by the Appellate Tribunal

The Supreme Court has moved in to crack down on frivolous appeals and wasting the court's precious time by saying the Debt Recovery Appellate Tribunal (DRAT) cannot hear any petition unless at least half of the debt is deposited.

A three-judge bench of Chief Justice of India SA Bobde, Justices AS Bopanna and V Ramansubramanian overturned an earlier order of the Delhi High Court order that had done away with the statutory requirement in this regard and had permitted the appeal to proceed at the DRAT.

The Apex Court ruling will come as a big relief for the lenders who at times encountered harrowing times at the hands of the borrowers while seeking recovery.

The bench examined Section 21 of the Recovery of Debts and Bankruptcy Act, 1993 that provides for depositing the amount of debt due before filing an appeal. The court noted that the DRAT by law is not allowed from entertaining an appeal by a borrower who has not deposited with it 50 per cent of the due debt.

The Top Court, however, clarified that in exceptional cases where the borrower has no means to deposit even half of the debt, it can be reduced to 25 per cent of the due debt amount. The Appellate Tribunal in that eventuality will have to give reasoned orders when it decides to do so.

In the case under litigation, the Court granted exemption on certain other considerations. It reduced the pre-deposit amount to 25 per cent saying:

* Where there was other security such as a mortgage that was available.

* Availability of personal guarantees.

* And the actual amount of debt is still to be determined by the DRAT.

Bishwajit Dubey, Partner at the leading law firm Cyril Amarchand Mangaldas (CAM) welcomed the Apex Court ruling saying that it will make it difficult for borrowers to file frivolous appeals and wasting the court's time.

The Supreme court bench has given eight weeks to the borrower to deposit the amount, failing which the appeal will cease to exist before the DRAT.