Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 538 OF 2021
(Arising out of SLP (CIVIL) No.21555 of 2019)
Kotak Mahindra Bank Pvt. Limited .…Appellant(s)
Versus
Ambuj A. Kasliwal & Ors. …. Respondent(s)
WITH
CONT.PET.(C)No.569/2020 in SLP(C) No. 21555/2019
J U D G M E N T
A.S. Bopanna,J.
Leave granted.
2. The appellant is before this Court assailing the order
dated 16.07.2019 passed in W.P.(C) No.7530 of 2019
whereby the High Court of Delhi has permitted the
Signature Not Verified
Digitally signed by
Madhu Bala
Date: 2021.02.16
16:53:53 IST
Reason:
respondents No. 1 and 2 herein to prosecute the appeal
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before the Debts Recovery Appellate Tribunal (‘DRAT’ for
short) without predeposit of a portion of the debt
determined to be due, as provided under Section 21 of
the Recovery of Debts and Bankruptcy Act, 1993 (‘RDBA
Act’ for short). The appellant/Bank claiming to be
aggrieved by the said order is before this Court in the
instant appeal.
3. This Court while taking note of the matter at the
first instance, had through the order dated 22.11.2019
directed the respondents No.1 and 2 to deposit an
amount of Rs.20 Crores before the Registry of this Court
within a period of 8 weeks. In the said order it was
indicated that the further proceedings in the appeal
before the DRAT shall remain stayed till the next date of
hearing or till the date of deposit of the said amount by
the respondents No.1 and 2, whichever is earlier. The
deposit as directed by this Court has not been made by
the respondents No.1 and 2. The appellant/Bank,
therefore, alleging that there is disobedience of the order
passed by this Court has filed the accompanying
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Contempt Petition seeking action against respondents 1
and 2. In that background, since both these matters
pertain to the same issue, they are taken up together,
considered and disposed of by this common order.
4. The brief facts leading to the present proceedings is
that the respondent No.3, namely, Hindon River Mills
Ltd. had availed financial assistance from the respondent
No.6 IFCI Ltd. The respondents No.1 and 2 had offered
their personal guarantee in respect of the said financial
assistance. The respondents No.1 to 3 had defaulted in
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
High Court in WP(C) No.14999 of 2006 which came to be
dismissed and the SLP(C) No. 35004 of 2011 filed was
taken note by this Court and in the said proceedings the
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settlement which was entered into between the parties
was recorded and disposed of. As per the settlement, the
respondents No. 1 to 3 had agreed to repay the sum of
Rs.145 Crores with interest at 15% per annum subject to
the same being repaid on or before 31.07.2012. The
respondents No. 1 to 3 are stated to have not adhered to
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 (‘DRT’ for short), New Delhi in O.A.
No.281 of 2015. In the said proceedings the appellant
Bank claimed that the respondents No. 1 to 3 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/(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
charges was claimed before the DRT.
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5. When this was the position, during the pendency of
O.A.No.281 of 2015 before the DRT the respondent
No.7/National Highways Authority of India (‘NHAI’ for
short), 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
District Magistrate (Arbitrator) Ghaziabad and a further
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
Hundred FiftyNine) was the compensation amount which
was deposited on behalf of respondent No.3 relating to
the mortgaged property, which was credited to the
account of respondent No.3. With these developments in
the background, the DRT had proceeded to consider the
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claim application and ultimately ordered issue of recovery
certificate through the order dated 15.03.2018. Through
the said order, as against the claim, the DRT had limited
the decretal amount to Rs.145 Crores with future interest
at 9% per annum till the realisation, on reducing
balance. It was further ordered therein that the amount
would be payable after taking into consideration the
amount of Rs.152,81,07,159/(Rupees One Hundred
FiftyTwo Crores EightyOne Lakhs Seven Thousand and
One Hundred FiftyNine) paid during the pendency of the
proceedings.
6. The appellant/Bank as well as respondents No. 1
to 3 claiming to be aggrieved by the order dated
15.03.2018 passed by DRT have preferred appeals before
the DRAT. This Court at this juncture is not required to
consider the merits of the rival contentions relating to the
loan transaction and the quantum of recovery thereof
etc., which is the matter arising in the appeal before
DRAT. The present proceeding is limited only with regard
to the issue pertaining to the predeposit contemplated in
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law insofar as the appeal filed by the respondents No.1
and 2 herein, before the DRAT. In that regard, the
respondents No.1 and 2 herein, in their Appeal No.311 of
2018 before the DRAT had also filed an application in IA
No.511 of 2018 seeking waiver of predeposit amounting
to fifty per cent of the debt determined by the DRT. The
DRAT having noticed the contentions on the said aspect
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
Hundred FiftyNine) was received by the appellant Bank,
had in that context noted that the balance of the debt
due works out to Rs.68,18,92,841/ (Rupees SixtyEight
Crores Eighteen Lakhs NinetyTwo Thousand and Eight
Hundred FortyOne). Hence, DRAT through the order
dated 27.02.2019 directed that fifty per cent of the said
amount is to be deposited. Review filed against the same
was dismissed on 09.04.2019.
7. The respondents No.1 and 2 claiming to be
aggrieved by the orders dated 27.02.2019 and
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09.04.2019 approached the High Court of Delhi in WP(C)
No.7530 of 2019. The High Court having adverted to the
rival contentions and being swayed by the fact that the
appellant/Bank has recovered the sum of
Rs.152,81,07,159/(Rupees One Hundred FiftyTwo
Crores EightyOne Lakhs Seven Thousand and One
Hundred FiftyNine), arrived at the conclusion that the
respondents No.1 and 2 are to be permitted to prosecute
the appeal without predeposit and directed accordingly.
It is in that view, the appellant/Bank claiming to be
aggrieved by such order dated 16.07.2019 passed by the
High Court is before this Court in the instant appeal.
8. Heard Mr. V.Giri, learned Senior Advocate for the
appellant, Mr. Mukul Rohtagi and Mr. Ritin Rai, learned
Senior Advocates for the respondents and perused the
appeal papers.
9. As seen, though the sequence which led to the
proceedings before the DRT and DRAT is taken note and
referred in some detail, the short issue for consideration
is with regard to the correctness or otherwise of the order
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passed by the DRAT and the High Court of Delhi in the
matter relating to predeposit of the debt due, in an
appeal before the DRAT. In order to address the said
issue, it would be appropriate to take note of Section 21
of the Recovery of Debts and Bankruptcy Act, 1993 which
provides for deposit of the amount of debt due on filing
the appeal. Section 21 of the RDBA reads as hereunder:
“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
per cent.] 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, [reduce the
amount to be deposited by such amount
which shall not be less than twentyfive per
cent. of the amount of such debt so due] to
be deposited under this section.”
(emphasis supplied)
10. A perusal of the provision which employs the
phrase “appeal shall not be entertained” indicates that it
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injuncts 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, fifty percent of the amount of debt so
due from him as determined by the Tribunal under
Section 19 of the Act. The proviso to the said Section,
however, grants the discretion to the Appellate Tribunal
to reduce the amount to be deposited, for reasons to be
recorded in writing, but such reduction shall not be less
than twentyfive per cent of the amount of such debt
which is due. Hence the pendulum of discretion to waive
predeposit is allowed to swing between fifty per cent and
twentyfive per cent of the debt due and not below
twentyfive per cent, much less not towards total waiver.
It is in that background, keeping in perspective the said
provision, the DRAT has in the instant case ordered
deposit of fifty per cent of the amount. The respondents
No.1 and 2 while seeking waiver of the deposit have
essentially projected the case to indicate that the recovery
certificate ordered by the DRT is for the sum of Rs.145
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Crores with interest at 9% per annum and the amount
realised by the Bank from the compensation amount
payable to respondent No.3 is itself a sum of
Rs.152,81,07,159/(Rupees One Hundred Fifty Two
Crores Eighty One Lakhs Seven Thousand and One
Hundred Fifty Nine) and as such there is no debt due.
11. In that regard the High Court has concluded as
hereunder:
“9. Having heard learned senior counsels
for the parties, we are of the considered view
that learned DRAT has not viewed the aspect
of predeposit correctly in the present case.
The amount of Rs.152,81,07,159/ was
received by the respondentbank during the
pendency of the Original Application. The
respondentbank did not amend its Original
Application to claim that it has adjusted the
said amount, and did not limit its claim for
the balance amount. Consequently, while
adjudicating the Original Application, the
DRT has proceeded on the basis that the
respondentbank is bound by the settlement
amount of Rs.145 crores, and is entitled to
future interest thereon at the rate of 9% per
th
annum from 5 July, 2012 onwards till
realization on the reducing balance, after
taking into account the amount of
Rs.152,81,07,159/ received during the
pendency of the Original Application.
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10. Aforesaid being the position, merely
because the amount of Rs.152,81,07,159/
was received by the respondentbank before
passing of the final judgment, and not
thereafter, would make no difference while
considering the aspect of predeposit that the
debtor, or the guarantor would have to
deposit in terms of Section 21 of the
aforesaid Act.”
12. The extracted portion indicates that the High Court
has proceeded at a tangent while adverting to the aspect
of recovery made towards the loan amount from the land
acquisition compensation payable to respondent No.3.
The conclusion appears to be that the receipt of the
compensation amount even though was before passing of
the decree, would wipe out the decretal amount of Rs.145
Crores with interest at 9% per annum, though it has not
been expressly stated so. Per contra, the DRAT by its
order dated 27.02.2019 while directing the predeposit of
fifty per cent of the amount 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
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Bank towards the compensation amount is credited, the
balance of the decretal amount payable by respondents
No.1 to 3 would work out to Rs.68,18,92,841/ (Rupees
Sixty Eight Crores Eighteen Lakhs Ninety Two Thousand
and Eight Hundred Forty One). It is in that view, the
DRAT has ordered predeposit of fifty per cent of the said
amount which still remains to be a debt due. On that
aspect, though the ultimate correctness of the actual
amount due is a matter for calculation to be made in the
execution proceedings, for the present, for the purpose of
predeposit if the decree/recovery certificate issued by
the DRT is taken into consideration the position is clear
that even if the amount of compensation is appropriated,
either before or after the decree, there would still be
outstanding amount payable which would be the subject
matter of the appeal in DRAT, apart from the fact that the
appellant Bank in their appeal are claiming the entire
amount which has fallen due since the terms of
settlement was not adhered to.
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13. Thus, when prima facie it was taken note by the
DRAT that further amount was due and the predeposit
was ordered, without finding fault with such conclusion
the High Court was not justified in setting aside the
orders passed by the DRAT. As noted from the extracted
portion of the order passed by the High Court, all that the
High Court has concluded is that the benefit of the
receipt of Rs.152,81,07,159/(Rupees One Hundred Fifty
Two Crores Eighty One Lakhs Seven Thousand and One
Hundred Fifty Nine) as against the decretal amount
cannot be denied though it was received before passing of
the final judgment. Such conclusion in any event could
not have tilted the balance in favour of the respondents
No.1 and 2 to waive the entire pre deposit, unless the
High Court had rendered a categorical finding that the
entire decretal amount stands satisfied from such receipt
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
having taken note of the decretal amount, the receipt of
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the amount credited as compensation and, having further
noted the debt is still due, has directed the predeposit
limited to that extent.
14. Therefore, in the facts and circumstances arising
herein, when further amount is due and payable in
discharge of the decree/recovery certificate issued by the
DRT in favour of the appellant/Bank, the High Court
does not have the power to waive the predeposit in its
entirety, nor can it exercise discretion which is against
the mandatory requirement of the statutory provision as
contained in Section 21, which is extracted above. In all
cases fifty per cent of the decretal amount i.e. the debt
due is to be deposited before the DRAT as a mandatory
requirement, but in appropriate cases for reasons to be
recorded the deposit of at least twentyfive per cent of the
debt due would be permissible, but not entire waiver.
Therefore, any waiver of predeposit to the entire extent
would be against the statutory provisions and, therefore,
not sustainable in law. The order of the High Court is,
therefore, liable to be set aside.
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15. It is noticed that this Court while considering an
analogous provision contained in Section 18 of the
Securitisation and Reconstruction of Financial Assets
and Enforcement of Security Interest Act, 2002
(‘SARFAESI’ for short) relating to predeposit in order to
avail the remedy of appeal has expressed a similar
opinion in the case of Narayan Chandra Ghosh vs.
(2011) 4 SCC 548, which reads
UCO Bank and Others
as hereunder:
7. Section 18(1) of the Act confers a statutory
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 Section 18(1) is
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
per cent of the amount of debt due from him,
as claimed by the secured creditors or
determined by the Debts Recovery Tribunal,
whichever is less. However, under the third
proviso to the subsection, the Appellate
Tribunal has the power to reduce the
amount, for the reasons to be recorded in
writing, to not less than twentyfive per cent
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of the debt, referred to in the second proviso.
Thus, there is an absolute bar to
entertainment of an appeal under Section
18 of the Act unless the condition precedent,
as stipulated, is fulfilled. Unless the borrower
makes, with the Appellate Tribunal, a pre
deposit of fifty per cent of the debt due from
him or determined, an appeal under the said
provision cannot be entertained by the
Appellate Tribunal. The language of the said
proviso is clear and admits of no ambiguity.
8. It is wellsettled that when a Statute
confers a right of appeal, while granting the
right, the Legislature can impose conditions
for the exercise of such right, so long as the
conditions are not so onerous as to amount
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
onerous. Thus, we hold that the requirement
of predeposit under subsection (1)
of Section 18 of the Act is mandatory and
there is no reason whatsoever for not giving
full effect to the provisions contained
in Section 18 of the Act. In that view of the
matter, no court, much less the Appellate
Tribunal, a creature of the Act itself, can
refuse to give full effect to the provisions of
the Statute. We have no hesitation in holding
that deposit under the second proviso
to Section 18(1) of the Act being a condition
precedent for preferring an appeal under the
said Section, the Appellate Tribunal had
erred in law in entertaining the appeal
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without directing the appellant to comply
with the said mandatory requirement.
9. The argument of learned counsel for the
appellant that as the amount of debt due
had not been determined by the Debts
Recovery Tribunal, appeal could be
entertained by the Appellate Tribunal
without insisting on predeposit, is equally
fallacious. Under the second proviso to sub
section (1) of Section 18 of the Act the
amount of fifty per cent, which is required to
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
the amount of debt is yet to be determined
by the Debts Recovery Tribunal, the
borrower, while preferring appeal, would be
liable to deposit fifty per cent of the debt due
from him as claimed by the secured
creditors. Therefore, the condition of pre
deposit being mandatory, a complete waiver
of deposit by the appellant with the Appellate
Tribunal, was beyond the provisions of the
Act, as is evident from the second and third
provisos to the said Section. At best, the
Appellate Tribunal could have, after
recording the reasons, reduced the amount
of deposit of fifty per cent to an amount not
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
without insisting on predeposit was clearly
unsustainable and, therefore, the decision of
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the High Court in setting aside the same
cannot be flawed.”
(emphasis supplied)
16. Having arrived at the above conclusion the issue is
also with regard to the extent to which predeposit is to
be ordered in the instant case. Though the learned Senior
Advocates on either side have indicated different figures
as the actual debt due as on today, we do not propose to
enter into that aspect of the matter since the actual
amount due is a matter which would be taken note by
the DRAT while considering the appeal on merits and at
the point of recovery if any, in the execution proceedings.
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
determining the predeposit, the decretal amount due is
taken at Rs.68,18,92,841/ (Rupees SixtyEight Crores
Eighteen Lakhs NinetyTwo Thousand and Eight
Hundred FortyOne). Mr. Mukul Rohtagi, learned Senior
Advocate would contend that a portion of property
19
belonging to respondent No.3 has been acquired and the
remaining property is still under mortgage and as such
predeposit would be burdensome to the respondents
No.1 and 2, more particularly when the entire
compensation amount is deposited and major portion of
the debt due is discharged.
17. As already noted, a total waiver would be against
the statutory provisions. However, in the instant case,
taking note that though the issue relating to the actual
amount due is to be considered by the DRAT, keeping in
view the fact that the DRT has taken into consideration
the earlier settlement and has accordingly decreed the
claim to that extent and towards such decree since
payment of a major portion is made, though by
appropriation of the compensation amount and
admittedly since the remaining properties belonging to
respondent No.3 is available by way of mortgage and the
respondents No.1 and 2 are the personal guarantors, we
deem it appropriate that in the peculiar facts and
circumstances of this case to permit the predeposit of
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twentyfive per cent of the amount as taken note by the
DRAT i.e. twentyfive per cent of Rs.68,18,92,841/
(Rupees Sixty Eight Crores Eighteen Lakhs Ninety Two
Thousands and Eight Hundred Forty One). To the said
extent, the order dated 27.02.2019 passed by the DRAT
on IA No.511 of 2018 is liable to be modified.
18. It is clarified that the consideration made herein
and debt due quantified is limited to the aspect relating
to predeposit. All other contentions including as to the
actual amount of debt due is left open to be urged in the
pending appeals.
19. In view of the above conclusion the interim
direction to deposit the amount of Rs.20 Crores as
ordered on 22.11.2019 would lose its relevance at this
point of time. Though as per the said direction dated
22.11.2019 the amount was to be deposited within the
time frame and there is noncompliance, in view of the
subsequent development of the final order being passed
in the appeal, we see no reason to proceed further in the
Contempt Petition initiated by the appellant, though at
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an earlier point of time notice was ordered to the
respondent.
20. In the result;
(i) The order dated 16.07.2019 passed by the
High Court of Delhi in WP(C) No.7530 of 2019 is
set aside;
(ii) The order dated 27.02.2019 passed by the
DRAT, Delhi on IA No.511 of 2018 in Appeal
No.311 of 2018 is modified. The respondents No. 1
and 2 are permitted to deposit twentyfive per cent
of Rs.68,18,92,841/(Rupees SixtyEight Crores
Eighteen Lakhs NinetyTwo Thousand and Eight
Hundred FortyOne) and prosecute the Appeal
No.311 of 2018, subject to such deposit being
made within 8 weeks, failing which the appeal shall
not subsist in the eye of law;
(iii) The appeal is accordingly allowed in part. No
costs;
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(iv) The Contempt Petition No.569 of 2020 is
closed as unnecessary;
(iv) Pending application, if any, shall stand
disposed of.
..…………....................CJI.
(S. A. Bobde)
…..…………....................J.
(A. S. Bopanna)
..…..………......................J
(V. Ramasubramanian)
New Delhi,
February 16, 2021
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