Interim debt determination triggers pre-deposit under DRT appeal rules, and a reduced deposit direction was upheld.
An interim order of the Debts Recovery Tribunal under Rule 12(5) was treated as a determination of debt for the purpose of the Section 21 pre-deposit requirement, because it formed part of the Section 19 scheme and reflected an adjudication of the admitted liability even before issuance of a recovery certificate. The Court also held that guarantors were bound by the borrower's admission on the facts. A direction to deposit a reduced amount, well below the statutory threshold, was not vitiated by lack of reasons or by any arbitrary exercise of discretion, so interference was declined.
Issues: (i) Whether an order passed by the Debts Recovery Tribunal under Rule 12(5) of the Debts Recovery (Procedure) Rules, 1993 constitutes a determination of debt attracting the pre-deposit requirement under Section 21 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993; (ii) Whether the Appellate Tribunal's direction to deposit Rs. 2 crores suffered from such absence of reasons or excess of discretion as to warrant interference.
Issue (i): Whether an order passed by the Debts Recovery Tribunal under Rule 12(5) of the Debts Recovery (Procedure) Rules, 1993 constitutes a determination of debt attracting the pre-deposit requirement under Section 21 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.
Analysis: Section 21 was construed on its plain language, especially the expression that the appeal lies only when the appellant deposits 75% of the amount of debt so due as determined by the Tribunal under Section 19. The Court held that an order under Rule 12(5), even if passed on an interim application and even before a recovery certificate is issued, is an interim adjudication of the admitted debt and forms part of the Section 19 scheme. The recovery certificate is only the formal consequence of that determination. The Court further held that the guarantors were bound by the admission operating against the borrower in the facts of the case.
Conclusion: Yes. An order under Rule 12(5) attracts Section 21, and the petitioners were liable to comply with the pre-deposit condition.
Issue (ii): Whether the Appellate Tribunal's direction to deposit Rs. 2 crores suffered from such absence of reasons or excess of discretion as to warrant interference.
Analysis: The Court noted that the amount directed to be deposited was substantially below the statutory 75% threshold and was based on the debt found due. In that setting, the challenge based on inadequacy of reasons did not justify interference. The discretion exercised by the Appellate Tribunal was not found arbitrary or legally unsustainable so as to require remand or quashing.
Conclusion: No. The impugned order did not warrant interference on the ground of want of reasons or improper exercise of discretion.
Final Conclusion: The writ petitions failed because the tribunal's order under Rule 12(5) was treated as an interim determination of debt, thereby attracting the statutory pre-deposit requirement, and the appellate order was sustained.
Ratio Decidendi: For the purpose of Section 21 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, a tribunal order under Rule 12(5) of the Debts Recovery (Procedure) Rules, 1993 amounting to an interim determination of debt is sufficient to trigger the pre-deposit requirement in an appeal.
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AI Drafter ✕
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