2021 (2) TMI 1251 - SC - IBC

Supreme Court modifies order on pre-deposit waiver, permits deposit of 25% debt due, appeal allowed.

Kotak Mahindra Bank Pvt. Limited Versus Ambuj A. Kasliwal & Ors.

The Supreme Court set aside the High Court's order allowing a waiver of pre-deposit and modified the Debts Recovery Appellate Tribunal's order. ... Maintainability of appeal - requirement of pre-deposit - permission to respondents No. 1 and 2 herein to prosecute the appeal before the Debts Recovery Appellate Tribunal (DRAT) without predeposit of a portion of the debt determined to be due - validity of this order of High Court of Delhi - HELD THAT:- On perusal of Section 21 of the RDBA, which employs the phrase “appeal shall not be entertained” indicates that it 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 twenty-five per cent of the amount of such debt which is due. Hence the pendulum of discretion to waive pre-deposit is allowed to swing between fifty per cent and twenty-five per cent of the debt due and not below twenty-five 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. 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, it is deemed appropriate that in the peculiar facts and circumstances of this case to permit the predeposit of twentyfive per cent of the amount as taken note by the DRAT i.e. twenty five per cent of ₹ 68,18,92,841/-. 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. The order dated 27.02.2019 passed by the DRAT, Delhi is modified. The respondents No. 1 and 2 are permitted to deposit twenty-five per cent of ₹ 68,18,92,841/- 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 - appeal allowed in part. Issues Involved:1. Waiver of pre-deposit requirement under Section 21 of the Recovery of Debts and Bankruptcy Act, 1993.2. Compliance with the order of deposit directed by the Supreme Court.3. Calculation of the debt due and the effect of compensation received on the debt amount.Issue-wise Detailed Analysis:1. Waiver of Pre-deposit Requirement:The appellant challenged the High Court of Delhi's order allowing respondents to prosecute an appeal before the Debts Recovery Appellate Tribunal (DRAT) without the pre-deposit mandated by Section 21 of the Recovery of Debts and Bankruptcy Act, 1993 (RDBA Act). Section 21 stipulates that an appeal cannot be entertained unless fifty percent of the debt due is deposited, with the Appellate Tribunal having the discretion to reduce this amount to not less than twenty-five percent. The Supreme Court emphasized that a total waiver of pre-deposit is against the statutory provisions and that the High Court's order was not justified. The DRAT had correctly ordered a fifty percent pre-deposit of the debt balance after considering the compensation received by the bank.2. Compliance with the Order of Deposit Directed by the Supreme Court:The Supreme Court had initially directed respondents to deposit Rs. 20 Crores as a condition for staying further proceedings before the DRAT. The respondents failed to comply, leading to a contempt petition by the appellant. However, considering the final order, the Supreme Court deemed further proceedings in the contempt petition unnecessary and closed it.3. Calculation of the Debt Due and the Effect of Compensation Received:The respondents argued that the compensation amount received by the bank during the pendency of the original application should be considered in the pre-deposit calculation. The High Court had concluded that the compensation amount received should be considered, leading to the waiver of the pre-deposit. However, the Supreme Court found that the DRAT had correctly calculated the remaining debt due after accounting for the compensation received. The DRAT had determined that even after the compensation, a balance of Rs. 68,18,92,841 remained due, and ordered a fifty percent pre-deposit of this amount. The Supreme Court modified this to allow a twenty-five percent pre-deposit of the remaining debt due, considering the peculiar facts and circumstances of the case.Conclusion:The Supreme Court set aside the High Court's order and modified the DRAT's order, permitting the respondents to deposit twenty-five percent of the remaining debt due (Rs. 68,18,92,841) within eight weeks to prosecute their appeal. The appeal was allowed in part, and the contempt petition was closed as unnecessary. Pending applications were disposed of accordingly.