2021 (2) TMI 1251 - SC - IBC

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

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. ... Pre-deposit of amount of debt due on filing appeal under Section 21 of the Recovery of Debts and Bankruptcy Act, 1993 - discretion of Appellate Tribunal to reduce pre-deposit to not less than twenty-five per cent - mandatory nature of statutory pre-deposit as condition precedent to entertain appeal - inadmissibility of total waiver of pre-deposit by courts contrary to statutory mandate - modification of appellate pre-deposit requirement in appropriate cases on facts - analogy to pre-deposit jurisprudence under Section 18 of SARFAESI ActPre-deposit of amount of debt due on filing appeal under Section 21 of the Recovery of Debts and Bankruptcy Act, 1993 - mandatory nature of statutory pre-deposit as condition precedent to entertain appeal - inadmissibility of total waiver of pre-deposit by courts contrary to statutory mandate - High Court erred in permitting complete waiver of pre-deposit and setting aside DRAT's direction for pre-deposit. - HELD THAT: - Section 21 bars the Appellate Tribunal from entertaining an appeal by a person from whom debt is due unless fifty per cent of the amount so due (subject to reduction by the Tribunal to not less than twenty-five per cent for reasons recorded) is deposited. The proviso permits reduction only down to twenty-five per cent and does not allow total waiver. The High Court's conclusion that receipt of compensation by the bank before the DRT's decree warranted complete waiver was beyond the scope of writ remedy and impermissibly negated the statutory condition precedent. Absent a categorical finding that the decretal amount was fully satisfied, the High Court could not lawfully waive pre-deposit in entirety; the DRAT's view that a balance remained due and its direction for pre-deposit was not shown to be erroneous. The Court relied on analogous precedent under the SARFAESI regime holding pre-deposit to be a mandatory condition subject only to the limited reduction permitted by statute. [Paras 11, 12, 13, 14, 15]Order of the High Court setting aside DRAT's pre-deposit direction is set aside; total waiver of pre-deposit is not permissible.Discretion of Appellate Tribunal to reduce pre-deposit to not less than twenty-five per cent - modification of appellate pre-deposit requirement in appropriate cases on facts - In the peculiar facts of the case, pre-deposit is to be fixed at twenty-five per cent of the decretal balance noted by DRAT, rather than fifty per cent or total waiver. - HELD THAT: - Although pre-deposit is ordinarily fifty per cent of the debt due, the proviso permits reduction to not less than twenty-five per cent for reasons to be recorded. The actual quantum of debt for final adjudication is left to the DRAT and execution, but for the limited purpose of enabling prosecution of the appeal the Court accepts the DRAT's computation of the outstanding balance as Rs. 68,18,92,841 and, in view of (i) substantial appropriation of compensation towards the decree, (ii) remaining mortgaged property and guarantor liability, and (iii) the peculiar facts of the case, permits pre-deposit of twenty-five per cent of that balance. All other contentions on quantum remain open for DRAT to decide on merits. [Paras 16, 17, 18]DRAT's order is modified to permit respondents No.1 and 2 to deposit twenty-five per cent of Rs. 68,18,92,841 within eight weeks and prosecute the appeal; failure to deposit will render the appeal non-existent.Modification of appellate pre-deposit requirement in appropriate cases on facts - procedural consequence of non-deposit - Consequential directions including disposal of the contempt petition and timeline for deposit were determined. - HELD THAT: - Given the modification of the pre-deposit requirement and the Court's direction permitting prosecution of the appeal on deposit of twenty-five per cent within eight weeks, the earlier interim direction to deposit Rs.20 crores loses relevance. Non-compliance with the earlier interim order therefore does not warrant further contempt proceedings in view of the final order. The Court directed that the respondents must make the stipulated deposit within eight weeks failing which the appeal shall not subsist; pending applications stand disposed of. [Paras 19, 20]Contempt petition closed as unnecessary; respondents permitted to prosecute appeal subject to deposit within eight weeks; pending applications disposed of.Final Conclusion: The High Court's order permitting complete waiver of pre-deposit is set aside. DRAT's direction is modified to allow respondents No.1 and 2 to prosecute the appeal on depositing twenty-five per cent of the decretal balance of Rs. 68,18,92,841 within eight weeks; failure to deposit will extinguish the appeal. Contempt proceedings are closed as unnecessary and other applications are disposed of. 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.