TaxTMI 
TaxTMI 
2011 (7) TMI 1003
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....impugned order decides that application. 3. The Petitioners have challenged the constitutional validity of the provisions of the first and second provisos to section 18 of the Act on the ground that they are discriminatory. The submission is based on a comparison with the provisions of section 21 of the Recovery of Debts due to Banks and Financial Institutions Act, 1993. According to the Petitioners while the Act of 1993 confers a discretion upon the Appellate Tribunal to allow a complete waiver of the pre-deposit, the discretion of the Appellate Tribunal, while entertaining an appeal under section 18 of the Securitisation Act is curtailed. By the first proviso to section 18(1) an appeal cannot be entertained unless the borrower has deposited an amount of 50 per cent of the debt due as claimed by the secured creditor, or as determined by the Tribunal, whichever is less. By the second proviso, the Appellate Tribunal is empowered for reasons to be recorded in writing to reduce the amount to not less than 25 per cent of the debt referred to in the second proviso. 4. Notice was issued to the Attorney General of India in view of the constitutional challenge. The learned Additional....
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....ts and enforcement of security interest and for matters connected therewith or incidental thereto. The provisions of the Ordinance would enable banks and financial institutions to realise long-term assets, manage problem of liquidity, asset liability mismatches and improve recovery by exercising powers to take possession of securities, sell them and reduce non- performing assets by adopting measures for recovery of reconstruction." 6. The second and third provisos to sub-section (1) of section 18 were inserted by Amending Act 30 of 2004. The reasons for the amendment are explained in the Statement of objects and reasons. The statement adverts to the judgment of the Supreme Court in Mardia Chemicals Ltd. v. Union of India [2004] 51 SCL 513 which had declared as ultra vires a provision under which a deposit of 75 per cent of the amount claimed was necessary before an appeal could be entertained. The amendment was brought about in view of the judgment of the Supreme Court and with a view to discourage borrowers from postponing the repayment of their dues and to enable secured creditors to speedily recover their debts, if required by enforcement of security or other measures specifi....
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....nt of the Supreme Court the rationale for the provisions of section 18 has been considered and determined in Narayan Chandra Ghosh v. UCO Bank [2011] 4 SCC 548. A Bench of two learned Judges of the Supreme Court while construing the provisions of the second and third provisos noted that the Appellate Tribunal has the power to reduce the amount, for reasons to be recorded in writing, to not less than 25 per cent of the debt, referred to in the second proviso. The judgment of the Supreme Court lays down that the right of appeal being a creation of statute, it was open to Parliament to condition that right subject to an order of deposit and to restrict the discretion of the Appellate Tribunal in the matter of granting a waiver. The Supreme Court held as follows : "The language of the said proviso is clear and admits of no ambiguity. It is well-settled 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 ....
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....he above reasons, Securitisation Act states that the enforcement could take place by non-adjudicatory process and that the said Act removes all fetters under the above circumstances on the rights of the secured creditor." [Emphasis supplied]. 13. These observations of the Supreme Court emphasize at more than once place that the Securitisation Act allows enforcement by a non-adjudicatory process. The Act removes fetters on the rights of the secured creditor. The Securitisation Act has therefore been held to create an additional remedy. Consistent with the object of Parliament of facilitating the enforcement of security interests by a non-adjudicatory process, Parliament could conceivably impose a condition by which it could require the making of a deposit as a condition precedent to the maintainability of an appeal under section 18. Such a condition has been imposed under the second proviso to sub-section (1) of section 18 by which an appeal cannot be entertained unless the borrower has deposited with the Appellate Tribunal 50 per cent of the amount debt due as claimed by the secured creditor, or as determined by the Tribunal, whichever is less. Parliament conferred upon the Appe....