Condition to Pre-Deposit Money to Prefer an Appeal and its Validity

 

Introduction

 

Today we will discuss the case of Kotak Mahindra Bank Pvt. Limited v. Ambuj A. Kasliwal and Others, 2021 SCC OnLine SC 95, wherein a question arose with regard to the correctness of an Order passed by the Debt Recovery Appellate Tribunal (DRAT) as well as the High Court, in a matter relating to pre-deposit of debt due, in an appeal before the DRAT. In the present case, the DRAT had ordered deposit of fifty per cent of the amount.

 

Important Legal Provision

 

Section 21 of the Recovery of Debts and Bankruptcy Act, 1993 – “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 twenty-five per cent. of the amount of such debt so due to be deposited under this section.”

 

Observations by the Court

 

According to the Court, S. 21 “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”

 

Therefore, considering the above, the Court opined that “the High Court does not have the power to waive the pre-deposit in its entirety, nor can it exercise discretion which is against the mandatory requirement of the statutory provision as contained in Section 21.” Thus, any waiver of pre-deposit to the entire extent by the High Court would be against the statutory provisions and, therefore, not sustainable in law.

 

Held by the Court

 

In order to further explain S. 21, the Court considered an analogous provision contained in Section 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 relating to pre-deposit in order to avail the remedy of appeal and considered its interpretation in the case of Narayan Chandra Ghosh v. UCO Bank, (2011) 4 SCC 548. The summation of reasoning is provided as under: -

 

1. There is an absolute bar to entertainment of an appeal unless the condition precedent i.e., the condition of pre-deposit, as stipulated, is fulfilled. The language of the provision is clear and admits of no ambiguity.

 

2. “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.”

 

3. No court, much less the Appellate Tribunal, a creature of the Statute itself, can refuse to give full effect to the legal provisions.

 

4. A total waiver would be against the statutory provisions.

 

Concluding Remarks

 

This is another case by the Supreme Court wherein it had to conduct an interpretative exercise to understand the true purport of a legal provision. Condition of pre-deposit is something that may act as a technical barrier against the right of appeal of a litigant if the bar of deposit is too high. However, DRT and DRAT are tribunals that deal exclusively with financial and banking disputes wherein money is of prime importance. It is equally true that unscrupulous parties try to take advantage of the legal proceedings to shy away from paying the banks their lawful dues. Thus, a holistic view would suggest that as long as the condition of pre-deposit is onerous, it is to be sustained by the Courts.

 

Though I concur with the reasoning of the Court, yet the legislature must consider bringing about a change in S. 21 of the Recovery of Debts and Bankruptcy Act, 1993 and further reduce the bar in relation to pre-deposit. Due to Covid-19, many people are suffering immense financial hardships and the legislature must be cognizant of this fact. The financial power of people in general has diminished considerably and in such a scenario, the pre-condition of deposit of 50% of the amount due or even 25% is something that may be excessive for a person on the verge of bankruptcy. For the time being, it would be appropriate if the legislature can reduce this bar to 10% or even lesser.