Case Note & Summary
The petitioner, Continental Construction Limited, was a defendant in a recovery suit filed by the Export Import Bank of India (Exim Bank) in the Debt Recovery Tribunal (DRT), Bombay, for recovery of Rs. 102,93,09,734.98 due under an agreement dated 6-2-1995. The DRT decreed the claim. Separately, the State Bank of India also obtained a decree against the petitioner from DRT, Delhi. The petitioner appealed against the Exim Bank decree before the Debt Recovery Appellate Tribunal (DRAT), Delhi, and simultaneously filed an application under Section 21 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, seeking waiver of the mandatory pre-deposit of 75% of the decreed amount. The DRAT refused to waive the deposit, leading the petitioner to file the present writ petition under Article 226 of the Constitution before the Bombay High Court. The petitioner argued that it was a sick company under the Board for Industrial and Financial Reconstruction (BIFR) and that requiring the deposit would cause severe financial hardship and render the appeal infructuous. The respondents, Exim Bank and the State Bank of India, opposed the waiver, contending that the petitioner had not demonstrated any prima facie case or hardship. The High Court examined the scope of Section 21 and the discretion of the DRAT. It held that the DRAT had considered the relevant factors, including the petitioner's financial condition and the merits of the appeal, and had not acted arbitrarily. The court noted that the petitioner had not placed sufficient material to show that the deposit would cause irreparable hardship or that the appeal had strong chances of success. Consequently, the writ petition was dismissed, and the DRAT's order refusing waiver was upheld.
Headnote
A) Debt Recovery - Pre-deposit under Section 21 - Waiver - The Debt Recovery Appellate Tribunal has discretion to waive or reduce the pre-deposit amount required under Section 21 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, but such discretion must be exercised judicially, considering the financial hardship of the appellant and the prima facie merits of the appeal. In the present case, the petitioner failed to demonstrate that the deposit of 75% of the decreed amount would cause undue hardship, and the DRAT's order refusing waiver was upheld. (Paras 1-10) B) Debt Recovery - Appeal - Pre-deposit - Hardship - The mere fact that the appellant is a company under liquidation or has large outstanding liabilities does not automatically entitle it to waiver of pre-deposit. The appellant must show that the deposit would render it impossible to pursue the appeal or cause irreparable injury. The court held that the DRAT's refusal to waive the deposit was not perverse or arbitrary. (Paras 5-10)
Issue of Consideration
Whether the Debt Recovery Appellate Tribunal (DRAT) was justified in refusing to waive the condition of pre-deposit under Section 21 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, while entertaining the appeal against the decree passed by the Debt Recovery Tribunal (DRT).
Final Decision
The High Court dismissed the writ petition, upholding the DRAT's order refusing to waive the pre-deposit under Section 21 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.
Law Points
- Section 21 of the Recovery of Debts Due to Banks and Financial Institutions Act
- 1993
- mandatory pre-deposit
- waiver of deposit
- discretion of Appellate Tribunal
- hardship
- prima facie case
