Case Note & Summary
The judgment concerns two writ petitions filed by guarantors (Mr. Jaisingrao Ghodke and Smt. Nalini Jadhav) challenging an order dated 4/5/2017 passed by the Debt Recovery Appellate Tribunal (DRAT), Mumbai, which rejected their applications for waiver of pre-deposit under Section 21 of the Recovery of Debts and Bankruptcy Act, 1993 (RDB Act). The petitioners had appealed against a recovery certificate issued by the Debt Recovery Tribunal (DRT) in favor of the Central Bank of India against the principal debtor, M/s Niranjan Alloy Steel Private Limited, and the guarantors. The DRAT directed the guarantors to deposit 50% of the debt amount as a condition for hearing their appeals. The petitioners argued that since the principal debtor had already deposited Rs. 1.5 crores with the DRT, the guarantors should be granted waiver of pre-deposit. The High Court, after hearing counsel for both sides, noted that the petitioners restricted their challenge to the impugned order only. The court observed that the DRAT's order was not sustainable because it failed to consider the substantial deposit already made by the principal debtor. The court held that the power under Section 21 is discretionary and must be exercised judiciously. Since the principal debtor had deposited a significant amount, the guarantors' appeals should not be burdened with an additional pre-deposit. The High Court set aside the impugned order and directed the DRAT to hear the appeals without insisting on pre-deposit. The court also clarified that other prayers in the petitions were not pressed and kept open. The judgment was delivered by a division bench of Justices Anoop V. Mohta and Sunil K. Kotwal on 29th June 2017.
Headnote
A) Debt Recovery - Waiver of Pre-deposit under Section 21 of RDB Act - Guarantors' Liability - The issue was whether the DRAT could waive the pre-deposit condition for guarantors when the principal debtor had already deposited a substantial amount. The High Court held that the Tribunal has discretion to waive or reduce the pre-deposit, and in this case, since the principal debtor had deposited Rs. 1.5 crores, the guarantors' appeal should not be burdened with an additional pre-deposit. The impugned order was set aside, and the DRAT was directed to hear the appeals without insisting on pre-deposit. (Paras 1-5) B) Debt Recovery - Section 21 of RDB Act - Discretion of Appellate Tribunal - The court observed that the Tribunal's order rejecting waiver was not sustainable as it failed to consider the substantial deposit already made by the principal debtor. The High Court emphasized that the power under Section 21 is discretionary and must be exercised judiciously, taking into account the facts of each case. (Paras 3-5)
Issue of Consideration
Whether the Debt Recovery Appellate Tribunal (DRAT) erred in rejecting the guarantors' application for waiver of pre-deposit under Section 21 of the Recovery of Debts and Bankruptcy Act, 1993, despite the principal debtor having already deposited a substantial amount.
Final Decision
The impugned order dated 4/5/2017 is set aside. The DRAT is directed to hear the appeals without insisting on pre-deposit. Rule made absolute in both petitions.
Law Points
- Section 21 of the Recovery of Debts and Bankruptcy Act
- 1993
- waiver of pre-deposit
- guarantors' liability
- discretion of Appellate Tribunal
- substantial deposit by principal debtor
