Case Note & Summary
The petitioners, Ms. Bani Kaur Bedi and Mr. Aman Singh Bedi, filed writ petitions under Article 227 of the Constitution challenging an order dated 29.7.2013 passed by the Debt Recovery Appellate Tribunal (DRAT), Chennai, in AIR (SA) 1015/2012. The DRAT had directed the petitioners to deposit a sum of Rs.9,23,08,407/- (approximately 50% of the claimed amount of Rs.18,46,16,813.41) as a condition for hearing their appeal against the proceedings initiated by HDFC Bank Ltd under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The DRAT further ordered that if the deposit was not made by 27.8.2013, the appeal would stand automatically dismissed. The petitioners contended that the condition was arbitrary, disproportionate, and violated principles of natural justice as it effectively denied them the right to appeal. The High Court, after hearing both sides, observed that the DRAT had not considered the petitioners' financial capacity or the merits of the appeal before imposing such a heavy pre-deposit condition. The court held that the power to impose conditions under Section 18 of the SARFAESI Act must be exercised judiciously and not in a manner that defeats the right of appeal. The impugned order was set aside, and the DRAT was directed to hear the appeal on its merits without insisting on any pre-deposit. The court also directed the DRAT to dispose of the appeal expeditiously.
Headnote
A) Constitutional Law - Article 227 - Supervisory Jurisdiction - High Court can interfere with orders of tribunals that are arbitrary or without jurisdiction - The impugned order of DRAT imposing a pre-deposit condition was set aside as it was disproportionate and not based on any assessment of the merits of the appeal (Paras 1-5).
B) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Section 18 - Appeal - Pre-deposit - The requirement of pre-deposit under Section 18 is not absolute and the appellate tribunal has discretion to waive or reduce the amount - The DRAT's order directing deposit of Rs.9.23 crores without considering the petitioners' financial capacity or the merits of the appeal was held to be arbitrary (Paras 2-5).
C) Civil Procedure - Interim Orders - Proportionality - Any interim order must be proportionate and not oppressive - The condition of depositing 50% of the claimed amount within a short period was held to be disproportionate and likely to defeat the right of appeal (Paras 3-5).
Issue of Consideration
Whether the Debt Recovery Appellate Tribunal (DRAT) could impose a condition of pre-deposit of 50% of the claimed amount as a condition for hearing the appeal, and whether such condition was arbitrary and disproportionate.
Final Decision
The High Court allowed the writ petitions, set aside the impugned order of the DRAT dated 29.7.2013, and directed the DRAT to hear the appeal on its merits without insisting on any pre-deposit. The DRAT was also directed to dispose of the appeal expeditiously.
Law Points
- Article 227 of the Constitution of India
- Section 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act
- 2002
- Section 13(2) of SARFAESI Act
- Interim relief
- Pre-deposit condition
- Proportionality
- Natural justice
Case Details
2013 LawText (KAR) (09) 1
Writ Petition Nos. 38093-94 / 2013 (GM-DRT)
D.H. Waghela, Chief Justice, B.V. Nagarathna, Justice
Sri Ajesh Kumar S for petitioners, Sri Sreevatsa and Ms. Pallavi Smriti for respondent
Ms. Bani Kaur Bedi and Mr. Aman Singh Bedi
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Nature of Litigation
Writ petition under Article 227 challenging an interim order of the Debt Recovery Appellate Tribunal (DRAT) imposing a pre-deposit condition for hearing an appeal under the SARFAESI Act.
Remedy Sought
Petitioners sought to set aside the DRAT order dated 29.7.2013 and direct the DRAT to hear the appeal without insisting on pre-deposit.
Filing Reason
The DRAT directed the petitioners to deposit Rs.9,23,08,407/- as a condition for hearing their appeal, failing which the appeal would stand automatically dismissed.
Previous Decisions
The DRAT had passed the impugned order in Interim Application No. 177/2013 in AIR (SA) 1015/2012.
Issues
Whether the DRAT could impose a pre-deposit condition of 50% of the claimed amount without considering the petitioners' financial capacity or the merits of the appeal.
Whether such condition was arbitrary and disproportionate, violating the right to appeal under Section 18 of the SARFAESI Act.
Submissions/Arguments
Petitioners argued that the pre-deposit condition was arbitrary, disproportionate, and effectively denied them the right to appeal.
Respondent bank supported the DRAT order, contending that the condition was reasonable given the large amount involved.
Ratio Decidendi
The power to impose conditions under Section 18 of the SARFAESI Act must be exercised judiciously and not in a manner that defeats the right of appeal. A pre-deposit condition that is disproportionate and imposed without considering the appellant's financial capacity or the merits of the appeal is arbitrary and liable to be set aside under Article 227.
Judgment Excerpts
Invoking Article 227 of the Constitution, the petitioners have sought to challenge the order dated 29.7.2013 of the Debt Recovery Appellate Tribunal (DRAT) at Chennai in AIR (SA) 1015/2012, whereby Interim Application No. 177/2013 in the appeal was disposed with the order as under: 'The petitioners are directed to deposit a sum of Rs.9,23,08,407/- into this tribunal on or before 27.8.2013. In the event the said deposit is not made into the tribunal on or before 27.8.2013 this petition shall stand automatically dismissed.'
The background of facts, briefly recorded in the impugned order, states that the amount claimed in Section 13(2) notice was Rs.18,46,16,813.41 ps. and it was seen that the petitioners had not made any payment.
Procedural History
The petitioners filed an appeal before the Debt Recovery Appellate Tribunal (DRAT), Chennai, against proceedings initiated by HDFC Bank under the SARFAESI Act. The DRAT, by order dated 29.7.2013, directed the petitioners to deposit Rs.9,23,08,407/- as a condition for hearing the appeal, failing which the appeal would stand automatically dismissed. The petitioners then filed the present writ petitions under Article 227 of the Constitution challenging that order.
Acts & Sections
- Constitution of India: Article 227
- Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002: Section 13(2), Section 18
