2005 (12) TMI 584 - HC - Companies Law

Summary

Issues:
1. Challenge to the proviso to Section 18(1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 as ultra vires Article 14 of the Constitution of India.

Detailed Analysis:
The petitioner, a retired Government servant, challenged the order of the Debt Recovery Appellate Tribunal (DRAT) and the proviso to Section 18(1) of the Securitisation Act, requiring pre-deposit for appeal under Section 18, alleging it to be ultra vires Article 14 of the Constitution. The respondent, a company availing credit facilities, faced action due to irregularities in repayment, leading to possession notices for mortgaged properties. The petitioner filed a writ petition challenging the Act's validity and subsequent actions by the bank. Despite deposits made and appeals filed, the Tribunal dismissed the petitioner's appeal, requiring a 25% deposit of the outstanding debt to entertain the appeal.

The petitioner contended the Constitutional validity of the proviso to Section 18(1) of the Act, arguing against the requirement of a 50% deposit for appeal consideration by the Appellate Tribunal. The Appellate Tribunal had directed the petitioner to deposit 25% of the debt, which the petitioner sought to waive due to being a retired individual with no means to make the deposit. However, the Tribunal held it lacked discretion to reduce the deposit below 25%, leading to the petitioner filing a writ petition challenging this decision.

The High Court, in its judgment, emphasized that the right of appeal is statutory and not inherent, allowing the Legislature to impose conditions for its exercise. It noted that the proviso to Section 18 required only a 50% deposit of the debt, reducible to a minimum of 25%, a provision found in various enactments and upheld by the Supreme Court in previous cases. Citing legal precedents, the Court highlighted that the right to appeal is subject to statutory conditions and can be circumscribed by the terms of the grant, ultimately dismissing the petition challenging the proviso's validity under Article 14 of the Constitution. The Court referenced cases where similar pre-deposit requirements for appeals were upheld, reinforcing the legality of such provisions and dismissing the petitioner's contentions against the deposit requirement for appeal consideration.

In conclusion, the High Court upheld the validity of the proviso to Section 18(1) of the Act, emphasizing the statutory nature of the right to appeal and the Legislature's authority to impose conditions for its exercise. The Court dismissed the petition, affirming the legality of the deposit requirement for appeal consideration and citing legal precedents supporting such provisions.