2016 (7) TMI 1629 - HC - Indian Laws

Requirement of pre-deposit - whether provision under Section 21 of RDDBI Act relating to pre-deposit for entertaining an appeal is applicable to the order passed by the Debts Recovery Tribunal on an interim application filed under Rule 12(5) of the Rules of 1993? - existence of proper reasoning or not - HELD THAT - A simple literal construction is required to be applied to the provisions of Section 21 of the RDDBI Act. The reference to amount of debt due as determined by the Tribunal under Section 19 occurring in Section 21 is of significance. It is relevant and important because in the facts of the present case the petitioners have raised issue that there was no determination done as per Section 19 of the RDDBI Act. Rule 12(5) cannot be separated in two parts. The said Rule clearly stipulates that on failure of the defendant to pay the amount to the extent of the admission within a period of one month from the date of order a certificate in accordance with Section 19 of the RDDBI Act would be issued. The words may issue a certificate occurring in Rule 12 (5) according to the learned counsel would mean that only in certain contingencies the issuance of certificate could get delayed /postponed and a party to the proceeding may independently challenge issuance of certificate itself - A recovery certificate would amount to formal expression of the adjudication. The Act and the Rules do not contemplate separate proceedings to be initiated much less adjudicated for getting the recovery certificate issued. The process of adjudicating is required to be gone into may be to limited extent or on an interim application to find out the quantum of money to be due. Ordinarily the final adjudication would take place upon conclusion of proceeding filed under Section 19 of the RDDBI Act. But there could be interim adjudication of part of the claim while the remaining adjudication of the balance of the claim is determined in a final judgment or order - It would not be permissible to read provisions of Rule 12(5) in a way to defeat the object of Sections 19 and 21 of the RDDBI Act. The Rules would not override the statutory provisions. It is elementary that the rules prescribed by a subordinate legislation cannot be in excess or in derogation of the statute under which it is made. The order passed by the DRT under Rule 12(5) of the Rules of 1993 amounts to an interim determination of the amount due. In the facts the petitioners-borrowers/guarantors would be liable to pay an amount towards pre-deposit under the provisions of Section 21 of the RDDBI Act - if a person files an appeal to DRAT against an order passed by DRT under Rule 12(5) of the Rules of 1993 the provisions of Section 21 of the RDDBI Act gets attracted irrespective of as to whether a recovery certificate was issued or not. Petition dismissed.

Summary

Issues Involved:
1. Applicability of Section 21 of the RDDBI Act to orders passed under Rule 12(5) of the Debts Recovery (Procedure) Rules, 1993.
2. Requirement of pre-deposit for entertaining an appeal under Section 21 of the RDDBI Act.
3. Liability of guarantors under the RDDBI Act.
4. Adequacy of reasoning provided by the Debt Recovery Appellate Tribunal (DRAT) in its order.

Detailed Analysis:

1. Applicability of Section 21 of the RDDBI Act to Orders Passed Under Rule 12(5) of the Debts Recovery (Procedure) Rules, 1993:
The court examined whether Section 21 of the RDDBI Act, which mandates a pre-deposit for appeals, applies to orders passed under Rule 12(5) of the Debts Recovery (Procedure) Rules, 1993. The petitioners argued that Rule 12(5) orders are interim and do not fall under Section 19 determinations. However, the court held that Rule 12(5) orders are interim determinations of the amount due and are part of the adjudication process under Section 19. Therefore, appeals against such orders attract the pre-deposit requirement under Section 21.

2. Requirement of Pre-deposit for Entertaining an Appeal Under Section 21 of the RDDBI Act:
The petitioners contended that the pre-deposit requirement should not apply to interim determinations under Rule 12(5). The court disagreed, stating that the pre-deposit requirement under Section 21 applies to any determination of debt due, whether interim or final. The court emphasized that the scheme of the RDDBI Act mandates a pre-deposit of 75% of the determined debt for appeals, except when the Appellate Tribunal waives or reduces the amount for reasons recorded in writing. In this case, the DRAT had directed a pre-deposit of Rs. 2 Crores, which was less than the mandatory 75%.

3. Liability of Guarantors Under the RDDBI Act:
The petitioners argued that guarantors should not be liable under Rule 12(5) orders. The court rejected this argument, noting that the Guarantee Deed included clauses binding the guarantors to admissions made by the borrower. The court held that guarantors are equally responsible for the debt determined by the Tribunal and are liable to pay the amount due.

4. Adequacy of Reasoning Provided by the Debt Recovery Appellate Tribunal (DRAT) in Its Order:
The petitioners claimed that the DRAT's order lacked adequate reasoning. The court acknowledged the importance of providing reasons to minimize arbitrariness and ensure transparency. However, the court found that the DRAT had exercised its discretion appropriately by directing a pre-deposit of Rs. 2 Crores, which was significantly less than the mandatory 75%. The court did not find it necessary to interfere with the DRAT's order or remand the matter for further reasoning.

Conclusion:
The court concluded that the order passed by the DRT under Rule 12(5) amounts to an interim determination of the amount due, and the provisions of Section 21 of the RDDBI Act apply to appeals against such orders. The petitioners were directed to deposit the pre-deposit amount as specified by the DRAT within four weeks, failing which the appeal would stand dismissed. The petitions were dismissed with no order as to costs, and the rule was discharged.