2018 (11) TMI 576 - HC - Indian Laws

Waiver of pre-deposit of debts - Recovery of Debts - Section 21 of the Banks and Financial Institutions Act, 1993 - Nature and effect of amendment to Section 21 of the Act of 1993 as brought about by the Amendment Act of the year 2016 - Held that - Ordinarily, the amendment of substantive law is presumed to be prospective in operation and the amendment of procedural law is presumed to be retrospective in operation - The pre-amendment provisions of Section 21 of the Act 1993 required the appellant to deposit 75% of the decreetal sum which the DRAT had the discretion to waive or reduce, depending upon the facts and circumstances of the individual case. The said Section came to be amended by substitution of certain expressions by Act 44 of 2016 w.e.f. 01.09.2016. By such amendment, the quantum of the amount of pre-deposit has been reduced to 50% in place of 75%; and the power of DRAT to waive has been restricted to the extent of 25%. The 2016 Amendment to the provisions of Section 21 of the Act of 1993, in substance, relates not to the right of appeal as such, but to the condition subject to which the said right becomes exercisable; ordinarily such conditions fall within the domain of procedure especially when the alteration of said conditions is not substantial, inasmuch as even after amendment, discretion is left with the DRAT to reduce the amount of pre-deposit, although not below 25% of the decreetal amount. Therefore, the law by which such conditions are varied cannot be construed to be substantive law but shall remain within the realm of procedural law - the contention of the petitioner that the amendment is prospective in effect, is not acceptable. Even if the Amendment Act 2016 that takes away the discretion of the DRAT to waive the condition of pre-deposit is assumed to be that of substantive law, the Amendment being by way of substitution, has to be construed as being of retrospective effect. Substitution of a provision of law or the words in a provision of law results in replacement by the new provision when new words are substituted in place of existing ones; therefore, the amended provision should be read as if it existed from the inception of the enactment. Also, even after amendment, the substance of the proviso to Section 21 is retained and what is trimmed is the condition subject to which the right of appeal is to be exercised. The trimming of condition, in essence, relates to the law of procedure, which is normally retrospective in operation. Therefore, the contention of the petitioner that the amendment is prospective in effect, is not well founded. Petition dismissed - decided against petitioner.

Summary

Issues Involved:
1. Retrospective application of the amendment to Section 21 of the Recovery of Debts due to Banks and Financial Institutions Act, 1993.
2. Justification of the DRAT's order for pre-deposit.
3. Petitioner's contention on deposits and financial hardship.
4. Conduct of the petitioner.

Detailed Analysis:

1. Retrospective Application of the Amendment to Section 21 of the Act of 1993:

Amendment of Section 21 of the Act of 1993 is retrospective:
The court examined whether the amendment to Section 21 of the Act of 1993, which limits the waiver of pre-deposit to 25%, is retrospective. The court noted that the right of appeal is substantive, but the conditions for exercising this right are procedural. The amendment, which reduced the pre-deposit requirement from 75% to 50% and limited the waiver to 25%, is procedural and thus retrospective. The court cited precedents, including *Shiv Shakti Co-op. Housing Society v. Swaraj Developers* and *Shamrao V Parulekar v. District Magistrate*, to support this view. The court also discussed the principles of substitution in amendments, concluding that the amendment should be read as if it existed from the inception of the enactment.

Alternative Argument:
Even if the amendment is considered substantive, the court argued that the substitution implies retrospective effect. The court referenced the Full Bench decision in *Hassan Co-operative Milk Producers Societies Union Ltd. v. State of Karnataka Department of Co-operative Societies*, which held that amendments by substitution are retrospective unless they lead to repugnancy, inconsistency, or absurdity.

Conclusion on Retrospective Application:
The court rejected the petitioner's argument that the amendment is prospective, emphasizing that the amendment is procedural and thus retrospective.

2. Justification of the DRAT's Order for Pre-deposit:

DRAT's Approach:
The court found that the DRAT's order directing the petitioner to deposit ?3,101 Crore as a pre-condition for restoring the appeal was justified. The appeal was dismissed for non-compliance and non-prosecution, and the petitioner’s subsequent actions raised doubts about his bona fides. The court clarified that the pre-deposit requirement was not a pre-condition for restoring the appeal but a statutory requirement under Section 21 of the Act for maintaining the appeal.

Evaluation of Financial Hardship:
The court noted that the petitioner did not come forward to deposit any amount to show bona fides. The discretionary order by the DRAT on 25.04.2018, dismissing the petitioner’s application for extension of time, was also found to be justified.

3. Petitioner's Contention on Deposits and Financial Hardship:

Deposits in Court Registry:
The court rejected the petitioner's argument that a considerable amount was lying in deposit in the Registry of the court in various proceedings arising out of the same loan transaction. The petitioner failed to provide material particulars regarding the deposits, and the court could not form an opinion in the absence of relevant material.

Attachment and Freezing Orders:
The court dismissed the petitioner's argument that all his properties and money were under attachment/freezing orders. The court noted that the petitioner had received substantial sums of money after the DRT's order and before the freezing orders were issued. These facts discredited the petitioner’s claim of financial hardship.

4. Conduct of the Petitioner:

Culpable Conduct:
The court highlighted the petitioner's culpable conduct, including questionable transactions and non-disclosure of assets. The Supreme Court had found the petitioner guilty of contempt, and the Commercial Court in the U.K. had issued a freezing injunction against him. The court emphasized that the petitioner's conduct disentitled him from discretionary remedies.

Conclusion:
The court dismissed the writ petitions, finding them devoid of merit. The retrospective application of the amendment to Section 21 of the Act of 1993 was upheld, and the DRAT's order for pre-deposit was justified. The court also rejected the petitioner's arguments regarding deposits and financial hardship, citing his culpable conduct as a significant factor.