2019 (12) TMI 221 - HC - Indian Laws

Waiver of the requirement of pre-deposit under Section 21 of the Recovery of Debts and Bankruptcy Act, 1993 - whether the DRAT was justified in declining the Petitioner‟s prayer for waiver of the pre-deposit? HELD THAT - A plain reading of the provisions of section 21 of RDB Act indicates that there is an absolute bar on the DRAT entertaining an appeal, unless the pre-deposit is made with the DRAT by the Appellant of 50% of the amount due from such Appellant as determined by the DRT under Section 19 of the RDB Act. The proviso to Section 21 permits the DRAT to reduce the amount of pre-deposit up to 25% of the amount of such debt but not beyond that. In other words, the discretion of the DRAT is only to reduce the amount of pre-deposit from 50% of the amount of debt to 25% of the amount of debt, but not to waive the requirement of pre-deposit - It should be noticed that appeals to the DRAT can be preferred not only against order of the DRT under Section 19 of the RDB Act but also against the orders of the DRT under Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (SARFAESI Act). Section 21 of the RDB Act is more or less identical to Section 18 of SARFAESI Act. In both provisions, for an appeal to be entertained before the DRAT, it is mandatory for the Appellant to make a pre-deposit of 50% of the amount of debt due from such Appellant. While under the RDB Act the amount of debt is that determined by the DRT, under the second proviso to Section 18(1) of the SARFAESI Act it could be 50% of the amount of debt as claimed by the secured creditors or determined by the DRT, whichever is less - In either instance there is no discretion with the DRAT to waive the pre-deposit. Unlike Section 21 of the RDB Act, the first proviso to Section 35F of the CE Act requires the Commissioner (Appeals) or the CESTAT to consider if the deposit of duty demanded or penalty levied would cause undue hardship to such person‟ and gives the power to the Commissioner (Appeals) or the CESTAT to dispense with such deposit subject to such conditions as he or it may deem fit to impose so as to safeguard the interest of the revenue.‟ This discretionary power to waive the deposit is missing in Section 21 of the RDB Act. Even before this Court, no plea was advanced about the Petitioner being in any financial hardship and not being able to make the pre-deposit of 50% of the amount found due by the DRT. In the circumstances, the Court is unable to find any error having been committed by the DRAT in declining to grant a waiver of the pre-deposit - there are no merits in the petition - petition dismissed.

Summary

Issues Involved:
1. Challenge to the DRAT order declining waiver of pre-deposit requirement under Section 21 of the Recovery of Debts and Bankruptcy Act, 1993 (RDB Act).
2. Interpretation of Section 21 of the RDB Act and its mandatory pre-deposit requirement.
3. Comparison with similar provisions under the SARFAESI Act and the Central Excise Act.
4. Examination of financial hardship as a ground for waiver of pre-deposit.

Detailed Analysis:

1. Challenge to the DRAT Order:
The Petitioner, Hassad Food Company Q.S.C., challenged an order dated 7th August 2019 by the Debts Recovery Appellate Tribunal (DRAT), which declined the waiver of the pre-deposit requirement under Section 21 of the RDB Act. The Petitioner argued that it was unfair to demand any further sum from them, as they were victims of fraud by Bush Foods and the consortium banks.

2. Interpretation of Section 21 of the RDB Act:
Section 21 of the RDB Act mandates a pre-deposit of 50% of the amount of debt due from the appellant as determined by the Tribunal under Section 19. The proviso allows the DRAT to reduce this amount to not less than 25% but does not permit a complete waiver. The Court emphasized that the language of Section 21 is clear and leaves no room for ambiguity, making the pre-deposit a mandatory condition for the appeal to be entertained.

3. Comparison with Similar Provisions:
The Court compared Section 21 of the RDB Act with Section 18 of the SARFAESI Act, which also mandates a pre-deposit of 50% of the debt amount for appeals, with the DRAT having the discretion to reduce it to 25%. The Supreme Court in Narayan Chandra Ghosh v. UCO Bank (2011) 4 SCC 548 upheld the mandatory nature of this pre-deposit. The Court also discussed Section 35F of the Central Excise Act, which allows for the waiver of pre-deposit in cases of undue hardship, noting that such discretionary power is absent in Section 21 of the RDB Act.

4. Examination of Financial Hardship:
The DRAT had enquired whether the Petitioner was in financial hardship, to which the Petitioner only responded that they were victims of fraud and would suffer irreparable loss if required to make the pre-deposit. The Court noted that no plea of financial hardship was advanced before it, and thus found no error in the DRAT's decision to decline the waiver of the pre-deposit.

Conclusion:
The Court dismissed the petition, upholding the DRAT's decision that the pre-deposit requirement under Section 21 of the RDB Act is mandatory and cannot be waived. The petitioner's arguments based on undue hardship and comparisons with other statutory provisions were found unconvincing, as Section 21 provides no discretion for a complete waiver of the pre-deposit.