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2017 DIGILAW 995 (CAL)

Prime Timbers Pvt. Ltd. v. State Bank of India

2017-12-19

SANJIB BANERJEE

body2017
JUDGMENT : SANJIB BANERJEE, J. 1. The petitioners question the propriety of an order passed by the Debts Recovery Appellate Tribunal requiring a pre-deposit to be made as condition precedent to entertaining an appeal arising out of an interlocutory order passed in proceedings instituted under Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. 2. The petitioners first refer to the judgment in Mardia Chemicals Limited reported at (2004) 4 SCC 311 , that held at paragraph 60 of the report, that the requirement of a pre-deposit under Section 17 of the Act of 2002 rendered the remedy under such provision illusory and nugatory. The petitioners say that the same logic should hold for Section 18 of the said Act. 3. The petitioners also rely on a judgment reported at (2013) 4 CHN (Cal) 270 which dealt with the appeal provisions in the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. Section 20 of the Act of 1993 recognises the right of appeal from every order passed by a Debts Recovery Tribunal but Section 21 of the 1993 Act requires the deposit of a part of the amount of debt due in certain cases when filing the appeal. On an interpretation of the right of appeal and in what situations the deposit would be required to be made, it was held that the wording of Section 21 of 1993 Act limited the class of persons required to make the deposit in terms thereof to only those from whom a debt had been determined by the Tribunal to be due under Section 19 of the 1993 Act. Thus, the appeal and deposit provisions in Sections 20 and 21 of the 1993 Act were read to imply that the deposit under Section 21 would not have to be made unless the appellant was a person against whom a determination had been made by the Tribunal that a quantum of debt was due from him to any bank or financial institution. 4. The principle in such judgment does not apply in the present case. Section 18 of the Act of 2002 reads as follows: "18. 4. The principle in such judgment does not apply in the present case. Section 18 of the Act of 2002 reads as follows: "18. Appeal to Appellate Tribunal.-(1)Any person aggrieved, by any order made by the Debts Recovery Tribunal under section 17, may prefer an appeal along with such fee, as may be prescribed to an Appellate Tribunal within thirty days from the date of receipt of the order of Debts Recovery tribunal. Provided that different fees may be prescribed for filing an appeal by the borrower or by the person other than the borrower: Provided further that no appeal shall be entertained unless the borrower has deposited with the Appellate Tribunal fifty per cent. of the amount of debt due from him, as claimed by the secured creditors or determined by the Debts Recovery Tribunal, whichever is less: Provided also that the Appellate Tribunal may, for the reasons to be recorded in writing, reduce the amount to not less than twenty-five per cent. of debt referred to in the second proviso. (2) Save as otherwise provided in this Act, the Appellate Tribunal shall, as far as may be, dispose of the appeal in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) and rules made thereunder." 5. The second proviso to Section 18 of the Act of 2002 is the provision relevant for the present consideration. It may first be noticed that Section 18 of the Act of 2002 is couched in the widest manner - as appellate provisions ordinarily are - where the right of appeal is not restricted to a party but is also extended to any person aggrieved by an order made by a Tribunal under Section 17 of such Act. 6. There may be several classes of persons who may seek to prefer an appeal against an order made by a Tribunal under Section 17 of the Act of 2002. In the most common situations, it may be a borrower who seeks to prefer an appeal, or a secured creditor; or even a person whose interest in any property is sought to be affected by any measures taken under Section 13(4) of the Act of 2002 but who may not be a borrower or may not even have any connection with a secured creditor or a borrower. The first proviso to Section 18 of the Act of 2002 recognises that there could be several classes of persons who could prefer appeals against orders made by a Tribunal under Section 17 of such Act. Different fees are permitted to be prescribed for such different classes of persons in terms of the first proviso to such Section. 7. Again, it must not be lost sight of that the word "any" has been used twice over in the opening limb of Section 18(1) of the Act of 2002: thus, implying that any person aggrieved by an order of the Tribunal under Section 17 of the Act may prefer an appeal there against and the nature of the order may be final or interlocutory. 8. The primary thrust of the petitioners' argument in this case is that just as there is a distinction between appeals from interlocutory orders and appeals from final orders under the 1993 Act, a similar distinction must be found in Section 18 of the Act of 2002 since both the 1993 Act and the Act of 2002 operate in similar fields. 9. The above submission of the petitioners is not acceptable. The most rudimentary tenets of statutory interpretation require the words of a provision to be given their full meaning in their ordinary sense and as used in the context. The second proviso to Section 18 of the Act of 2002 makes no distinction between borrowers against whom there is only an outstanding claim which has not ripened to a debt adjudged as due and borrowers who have suffered an order of adjudication and found to be debtors of secured creditors. 10. The word "borrower" is defined in Section 2(1)(f) of the Act of 2002. If a prospective appellant answers to the description of a "borrower" in Section 2(1)(f) of the Act of 2002, such prospective appellant would, per force, be obliged to make the statutory pre-deposit as a condition precedent to exercising his right of appeal under Section 18 of the Act of 2002. 11. The expression "whichever is less" at the end of the second proviso to Section 18 of the Act of 2002 makes the distinction between the quantum of deposit to be made by a borrower who has come through the process of adjudication of the debt claimed from him and a borrower who awaits such adjudication. 11. The expression "whichever is less" at the end of the second proviso to Section 18 of the Act of 2002 makes the distinction between the quantum of deposit to be made by a borrower who has come through the process of adjudication of the debt claimed from him and a borrower who awaits such adjudication. In an appeal preferred by a borrower against a final order by which his debt due to the secured creditor has been adjudged, such borrower appellant will have to deposit 50 per cent of the amount adjudged to be due from him to the secured creditor to be entitled to lodge or pursue his appeal from the final order of adjudication. On the other hand, a borrower who seeks to prefer an appeal from an order passed by the Tribunal under Section 17 of the Act of 2002, but whose debt to the secured creditor has not been adjudged by the Tribunal till then, would have to deposit 50 per cent of the amount claimed by the secured creditor to be due from such borrower to be entitled to maintain the appeal. The second situation is a case of an appeal from an interlocutory order passed under Section 17 of the Act of 2002. 12. Section 21 of the 1993 Act only provides for the deposit of a part of the debt adjudged to be due as condition precedent to an appeal being preferred. A fortiori, such condition would apply only to an appellant who is a borrower and the debt due from whom has been adjudged by the Tribunal. Like Section 21 of the 1993 Act, the precondition stipulated in the second proviso to Section 18 of the Act of 2002 only attracts borrowers no doubt; but, unlike Section 21 of the 1993 Act, the second proviso to Section 18 of the Act of 2002 covers both borrowers against whom claims are outstanding and borrowers who have been adjudged to be debtors of the secured creditors. Thus, unlike the appeal provisions of the 1993 Act, borrower appellants under the Act of 2002 are required to make a pre-deposit to maintain appeals against both interlocutory and final orders. 13. Thus, unlike the appeal provisions of the 1993 Act, borrower appellants under the Act of 2002 are required to make a pre-deposit to maintain appeals against both interlocutory and final orders. 13. If a person aggrieved by an order passed under Section 17 of the Act of 2002 seeks to prefer an appeal and such person does not answer to the description of a borrower within the meaning of the Act of 2002, he will only be required to pay the fees prescribed for his class of appellants while preferring the appeal; he would not be required to make any pre-deposit. Again, since the definition of a "borrower" in Section 2(1)(f) of the Act of 2002 includes both a principal debtor and a guarantor; the extent of the deposit that is required to be made by a prospective borrower-appellant will depend on the quantum of the claim against him or the quantum of debt adjudged to be due from him. It is possible that both the principal debtor and the guarantor seek to prefer appeals from the same interlocutory order passed under Section 17 of the Act of 2002. The extent of the deposits to be made by the two will be different as the amount claimed from the principal debtor may vary from the amount claimed against the guarantor. 14. The expression "whichever is less" at the end of the second proviso to Section 18 of the Act of 2002 has a balancing effect. The proviso may otherwise have been irrational if such expression was not incorporated therein. Say, a borrower against whom a claim of a secured creditor is outstanding seeks to prefer an appeal against the order of adjudication that finds him liable as a debtor to an extent somewhat less than what is claimed by the secured creditor. The expression "whichever is less" would apply in such a scenario so that the borrower who seeks to prefer an appeal in such a case is not subjected to a demand for the statutory pre-deposit on the basis of the claim any more since the claim of the secured creditor would have merged into the order of adjudication made against such borrower. 15. 15. Though it may not be relevant for the present purpose, but it appears on a plain reading of the provision that once a deposit has been made by a borrower, particularly, if the order impugned is an interlocutory order, the provision may not warrant a deposit being required again if a further interlocutory order were to be assailed by the same borrower while his deposit in respect of the previous appeal is retained by the appellate authority. 16. The petitioners' contention that the appeal provision under the Act of 2002 imposes an onerous condition on a prospective appellant and makes his right of appeal illusory is exceptionable. An appeal, as is elementary, is a creature of a statute and it is open to the legislature to impose such conditions as may be deemed fit for the exercise of the right of appeal. Of course, if brazenly unconscionable conditions are imposed, the same may be justiciable; but the body of judicial authorities that precedes the present consideration does not regard a predeposit to be such an onerous condition as would make a right of appeal illusory. 17. A further contention has been raised by the appellant that in view of Section 13 (2) of the Act and the conditions imposed by a secured creditor on a constituent, in certain cases it may be impossible to raise the money required for the pre-deposit even though the money may be available to the prospective appellant. Such a ground cannot be considered appropriate to challenge the requirement of a pre-deposit in an appeal provision. In any event, there is a third proviso to Section 18 of the Act of 2002 that permits the appellate tribunal to halve the quantum of deposit in appropriate cases. Thus, the aspect of hardship is addressed in the provision itself and a degree of latitude has been given to the appellate authority to relax the quantum of deposit. 18. However, it cannot be said, unlike in the matter pertaining to Section 18 of the 1993 Act, that a borrower would not have to make a pre-deposit while invoking Section 18 of the Act of 2002 against an interlocutory order passed under Section 17 of the Act of 2002. The language of Section 21 of the 1993 Act is quite distinct from the clear words used in Section 18 of the Act of 2002. 19. The language of Section 21 of the 1993 Act is quite distinct from the clear words used in Section 18 of the Act of 2002. 19. For the reasons aforesaid, the appellate order impugned, declining to receive the petitioners' appeal without the pre-deposit, cannot be faulted on such count. C.O. 2506 of 2017 is dismissed, but without any order as to costs. 20. It is made clear that the merits of the petitioners' case have not been gone into and it will be open to the petitioners to pursue their remedies in accordance with law before the appropriate forum. 21. Certified website copy of this order be given to the parties on usual undertakings.