Kotak Mahindra Bank Pvt. Limited vs Ambuj A. Kasliwal on 16 February, 2021

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Supreme Court of India
Kotak Mahindra Bank Pvt. Limited vs Ambuj A. Kasliwal on 16 February, 2021Author: A.S. Bopanna

Bench: Hon’Ble The Justice, A.S. Bopanna, V. Ramasubramanian

REPORTABLE

IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 538 OF 2021
(Arising out of SLP (CIVIL) No.21555 of 2019)

Kotak Mahindra Bank Pvt. Limited .…Appellant(s)

Versus

Ambuj A. Kasliwal & Ors. …. Respondent(s)

WITH
CONT.PET.(C)No.569/2020 in SLP(C) No. 21555/2019

JUDGMENT

A.S. Bopanna,J.

Leave granted.

2. The appellant is before this Court assailing the order

dated 16.07.2019 passed in W.P.(C) No.7530 of 2019

whereby the High Court of Delhi has permitted the
Signature Not Verified

respondents No. 1 and 2 herein to prosecute the appeal
Digitally signed by
Madhu Bala
Date: 2021.02.16
16:53:53 IST
Reason:

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before the Debts Recovery Appellate Tribunal (‘DRAT’ for

short) without pre­deposit of a portion of the debt

determined to be due, as provided under Section 21 of

the Recovery of Debts and Bankruptcy Act, 1993 (‘RDBA

Act’ for short). The appellant/Bank claiming to be

aggrieved by the said order is before this Court in the

instant appeal.

3. This Court while taking note of the matter at the

first instance, had through the order dated 22.11.2019

directed the respondents No.1 and 2 to deposit an

amount of Rs.20 Crores before the Registry of this Court

within a period of 8 weeks. In the said order it was

indicated that the further proceedings in the appeal

before the DRAT shall remain stayed till the next date of

hearing or till the date of deposit of the said amount by

the respondents No.1 and 2, whichever is earlier. The

deposit as directed by this Court has not been made by

the respondents No.1 and 2. The appellant/Bank,

therefore, alleging that there is disobedience of the order

passed by this Court has filed the accompanying

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Contempt Petition seeking action against respondents 1

and 2. In that background, since both these matters

pertain to the same issue, they are taken up together,

considered and disposed of by this common order.

4. The brief facts leading to the present proceedings is

that the respondent No.3, namely, Hindon River Mills

Ltd. had availed financial assistance from the respondent

No.6­ IFCI Ltd. The respondents No.1 and 2 had offered

their personal guarantee in respect of the said financial

assistance. The respondents No.1 to 3 had defaulted in

re­payment of the dues and the account having been

classified as non­performing asset was thereafter

auctioned by respondent No.6­IFCI Ltd. wherein the

appellant herein was the successful bidder and

accordingly, the unpaid debt and non­performing asset

was assigned in their favour. The assignment as made

was assailed by the respondents No. 1 to 3 before the

High Court in WP(C) No.14999 of 2006 which came to be

dismissed and the SLP(C) No. 35004 of 2011 filed was

taken note by this Court and in the said proceedings the

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settlement which was entered into between the parties

was recorded and disposed of. As per the settlement, the

respondents No. 1 to 3 had agreed to repay the sum of

Rs.145 Crores with interest at 15% per annum subject to

the same being repaid on or before 31.07.2012. The

respondents No. 1 to 3 are stated to have not adhered to

the terms of settlement and the re­payment was not

made. The appellant Bank, therefore, instituted recovery

proceedings by filing an application before the Debts

Recovery Tribunal (‘DRT’ for short), New Delhi in O.A.

No.281 of 2015. In the said proceedings the appellant

Bank claimed that the respondents No. 1 to 3 would be

liable to pay the entire outstanding since the benefit of

the settlement wherein the outstanding amount was

frozen had not been availed within the time frame.

Accordingly, the sum of Rs. 572,18,77,112/­(Rupees Five

Hundred Seventy­Two Crores Eighteen Lakhs Seventy­

Seven Thousand and One Hundred Twelve), which was

due as on 31.12.2014 along with interest and other

charges was claimed before the DRT.

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5. When this was the position, during the pendency of

O.A.No.281 of 2015 before the DRT the respondent

No.7/National Highways Authority of India (‘NHAI’ for

short), acquired a portion of the mortgaged property

belonging to respondent No.3 and deposited the

compensation amount of Rs.62,31,87,312/­(Rupees

Sixty­Two Crores Thirty­One Lakhs Eighty­Seven

Thousand and Three Hundred Twelve), before the DRT.

The compensation was thereafter enhanced by the

District Magistrate (Arbitrator) Ghaziabad and a further

sum of Rs.72,96,12,827/­(Rupees Seventy­Two Crores

Ninety­Six Lakhs Twelve Thousand and Eight­Hundred

Twenty­Seven) was deposited. Thus, in all a sum of

Rs.152,81,07,159/­(Rupees One Hundred Fifty­Two

Crores Eighty­One Lakhs Seven Thousand and One

Hundred Fifty­Nine) was the compensation amount which

was deposited on behalf of respondent No.3 relating to

the mortgaged property, which was credited to the

account of respondent No.3. With these developments in

the background, the DRT had proceeded to consider the

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claim application and ultimately ordered issue of recovery

certificate through the order dated 15.03.2018. Through

the said order, as against the claim, the DRT had limited

the decretal amount to Rs.145 Crores with future interest

at 9% per annum till the realisation, on reducing

balance. It was further ordered therein that the amount

would be payable after taking into consideration the

amount of Rs.152,81,07,159/­(Rupees One Hundred

Fifty­Two Crores Eighty­One Lakhs Seven Thousand and

One Hundred Fifty­Nine) paid during the pendency of the

proceedings.

6. The appellant/Bank as well as respondents No. 1

to 3 claiming to be aggrieved by the order dated

15.03.2018 passed by DRT have preferred appeals before

the DRAT. This Court at this juncture is not required to

consider the merits of the rival contentions relating to the

loan transaction and the quantum of recovery thereof

etc., which is the matter arising in the appeal before

DRAT. The present proceeding is limited only with regard

to the issue pertaining to the pre­deposit contemplated in

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law insofar as the appeal filed by the respondents No.1

and 2 herein, before the DRAT. In that regard, the

respondents No.1 and 2 herein, in their Appeal No.311 of

2018 before the DRAT had also filed an application in IA

No.511 of 2018 seeking waiver of pre­deposit amounting

to fifty per cent of the debt determined by the DRT. The

DRAT having noticed the contentions on the said aspect

and also taking into consideration that the amount of

Rs.152,81,07,159/­(Rupees One Hundred Fifty­Two

Crores Eighty­One Lakhs Seven Thousand and One

Hundred Fifty­Nine) was received by the appellant Bank,

had in that context noted that the balance of the debt

due works out to Rs.68,18,92,841/­ (Rupees Sixty­Eight

Crores Eighteen Lakhs Ninety­Two Thousand and Eight

Hundred Forty­One). Hence, DRAT through the order

dated 27.02.2019 directed that fifty per cent of the said

amount is to be deposited. Review filed against the same

was dismissed on 09.04.2019.

7. The respondents No.1 and 2 claiming to be

aggrieved by the orders dated 27.02.2019 and

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09.04.2019 approached the High Court of Delhi in WP(C)

No.7530 of 2019. The High Court having adverted to the

rival contentions and being swayed by the fact that the

appellant/Bank has recovered the sum of

Rs.152,81,07,159/­(Rupees One Hundred Fifty­Two

Crores Eighty­One Lakhs Seven Thousand and One

Hundred Fifty­Nine), arrived at the conclusion that the

respondents No.1 and 2 are to be permitted to prosecute

the appeal without pre­deposit and directed accordingly.

It is in that view, the appellant/Bank claiming to be

aggrieved by such order dated 16.07.2019 passed by the

High Court is before this Court in the instant appeal.

8. Heard Mr. V.Giri, learned Senior Advocate for the

appellant, Mr. Mukul Rohtagi and Mr. Ritin Rai, learned

Senior Advocates for the respondents and perused the

appeal papers.

9. As seen, though the sequence which led to the

proceedings before the DRT and DRAT is taken note and

referred in some detail, the short issue for consideration

is with regard to the correctness or otherwise of the order

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passed by the DRAT and the High Court of Delhi in the

matter relating to pre­deposit of the debt due, in an

appeal before the DRAT. In order to address the said

issue, it would be appropriate to take note of Section 21

of the Recovery of Debts and Bankruptcy Act, 1993 which

provides for deposit of the amount of debt due on filing

the appeal. Section 21 of the RDBA reads as hereunder: ­

“Deposit of amount of debt due, on filing
appeal – Where an appeal is preferred by any
person from whom the amount of debt is due
to a bank or a financial institution or a
consortium of banks or financial institutions,
such appeal shall not be entertained by the
Appellate Tribunal unless such person has
deposited with the Appellate Tribunal [fifty
per cent.] of the amount of debt so due from
him as determined by the Tribunal under
section 19:
Provided that the Appellate Tribunal may, for
reasons to be recorded in writing, [reduce the
amount to be deposited by such amount
which shall not be less than twenty­five per
cent. of the amount of such debt so due] to
be deposited under this section.”
(emphasis supplied)

10. A perusal of the provision which employs the

phrase “appeal shall not be entertained” indicates that it

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injuncts the Appellate Tribunal from entertaining an

appeal by a person from whom the amount of debt is due

to the Bank, unless such person has deposited with the

Appellate Tribunal, fifty percent of the amount of debt so

due from him as determined by the Tribunal under

Section 19 of the Act. The proviso to the said Section,

however, grants the discretion to the Appellate Tribunal

to reduce the amount to be deposited, for reasons to be

recorded in writing, but such reduction shall not be less

than twenty­five per cent of the amount of such debt

which is due. Hence the pendulum of discretion to waive

pre­deposit is allowed to swing between fifty per cent and

twenty­five per cent of the debt due and not below

twenty­five per cent, much less not towards total waiver.

It is in that background, keeping in perspective the said

provision, the DRAT has in the instant case ordered

deposit of fifty per cent of the amount. The respondents

No.1 and 2 while seeking waiver of the deposit have

essentially projected the case to indicate that the recovery

certificate ordered by the DRT is for the sum of Rs.145

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Crores with interest at 9% per annum and the amount

realised by the Bank from the compensation amount

payable to respondent No.3 is itself a sum of

Rs.152,81,07,159/­(Rupees One Hundred Fifty Two

Crores Eighty One Lakhs Seven Thousand and One

Hundred Fifty Nine) and as such there is no debt due.

11. In that regard the High Court has concluded as

hereunder: ­

“9. Having heard learned senior counsels
for the parties, we are of the considered view
that learned DRAT has not viewed the aspect
of pre­deposit correctly in the present case.
The amount of Rs.152,81,07,159/­ was
received by the respondent­bank during the
pendency of the Original Application. The
respondent­bank did not amend its Original
Application to claim that it has adjusted the
said amount, and did not limit its claim for
the balance amount. Consequently, while
adjudicating the Original Application, the
DRT has proceeded on the basis that the
respondent­bank is bound by the settlement
amount of Rs.145 crores, and is entitled to
future interest thereon at the rate of 9% per
annum from 5th July, 2012 onwards till
realization on the reducing balance, after
taking into account the amount of
Rs.152,81,07,159/­ received during the
pendency of the Original Application.

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 10. Aforesaid being the position, merely
because the amount of Rs.152,81,07,159/­
was received by the respondent­bank before
passing of the final judgment, and not
thereafter, would make no difference while
considering the aspect of pre­deposit that the
debtor, or the guarantor would have to
deposit in terms of Section 21 of the
aforesaid Act.”

12. The extracted portion indicates that the High Court

has proceeded at a tangent while adverting to the aspect

of recovery made towards the loan amount from the land

acquisition compensation payable to respondent No.3.

The conclusion appears to be that the receipt of the

compensation amount even though was before passing of

the decree, would wipe out the decretal amount of Rs.145

Crores with interest at 9% per annum, though it has not

been expressly stated so. Per contra, the DRAT by its

order dated 27.02.2019 while directing the pre­deposit of

fifty per cent of the amount had taken note of the fact

that if the decretal amount as ordered by the DRT is

taken into consideration and the amount received by the

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Bank towards the compensation amount is credited, the

balance of the decretal amount payable by respondents

No.1 to 3 would work out to Rs.68,18,92,841/­ (Rupees

Sixty Eight Crores Eighteen Lakhs Ninety Two Thousand

and Eight Hundred Forty One). It is in that view, the

DRAT has ordered pre­deposit of fifty per cent of the said

amount which still remains to be a debt due. On that

aspect, though the ultimate correctness of the actual

amount due is a matter for calculation to be made in the

execution proceedings, for the present, for the purpose of

pre­deposit if the decree/recovery certificate issued by

the DRT is taken into consideration the position is clear

that even if the amount of compensation is appropriated,

either before or after the decree, there would still be

outstanding amount payable which would be the subject

matter of the appeal in DRAT, apart from the fact that the

appellant Bank in their appeal are claiming the entire

amount which has fallen due since the terms of

settlement was not adhered to.

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13. Thus, when prima facie it was taken note by the

DRAT that further amount was due and the pre­deposit

was ordered, without finding fault with such conclusion

the High Court was not justified in setting aside the

orders passed by the DRAT. As noted from the extracted

portion of the order passed by the High Court, all that the

High Court has concluded is that the benefit of the

receipt of Rs.152,81,07,159/­(Rupees One Hundred Fifty

Two Crores Eighty One Lakhs Seven Thousand and One

Hundred Fifty Nine) as against the decretal amount

cannot be denied though it was received before passing of

the final judgment. Such conclusion in any event could

not have tilted the balance in favour of the respondents

No.1 and 2 to waive the entire pre deposit, unless the

High Court had rendered a categorical finding that the

entire decretal amount stands satisfied from such receipt

and there was no debt due which in any event was

beyond the scope of consideration in a petition of the

present nature. On the other hand, as stated, the DRAT

having taken note of the decretal amount, the receipt of

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the amount credited as compensation and, having further

noted the debt is still due, has directed the pre­deposit

limited to that extent.

14. Therefore, in the facts and circumstances arising

herein, when further amount is due and payable in

discharge of the decree/recovery certificate issued by the

DRT in favour of the appellant/Bank, the High Court

does not have the power to waive the pre­deposit in its

entirety, nor can it exercise discretion which is against

the mandatory requirement of the statutory provision as

contained in Section 21, which is extracted above. In all

cases fifty per cent of the decretal amount i.e. the debt

due is to be deposited before the DRAT as a mandatory

requirement, but in appropriate cases for reasons to be

recorded the deposit of at least twenty­five per cent of the

debt due would be permissible, but not entire waiver.

Therefore, any waiver of pre­deposit to the entire extent

would be against the statutory provisions and, therefore,

not sustainable in law. The order of the High Court is,

therefore, liable to be set aside.

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15. It is noticed that this Court while considering an

analogous provision contained in Section 18 of the

Securitisation and Reconstruction of Financial Assets

and Enforcement of Security Interest Act, 2002

(‘SARFAESI’ for short) relating to pre­deposit in order to

avail the remedy of appeal has expressed a similar

opinion in the case of Narayan Chandra Ghosh vs.

UCO Bank and Others (2011) 4 SCC 548, which reads

as hereunder: ­

7. Section 18(1) of the Act confers a statutory
right on a person aggrieved by any order
made by the Debts Recovery Tribunal
under Section 17 of the Act to prefer an
appeal to the Appellate Tribunal. However,
the right conferred under Section 18(1) is
subject to the condition laid down in the
second proviso thereto. The second proviso
postulates 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. However, under the third
proviso to the sub­section, the Appellate
Tribunal has the power to reduce the
amount, for the reasons to be recorded in
writing, to not less than twenty­five per cent

16
of the debt, referred to in the second proviso.
Thus, there is an absolute bar to
entertainment of an appeal under Section
18 of the Act unless the condition precedent,
as stipulated, is fulfilled. Unless the borrower
makes, with the Appellate Tribunal, a pre­
deposit of fifty per cent of the debt due from
him or determined, an appeal under the said
provision cannot be entertained by the
Appellate Tribunal. The language of the said
proviso is clear and admits of no ambiguity.
8. It is well­settled that when a Statute
confers a right of appeal, while granting the
right, the Legislature can impose conditions
for the exercise of such right, so long as the
conditions are not so onerous as to amount
to unreasonable restrictions, rendering the
right almost illusory. Bearing in mind the
object of the Act, the conditions hedged in
the said proviso cannot be said to be
onerous. Thus, we hold that the requirement
of pre­deposit under sub­section (1)
of Section 18 of the Act is mandatory and
there is no reason whatsoever for not giving
full effect to the provisions contained
in Section 18 of the Act. In that view of the
matter, no court, much less the Appellate
Tribunal, a creature of the Act itself, can
refuse to give full effect to the provisions of
the Statute. We have no hesitation in holding
that deposit under the second proviso
to Section 18(1) of the Act being a condition
precedent for preferring an appeal under the
said Section, the Appellate Tribunal had
erred in law in entertaining the appeal

17
without directing the appellant to comply
with the said mandatory requirement.
9. The argument of learned counsel for the
appellant that as the amount of debt due
had not been determined by the Debts
Recovery Tribunal, appeal could be
entertained by the Appellate Tribunal
without insisting on pre­deposit, is equally
fallacious. Under the second proviso to sub­
section (1) of Section 18 of the Act the
amount of fifty per cent, which is required to
be deposited by the borrower, is computed
either with reference to the debt due from
him as claimed by the secured creditors or
as determined by the Debts Recovery
Tribunal, whichever is less. Obviously, where
the amount of debt is yet to be determined
by the Debts Recovery Tribunal, the
borrower, while preferring appeal, would be
liable to deposit fifty per cent of the debt due
from him as claimed by the secured
creditors. Therefore, the condition of pre­
deposit being mandatory, a complete waiver
of deposit by the appellant with the Appellate
Tribunal, was beyond the provisions of the
Act, as is evident from the second and third
provisos to the said Section. At best, the
Appellate Tribunal could have, after
recording the reasons, reduced the amount
of deposit of fifty per cent to an amount not
less than twenty­five per cent of the debt
referred to in the second proviso. We are
convinced that the order of the Appellate
Tribunal, entertaining appellant’s appeal
without insisting on pre­deposit was clearly
unsustainable and, therefore, the decision of

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 the High Court in setting aside the same
cannot be flawed.”
(emphasis supplied)

16. Having arrived at the above conclusion the issue is

also with regard to the extent to which pre­deposit is to

be ordered in the instant case. Though the learned Senior

Advocates on either side have indicated different figures

as the actual debt due as on today, we do not propose to

enter into that aspect of the matter since the actual

amount due is a matter which would be taken note by

the DRAT while considering the appeal on merits and at

the point of recovery if any, in the execution proceedings.

However, for the present we would take note of the

amount as indicated in the order dated 27.02.2019

passed by the DRAT. Hence, for the purpose of

determining the pre­deposit, the decretal amount due is

taken at Rs.68,18,92,841/­ (Rupees Sixty­Eight Crores

Eighteen Lakhs Ninety­Two Thousand and Eight

Hundred Forty­One). Mr. Mukul Rohtagi, learned Senior

Advocate would contend that a portion of property

19
belonging to respondent No.3 has been acquired and the

remaining property is still under mortgage and as such

pre­deposit would be burdensome to the respondents

No.1 and 2, more particularly when the entire

compensation amount is deposited and major portion of

the debt due is discharged.

17. As already noted, a total waiver would be against

the statutory provisions. However, in the instant case,

taking note that though the issue relating to the actual

amount due is to be considered by the DRAT, keeping in

view the fact that the DRT has taken into consideration

the earlier settlement and has accordingly decreed the

claim to that extent and towards such decree since

payment of a major portion is made, though by

appropriation of the compensation amount and

admittedly since the remaining properties belonging to

respondent No.3 is available by way of mortgage and the

respondents No.1 and 2 are the personal guarantors, we

deem it appropriate that in the peculiar facts and

circumstances of this case to permit the pre­deposit of

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twenty­five per cent of the amount as taken note by the

DRAT i.e. twenty­five per cent of Rs.68,18,92,841/­

(Rupees Sixty Eight Crores Eighteen Lakhs Ninety Two

Thousands and Eight Hundred Forty One). To the said

extent, the order dated 27.02.2019 passed by the DRAT

on IA No.511 of 2018 is liable to be modified.

18. It is clarified that the consideration made herein

and debt due quantified is limited to the aspect relating

to pre­deposit. All other contentions including as to the

actual amount of debt due is left open to be urged in the

pending appeals.

19. In view of the above conclusion the interim

direction to deposit the amount of Rs.20 Crores as

ordered on 22.11.2019 would lose its relevance at this

point of time. Though as per the said direction dated

22.11.2019 the amount was to be deposited within the

time frame and there is non­compliance, in view of the

subsequent development of the final order being passed

in the appeal, we see no reason to proceed further in the

Contempt Petition initiated by the appellant, though at

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an earlier point of time notice was ordered to the

respondent.

20. In the result;

(i) The order dated 16.07.2019 passed by the

High Court of Delhi in WP(C) No.7530 of 2019 is

set aside;

(ii) The order dated 27.02.2019 passed by the

DRAT, Delhi on IA No.511 of 2018 in Appeal

No.311 of 2018 is modified. The respondents No. 1

and 2 are permitted to deposit twenty­five per cent

of Rs.68,18,92,841/­(Rupees Sixty­Eight Crores

Eighteen Lakhs Ninety­Two Thousand and Eight

Hundred Forty­One) and prosecute the Appeal

No.311 of 2018, subject to such deposit being

made within 8 weeks, failing which the appeal shall

not subsist in the eye of law;

(iii) The appeal is accordingly allowed in part. No

costs;

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 (iv) The Contempt Petition No.569 of 2020 is

closed as unnecessary;

(iv) Pending application, if any, shall stand

disposed of.

..…………………………..CJI.
(S. A. Bobde)

…..…………………………..J.
(A. S. Bopanna)

..…..………………………….J
(V. Ramasubramanian)

New Delhi,
February 16, 2021

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