Rajasthan High Court - Jaipur
Xlo India Limited vs Union Of India on 27 September, 2019
Author: Narendra Singh Dhaddha
Bench: Narendra Singh Dhaddha
HIGH COURT OF JUDICATURE FOR RAJASTHAN
BENCH AT JAIPUR
D.B. Civil Writ Petition No.25734/2018
With
D.B. Civil Misc. Stay Application No.21511/2018
1. XLO India Limited, A Company Incorporated And
Registered Under The Companies Act, 1956 Having
Registered Office At Dhanwatay Building, Wing 1, 80 Dr.
Annie Besant Road, Worli, Mumbai -400 018 Through
Director S.C. Saran
2. S.C. Saran S/o (Late) Shri. C.B. Saran, (Director /
Guarantor) Of M/s. XLO India Limited And R/o Devonshire
House 3, West Field Estate Bhulabhai Desai Road Mumbai -
400026
----Petitioners
Versus
1. Union Of India, Ministry Of Finance, Rajpath Marg, E-Block,
Central Secretariat, New Delhi 110011 Through Principal
Secretary
2. International Asset Reconstruction Company Pvt. Ltd.,
Having Registered Office At A-301 Millennium Plaza, Tower-
A, Sector -27, Gurugram - 122 002 Through Senior Vice-
President
3. IFCI Ltd., A Company Incorporated And Registered Under
The Companies Act, 1956 Having Its Registered Office At
Bank Of Baroda Bhawan, 16, Sansad Marg, New Delhi -
110 001. And Having Branch Office At Anand Bhawan,
Sansar Chandra Road, Jaipur - 302 001 Through Chief
General Manager
4. XLO United Clutch Products Ltd., A Company Registered
Under The Companies Act, 1956 Having Registered Office
At 127-128, Matasya Industrial Area Desula, Alwar
Through The Official Liquidator
----Respondents
For Petitioner(s) : Ms. Suruchi Kasliwal
For Respondent(s) : Mr. R.D. Rastogi, Additional Solicitor
General, with
Mr. Amitosh Pareek
Mr. Kersi J. Mehta
HON'BLE THE ACTING CHIEF JUSTICE
HON'BLE MR. JUSTICE NARENDRA SINGH DHADDHA
Judgment
(Downloaded on 06/06/2021 at 10:22:21 PM)
(2 of 55) [CW-25734/2018]
//Reportable//
Per Hon'ble Mr. Acting Chief Justice Mohammad Rafiq:
27/09/2019
This writ petition has been jointly preferred by XLO India
Limited, a company incorporated and registered under the
Companies Act, 1956, having its registered office at Mumbai, and its
Director Mr. S.C. Saran, challenging the constitutional validity of
Section 30A of the Recovery of Debts and Bankruptcy Act, 1993,
with the alternative prayer that the words 'debt due as determined
by the Tribunal' in that provision should be severed from its
remaining part. Prayer has also been made for quashing the order
dated 23.10.2018 passed by the Registrar, Debts Recovery Tribunal,
Jaipur, in Miscellaneous Appeal and order dated 18.07.2018 passed
by the Recovery Officer-II, Debts Recovery Tribunal, Jaipur in
Execution Case No.11/2008. Grievance of the petitioners is that
the Registrar, Debts Recovery Tribunal, by the aforesaid order dated
23.10.2018 has declined to register the Miscellaneous Appeal
preferred by the petitioners against the order dated 18.07.2018
passed by the Recovery Officer-II, DRT, Jaipur, who thereby allowed
the I.A. filed by the respondent no.2 - International Asset
Reconstruction Company Pvt. Ltd. (for short, 'the IARC') vide order
dated 11.08.2017 and directed attachment of 599993 shares of
Hindustan Hardy Spicers Ltd. held by the petitioner no.1.
It is pertinent to mention here that there have been
amendments to the various provisions of Recovery of Debts due to
Banks and Financial Institutions Act, 1993, which has been given a
new nomenclature and is now known as the Recovery of Debts and
Bankruptcy Act, 1993 by the Finance Act, 2017.
(Downloaded on 06/06/2021 at 10:22:21 PM)
(3 of 55) [CW-25734/2018]
Facts giving rise to this writ petition are that loan facility under
the Project Financing Participation Certificate Scheme (for short,
'the PFPCS') for a sum of Rs.159.00 lakh was extended by the
respondent no.3 - IFCI Ltd. and ICICI Bank Ltd., which has now
been succeeded by respondent no.2 herein, respectively of Rs.80
lakh and Rs.79 lakhs, on interest at the rate of 12.5%, to
respondent no.4 - XLO United Clutch Products Ltd. The respondent
no.3 - IFCI Ltd. executed a loan agreement dated 30.03.1985 for
self and on behalf of the ICICI Bank Ltd. as participant in the said
PFPCS lending, in favour of the respondent no.4. The financial
assistance sanctioned by the respondent no.3 was duly secured by
creating a primary security of the current assets of the respondent
no.4 by way of hypothecation on 30.03.1985, whereby first charge
was created on all the movable properties of the respondent no.4 in
favour of the respondent no.3. Over and above the primary security,
collateral security in the form of mortgage by deposit of original title
deeds of the immovable properties of the respondent no.4 were also
created on 24.09.1985 in favour of the respondent no.2, thereby
duly securing repayment of the entire financial assistance
sanctioned and allowed by the respondent no.3 and the ICICI Bank
Ltd., which is predecessor of the respondent no.2. In due
compliance of the terms of the sanction, a deed of guarantee dated
14.06.1985 was executed by and between the petitioner no.1 as
corporate guarantor, respondent no.4 as the principal borrower and
IFCI Ltd., in terms of Clause no.3.4 of the Loan Agreement dated
30.03.1985. Another loan agreement for a sum of Rs.15 lakh was
extended by the IFCI Limited on payment of interest at the rate of
12% per annum. A deed of hypothecation creating first charge on
the movable property of respondent no.4 was executed on
(Downloaded on 06/06/2021 at 10:22:21 PM)
(4 of 55) [CW-25734/2018]
08.04.1988 in favour of only respondent no.3 as it alone sanctioned
and allowed the financial assistance to the respondent no.4. The
joint mortgage by deposit of title deeds of immovable properties of
the respondent no.4 was also created and extended by the
respondent no.4 in favour of the respondent no.3 on 27.07.1988.
Additionally, a deed of guarantee came to be executed by the
petitioner only in favour of the respondent no.3 thereby duly
securing the repayment of second loan sanctioned by the
respondent no.3 to the respondent no.4. Upon failure of the
respondent no.4 to maintain the financial discipline in its account,
the respondent no.3 recalled the entire financial assistance
sanctioned and allowed to the respondent no.4 vide recall letter
dated 21.08.1996 thereby demanding payment of Rs.2,92,26,743/-
due to the respondent no.3, and Rs.3,37,65,029/- due to the ICICI
Bank Ltd.
Upon failure of the respondent no.4 and the petitioners herein
to repay the dues, an Original Application No.55/1998 was
instituted on 08.05.1997 by the respondent no.3 and others against
the respondent no.4 and the petitioners, before the Debt Recovery
Tribunal. In the meanwhile, this Court vide order dated 28.07.2000
ordered winding-up of the respondent no.4, however, subsequently,
the order of winding-up of the respondent no.4 came to be set
aside. A deed of assignment dated 18.02.2006 came to be executed
in between the ICICI Bank Ltd. and Standard Chartered Bank,
whereby the entire dues of the respondent no.4 came to be
assigned by the ICICI Bank Ltd., in favour of the Standard
Chartered Bank. Based on the documents submitted including the
deed of guarantee dated 14.06.1985, the Debts Recovery Tribunal,
Jaipur, vide judgment dated 17.03.2008 decreed the Original
(Downloaded on 06/06/2021 at 10:22:21 PM)
(5 of 55) [CW-25734/2018]
Application in favour of the respondent no.3 and Standard
Chartered Bank and held that they were entitled to grant of a
recovery certificate against the respondent no.4 and the petitioners.
The respondent no.4 and the petitioner no.1 were jointly and
severally held liable to pay a sum of Rs.3,31,45,988/- with future
and pendente lite interest at the rate of 10% per annum with six
monthly rests due to the respondent no.3; the petitioner no.2
herein was held liable to pay a sum of Rs.44,89,034/- with future
and pendente lite interest at the rate of 10% per annum with six
monthly rests due to respondent no.3 and they were both jointly
and severally held liable to pay a sum of Rs.3,07,62,489/- with
future and pendente lite interest at the rate of 10% per annum with
six monthly rests due to Standard Chartered Bank.
The Debts Recovery Tribunal, Jaipur, in terms of the aforesaid
judgment dated 17.03.2008, issued a recovery certificate under
Section 19(22) of the Recovery of Debts due to Banks and Financial
Institutions Act, 1993, which was corrected vide a subsequent order
dated 26.05.2008. Based on the judgment and the recovery
certificate issued by the Debts Recovery Tribunal, Jaipur, the
respondent no.3 initiated Execution Case No.11/2008 before the
Recovery Officer-II, Debts Recovery Tribunal, Jaipur and thereunder
took various actions including conducting an auction with respect to
the properties of the respondent no.4. Upon confirmation of auction
sale, a certificate of sale for Rs.5,81,00,000/- was issued in favour
of the auction purchaser. In the meanwhile, this Court ordered
winding-up of the respondent no.4 and appointed the Official
Liquidator to take over the affairs of the respondent no.4 company.
Subsequently, the Standard Chartered Bank Ltd. also assigned the
debt of the respondent no.4 to the respondent no.2 vide deed of
(Downloaded on 06/06/2021 at 10:22:21 PM)
(6 of 55) [CW-25734/2018]
assignment dated 31.07.2012. Based on the said deed of
assignment, the contesting respondent no.2 IARC substituted
Standard Chartered Bank in the said Execution Case No.11/2008
before the Recovery Officer. During the pendency of the said
execution case, the respondent no.3, on 23.12.2014, accepted a
settlement proposal submitted by petitioner no.1 with respect to
personal and corporate guarantees of both the petitioners by
reinstating an earlier settlement proposal dated 29.11.2010. The
reinstated proposal was for payment of balance Rs.45 lakh with
interest thereon at the rate of 15% from 15.01.2011 totaling to
Rs.76,20,118/-.
Thereafter, the respondent no.2 moved the interlocutory
application seeking attachment of the shares invoked the corporate
guarantee in favour of the respondent no.3 on 14.06.1985, which
guarantee, according to the petitioner, was discharged/released by
the respondent no.3. The statement of account sought to be relied
upon by the respondent no.2 is in the from the ledger of respondent
no.3 which also bears the stamp and signature of respondent no.3.
The petitioners submitted a detailed reply dated 20.11.2017 to the
said application for attachment duly supported with various
documents. The respondent no.2 filed rejoinder to the reply, to
which the petitioner filed sur-rejoinder. The Recovery Officer-II, vide
order dated 18.07.2018, allowed the attachment application filed by
the respondent no.2 dismissing the objections filed by the petitioner
no.1. Aggrieved thereby, the petitioners preferred a Miscellaneous
Appeal before the Debts Recovery Tribunal, Jaipur under Section 30
of the Recovery of Debts and Bankruptcy Act, 1993. The petitioner
also preferred an application on 22.09.2018 under Section 30A, as
amended vide Section 16 of the Act 1 of 2013 read with Section
(Downloaded on 06/06/2021 at 10:22:21 PM)
(7 of 55) [CW-25734/2018]
19(25) of the Recovery of Debts and Bankruptcy Act, 1993, seeking
waiver from pre-deposit of fifty per cent of the amount of debt due
as determined by the DRT for the purpose of preferring the said
miscellaneous appeal. The Registrar, Debts Recovery Tribunal,
Jaipur, vide order dated 23.10.2018, dismissed the said application.
Ms. Suruchi Kasliwal, learned counsel for the petitioners,
submitted that Section 30A has been recently added to the
Recovery of Debts and Bankruptcy Act, 1993 with effect from
01.09.2016 vide Act No.44 of 2016. Section 35 of the Recovery of
Debts and Bankruptcy Act, 1993, has provided that if any difficulty
arises in giving effect to the provisions of this Act, the Central
Government may, by order published in the Official Gazette make
such provisions, not inconsistent with the provisions of this Act, as
appear to it to be necessary or expedient for removing the difficulty,
within a period of three years from the date of commencement of
this Act. This therefore makes it clear that the legislature itself by
aforesaid Section 35 removed the presumption of legality/validity of
the provisions contained in the Act of 1993 while conferring powers
on the Central Government to make such provisions that are not
inconsistent with the provisions of the Recovery of Debts and
Bankruptcy Act, 1993, (for short, 'the Act of 1993') to remove the
inconsistencies, if any, within three years from the date of
commencement of the Act of 1993. The present writ petition seeks
to assail the validity of Section 30A of the Act of 1993 not only on
account of it being "inconsistent" with the very purpose with which
the Act of 1993 came to be enacted but also the manner in which it
operates. Section 30A of the Act of 1993 envisages pre-deposit to
be made with the Tribunal, while there is no rule in the DRT
(Procedure) Rules in respect of pre-deposit under Section 30A. It is
(Downloaded on 06/06/2021 at 10:22:21 PM)
(8 of 55) [CW-25734/2018]
completely at the discretion of the Tribunal to keep the said pre-
deposit in the manner it deems fit and to allow or not to allow
benefit of the interest as may accrue on the pre-deposit to the
appellant. Hundreds of crores of rupees in the form of pre-deposit
are taken and lying idle not only in Section 30A but also Section 21
of the Act of 1993 without any reason or rhyme.
Learned counsel relied on the judgment of the Supreme Court
in Harbilas Rai Bansal Vs. State of Punjab - (1996) 1 SCC 1 and
submitted that the Supreme Court in that case has held that the
classification created by the amendment has no reasonable nexus
with the object sought to be achieved. The requirement of pre-
deposit in Section 30A of the Act of 1993 does not have any nexus
with the object sought to be achieved. Reliance is also placed on the
judgment of the Supreme Court in Axis Bank Vs. SBS Organics
Private Limited and Another - (2016) 12 SCC 18, wherein it has
been held that the Bank does not have any lien as envisaged by
Section 171 of the Contact Act on the pre-deposit made by a
borrower under Section 18 of the Securitisastion and Reconstruction
of Financial Assets and Enforcement of Security Interest Act, 2002
(for short, 'the SARFAESI Act'). It was further held that pre-deposit
is required to be made with the Tribunal and not with the creditor.
Since Section 30A of the Act of 1993 is pari materia with provision
of pre-deposit for appeal under Section 18 of the SARFAESI Act, the
judgment passed in Axis Bank, supra, applies as much to Section
30A of the Act of 1993. The object of the Act of 1993 is to ensure
recovery of debt. Pre-deposit is not 'debt' and hence there is no
justifiable reason to take pre-deposit as high as 50% of the
originally determined debt which ranges from Rs.10 lakh (minimum
pecuniary jurisdiction) to crores of rupees thereby infringing Article
(Downloaded on 06/06/2021 at 10:22:21 PM)
(9 of 55) [CW-25734/2018]
19(1)(g) of the Constitution of India by refraining the petitioners
from utilizing the said money in generating more income to pay
back the due debt of the Banks, Banking Companies and Financial
Institutions. Since the Act of 1993 envisages only recovery of debt,
'pre-deposit' envisaged in Section 30A of the Act of 1993 is clearly
beyond the contours of the Act of 1993 and entirely inconsistent
with the provisions of the Act of 1993. Hence it liable to be struck
down being constitutionally invalid.
It is argued that Section 30A of the Act of 1993 is harsher
than even fiscal/revenue laws. Even when the Fiscal/Revenue Acts
permit hundred per cent waiver of pre-deposit, no such discretion
has been conferred with the Tribunal under Section 30A of the Act
of 1993, thus denuding right of appeal and making the remedy of
appeal merely illusory. Example is given of Section 15 of the
National Tax Tribunal Act, 2005 as also Section 35F of the Central
Excise Act, 1944 and Section 129E of the Customs Act, 1962.
Reliance is placed on judgment of the Supreme Court in Dadu alias
Tulsidas Vs. State of Maharashtra - (2000) 8 SCC 437. It is
contended that Section 21 of the Act of 1993 also required pre-
deposit to be made to the extent of 75% for filing appeal before the
Appellate Tribunal, which was by amendment vide Act No.44 of
2016, reduced to 50% with effect from 01.09.2016, but the proviso
thereof conferred discretion on the Appellate Tribunal, for reasons to
be recorded in writing, to reduce the amount, to be deposited by
such amount, which shall not be less than 25% of the amount of
such debt so due to be deposited under this Section. The Division
Bench of the Delhi High Court in Satinder Kapur & Others Vs. IFCI
Ltd. & Others - 2011 SCC OnLine Del 3425 in respect of Section 21
of the Act of 1993, observed in para 16 of the report that no person
(Downloaded on 06/06/2021 at 10:22:21 PM)
(10 of 55) [CW-25734/2018]
should be denuded the right of appeal if there is financial hardship
and this is the reason why the legislature has enacted the proviso to
Section 21 of the Act of 1993, otherwise the section would be
susceptible to a constitutional challenge of being unreasonable. It is
submitted that the aforesaid observation would apply to the facts of
the present case in full or even for partial waiver of the amount of
pre-deposit.
It is argued that the 'debt' in Section 2(g) of the Act of 1993
includes only the debt in praesenti, solvendum in futuro, contrary
thereto, instead of taking status of debt as exists during the course
of execution proceedings and particularly at the date of filing of an
appeal under Section 30, Section 30A looks at the past status of the
debt as existed on the date of passing of judgment by the DRT
under Section 19 of the Act of 1993 by insisting on pre-deposit of
"fifty per cent of the amount of debt due as determined by the
Tribunal". Reliance is placed on the judgment of the Madras High
Court in Shree Jaya Soundharam Textile Vs. Canara Bank dated
11.04.2019, wherein it has been held that "Debt" implies Debitum
in praesenti, solvendum in futuro. The definition of the 'Debt' as
given in Section 2(g) of the Act of 1993 also includes within its
ambit only such amount as is 'payable' under a Decree or Order of
any Civil Court or otherwise, which include within its ambit Tribunal.
The word 'payable' in Section 2(g) has been further qualified by the
legislature with words such as "...and subsisting on, and legally
recoverable on, the date of the application and includes any liability
towards debt securities which remains unpaid in full or part ....".
Section 30A however in most unreasonable and unjustified manner,
completely fails to take into consideration the existing status of the
"debt" that remains payable on the date an appeal under Section 30
(Downloaded on 06/06/2021 at 10:22:21 PM)
(11 of 55) [CW-25734/2018]
of the Act of 1993 is being preferred, while demanding 50% of the
originally determined debt by the Tribunal as a pre-deposit. In the
present case, on issuance of the discharge certificate, the Debt
originally determined by the Tribunal way back on 17.03.2008 does
not even subsist today, however, Section 30A still requires payment
of 50% thereof.
Ms. Suruchi Kasliwal, learned counsel for the petitioners,
submitted that Section 30A of the Act of 1993 is violative of Article
14 of the Constitution of India as it discriminates between the
appellants who are financially capable to make pre-deposit with
those who are not capable to do so, and the same is therefore liable
to be struck down. It does not make any reasonable classification
between the good and the bad borrowers and treats the borrowers
who have discharged their debt during the course of execution
proceedings at par with those who have not done so. It is argued
that once a borrower has able to show that he has made payment
due during execution, he comes at par with the third party. Section
30A does not apply to the third parties but continues to apply to
those good borrowers though they have been discharged.
It is argued that the execution proceedings before the
Recovery Officer against the petitioners are pending since 2008.
Section 30A was inserted in the Act of 1993 on 01.09.2016 vide Act
44 of 2016 and has not been given retrospective effect, yet is being
applied to the appeals preferred under Section 30, which conferred
unfettered rights to prefer an appeal upon the appellants aggrieved
of orders of the Recovery Officer under Section 30 of the Act of
1993 as it was originally framed. Section 30 came to be amended
with retrospective effect from 17.01.2000 by Act 1 of 2000.
Subsequently Section 30A was inserted with effect from
(Downloaded on 06/06/2021 at 10:22:21 PM)
(12 of 55) [CW-25734/2018]
01.09.2016. Mere fact that the order impugned in the appeal under
Section 30A was passed subsequent to insertion of the aforesaid
provision would not have any effect. This would be immaterial, as
the date on which the claim was filed before the Debts Recovery
Tribunal or at-least the date on which the execution was filed, would
be considered as the basis for determining the right to file appeal
with reference to the provisions then existing.
Learned counsel for the petitioners, relying on the judgment of
the Supreme Court in Deepak Sibal Vs. Punjab University & Others -
(1989) 2 SCC 145, submitted that the Supreme Court therein held
that where the legislature while framing the new rule deviates from
its original objective, the changed rule is discriminatory and
violative of Article 14 of the Constitution of India. It is argued that
Section 30A has taken away the right of appeal particularly for the
appellants whose execution petition was already pending on the
date Section 30A came to be added, eight years after its filing. The
subsequent amendment cannot be permitted to take away the right
to prefer appeal without pre-deposit. Reliance in this connection is
placed on the judgment of the Supreme Court in State of Bombay
Vs. Supreme General Films Exchange Limited - AIR 1960 SC 980,
which was followed by the Supreme Court in K. Raveendranathan
Nair and Another Vs. Commissioner of Income Tax and Others -
(2017) 9 SCC 355.
Ms. Suruchi Kasliwal, learned counsel, in support of his
argument, has also relied on judgments of the Supreme Court in
Hoosein Kasam Dada (India) Ltd. Vs. The State of Madhya Pradesh
and Others - MANU/SC/0075/1953 = AIR 1953 SC 221, Lakshmi
Ammal Vs. K.M. Madhavakrishnan and Others -
MANU/SC/0011/1978 =AIR 1978 SC 1607, judgment of the High
(Downloaded on 06/06/2021 at 10:22:21 PM)
(13 of 55) [CW-25734/2018]
Court of Andhra Pradesh in Mohd. Abdul Azeem Zakee and Others
Vs. Government of Andhra Pradesh and Others -
MANU/AP/0669/2001 = 2001 (6) ALD 394, judgment of High Court
of Calcutta in Kamal Sukla Vs. Krishna Roy - MANU/WB/0323/2003,
and judgment of High Court of Delhi in Bajaj Overseas Impex and
Others Vs. The Special Commissioner-I and Others -
MANU/DE/1324/2013 = 201 (2013) DLT 271.
Ms. Suruchi Kasliwal further argued that Section 30A, even if
applied as it is, in the existing form, would be self-contradictory.
Section 30A envisages maximum pre-deposit of fifty per cent of the
debt determined, however, in case three separate orders during one
execution are assailed then the pre-deposit would far exceed 50%
and would be 150%. Similarly, if three different appellants prefer
three different appeals against the same order, then too, the pre-
deposit would far exceed and reach 150%, which was never the
intention of the legislature. The usage of the words "any orders of
the Recovery Officer" takes within its sweep even orders such as
those passed under Order 1 Rule 10, Order 22, Sections 60-64 and
Order XXI, Rules 41-57 CPC, Section 25-B and 28(4)(A) of the Act
of 1993 and so on and so forth. There may be a challenge to the
orders passed by the Recovery Officer on different stages and
aggrieved party cannot be required to deposit 50% of the debt
determined by the Tribunal on each occasion. Reliance is placed on
judgment of the Madras High Court in Shree Jaya Soundharam
Textile, supra, wherein it was held that if each of the appellants
were directed to pay 50%, it would mean that the total deposit
would far exceed the amount due and payable. A verbatim
compliance of Section 30A would be self-contradictory in most of
(Downloaded on 06/06/2021 at 10:22:21 PM)
(14 of 55) [CW-25734/2018]
the cases and hence, for this reason too, Section 30A deserves to
be declared as constitutionally invalid.
It is argued that the Recovery Officer is merely acting as an
Executing Court and during the execution proceedings the Recovery
Officer also passes certain orders which are final in nature, viz.,
confirmation of auction sale, order of attachment of properties,
impleadment of parties under Order 1 Rule 10 CPC, Order XX of the
CPC. Reliance is placed on the judgment of the Madras High Court
in S. Reshma Vs. Debts Recovery Tribunal, decided on 04.01.2017 -
MANU/TN/0862/2017, which held that "...there are other types of
orders which may be passed by the Recovery Officer, against which
also, appeal is maintainable under Section 30 of the DRT Act, 1993.
In many of the cases, pre-deposit may not be required, except in
the case of challenge of sale." The Madras High Court in Shree Jaya
Soundharam Textile, supra, held that the scope of operation of
Section 21 applies only to "Final Orders" passed by the Tribunal and
not to "Interlocutory Orders". It is argued that the proceedings
undertaken by the Recovery Officer of a Tribunal being akin to those
of an Executing Court are purely "interlocutory" in nature and no
final order gets passed therein in respect of a borrower. The Madras
High Court in Shree Jaya Soundharam Textile, supra, held that no
pre-deposit is required to be made by a third party. A borrower,
despite receipt of discharge certificate, continues to be treated
borrower for the purpose of preferring an appeal under Section 30A
by virtue of usages of the words "debt due as determined by the
Tribunal", which is clearly contrary to the very principles of natural
justice, equity and good conscience.
The statutory right of appeal conferred by Section 30A has
thus been rendered into a mere eye-wash as no borrower fastened
(Downloaded on 06/06/2021 at 10:22:21 PM)
(15 of 55) [CW-25734/2018]
with liability of crores of debt can afford to make the said pre-
deposit of 50%, each time he would challenge different
interlocutory orders passed by the Recovery Officer. Learned
counsel has relied on the judgment of the Supreme Court in Mardia
Chemicals Vs. Union of India - (2004) 4 SCC 311, wherein the
Supreme Court declared Section 17(2) of the SARFAESI Act as
unconstitutional since it required pre-deposit of 75% at the time of
preferring an appeal against the demand notice issued under
Section 13(2) of the SARFAESI Act on account of the same being
oppressive, onerous and arbitrary condition against all the cannons
of reasonableness.
Ms. Suruchi Kasliwal, learned counsel for the petitioners,
argued that the ICICI Bank Ltd., despite being a participant creditor,
never executed any loan document and similarly, no security, either
primary or collateral, was ever executed directly in its favour.
Similarly no deed of guarantee was also ever executed directly by
either of the petitioners in favour of the ICICI Bank Ltd. In fact, the
only deed of guarantee that was ever executed for the benefit of the
ICICI Bank Ltd., was of 14.06.1985 and that too was executed only
by the petitioner no.1 in favour of the respondent no.4.
Learned counsel submitted that the petitioners have till date
made payment of Rs.7.02 crore and have already been issued a
discharge certificate by the respondent no.3 during the pendency of
the execution petition as against the principal sum of Rs.6.39 crore.
Despite that Section 30A requires pre-deposit of 50% which implies
around Rs.12.50 crore, which is clearly in the teeth of the discharge
certificate and definition of "Debt" envisaged in Section 2(g) of the
Act of 1993. The respondents no.2 and 3 have during the course of
pendency of execution proceedings, recovered a sum of
(Downloaded on 06/06/2021 at 10:22:21 PM)
(16 of 55) [CW-25734/2018]
Rs.5,81,00,000/- in addition to which a sum of Rs.96,20,118/- has
also been paid by the petitioners along-with FDR of Rs.25,00,000/-,
as such, in all, a sum of Rs.7,02,00,000/- has been recovered as
against the debt due originally determined vide judgment dated
17.03.2008. Yet, the Debts Recovery Tribunal, vide order dated
23.10.2018, has demanded pre-deposit at the rate of 50% of the
originally determined debt, viz., an amount of Rs.3,19,54,238.50
along with interest, which is completely unjustified. The petitioners
have been issued discharge certificate dated 12.01.2015 by the
respondent no.3 in service of the powers vested in it vide Clause
No.20 of the Guarantee Deed. The respondent no.2 is as much
bound by the said discharge certificate given by the respondent
no.3 as it was availing benefits under the said guarantee deed
executed by and between the petitioner and the respondent no.3
alone. The respondent no.2 is therefore wrongly pursuing execution
against the petitioners even when the respondent no.4 has vide
email dated 30.05.2017 informed the respondent no.2 of having
discharged both the petitioners from their liabilities way back in the
year 2015.
Learned counsel has relied on the judgment of the Supreme
Court in State of Tripura Vs. Manoranjan Chakraborty and Others -
(2001) 10 SCC 740, wherein while upholding the validity of Section
20 and Section 21 of the Act imposing conditions of pre-deposit, it
has been held that if the gross injustice is done and it can be shown
that for good reason the court should interfere, then
notwithstanding the alternative remedy which may be available by
way of an appeal under Section 20 or revision under Section 21, a
writ court can in an appropriate case exercise its jurisdiction to do
substantive justice. Learned counsel, in support of the arguments,
(Downloaded on 06/06/2021 at 10:22:21 PM)
(17 of 55) [CW-25734/2018]
has also relied on the judgments of the Supreme Court in Hiral P.
Harsora and Others Vs. Kusum Narottamdas Harsora and Others -
(2016) 10 SCC 165 Nikesh Tarachand Shah Vs. Union of India and
Another - (2018) 11 SCC 1, Lok Prahari Vs. State of Uttar Pradesh
and Others - (2016) 8 SCC 389, Joseph Shine Vs. Union of India -
(2019) 3 SCC 39, Indian Hotel & Restaurant Association (AHAR) &
Others Vs. The State of Maharashtra & Others - (2019) 3 SCC 429
and Subramanian Swamy Vs. Director, Central Bureau of
Investigation & Another - (2014) 8 SCC 682.
Mr. R.D. Rastogi, learned Additional Solicitor General
appearing on behalf of the Union of India, has opposed the writ
petition. Relying on the judgments of the Supreme Court in Bhavesh
D. Parish and Others Vs. Union of India and Another - (2000) 5 SCC
471 and Dharmendra Kirthal Vs. State of Uttar Pradesh and Another
- (2013) 8 SCC 368, he argued that there is always a presumption
in favour of constitutional validity of a provision. It is argued that
right to appeal is the creature of the statute. The legislature can
impose certain conditions on such right and imposition of such
conditions is reasonable so that frivolous appeals are not filed.
Reliance is placed on the judgment of the Supreme Court in All
India Sainik Schools Employees' Association Vs.Sainik Schools
Society - 1989 Supp (1) SCC 205. It is submitted that there is a
substantial increase in Non Performing Assets (NPA) since the last
few years which is adversely impacting on the deployment of funds
by the Banks and Financial Institutions for productive and priority
sectors of the economy. Due to significant rise in NPAs, there has
been a consequent rise in the number of applications being filed by
the Banks and Financial Institutions with the various Debts
Recovery Tribunals across the country for recovery of dues from the
(Downloaded on 06/06/2021 at 10:22:21 PM)
(18 of 55) [CW-25734/2018]
loan defaulters. The dominant objective of the mechanism of the
Act is that such applications need to be disposed of expeditiously so
that there is speedy recovery of dues. Section 30 of the Act
provides for filing an appeal against the order of the Recovery
Officer with the Tribunal within 30 days of receipt of the said order.
Section 30A, as it reads, states that where an appeal is preferred
against any order of the Recovery Officer, under Section 30, by any
person from whom the amount of debt is due, such appeal shall not
be entertained by the Tribunal unless such person has deposited
with the Tribunal fifty per cent of the amount of debts due as
determined by the Tribunal. Section 30A is merely a prerequisite for
filing appeal under Section 30 and does not take away the right of
appeal. It merely imposes a condition for filing appeal so that
genuine appellants may approach the Tribunal against the order of
recovery and the provision of appeal does not become a tool for
delaying the payment of dues to Banks and Financial Institutions.
Sections 30 and 30A of the Act of 1993 provide an opportunity to
the debtor to appeal against any order of Recovery Officer while
obviating delay in recovery due to frivolous appeals. Section 30A
only brings a "reasonable restriction" which has a justified 'nexus'
with the object of the Act, without in any manner diluting the right
of the appellant. Such a right has to be seen in the context of the
statement of objects and reasons of the Act itself. This is intended
to curb and eradicate the arbitrariness, if any, in the mechanism of
entertaining appeals and has brought uniformity in the treatment of
all appeals filed under Section 30. The Act of 1993 aims to act as
safeguard to the public money and as such the restriction imposed
is reasonable in larger public interest and can withstand the judicial
scrutiny.
(Downloaded on 06/06/2021 at 10:22:21 PM)
(19 of 55) [CW-25734/2018]
Learned Additional Solicitor General further argued that the
petitioners in the garb of challenging the validity of the provision,
have also challenged the recovery order of the Debts Recovery
Tribunal, Jaipur. It is settled proposition of law that when there is a
statutory remedy available against an order, then no writ lies
against the same. Contention of the petitioner that since he has
been discharged from his guarantee obligations by the respondent
no.4, there should be waiver of pre-deposit, is liable to be rejected.
The petitioners are merely resorting to delay tactics to avoid
recovery of dues by giving different interpretation. It not only has
the remedy of filing appeal against the order of Recovery Officer but
also filing appeal against the judgment passed under Section 19 of
the Act, as per the provisions of Section 20 and 21 of the Act. No
fault can be found with the provisions of Section 30A of the Act in
not providing the power of relaxation to the Presiding Officers of the
Debts Recovery Tribunals, akin to those given to the Debts Recovery
Appellate Tribunals under proviso to Section 21 of the Act of 1993.
Two provisions operate in different spheres. Despite the provision of
waiver to the extent of 25% envisaged in proviso to Section 31 in
appeal filed against the final order, insistence of pre-deposit of 50%
in every appeal under Section 30A is intended to curb the tendency
of filing frivolous appeals against each and every order of the
Recovery Officer, as the experience has shown enormous delay in
execution of the final judgment of the Tribunal even after it has
been upheld by the Appellate Tribunal. Section 30A in no way can
therefore be described as unconstitutional or violative of Article 14
and 19(1) of the Constitution of India.
Learned Additional solicitor General argued that there is
absolutely no confusion or ambiguity in that aspect about the due
(Downloaded on 06/06/2021 at 10:22:21 PM)
(20 of 55) [CW-25734/2018]
amount of debt determined by the Tribunal. The execution
proceedings are filed before the Recovery Officer only thereafter,
who ensures that the amount of debt so determined by the
Presiding Officer is fully paid by the borrower. This amount may get
decreased during the course of the recovery proceedings before the
Recovery Officer as the borrower might pay certain amounts during
such course, but that does not mean that the entire amount has
been paid off and therefore the provisions that in case a person
wants to appeal against the order of the Recovery Officer, he has to
deposit 50% of the amount determined by the Tribunal. This
provision has been made to discourage filing of frivolous appeals
before the Tribunal. It is not the whole Act which would be held
invalid, being inconsistent with Part III of the Constitution but only
such part of it, which is violative of the fundamental rights, can be
severed, provided that the part which violates the fundamental
rights is separable from that, which does not isolate them. But if the
valid portion is so closely mixed up with invalid portion that it
cannot be separated without leaving an incomplete or more or less
mingled remainder, the court will declare the entire Act void. This
process is known as doctrine of severability or reparability. In the
present case, firstly none of the fundamental rights of the petitioner
has been violated but even if the petitioner is trying to apply the
doctrine of severability to the present case, it is wrong as in the
present case Section 30A was inserted to discourage filing of
frivolous appeals by persons on one pretext or the other to delay
the process of recovery.
It is argued that Section 26 of the Act of 1993 provides that it
shall not be open to the defendant to dispute before the Recovery
Officer, the correctness of the amount specified in the certificate and
(Downloaded on 06/06/2021 at 10:22:21 PM)
(21 of 55) [CW-25734/2018]
no objection to the certificate on any other ground shall also be
entertained by the Recovery Officer. The Recovery Officer cannot go
into the correctness of the amount determined. The Recovery
Officer therefore has no authority to know the correctness of the
amount so determined. That remedy is available to the borrower
only in appeal filed before the Appellate Tribunal under Section 20
of the Act where he will be required to deposit 50% of the amount
determined by the Tribunal as per Section 21, which shall be
reduced by 25%. Under the garb of validity of Section 30A, the
petitioner cannot be allowed to bypass the statutory remedy of
appeal. Reliance in this connection is placed on the judgments of
the Supreme Court in CIT Vs. Chhabil Dass - (2014) 1 SCC 603,
Authorized Officer, SBT Vs. Mathew KC - (2018) 3 SCC 85 and Raj
Kumar Shivhare Vs. Assistant Director, E.D. - (2010) 4 SCC 772.
Reliance is also placed on the judgments in Anant Mills
Company Ltd. Vs. State of Gujarat - (1975) 2 SCC 175, C.C.E Vs.
Dunlop India Ltd. - (1985) 1 Scale 260, Government of Andhra
Pradesh Vs. P. Laxmi Devi - (2008) 4 SCC 720, and State of Triplura
Vs. Manoranjan Chakraborty - (2001) 10 SCC 740, to argue that it
is only when there is no manner of doubt that the statute is
unconstitutional that it should be declared to be so. However, even
reasonable men can sometimes differ as to whether there is a doubt
or not about the constitutional validity. In other words, sometimes
there can be a doubt whether there is a doubt at all. Reliance is
placed on the judgment of the Supreme Court in State of Tripura
Vs. Manoranjan Chakraborty - (2001) 10 SCC 740 and judgment of
the Jharkhand High Court in Sri Satyanand Jha Vs. Union of India
and Others - 2016 SCC OnLine Jhar 2323, wherein similar
provisions were challenged and upheld by the High Court.
(Downloaded on 06/06/2021 at 10:22:21 PM)
(22 of 55) [CW-25734/2018]
Mr. R.D. Rastogi, learned Additional Solicitor General, argued
that condition of pre-deposit is mandatory for maintainability of the
appeal, is no longer res integra. It has already been decided by the
Supreme Court and various High Courts that as far as the issue
relating to filing of appeal is concerned, that right to file appeal is a
substantive right but so far as the mandatory condition of pre-
deposit before filing the appeal is concerned, it is a procedural
thing. It has been held that condition is a procedural in nature.
Learned counsel has relied on judgment of Jharkhand High Court in
Satya Nand Jha Vs. Union of India - 2016 SCC OnLine Jhar 2323
and argued that a Division Bench of Jharkhand High Court therein
has categorically held that Section 35F of the Central Excise Act,
1944 as amended, consists of a mandatory requirement of pre-
deposit for entertaining an appeal before the appellate authority or
the appellate tribunal concerned is a piece of procedural legislation
and does not fall within the realm of substantive law. The aforesaid
judgment of the Jharkhand High Court was challenged before the
Supreme Court preferring SLP (Civil) No.31927/2016, which was
dismissed by the Supreme Court. Learned counsel also relied on
judgment of the Supreme Court dated 29.05.2019 in Surendra
Singh Deswal @ Col. S.S. Deswal & Others Vs. Virender Gandhi -
Criminal Appeal No.917-944 of 2019, deciding a similar controversy
which arose out of the Negotiable Instruments Act, 1881, whereby
Section 148 was amended in 2018. The amendment provided that
in case a person is convicted under Section 138 of the NI Act by the
trial court, he shall deposit minimum 20% of the amount of
compensation/fine awarded by the Tribunal, before filing appeal in
the first appellate court. The argument was that the amendment
(Downloaded on 06/06/2021 at 10:22:21 PM)
(23 of 55) [CW-25734/2018]
having into being recently cannot be applied retrospectively to
pending cases. The Supreme Court concluded that such amendment
has to be applied retrospectively as the right of appeal has not been
taken away or affected by the said amendment.
Learned Additional Solicitor General, relying on the judgment
of the Supreme Court in Union of India Vs. Sukumar Pyne - (1966)
2 SCR 34, argued that it is settled proposition of law that alterations
in procedure may be retrospective and no person has a vested right
to be tried by a particular court or a particular procedure. Right to
file appeal against the order of Recovery Officer accrued to the
petitioner only when the Recovery Officer passed the order on
18.07.2018, whereas the amendment in Section 30A of the Act of
1993 came into force on 01.09.2016. It is thus clear that on the
date of amendment the right of appeal did not even accrue to the
petitioner and the amendment had already come into force before
accrual of such right.
Mr. Kersi J. Mehta, learned counsel for the respondent No.2
argued that the petitioner no.2 is a personal guarantor to the loan
granted to the respondent no.4, who is the principal debtor of the
respondent no.3 and IARC. The debtor company should have been
impleaded as petitioner and not respondent. Therefore, the petition
must be dismissed for misjoinder of parties. It is submitted that the
Supreme Court in OL of UP and Uttarakhand Vs. Allahabad Bank
and others - (2013) 4 SCC 381 held that the Act of 1993 is
complete code in itself and the High Courts must not entertain
appeals against its orders. Whether IARC has a concurrent charge
or not, or the loan given to the debtor company is not covered by a
guarantee deed are facts that only be challenged as per the appeals
(Downloaded on 06/06/2021 at 10:22:21 PM)
(24 of 55) [CW-25734/2018]
procedure provided under the Act. The petitioner's main object is to
appeal against that order. The vires of section 30A is only a
camouflage to cover this main objective of the Petitioner. Since this
is a division bench writ petition challenging the constitutional
validity of section 30A of the Act, the challenge to the order of the
Registrar of the DRT dated 23.10.2018, cannot be adjudicated upon
before this Court, as this would then turn this writ petition into an
appeal, which it is not meant to be.
The Registrar, vide order dated 23.10.2018, rejected the
appeal of the petitioners filed against the order of the Recovery
Officer dated 18.07.2018, because Section 30A of the Act permits
such appeals to be filed upon depositing 50% of the dues payable
as per the order of the Recovery Officer. Reliance in this connection
is placed on catena of judgments of the Supreme Court, which are,
Commissioner of Income Tax and others Vs. Chhabil Dass Agarwal
(2014) 1 SCC 603, Raj Kumar Shivhare Vs. Assistant Director,
Directorate of Enforcement and others (2010) 4 SCC 772, and
Bhavesh D Parish and others V Union of India and another (2000) 5
SCC 471. Learned counsel further argued that there are many Acts,
which insist on a deposit to be paid first before the appeal is filed.
There is no denial of natural justice in such provisions as stated by
the petitioners. Reliance in this respect is placed on the judgments
of the Supreme Court in Har Devi Asnani V State of Rajasthan
(2011) 14 SCC 160 and Narayan Chandra Ghosh V UCO Bank and
others (2011) 4 SCC 548.
It is submitted that in para 18 of the memo of the writ
petition, the petitioners are giving the impression that the
guarantee deed is registered with the Registrar of Companies. The
(Downloaded on 06/06/2021 at 10:22:21 PM)
(25 of 55) [CW-25734/2018]
law is that the Registrar of Companies only registers the charges,
and not the documents to the charge. It is submitted that the
charge registered is for the complete loan of Rs.159 lakhs. This
includes the loan of Rs.79 lakhs of IARC and Rs.80 lakhs of IFCI.
Therefore, a charge of IARC has also been created. However, it is to
be borne in mind that this dispute can only be decided in an appeal,
and not in this writ petition. The debtor-company was given a loan
under the Project Finance Participation Certificate Scheme. The
debtor-company had a repayment schedule not only to IFCI but
also to ICICI, the predecessor to IARC. The ICICI was also an
institution to whom the debtor company had to return the loan. To
further accentuate this, even the deed of hypothecation dated
30.03.1985 also confirms the above fact. The letter of intent dated
20.04.1983 clearly states "the borrower shall pay to the Corporation
and the Participant, viz., ICICI directly the amounts of principal,
interest, commitment charge and liquidated damages as provided
herein, in proportion to their respective participations."
It is submitted that to further nail the coffin, the debtor
company had itself offered OTS to both ICICI and Standard
Chartered Bank vide their letter dated 14.07.2004 and 17.08.2011.
To make matters worse for the petitioners on the issue, the recall
notice dated 21.08.1996 clearly states that "...the Corporation and
ICICI had in participation with each other had from time to time
disbursed to you the first Loan...." It also stated the shares of both
the lenders in distributing the loan. The notice further stated that
the particulars of the outstanding of both IFCI and ICICI are
mentioned in Annexure III. It is stated that IFCI and ICICI are
(Downloaded on 06/06/2021 at 10:22:21 PM)
(26 of 55) [CW-25734/2018]
recalling their outstanding and that both must be paid individually.
XLO was sent an identical recall notice dated 24.10.1996.
It is argued that the XLO itself made a separate offer of one
time settlement to ICICI, the predecessor assignor of Standard
Chartered Bank and IARC, vide its letter dated 14.07.2004. If they
felt that all matter dealt with by IFCI included IARC, then why did
they make a separate offer to the Standard Chartered Bank? The
Standard Chartered Bank also wrote a letter dated 17.08.2011 to
the debtor company enclosing an order dated 30.05.2011 of the
Debts Recovery Appellate Tribunal in which the counsel for the
company stated that it had made an offer to settle the dues of IARC
which the counsel for the respondent no.1 therein affirmed before
the Tribunal. All this goes to show that the dues of IARC are
separate and have nothing to do with any settlement that the
company made with IFCI. It is stated that after the letter of IFCI
dated 16.12.2010 to the XLO, the XLO itself offered another one
time settlement to Standard Chartered Bank vide its letter dated
01.02.2011 which the petitioner has deliberately concealed from the
Court. The XLO also wrote letter dated 21.01.2011, 21.03.2011 and
11.08.2011 to Standard Chartered Bank further offers of one time
settlement. The Registrar, therefore, rightly refused to register the
appeal unless the deposit was paid first. It is completely wrong to
say that IARC does not have any ledger of its own and relies on the
ledgers of IFCI to stake its claim. In fact, the complete ledger of
ICICI Ltd. was filed with the Original Application No.55/98 filed at
the DRT Jaipur. It is, therefore, prayed the writ petition be
dismissed and the recovery process initiated before the Recovery
Officer-II at the DRT, Jaipur, be permitted to be continued.
(Downloaded on 06/06/2021 at 10:22:21 PM)
(27 of 55) [CW-25734/2018]
We have given our thoughtful consideration to rival
submissions and perused the material on record.
Learned counsel for the parties on both sides, apart from
addressing the Court on merits of the case, have also argued on the
question of constitutional validity of Section 30A of the Act of 1993
and submitted that since in the present case the petition filed before
the D.R.T. for recovery was decided by judgment dated 17.03.2008,
(which was corrected on 26.05.2008) and the recovery certificate
was issued on 17.03.2008, the recovery proceedings should be
taken to have been initiated in the year 2008, which will entitle the
petitioner to avail remedy of appeal then available under Section 30
of the Act of 1993, without the requirement of pre-deposit. The
amendment in Section 30A of the Act of 1993 having been
introduced subsequently with effect from 01.09.1996, such
amendment should be applicable only prospectively and not
retrospectively.
We shall, before embarking on examination of constitutional
validity of Section 30A of the Act of 1993, discuss the law laid down
by the Supreme Court on the scope of jurisdiction of this Court in
some of the leading cases in this behalf.
In Mohd. Hanif Quareshi Vs. State of Bihar, AIR 1958 SC 731,
the Constitution Bench of the Supreme Court held that there is
always a presumption in favour of constitutionality of an enactment
and the burden is upon him, who attacks it, to show that there has
been a clear violation of the constitutional principles. The Supreme
Court in para 15 of the report held as under:-
"........The courts, it is accepted, must presume that the
legislature understands and correctly appreciates the
needs of its own people, that its laws are directed to
(Downloaded on 06/06/2021 at 10:22:21 PM)
(28 of 55) [CW-25734/2018]
problems made manifest by experience and that its
discriminations are based on adequate grounds. It must
be borne in mind that the legislature is free to recognise
degrees of harm and may confine its restrictions to those
cases where the need is deemed to be the clearest and
finally that in order to sustain the presumption of
constitutionality the Court may take into consideration
matters of common knowledge, matters of common
report, the history of the times and may assume every
state of facts which can be conceived existing at the time
of legislation........."
The Supreme Court in ITO Vs. T.S. Devinatha Naddar - AIR
1968 SC 623, in para 30 of the report, held as under:-
"30. From the foregoing decisions it is clear that the
consideration whether a levy is just or unjust, whether it
is equitable or not, a consideration which appears to
have greatly weighed with the majority, is wholly
irrelevant in considering the validity of a levy. The courts
have repeatedly observed that there is no equity in a
tax. The observations of Lord Hatherley, L.C. in (1869) 4
Ch. A 735. "In fact we must look to the general scope
and purview of the statute, and at the remedy sought to
be applied, and consider what was the former state of
the law, and what it was that the legislature
contemplated," were made while construing, a non-
taxing statute. The said rule has only a limited
application in the interpretation of a taxing statute."
The Supreme Court in R.K. Garg Vs. Union of India, (1981) 4
SCC 675, held that the law relating to economic activities should be
viewed with greater latitude than laws touching civil rights such as
freedom of speech, religious etc. It was held that while dealing with
the constitutional validity of a taxation law enacted by Parliament or
State Legislature, the court must have regard to the following
principles:-
"(i) there is always presumption in favour of
constitutionality of a law made by Parliament or a State
Legislature,
(ii) no enactment can be struck down by just saying that
it is arbitrary or unreasonable or irrational but some
constitutional infirmity has to be found,
(Downloaded on 06/06/2021 at 10:22:21 PM)
(29 of 55) [CW-25734/2018]
(iii) the court is not concerned with the wisdom or
unwisdom, the justice or injustice of the law as the
Parliament and State Legislatures are supposed to be
alive to the needs of the people whom they represent and
they are the best judge of the community by whose
suffrage they come into existence,
(iv) hardship is not relevant in pronouncing on the
constitutional validity of a fiscal statute or economic law,
and
(v) in the field of taxation, the Legislature enjoys greater
latitude for classification."
The Supreme Court in State of A.P. Vs. McDowell and
Company, (1996) 3 SCC 709 held that a legislative enactment can
be struck down by courts on two grounds, namely, (1) that the
appropriate legislature does not have competence to make the law
and (2) it takes away or abridges fundamental rights enumerated in
Part-III of the Constitution or any other constitutional provision. It
was held that there is no third ground. If an enactment is
challenged being as violative of Article 14, it can be struck down
only if it is found that it is violative of the equality clause/equal
protection clause enshrined therein. Similarly, if an enactment is
challenged as violative of any of the fundamental rights guaranteed
by clauses (a) to (g) of Article 19(1), it can be struck down only if it
is found not saved by any of the clauses (2) to (6) of Article 19 and
so on. No enactment can be struck down by just saying that it is
arbitrary or unreasonable. Some or other constitutional infirmity has
to be found before invalidating an Act. It cannot be struck down
only because the Court thinks it is unjustified. The Parliament and
the Legislatures are composed of the representatives of the people,
who are supposed to know and be aware of the needs of the people
(Downloaded on 06/06/2021 at 10:22:21 PM)
(30 of 55) [CW-25734/2018]
and what is good and bad for them. The Court cannot sit in
judgment over their wisdom.
The Supreme Court in State of Tripura Vs. Manoranjan
Chakraborty, (2001) 10 SCC 740, in paras 3 and 4 of the report,
held as under:-
"3. As we see it, the point in issue is no longer res
integra. This Court in Gujarat Agro Industries Co. Ltd. v.
Municipal Corpn. of the City of Ahmedabad, (1999) 4
SCC 468, dealing with an analogous provision, where
discretion to waive pre-deposit was limited only to the
extent of 25 per cent of the tax, was upheld by this
Court. To the same effect is the decision of this Court in
Shyam Kishore v. Municipal Corpn. of Delhi, (1993) 1
SCC 22.
4. For the reasons contained in the said decisions, we
hold that the impugned provisions are valid. It is, of
course, clear that if gross injustice is done and it can be
shown that for good reason the court should interfere,
then notwithstanding the alternative remedy which may
be available by way of an appeal under Section 20 or
revision under Section 21, a writ court can in an
appropriate case exercise its jurisdiction to do
substantive justice. Normally of course the provisions of
the Act would have to be complied with, but the
availability of the writ jurisdiction should dispel any
doubt which a citizen has against a high-handed or
palpable illegal order which may be passed by the
assessing authority."
The Supreme Court in State of West Bengal and Another Vs.
E.I.T.A. India Ltd., (2003) 5 SCC 239, in para 4 of the report held as
under:-
"4. In examining the constitutional validity of the
impugned provisions of a statute, it will be useful to bear
in mind the following well-settled propositions. If a
legislation is found to lack in legislative competence or is
found to be in contravention of any provision of Part III
or any other provision of the Constitution, the impugned
legislation cannot escape the vice of unconstitutionality
[See: Keshavananda Bharti v. State of Kerala, AIR
(1973) SC 1643 and also State of Andhra Pradesh and
Ors. v. Macdowell & Co., [1996] 3 SCC 709]. A challenge
to any statutory provision on the ground of the
classification being discriminatory and violative of Article
14 of the Constitution, can be successfully met on the
(Downloaded on 06/06/2021 at 10:22:21 PM)
(31 of 55) [CW-25734/2018]
principle of reasonable classification having nexus to the
object of the Act sought to be achieved [See: State of
Bombay v. F.N. Sahara, [1951] SCR 682 and Budhan
Choudhary and Ors. v. State of Bihar, [1955] 1 SCR
1045]. However, the legislature enjoys a greater latitude
for classification in the field of taxation [See: M/s.
Steelworth Ltd. v. State of Assam, [1962] Suppl. 2 SCR
589; Gopal Narain v. State of Uttar Pradesh and Anr.,
AIR (1964) SC 370; and Ganga Sugar Corporation Ltd.
v. State of Uttar Pradesh and Ors., AIR (1980) SC 286].
No legislation can be declared to be illegal, much less
unconstitutional on the ground of being unreasonable or
harsh on the anvil of Article 14 of the Constitution,
except, of course, when it fails to clear the test of
arbitrariness and discrimination which would render it
violative of Article 14 of the Constitution. [See: M/s.
Steelworth Ltd. and Macdowell & Co. (supra)]."
The Supreme Court in Karnataka Bank Ltd. Vs. State of A.P.,
(2008) 2 SCC 254, while dealing with the jurisdiction of the
constitutional courts in declaring laws passed by the Legislature
unconstitutional, in para 19 of the report held as under:
"19. The rules that guide the constitutional courts in
discharging their solemn duty to declare laws passed by
a legislature unconstitutional are well known. There is
always a presumption in favour of constitutionality, and a
law will not be declared unconstitutional unless the case
is so clear as to be free from doubt; "to doubt the
constitutionality of a law is to resolve it in favour of its
validity". Where the validity of a statute is questioned
and there are two interpretations, one of which would
make the law valid and the other void, the former must
be preferred and the validity of law upheld. In
pronouncing on the constitutional validity of a statute,
the court is not concerned with the wisdom or
unwisdom, the justice or injustice of the law. If that
which is passed into law is within the scope of the power
conferred on a legislature and violates no restrictions on
that power, the law must be upheld whatever a court
may think of it. (See State of Bombay v. F.N. Balsara,
AIR 1951 SC 318)"
The Supreme Court in Govt. of A.P. Vs. P. Laxmi Devi - (2008)
4 SCC 720, was dealing with a case where the Andhra Pradesh High
Court had declared Section 47-A of the Indian Stamp Act, 1899, as
amended by A.P. Act No.8 of 1998, that required a party to deposit
50% deficit stamp duty as a condition precedent for a reference to a
(Downloaded on 06/06/2021 at 10:22:21 PM)
(32 of 55) [CW-25734/2018]
Collector under Section 47-A, unconstitutional. The Court in para 19
and 21 of the report held as under:-
"19. It is well settled that stamp duty is a tax, and
hardship is not relevant in construing taxing statutes
which are to be construed strictly. As often said, there is
no equity in a tax vide CIT v. V.MR.P. Firm Muar, AIR
1965 SC 1216. If the words used in a taxing statute are
clear, one cannot try to find out the intention and the
object of the statute. Hence the High Court fell in error
in trying to go by the supposed object and intendment of
the Stamp Act, and by seeking to find out the hardship
which will be caused to a party by the impugned
amendment of 1998.
20. xxx xxx xxx
21. It has been held by a Constitution Bench of this
Court in ITO v. T.S. Devinatha Nadar (vide AIR paras 23
to 28) that where the language of a taxing provision is
plain, the court cannot concern itself with the intention
of the legislature. Hence, in our opinion the High Court
erred in its approach of trying to find out the intention of
the legislature in enacting the impugned amendment to
the Stamp Act."
Dealing with the question as to when the statute enacted by
the Parliament or the Legislature can be declared unconstitutional,
the Supreme Court in para 46, 56 and 57 of the report in P. Laxmi
Devi, supra, held as under:-
"46. In our opinion, there is one and only one ground for
declaring an Act of the legislature (or a provision in the
Act) to be invalid, and that is if it clearly violates some
provision of the Constitution in so evident a manner as
to leave no manner of doubt. This violation can, of
course, be in different ways, e.g. if a State legislature
makes a law which only the Parliament can make under
List I to the Seventh Schedule, in which case it will
violate Article 246(1) of the Constitution, or the law
violates some specific provision of the Constitution
(other than the directive principles). But before declaring
the statute to be unconstitutional, the Court must be
absolutely sure that there can be no manner of doubt
that it violates a provision of the Constitution. If two
views are possible, one making the statute constitutional
and the other making it unconstitutional, the former
view must always be preferred. Also, the Court must
make every effort to uphold the constitutional validity of
a statute, even if that requires giving a strained
construction or narrowing down its scope vide Mark
(Downloaded on 06/06/2021 at 10:22:21 PM)
(33 of 55) [CW-25734/2018]
Netto Vs. Government of Kerala and Others - AIR 1979
SC 83. (para 6). Also, it is none of the concern of the
Court whether the legislation in its opinion is wise or
unwise."
....
....
"56. In our opinion adjudication must be done within the system of historically validated restraints and conscious minimization of the judges personal preferences. The Court must not invalidate a statute lightly, for, as observed above, invalidation of a statute made by the legislature elected by the people is a grave step. As observed by this Court in State of Bihar Vs. Kameshwar Singh, AIR 1952 SC 252 (274):
"The legislature is the best judge of what is good for the community, by whose suffrage it comes into existence".
57. In our opinion, the Court should, therefore, ordinarily defer to the wisdom of the legislature unless it enacts a law about which there can be no manner of doubt about its unconstitutionality."
The Supreme Court in State of M.P. Vs. Rakesh Kohli and Another, (2012) 6 SCC 312, was considering the correctness of the division bench judgment of the M.P. High Court which declared Clause (d), Article 45 of Schedule 1-A of the Indian Stamp Act, 1899 introduced by the Indian Stamp (Madhya Pradesh Amendment) Act, 2002, as unconstitutional being violative of Article 14 of the Constitution of India, which provided for stamp duty at the rate of 2% on the market value of the property subject matter of power of attorney when power of attorney is given without consideration to a person other than father, mother, wife or husband, son or daughter, brother or sister in relation to the executant without consideration. The Supreme Court reversing the judgment of the High Court, in para 15 and 16 of the report observed as under:-
"15. In our opinion, the High Court was clearly in error in declaring Clause (d), Article 45 of Schedule 1-A of the 1899 Act which as brought in by the M.P. 2002 Act as (Downloaded on 06/06/2021 at 10:22:21 PM) (34 of 55) [CW-25734/2018] violative of Article 14 of the Constitution of India. It is very difficult to approve the reasoning of the High Court that the provision may pass the test of classification but it would not pass the requirement of the second limb of Article 14 of the Constitution which ostracises arbitrariness, unreasonable and irrationality. The High Court failed to keep in mind the well defined limitations in consideration of the constitutional validity of a statute enacted by Parliament or a State Legislature.
16. The statute enacted by Parliament or a State Legislature cannot be declared unconstitutional lightly. The court must be able to hold beyond any iota of doubt that the violation of the constitutional provisions was so glaring that the legislative provision under challenge cannot stand. Sans flagrant violation of the constitutional provisions, the law made by Parliament or a State Legislature is not declared bad."
This now brings us to the question whether right of the petitioners to file appeal shall be governed by the law applicable on the date of filing of petition for recovery before the Debts Recovery Tribunal or the date when judgment was delivered by the Tribunal and the Recovery Certificate issued, and whether the requirement of pre-deposit for filing of appeal would fall in the domain of substantive law. It may be significant to note that adjudication proceedings in the present case were concluded with the DRT having passed the judgment on 17.03.2008. The remedy of appeal against adjudication order of the DRT has already been availed by the petitioner and other affected parties. But the execution of the recovery certificate is an independent proceeding which commenced with filing of the application for execution, much after the judgment passed by the Tribunal. What is sought to be challenged is the order of the Recovery Officer dated 18.07.2018 and this order was admittedly passed much after insertion of Section 30A of the Act of 1993 by way of amendment on 01.09.2016.
(Downloaded on 06/06/2021 at 10:22:21 PM)
(35 of 55) [CW-25734/2018] The Supreme Court in Thirumalai Chemicals Limited Vs. Union of India and Others - (2011) 6 SCC 739 held that substantive law refers to a body of rules that creates, defines and regulates rights and liabilities. The right conferred on a party to prefer an appeal against an order is a substantive right conferred by a statute which remains unaffected by subsequent changes in law, unless modified expressly or by necessary implication. Procedural law establishes a mechanism for determining those rights and liabilities and a machinery for enforcing them. Right of appeal being a substantive right always acts prospectively. However, the manner in which the appeal has to be filed, its form and the period within which the same has to be filed are matters of procedure. While the right conferred on a party to file an appeal is a substantive right, the procedure for filing the appeal including the period of limitation cannot be called a substantive right, and an aggrieved person cannot claim any vested right claiming that he should be governed by the old provision pertaining to period of limitation. Procedural law is retrospective meaning thereby that it will apply even to acts or transactions under the repealed Act. Every litigant has a vested right in substantive law but no such right exists in procedural law. It was held that unless the language used plainly manifests in express terms or by necessary implication a contrary intention, a statute divesting vested rights is to be construed as prospective. A statute merely procedural is to be construed as retrospective and a statute, which, while procedural in its character, affects vested rights adversely, is to be construed as prospective. In such a situation test is to see whether the statute, if applied retrospectively to a particular type of case, would impair existing rights and obligations. (Downloaded on 06/06/2021 at 10:22:21 PM)
(36 of 55) [CW-25734/2018] An accrued right to plead a time bar, which is acquired after the lapse of the statutory period, is nevertheless a right, even though it arises under an Act which is procedural and a right which is not to be taken away pleadin g retrospective operation unless a contrary intention is discernible from the statute.
The Supreme Court in Surendra Singh Deswal @ Col. S.S. Deswal & Others, supra, was considering the question whether the first appellate court was justified in directing the appellants (original accused), who was convicted for offence under Section 138 of the NI Act, to deposit 25% of the amount of compensation/fine imposed by the trial court, pending appeals challenging the order of conviction and sentence and while suspending the sentence under Section 389 of the Cr.P.C. in view of the amended Section 148 of the NI Act. The argument was that since the complaints against the appellant under Section 138 of the NI Act were lodged before the Amendment Act 20/2018 by which Section 148 of the NI Act was amended, therefore, such amendment shall not apply to the appellant. The Supreme Court noted that the amended Section 148 of the NI Act came into force on 01.09.2018 when the appellant filed application under Section 389 of the Cr.P.C. seeking suspension of the sentence pending appeals challenging conviction and sentence. Considering the object and purpose of the aforesaid amendment, the Supreme Court while suspending the sentence directed the appellant to deposit 25% of the amount of fine/compensation. The Supreme Court held that it cannot be said that any vested right of appeal of accused-appellant has been taken away and/or affected. The submission of the appellant that the amendment in Section 148 of the NI Act shall not be made (Downloaded on 06/06/2021 at 10:22:21 PM) (37 of 55) [CW-25734/2018] applicable retrospectively and more particularly, shall not be made applicable in respect of complaints filed prior to 01.09.2018, has no substance and cannot be accepted, held the Supreme Court. It was held that amendment in Section 148 of the NI Act does not take away and/or affect the substantive right of appeal. The Supreme Court held that considering the statement of objects and reasons of the amendment in Section 148 of the NI Act, a purposive interpretation has to be given thereto. It was held that amended Section 148 of the NI Act shall be applicable in respect of appeals challenging the conviction and sentence even in cases where the criminal complaints were filed prior to Amendment Act No.20/2018 with effect from 01.09.2018.
Argument before the Division Bench of Jharkhand High Court in Satya Nand Jha Vs. Union of India - 2016 SCC OnLine Jhar 2323 was that the right to prefer appeal had already accrued to the petitioner prior to 6th of August, 2014 when Section 35F of the Central Excise Act, 1944 was substituted incorporating the condition of pre-deposit of 7.5% or 10% of duty demanded and penalty levied in case an appeal is preferred before the Commissioner (Appeals) or the Tribunal, whereas there was no such condition imposed for filing of the appeal under original Section 35 of the Central Excise Act, 1944. If the assessee could prove undue hardship, the appellate authority could waive the condition of pre- deposit fully or partially. The Jharkhand High Court, relying on Section 6 of the General Clauses Act, held that since a different intention appears, the right, privilege, obligation and liabilities acquired, accrued or incurred under any enactment, so repealed, shall be affected. The different intention in the Act is derived from (Downloaded on 06/06/2021 at 10:22:21 PM) (38 of 55) [CW-25734/2018] the amended or substituted Section 35F of the Act of 1944. The second proviso to Section 35F provided that the provisions of this Section shall not apply to stay applications pending before any appellate authority prior to commencement of the Finance (No.2) Act, 2014. The High Court held that this shows clear intention of the legislature that Amendment Act of 2014 shall not be applicable to only stay applications and appeals which were preferred or pending before 06.08.2014. Thus the effect of Section 6 of the General Clauses Act is being taken away by second proviso of Section 35. It was held that the judgment of the Supreme Court in Hoosein Kasam Dada (India) Ltd., supra, does not apply to the facts situation obtaining in this case. The Supreme Court in Hoosein Kasam Dada (India) Ltd., supra, held that right to file appeal was a substantive right and not a mere procedure. But this situation was later clarified by the Supreme Court in Garikapati Veerayya Vs. N. Subbaiah Choudary - AIR 1957 SC 540 and it was held that right to file appeal is a substantive right but condition accompanying with that right for filing an appeal was in the realm of procedure.
The Supreme Court in Anant Mills Ltd. Vs. State of Gujarat - (1975) 2 SCC 175, held that the right of appeal is a creature of the statute and it is for the Legislature to decide whether the right of appeal should be unconditionally given to an aggrieved party or it should be conditionally given. The Supreme Court in Vijay Prakash D. Mehta & Another Vs. Collector of Customs - (1988) 4 SCC 402, in para 9 and 13 of the report, held as under:-
"9. Right to appeal is neither an absolute right nor an ingredient of natural justice the principles of which must be followed in all judicial and quasi-judicial adjudications. The right to appeal is a statutory right and it can be circumscribed by the conditions in the grant.(Downloaded on 06/06/2021 at 10:22:21 PM)
(39 of 55) [CW-25734/2018]
13. It is not the law that adjudication by itself following the rules of natural justice would be violative of any right- constitutional or statutory, without any right of appeal, as such. If the statute gives a right to appeal upon certain conditions, it is upon fulfilment of those conditions that the right becomes vested and exercisable to the appellant. The proviso to Section l29E of the Act gives a discretion to the Tribunal in cases of undue hardships to condone the obligation to deposit or to reduce. It is a discretion vested in an obligation to act judicially and properly."
The Supreme Court in Gujarat Agro Industries Co. Ltd. Vs. Municipal Corporation of the City of Ahmedabad - (1999) 4 SCC 468, relied on its earlier decision in Vijay Prakash D. Mehta, supra, wherein it was held that right to appeal is neither an absolute right nor an ingredient of natural justice the principles of which must be followed in all judicial and quasi-judicial adjudications. The right to appeal is a statutory right and it can be circumscribed by the conditions in the grant.
The cited judgment of the Supreme Court in Mardia Chemicals Ltd., supra, is an entirely distinguishable case on facts and does not in any manner help the petitioner. The Supreme Court in that case declared Section 17(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, 'the SARFAESI Act') to be unconstitutional because requirement of deposit of 75% of the demand, at the initial proceeding itself, was held unreasonable and oppressive, more particularly when the secured assets/the management thereof along with the right to transfer such interest has been taken over by the secured creditor or in some cases property was also sold. It was held by the Supreme Court that requirement of deposit of such a heavy amount on the basis of a one-sided claim alone, cannot be (Downloaded on 06/06/2021 at 10:22:21 PM) (40 of 55) [CW-25734/2018] said to be a reasonable condition at the first instance itself before start of adjudication of the dispute. The present one is however a case where dispute has already been adjudicated. Not only the Tribunal has passed the final judgment but also the Appellate Tribunal and thereafter the matter attained finality even up to the Supreme Court.
The Supreme Court in Hoosein Kasam Dada (India) Ltd., supra, was dealing with a case where unamended Section 22(1) of the Central Provinces and Berar Sales Tax Act, 1947, relating to provisions providing appeal required that the same shall not be entertained by the appellate authority unless it is satisfied that the amount of tax or penalty or both as the appellant may admit due from him to be paid. However, Section 22(1) was amended on 25.11.1949 which provided that such appeal shall not be admitted by the appellate authority unless it is accompanied by satisfactory proof of payment of tax with penalty in respect of which appeal has been preferred. The appellant did not admit that any amount was due to him and he was held entitled to file appeal without depositing any sum of money as the appeal in that case was filed against the order of assessment in adjudicating process. Conversely, the appeal in the present case is the one which is being filed against the order of the Recovery Officer in the process of the execution much after adjudication. Requiring the appellant, who seeks to question the order of the Recovery Officer, to deposit 50% of the amount, as may be determined due against him by the Tribunal, is intended to eliminate the frivolous appeals. Moreover, the appeal in the present case is sought to be filed against the order of Recovery Officer which has been passed much subsequent to amendment. Such a provision cannot be held to have taken away the right of appeal, muchless the substantive right. (Downloaded on 06/06/2021 at 10:22:21 PM)
(41 of 55) [CW-25734/2018] Condition of pre-deposit in the facts of the present case cannot be held to be a substantive right.
We may at this stage also refer to the decision of the Supreme Court in Garikapati Veerayya, supra, wherein it was held that right to file appeal is a substantive right but condition accompanying for filing an appeal was in the name of procedure. As far as the right of the aggrieved party to file an appeal unde r Section 30A of the Act has been kept intact and not interfered with. This section has been purposely added only to discourage and curtail frivolous appeals as the experience of more than one-and-a-half-decade after the amendment in Section 30 was introduced on 17.01.2000 was that challenge to different orders passed by the Recovery Officer in multiple appeals hampered the process of expeditious recovery, thus frustrating the very purpose of the recovery certificate obtained by the decree holder after a prolonged adjudicatory process before the Debts Recovery Tribunal. It also goes without saying that all those appeals which have already been filed prior to insertion of Section 30A by amendment on 01.09.2016 shall remain unaffected by the aforesaid amendment. It is only such appeals which are being filed subsequent to insertion of Section 30A by way of amendment that would require to be accompanied by the proof of deposit of 50% of the amount of debt due as determined by the Tribunal qua the person seeking to file appeal and avoid recovery.
There should be no manner of doubt about the language employed in Section 30 of the Act of 1993 that 'any person' aggrieved by the order of the Recovery Officer may file appeal thereagainst, which would include not only the borrower or the guarantor but also any other person. This issue is no longer res- (Downloaded on 06/06/2021 at 10:22:21 PM)
(42 of 55) [CW-25734/2018] integra having been settled by the Supreme Court in Jagdish Singh v. Heeralal, (2014) 1 SCC 479, while interpreting the expression 'any person' used in Section 17 of the SARFAESI Act is of wide import and takes within its fold not only the borrower but also the guarantor or any person who may be affected by action under Section 13(4) of the SARFAESI Act.
Contention that Section 30A is discriminatory as the respondents in prescribing the requirement of pre-deposit under that Section have not followed the uniform procedure as ordained by Section 36(2) of the Act of 1993, is noted to be rejected. There can be no uniformity in regard to pre-deposit for filing appeals where the orders sought to be challenged are different in nature. The appeal filed against adjudication by the DRT before the DRAT stands on different footings than the appeal filed against the order of the Recovery Officer before the DRT after the adjudicatory process is over. The rule of procedure framed by virtue of the authority conferred on the Central Government under Section 36(2) (da) merely provides for procedural aspect with regard to Tribunal and Appellate Tribunal. There is therefore no justification for insisting on uniformity on this aspect. When the statute has in Section 30A specifically required the pre-deposit of 50% of the due amount as may be determined by the Tribunal, it would in any case have primacy regardless of whatever is said in the Rules.
The Delhi High Court in R.V. Saxena Vs. Union of India and Others - AIR 2006 Delhi 96 was dealing with challenge to the constitutional validity of second proviso to Section 18(1) of the SARFAESI Act, which required that no appeal shall be entertained unless the borrower has deposited with the Appellate Tribunal 50% (Downloaded on 06/06/2021 at 10:22:21 PM) (43 of 55) [CW-25734/2018] of the amount of debt due from him, as claimed by the secured creditors or determined by the Debts Recovery Tribunal, whichever is less. The challenge to the aforesaid proviso was repelled by the Delhi High Court in the following terms:-
"16. The right of appeal is not an inherent right but is a creature of the statute. The Legislature can impose conditions under which this is to be exercised. Moreover, the proviso to Section 18 does not require the entire amount to be deposited, but only 50% thereof which can be reduced to a minimum of 25% of the sum. We see no illegality in this proviso. There are similar provisions in many enactments and they are being upheld by the Supreme Court. For example, in the second proviso under Section 15(1) of the Foreign Trade (Development and Regulation) Act, 1992, it is provided that the appeal against an order imposing a penalty or redemption charges shall not be entertained unless the amount of the penalty or redemption charges have been deposited by the appellant. Similarly in many other statutes, there are such similar provisions."
The judgment of the Delhi High Court in R.V. Saxena, supra, was followed by the Gujarat High Court in Babu Ganesh Singh Deepnarayan Vs. Union of India and Another - AIR 2009 Gujarat 98, and in para 5 of the report, held as under:-
"5. Right of appeal is a creature of the statute. Legislature can impose conditions under which it is to be exercised. Without a statutory provision creating such a right, a person aggrieved is not entitled to prefer an appeal. Legislature while granting right of appeal can impose conditions which it thinks reasonable. Such conditions merely regulate the exercise of right of appeal so that the same is not abused by a recalcitrant parry, and there is no difficulty in the enforcement of the order appealed against in case the appeal is ultimately dismissed. Imposition of such a condition is essential, so that frivolous appeals would not be filed. Ultimately if the appeal is dismissed, the aggrieved party can always seek refund of the amount deposited and therefore, he is not in any way aggrieved. Further the Third Proviso to Section 18(1) of the Securitization Act also enables the Appellate Tribunal, for the reasons to be recorded in writing, reduce the amount to not less than 25% of the debt referred to in the Second Proviso. We are not prepared to accept the contention that conditions imposed in the second and third proviso to Section 18(1) of the Securitization Act are onerous in nature so as to make the right of appeal (Downloaded on 06/06/2021 at 10:22:21 PM) (44 of 55) [CW-25734/2018] illusory. Delhi High Court in R.V. Saxena's case (supra) also upheld the validity of Second Proviso to Section 18(1) of the Securitization Act with which we fully concur."
The line of reasoning which the Gujarat High Court adopted in Babu Ganesh Singh Deepnarayan, supra, was that ultimately if the appeal is dismissed, the aggrieved party may also seek refund of the amount deposited and therefore he is not in any way aggrieved, has been approved by the Supreme Court in its subsequent judgment in Axis Bank Vs. SBS Organics (P) Ltd. - (2016) 12 SCC 18, wherein the appeal under Section 18 of the SARFAESI Act against the interim order did not survive and was withdrawn. The Supreme Court in that case noticed that the SARFAESI Act was intended to facilitate easy and faster recovery of loan amounts advanced by the banks or financial institutions. The ordinary recovery mechanism, which has been contemplated in the Code of Civil Procedure, 1908 was not considered sufficient. Thus, the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 was enacted for a special and speedier mechanism for the recovery. Almost a decade of experience proved that the recovery process was not achieving the intended objects and hence, the SARFAESI Act to regulate securitisation and reconstruction of financial assets and enforcement of security interest was enacted, whereby direct action for recovery of secured debt may be initiated against the secured assets of a borrower after the debt is declared to be a non performing asset. It was held that the secured creditor in the event of non-payment of the dues as per Section 13(2) notice, is entitled to not only proceed against the secured assets mentioned in the notice under Section 13 and is also to proceed first against the (Downloaded on 06/06/2021 at 10:22:21 PM) (45 of 55) [CW-25734/2018] guarantor for sale of the pledged assets. However, the partial deposit before the DRAT as precondition for considering the appeal on merits in terms of Section 18 of the Act is not a secured asset. That being so, on disposal of the appeal, either on merits or on withdrawal, or on being rendered infructuous, in case the appellant makes a prayer for refund of the pre-deposit, the same has to be allowed and the pre-deposit has to be returned to the appellant, unless the Appellate Tribunal, on the request of the secured creditor but with the consent of the depositors, had already appropriated the pre-deposit towards the liability of the borrower, or with the consent, had adjusted the amount towards the dues, or if there be any attachment on the pre-deposit in any proceedings under Section 13(1) of the Act read with Rule 11 of The Security Interest (Enforcement) Rules, 2002.
The Supreme Court in Axis Bank, supra, turned down the argument that the bank has a lien on the pre-deposit made under Section 18 of the SARFAESI Act in terms of Section 171 of the Indian Contract Act, 1872, which provides for retention of the goods bailed to the Bank by way of security for the general balance of account. It was held that such pre-deposit is not with the Bank but with the Tribunal and it is not a bailment of the bank as provided under Section 148 of the Contract Act. Conceptually, it should be an argument available to the depositor, since the goods bailed are to be returned or otherwise disposed of, after the purpose is accomplished as per the directions of the bailor, held the Supreme Court.
Section 30 of the Recovery of Debts and Bankruptcy Act, 1993 provided appeal against order of the Recovery Officer in the terms (Downloaded on 06/06/2021 at 10:22:21 PM) (46 of 55) [CW-25734/2018] that any person aggrieved by an order of the Recovery Officer made under the Act of 1993 may, within thirty days from the date on which a copy of the order is issued to him, prefer an appeal to the Tribunal. Section 30A of the Act of 1993, inserted by Act No.1 of 2013 with effect from 15.01.2013, does not in any manner interfere with the right of the petitioner to avail the remedy of appeal so provided under Section 30 of the Act of 1993. This Court is cognizant of the mischief with the legislature wanted to suppress by introducing the condition of deposit of "fifty per cent of the amount of debt due" The respondents have amply demonstrated that remedy of appeal against the order of Recovery Officer after adjudication was found responsible for enormous delay in execution of the recovery certificates. Unscrupulous litigants used to frustrate the recovery proceedings by filing successive appeals against different orders, passed by the Recovery Officer. The legislature therefore in its wisdom thought it necessary to suppress this mischief of the judgment-debtors and those claiming through them, who were resorting to delay tactics so as to frustrate the process of recovery.
Contention that according to this provision, an aggrieved party may be required to file appeals, not just against one order but different orders passed at different stages by the Recovery Officer and at each stage, he would be required to deposit fifty per cent of the amount of debt due to him, before the Tribunal, thus, in fact, requiring him to deposit much more amount than the total of the due amount, is noted to be rejected for the simple reason that it is precisely for this reason of filing of frivolous and multiple appeals that the Parliament, after remedy of appeal against the order of (Downloaded on 06/06/2021 at 10:22:21 PM) (47 of 55) [CW-25734/2018] Recovery Officer provided long time ago, having noticed the tendency of the litigants in prolonging execution of recovery certificate and frustrating the process of recovery, purposely introduced the requirement of pre-deposit of fifty per cent of the amount of debt due against him. For the same reason, the argument that if one order is challenged by different parties, each party would be required to separately deposit fifty per cent of the amount of debt due determined by the Tribunal also does not have any substance. It was in order to curb this tendency of filing frivolous appeals against each and every order of the Recovery Officer that the requirement of fifty per cent of the amount of debt due as determined by the Tribunal was introduced. In fact, the very purpose of having such a provision is to ensure that, whoever it be, one party or several parties, if any of them question the correctness of the order passed by the Recovery Officer, has to prove his bona- fides by making such deposit, which amount eventually, if and when appeal is decided, in any case, can be reclaimed by such party.
Character of those who are defaulters, and have been adjudged liable to repay the loan amount, cannot be judged on the basis of their capacity to repay. Further the contention that Section 30A of the Act does not make any reasonable classification between the good and the bad borrower and treats the borrowers who have discharged their debt during the course of execution proceedings at par with those who have not done so, does not appeal to logic as there are not good or bad borrowers. They would rather be considered on the basis of the adjudication made by the DRT as judgment debtor held liable to make payment of the amount due as determined by the Tribunal. There is no substance in the argument (Downloaded on 06/06/2021 at 10:22:21 PM) (48 of 55) [CW-25734/2018] that Section 30A is violative of Article 14 as it discriminates between the parties who are financially capable to make pre-deposit with those who are not so capable. Appeals challenging the order passed by the Recovery Officer are invariably filed by only those who are found guilty of not making payment of dues of the banks and financial institutions.
Section 30A applies equally to all whoever seeks to assail the order of the Recovery Officer. Section 30A places a reasonable restriction on the right of the defaulters/borrowers/guarantors or debtors if they decide to challenge the order of the Recovery Officer in appeal requiring them to make deposit of 50% of the amount as determined by the Tribunal. This has got intelligible diferentia underlying it and a reasonable nexus with the object sought to be achieved, i.e., to curb the tendency of filing multiple number of appeals or frivolous appeals so as to delay the proceedings. It is trite that the statute enacted by the Parliament cannot be declared unconstitutional unless the court holds that legislative provision under challenge cannot at all stand for violation of the constitutional provision. It is settled proposition of law that hardship is not a ground to declare a principal statute or economic law unconstitutional. The constitutional infirmity has to be expressly found and specifically stated. Even if there are two views possible making one as constitutional and another unconstitutional, it must lean in favour of its constitutionality. The Court cannot strike down an enactment or part of it just by holding that it is arbitrary or unreasonable or irrational.
It is trite that if a statutory provision is open to more than one interpretation, then the courts have to chose that interpretation, (Downloaded on 06/06/2021 at 10:22:21 PM) (49 of 55) [CW-25734/2018] which represents the true intention of the Legislature. Following passage from MAXWELL on Statutes, 11th Edition, p. 51, 12th Edition, p. 76, which is based on dictum of AB-BOT, C.J. in R.V. Hall, (1822) 107 ER 47, p.51 supports this view point:
"The words of a statute, when there is doubt about their meaning, are to be understood in the sense in which they best harmonise with the subject of the enactment and the object which the Legislature has in view. Their meaning is found not so much in a strict grammatical or etymological propriety of language, nor even in its popular use, as in the subject or in the occasion on which they are used, and the object to be attained."
Similar language is used in Broom's Legal Maxims, pp. 466, 467, which was cited with approval by LORD ROMILLY in Lion, (1869) 16 ER 688, p.691 (PC). The afore-extracted passage has been quoted with approval by the Supreme Court of India in Ashok Singh Vs. Assistant Controller of Estate Duty, Calcutta and Others (1992) 3 SCC 169; Workmen of Dimakuchi Tea Estate Vs. Management of Dimakuchi Tea Estate, AIR 1958 SC 353; and Mukesh K. Tripathi Vs. Senior Divisional Manager, LIC and Others, (2004) 8 SCC 387. Therefore, when two interpretations are feasible, the court will prefer that, which advances the remedy and suppresses the mischief which the Legislature envisioned. The court should adopt an object oriented approach keeping in mind the principle that legislative futility is to be ruled out so long as interpretative possibility permits. The object oriented approach, however, cannot be carried to the extent of doing violence to the plain language used by rewriting the section or substituting words in place of the actual words used by the Legislature. On analysis of the entire law on the subject, we find (Downloaded on 06/06/2021 at 10:22:21 PM) (50 of 55) [CW-25734/2018] that the impugned condition in Section 30A of the Act of 1993 cannot be said to be arbitrary or discriminatory inasmuch as it applies equally to all whoever decides to challenge the order of the Recovery Officer. Having a condition like this for filing of appeal against the order of the Recovery Officer would only ensure expeditious and speedy recovery of the dues of the banks etc. The alternative prayer made by the petitioner that the words "debt due as determined by the Tribunal" may be severed from the remaining Section 30A of the Recovery of Debts and Bankruptcy Act, 1993, is noted to be rejected. As held by the Constitution Bench of the Supreme Court in Kihoto Hollohan Vs. Zachillhu and Others, 1992 Supp (2) SCC 651, (para 172), "the doctrine of severability applies in a case where an otherwise validly enacted legislation contains a provision suffering from a defect of lack of legislative competence and the invalid provision is severable leaving the remaining valid provisions a viable whole." There is no case for holding that the Parliament was lacking in competence in enacting Section 30A of the Act. Section 30A stipulates that where an appeal is preferred against any order of the Recovery Officer, under Section 30, by any person from whom the amount is due to a bank or financial institution or consortium of banks or financial institutions, such appeal shall not be entertained by the Tribunal unless such person has deposited with the Tribunal fifty per cent of the amount of debt due as determined by the Tribunal. The words "debt due as determined by the Tribunal" may not be given an interpretation that pre-deposit of fifty per cent is required to be made of whatever final amount is determined by the Tribunal as it has to take color from the words "by any person from whom the amount of debt is due to (Downloaded on 06/06/2021 at 10:22:21 PM) (51 of 55) [CW-25734/2018] a bank", which is followed by the wordings "such appeal shall not be entertained by the Tribunal unless such person has deposited with the Tribunal fifty per cent of the amount of debt due as determined by the Tribunal". It has to be therefore necessarily read as debt due against the person who is seeking to prefer an appeal. This can be explained with an example. Suppose, in a given case, if there are three debtors and the Tribunal has determined the amount of debt due to be deposited by each one of them jointly and severally, fifty per cent of the entire amount would be required sum of pre-deposit, which anyone of them filing the appeal against the order of Recovery Officer, would be required to deposit. However, if the Tribunal has determined individual liability for each of them separately, the amount of the "debt due as determined by the Tribunal" shall have to be read down as the amount due as quantified by the Tribunal against such person from whom recovery has to be made. Since the appeal against the order of the Recovery Officer would lie to the Debts Recovery Tribunal itself, which has adjudicated the recovery claim, in the event of any dispute about the "debt due as determined by the Tribunal" against such person, the Tribunal would be the appropriate body to decide as to what amount of debt was determined as due from the person who has preferred such appeal so as to quantify the requisite amount of pre- deposit. Merely because this provision has not been properly articulated, cannot be a reason to strike it down. Apprehension of the petitioner that even though the aggrieved person seeking to file an appeal may not be liable to pay the entire due amount as may be determined by the Tribunal, yet he would be compelled to deposit fifty per cent of whole of the amount determined by the (Downloaded on 06/06/2021 at 10:22:21 PM) (52 of 55) [CW-25734/2018] Tribunal, can be taken care of by invoking the doctrine of reading down rather than striking down the provision of Section 30A or by invoking doctrine of severability. Doctrine of reading down is a principle of statutory interpretation which is invoked by the Constitutional Courts when the statute is either not expressive or articulate, by ironing out the creases, to give the life and force to the intention of the legislature which is otherwise discernible.
The Constitution Bench of the Supreme Court in Delhi Transport Corporation Vs. D.T.C. Mazdoor Congress and Others, 1991 Supp (1) SCC 600, held that provision conferring wide powers on authority can be read down in conformity with legislative intent of exercise of the power within the constitutional limits. Where statute is silent or not expressive or inarticulate, court should read down the statute and transmute the inarticulate. The Constitution Bench of the Supreme Court further held that the Doctrine of Reading Down is an internal aid to construe the word or phrase in a statute to give reasonable meaning. The object of reading down is to keep the operation of the statute within the purpose of the Act and constitutionally valid. Their Lordships in para 329 of the report held that "...the courts, though, have no power to amend the law by process of interpretation, but do have power to mend it so as to be in conformity with the intendment of the legislature. Doctrine of reading down is one of the principles of interpretation of statute in that process. But when the offending language used by the legislature is clear, precise and unambiguous, violating the relevant provisions in the Constitution, resort cannot be had to the doctrine of reading down to blow life into the void law to save it from unconstitutionality or to confer jurisdiction on the legislature......". It (Downloaded on 06/06/2021 at 10:22:21 PM) (53 of 55) [CW-25734/2018] was further held that the Courts should proceed with a straight forward method of striking down such legislations. But where the statute is silent or not expressive or inarticulate, the Court must read down in the silence of the statute and in the inarticulation of its provisions, the Constitutional inhibitions and transmute the major inarticulate premise into a reality and read down the statute accordingly. Their Lordships therein also held that "..... In an appropriate case judges would articulate the inarticulate major premise and would give life and force to a statute by reading harmoniously all the provisions ironing out the creases. .....". And in para 323 it was held that ".... Where an ambiguity arises to supposed intention of the legislature, one of the statutory constructions, the court propounded, is the doctrine of reading down. ....". Reliance therein was placed on the judgment in Federal Steam Navigation Co. v. Department of Trade and Industry, (1974) 2 All ER 97, 100 (as also extracted by Cross Statutory Interpretation, Butterworths' edition, 1976 at page 43 in proposition
3), wherein Lord Reid has stated thus:-
"...the judge may read in words which he considers to be necessarily implied by words which are already in the statute and he has a limited power to add to, alter or ignore statutory words in order to prevent a provision from being unintelligible, absurd or totally unreasonable, unworkable or totally irreconcilable with the rest of the statute."
The Supreme Court in Subramanian Swamy and Others Vs. Raju, (2014) 8 SCC 390, while relying on the afore-extracted passage from its earlier constitution bench judgment in Delhi Transport Corporation Vs. D.T.C. Mazdoor Congress, supra, in para 61 of the report held as under:-
(Downloaded on 06/06/2021 at 10:22:21 PM)
(54 of 55) [CW-25734/2018] "61. Reading down the provisions of a statute cannot be resorted to when the meaning thereof is plain and unambiguous and the legislative intent is clear. The fundamental principle of the "reading down" doctrine can be summarized as follows. Courts must read the legislation literally in the first instance. If on such reading and understanding the vice of unconstitutionality is attracted, the courts must explore whether there has been an unintended legislative omission. If such an intendment can be reasonably implied without undertaking what, unmistakably, would be a legislative exercise, the Act may be read down to save it from unconstitutionality....."
The Supreme Court in Cellular Operators Association of India Vs. TRAI, (2016) 7 SCC 703 has reiterated the doctrine of reading down in constitutional adjudication, which was relied on in Hiral P. Harsora and Others Vs. Kusum Narottamdas Harsora and Others, (2016) 10 SCC 165, and held as under:-
"But it was said that the aforesaid Regulation should be read down to mean that it would apply only when the fault is that of the service provider. We are afraid that such a course is not open to us in law, for it is well settled that the doctrine of reading down would apply only when general words used in a statute or regulation can be confined in a particular manner so as not to infringe a constitutional right. ....."
In view of above discussion, we are inclined to hold that the phraseology such person has deposited with the Tribunal "50% of the amount of debt due as determined by the Tribunal", would have to be read down as "such person has deposited 50% of the amount of debt due as determined by the Tribunal qua him", namely, the party/litigant or the person who challenges the order passed by the Recovery Officer by filing an appeal.
In view of the above discussion, the challenge to constitutional validity of Section 30A of the Act is repelled, however, by reading (Downloaded on 06/06/2021 at 10:22:21 PM) (55 of 55) [CW-25734/2018] down part of it as referred to above. The writ petition is accordingly allowed in part. This also disposes of stay application.
Considering however that limitation for filing appeal has expired, we direct that if the petitioners even now files appeal against the order of the Recovery Officer within sixty days along- with proof of deposit of 50% of the amount determined as due from the petitioners, their appeal shall be entertained by the Debts Recovery Tribunal and decided on merits.
(NARENDRA SINGH DHADDHA),J (MOHAMMAD RAFIQ),ACTING CJ //Jaiman// (Downloaded on 06/06/2021 at 10:22:21 PM) Powered by TCPDF (www.tcpdf.org)