Pre-Deposit U/S 21 Of RDB Act Should Be Waived For Non-Substantive Appeals: Telangana High Court

The Telangana High Court has distinguished between substantive Appeal and procedural appeal under the Recovery of Debts and Bankruptcy Act, 1993 and held that, when a procedural appeal is made under section 21, the pre-deposit of 25%/50% as stipulated under section 21 would be waived off, if the appeal was non-substantive.“The appeal filed by the petitioner before the DRAT is not a substantive appeal from an adjudication of debt but an appeal for restoration of the principles of natural justice from an ex parte order excluding the petitioner from presenting his case. The significance of preserving the principles of natural justice has specifically been recognised by section 22(1) of the RDB Act. The petitioner's appeal cannot be brought within the stranglehold of the deposit requirement under section 21 of the RDB Act or the proviso contained therein,” held the Division Bench of Justice Moushumi Bhattacharya and Justice Gadi Praveen Kumar. The Bench, referring to section 22 of the DBA Act, noted that while section 22(1) stipulates that the Tribunal would not be bound by the procedure laid down in CPC, section 22(2) delineates the matters where the DRT/DRAT can exercise the powers of a Civil Court. The Bench further noted that CPC prescribes for appeals against Original Decrees (section 96 r/w Order XLI) and Appeals against Original Orders (Section 104 r/w Order XLIII Rule 1). Thus, the Bench deemed it prudent that there should be a distinction made between the above-mentioned Appeals even under the DBA, 1993. “Order XLIII Rule 1(d) makes an order under Order IX Rule 13 (order rejecting an application seeking to set aside an ex parte decree against defendant) appealable under Order XLIII Rule 1. Thus, a distinction must be made between appeals under the aforesaid categories i.e., under section 96 read with Order XLI as opposed to appeals under Order XLIII Rule 1(d) of the CPC. If this distinction is applied to the RDB Act, it must logically follow that appeals from final determinations of debt are subject to section 21 of the RDB Act (akin to appeals under section 96 of the CPC) as opposed to appeals from interlocutory/procedural orders. The latter category, falling outside substantive appeals which should therefore not be subject to the condition of deposit under section 21 of the RDB Act or the proviso thereto.”Background:The genesis of the writ petition is in an order rendered by the Debts Recovery Appellate Tribunal at Kolkata, by way of which, the Tribunal had directed the writ petitioner to make a pre-deposit of 25% of the awarded debt amount, as prescribed under section 21 of the DBA, for preferring an appeal. Challenging the same, the present writ was filed. The petitioner contended that he had been set ex parte before the Debt Recovery Tribunal, and the application was disposed of holding him, along with other respondents, liable for recovery of INR 47,13,93,098/-. When the writ petitioner, filed an IA for setting aside ex-parte order, it was dismissed on the ground that the petitioner failed to establish sufficient cause for condoning the delay of 1484 days. The writ petitioner filed an appeal before the Appellant Tribunal, along with an IA to waive the pre-deposit of 25% contending that the appeal was not substantial, but procedural. The IA was dismissed and the petitioner was directed to pay a pre-deposit of INR66,86,20,751/-. When the matter reached the High Court, the petitioner reiterated his pleadings as made before the Appellate Tribunal, while the respondents argued that the petitioner could not circumvent the statutory mandate; that the petitioner was referring to the recovery amount ordered by the Tribunal, and hence it could not be said that the appeal was not substantive. After hearing the arguments advanced by both sides, the Bench noted that ex parte orders are an exception and not the rule. That they lack finality, and are one-sided. Thus held that denial of the right to correct the procedural infirmity in the specific context of refusal to condone the delay in seeking to recall an ex parte order must be put in its proper place in the scheme of the RDB Act.. “The proper place would be section 22(2)(g) which facilitates access to justice by enabling recall of ex parte orders. Placing undue burden of a pre-deposit for such procedural access would certainly be onerous on the appellant and discordant to the legislative intention behind section 22(2)(g) of the RDB Act. To put it simply, imposing a mandatory condition for a non-substantive appeal to be entertained by the Appellate Tribunal would render the statutory right under section 22(2)(g) illusory, harsh and burdensome.”With that observation, the writ was allowed, and the appellant court was directed to re-call the pre-deposit order. WP 12395 of 2025Counsel for petitioner: Murali ManoharCounsel for respondent: V.L.V Devi, appearing for G. Prabhakar Sarma.Click Here To Read/Download Order

Pre-Deposit U/S 21 Of RDB Act Should Be Waived For Non-Substantive Appeals: Telangana High Court

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