Writ petition filed by liquor baron Vijay Mallya dismissed holding requirement of pre-deposit under Section 21 of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 to be retrospective in operation

Karnataka High Court: A Division bench comprising of Dinesh Maheshwari and Krishna N. Dixit, JJ. dismissed a writ petition filed by fugitive industrialist Vijay Mallya, against order requiring pre-deposit of Rs. 3101 crores in order to maintain appeal against fixation of liability for debt due to banks.

The factual background of the case revolves around the default in payment of debts taken by petitioner’s company Kingfisher Airlines Ltd. from a consortium of banks. The consortium of banks instituted a petition for recovery of their money in the Debt Recovery Tribunal (DRT), Karnataka wherein the petitioner was held liable for the recovery of money. Aggrieved by the said order, the petitioner preferred an appeal in Debt Recovery Appellate Tribunal (DRAT) which was dismissed for want of appearance and non-compliance of office objections. An application was filed by the petitioner seeking restoration of the appeal whereupon DRAT directed him to deposit a sum of Rs 3101 crores and observed that in case of failure of compliance, the appeal would be liable to dismissed automatically. The petitioner did not make such deposit and consequently, the appeal stood dismissed. Thereafter, the petitioner filed another application seeking restoration of the dismissed appeal and praying enlargement of time for making the deposit. The Hon’ble Tribunal dismissed this application holding that there was no substance in the prayers of petitioner. It is against this order of DRAT, that the instant writ petition has been filed, praying for quashing of the said order.

The court discussed the effect of amendment in the year 2016 on Section 21 of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 and opined that the amendment did not relate to the right of appeal as such but to the conditions subject to which the said right would become exercisable. It was noted that prior to the 2016 amendment, the borrower had an absolute and unconditional right to appeal and the proviso to Section 21 conferred power on DRAT to waive off or limit the condition of pre-deposit. But after the amendment, this absolute discretion of DRAT was restricted and now it only has the power to reduce the pre-deposit to not less than 25% of the decretal sum. This trimming of DRAT’s power being essentially an amendment by way of substitution was held to be retrospective in operation. In order to give force to its reasoning, the court relied on the decision of Full Bench of this High Court in Hassan Cooperative Milk Producers Societies Union Ltd. v State of Karnataka, 2014 SCC OnLine Kar 2924.

The High Court also adverted to the facts of the case and expressed serious doubts over bonafides of the proceedings and the seriousness of the petitioner in pursuing his remedies. As such, it was held that the DRAT’s requirement of pre-deposit for maintaining the appeal was legitimate and the writ petition was dismissed for being bereft of substance and merits. [Vijay Mallya v. State Bank of India, WP (C) No. 22111of 2018, decided on 05-10-2018]

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