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2019 Supreme(Raj) 1592
IN THE HIGH COURT OF RAJASTHAN AT JAIPUR BENCH
Mohammad Rafiq and Narendra Singh Dhaddha, JJ.
Xlo India Limited - Appellant
Versus
Union Of India, Ministry Of Finance - Respondent
Civil Writ Petition No. 25734 of 2018; Civil Miscellaneous Stay Application No. 21511 of 2018
Decided On : 27-09-2019
Suruchi Kasliwal, Advocate, R.D. Rastogi, Advocate, Additional Solicitor, Advocate, Amitosh Pareek, Advocate, Kersi J Mehta, Advocate
Headnote:
Whether Section 30A of the Recovery of Debts and Bankruptcy Act, 1993 (Act of 1993) is unconstitutional? Whether the words "debt due as determined by the Tribunal" in Section 30A of the Act of 1993 can be severed from the remaining part?
Fact of the Case:
Petitioners, XLO India Limited and its Director, challenged the constitutional validity of Section 30A of the Act of 1993, which required a 50% pre-deposit of the debt due as determined by the Tribunal for filing an appeal against the order of the Recovery Officer. The petitioners argued that Section 30A was unconstitutional as it discriminated between appellants who could afford to make the pre-deposit and those who could not, and that it did not apply to third parties. They also contended that the requirement of pre-deposit was excessive and unreasonable, and that it violated their right to appeal under Article 19(1)(g) of the Constitution of India.
Finding of the Court:
The Court held that Section 30A of the Act of 1993 was constitutionally valid, but it read down the words "debt due as determined by the Tribunal" to mean "debt due as determined by the Tribunal qua him", i.e., the party challenging the order of the Recovery Officer. The Court held that the requirement of pre-deposit was a reasonable restriction on the right to appeal, and that it was necessary to prevent frivolous appeals and to expedite the recovery of debts.
Issues: 1. Whether Section 30A of the Act of 1993 is unconstitutional? 2. Whether the words "debt due as determined by the Tribunal" in Section 30A of the Act of 1993 can be severed from the remaining part?
Ratio Decidendi: 1. The Court held that Section 30A of the Act of 1993 was constitutionally valid because: a) It did not discriminate between appellants who could afford to make the pre-deposit and those who could not, as it applied equally to all appellants. b) It did apply to third parties, as the term "any person" in Section 30A included third parties. c) The requirement of pre-deposit was not excessive or unreasonable, as it was necessary to prevent frivolous appeals and to expedite the recovery of debts. d) It did not violate the right to appeal under Article 19(1)(g) of the Constitution of India, as the right to appeal was not an absolute right and could be reasonably restricted. 2. The Court held that the words "debt due as determined by the Tribunal" in Section 30A of the Act of 1993 could not be severed from the remaining part, as they were essential to the meaning of the provision.
Final Decision: The Court allowed the writ petition in part and directed that if the petitioners filed an 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 them, their appeal would be entertained by the Debts Recovery Tribunal and decided on merits.
JUDGMENT
Mohammad Rafiq, A.C.J. - 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.
2. 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.
3. 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 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
