ORDER
A.K. Srivastava, J. (Chairman)
1. This is application under Section 21 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 for waiver of pre-deposit of 75% required under that section. The applicant has filed an Appeal No. 192/2000 against the final order dated 31.5.1999 passed by the Debts Recovery Tribunal, Delhi in O.A. No. 339/97. In that O.A. there were seven defendants and the applicant was defendant No. 7. Rest defendants 1 to 6 have also filed an appeal against the same final order, which is Appeal No. 164/2000.
2. As per the impugned order there is a decree against all the defendants. Against defendant Nos. 1 to 3 the decree is of Rs. 8,13,47,820.32 and against all the defendants there is a further decree of Rs. 1,03,86,677.76. Since the applicant here is defendant No. 7 in the said O.A., the decree against him is to the tune of Rs. 1,03,86,677.76.
3. On perusal of the order, it transpires that notices were sent to the applicant/appellant and when the same could not be served normally through registered post he was served by publication in March, 1998. He appeared before the Tribunal and moved an application for deleting his name from the array of the defendants on several grounds taken in that application. That application was dismissed on 25.5.1999 and he was directed to file written statement and to take all the objections in that written statement and 31.5.1999 was fixed as the next date. From the contents of the impugned order it transpires that the applicant/ appellant did not file his written statement and consequently the impugned order was passed in which an observation was made that the defendants failed to show any cause to the relief claimed by the applicant Bank.
4. The applicant/appellant challenged the impugned order before the Hon’ble High Court in a Writ Petition. The Hon’ble High Court declined to entertain the Writ Petition and relegated the applicant/appellant to the remedy of appeal. However, in that order it was observed that in case an application for waiver of pre-deposit is moved before this Appellate Tribunal, the same would be considered sympathetically in case the facts and circumstances of the case so warranted.
5. In this application for waiver and in the Memorandum of Appeal the grounds taken are that the applicant/appellant had no liability to pay the debt of M/s. Varuna Marine Products Ltd., the principal borrowenwhich ultimately got merged with defendant No. 1 in the O.A., namely, M/s. Golden Protein because he had retired from M/s. Varuna Marine Products Ltd. on 24.8.1991 and the said retirement was accepted by the respondent Bank; that thereafter, the defendant No. 1 executed further documents with the respondent Bank in the shape of revival letter and defendant Nos. 2 to 6 had executed the documents in favour of the respondent Bank; that the applicant/appellant no longer remained a guarantor for the loan; and that the claim of the respondent Bank was time-barred as against the applicant/appellant.
6. Though the applicant/appellant moved an application before the Tribunal below for striking off his name from the array of defendants but the same was dismissed by the Tribunal on 25.5.1999 and he was directed to file the written statement by the next date. The applicant/ appellant did not file any written statement by the next date i. e. 31.5.1999 and consequently the decree was passed against him staying that no cause in defence was shown by him.
7. This application has been vehemently opposed by the respondent Bank.
8. Heard learned Counsel for the parties. In this case I find that despite that applicant/ appellant being served, he did not file his written statement and ultimately the Tribunal below had to pass an ex parte decree saying that the applicant/appellant failed to show cause.
9. As per his own admission M/s. Varuna Marine Products Ltd. had been granted a cash credit hypothecation facility of Rs. 12 lakhs in May, 1987; that with effect from 27.9.1989 the limit of that facility was enhanced to Rs. 24 lakhs; that the applicant/appellant signed and executed guarantee agreements on 6.5.1987 and on 27.9.1989 in favour of the respondent Bank. There is no dispute that the applicant/appellant resigned from the Board of Directors of M/s. Varuna Marine Products Ltd. and the same was accepted by the respondent Bank but the fact which remains to be decided is whether by resigning as Director of M/s. Varuna Marine Products Ltd. the applicant/appellant was absolved from the guarantee also. Learned Counsel for the respondent Bank vehemently contended that the liability as guarantor continued even though the applicant/appellant ceased to be one of the Directors of M/s. Varuna Marine Products Ltd. There is also no dispute that M/s. Varuna Marine Products was taken over by M/s. Golden Protein with all the assets and liabilities. From the facts as urged by the Counsels for the parties, in September, 1991 M/s. Varuna Marine Products Ltd. had asked for enhancement of the said credit facility to the tune of Rs. 38 lakhs and for that, defendant Nos. 2 to 6 had executed the guarantee agreement. It has been accepted by the Bank that the applicant/appellant did not execute guarantee agreement so far as the enhanced credit facility to the tune of Rs. 38 lakhs was concerned.
10. While deciding this application for waiver I do not enter into the merits of the appeal. Only a prima facie view is to be taken. Whatever the appellant is contending appears to be arguable but facts may not be substituted in appeal if the same had not been placed before the Tribunal below in defence by filing the written statement. The applicant/appellant is
contending before me that he was not afforded adequate opportunity to defend the case filed
by the respondent Bank. That question will also be looked into when the appeal is heard on
merits.
11. There is a mandate under Section 21 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 that the appeal shall not be entertained unless the appellant deposits 75% of the adjudged sum but there is a proviso that the Appellate Tribunal may waive the deposit or reduce the same. Question arises whether in the facts and circumstances of the case there should be entire waiver or only reduction in the required deposit or nothing. I now proceed to take it up.
12. The undisputed fact is that the applicant/appellant had become guarantor of the credit facility to the tune of Rs. 24 lakhs. Therefore, prima facie, it would be appropriate to deal the applicant/appellant without prejudice to the contentions of the respondent Bank on the issue, to the liability emanating from the credit facility to the tune of Rs. 24 lakhs only.
13. Considering the conduct of the applicant/appellant I do not consider it appropriate to grant complete waiver in the matter. The interest of the respondent Bank who had given the credit facility to the tune of Rs. 1.77 crores has also to be looked into. There is nothing on record to show that the respondent Bank has received anything from the defendants against the liability incurred by the defendants. It is not fair that after receiving the facility the defendants remained silent and did not pay a single pie to the respondent Bank.
14. In the aforesaid facts and circumstances of the case and considering the urged financial position of the applicant/appellant, in my opinion, reduction in the required deposit is warranted. The requirement of the provisions of Section 21 of the Act would be fulfilled if the appellant is directed to deposit Rs. 10 lakhs within two months from the date of this order. Ordered accordingly. Application stands disposed of. It is to be noted that in case the appellant does not deposit Rs. 10 lakhs within the time-schedule as above, the appeal will not be entertained as per the provisions of the said Section 21 of the Act.
Copy of this order be sent to the parties by registered post.