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Judgment
The three appellants are seeking waiver of the requirement of pre-deposit for the entertainment this appeal which arises out of the final order dated 24.06.2019 passed by the Debts Recovery Tribunal(DRT) in the Original Application filed by respondent no.1 Bank herein against the appellants and five others who are respondents 2 to 6 herein under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act,1993('RDDBFI Act').
Vide order dated 24.06.2019 the learned DRT has ordered issuance of a Recovery Certificate for a sum of Rs.557,98,62,347/- with interest against the appellants-defendants and respondents-defendants 2 to 6. The appellants have felt aggrieved with that order of the DRT which has been passed in the O and thus have approached this appellate tribunal with the present appeal under Section 20(1) of RDDBFI Act. For the entertainment of this appeal the appellants are required to make a pre-deposit of 50% of the amount of debt adjudicated by the DRT to be recoverable from them, as provided under Section 21 of RDDBFI Act. The appellants are, however, seeking complete waiver of this mandatory requirement of pre-deposit despite the fact that this Tribunal cannot grant cannot reduce the amount of pre-deposit beyond 25% of the amount of debt in dispute as provided under Section 21 of RDDBFI Act which is re-produced below:-
"21. Deposit of amount of debt due, on filing appeal.- Where an appeal is preferred by any person from whom the amount of debt is due to a bank or a financial institution or a consortium of banks or financial institutions, such appeal shall not be entertained by the Appellate Tribunal unless such person has deposited with the Appellate Tribunal fifty per cent of the amount of debt so due from him as determined by the Tribunal under section 19:
Provided that the Appellate Tribunal may, for reasons to be recorded in writing, reduce the amount to be deposited by such amount which shall not be less than twenty-five per cent of the amount of such debt so due to be deposited under this section."
To seek reduction in the amount of pre-deposit the appellants are required to make out a prima facie case in their favour which would show that they are likely to succeed in appeal and further that they are not in a sound financial position to make a pre-deposit of 50% of the amount of debt determined by DRT to be recoverable from them.
The appellants here have been held liable to pay the decretal amount severally and jointly with respondents 2 to 6 herein. The respondent Bank had advanced crores of rupees to respondent no.2 herein. Respondents 23 to 6 were impleaded in the O.A. being guarantors/mortgagors. The appellants herein were impleaded on the allegations that they were the founder/promoter directors of the borrower Company, respondent no.2 herein REI Agro Limited, which was incorporated almost two decades before the grant of loans to it by respondent no.1 Bank. The O.A. applicant Bank had claimed that these appellants were the brains behind by the siphoning off crores of public money lent to their Company which belongs to them and their family members/close relatives. This claim of the Bank has been accepted by the DRT and a recovery certificate has been issued against the appellants also. The grievance of the appellants as raised before this Tribunal by Mr. RajeeveMehra, learned senior counsel for the appellants is that despite the fact that neither the Bank had pleaded in its O.A. nor led any evidence to the effect that the appellants were in way connected with the grant of loans to the borrower Company the DRT has held them also liable for the claimed amount and that conclusion is ex facie a perverse conclusion and cannot be sustained at all. It was highlighted by Mr. Rajeev Mehra that the loans were granted to respondent no.2 somewhere in the year 2010 while the appellants had severed their relationship with the Company in early nineties and they had not executed any loaning documents in favour of the O.A. applicant Bank. And since this case is coming up before tribunal after full trial a bare reading of the impugned final order of DRT would show that there is not even an iota of evidence found by the DRT against the appellants and merely on surmises and conjectures a perverse order has been passed against the appellants.
Mr. PallavSaxena, learned counsel for the respondent Bank simply supported the impugned order of DRT and submitted that the DRT has rightly lifted the corporate veil and come to the conclusion that the appellants were all along been the people behind the ilIegal activities of the borrower Company which has resulted in enormous loss of public money and rightly they have also been held liable to pay the dues of the Bank. He however very fairly submitted that it has not been the case of the Bank at any stage that the appellants or anyone of them had executed any loan document for the loans advanced to the borrower Company starting from the year 2010. He, however, strongly maintained that for fastening of financial liability even upon former directors of a borrower Company it is not necessary that they must be shown to be actually a part of the loaning transactions between a bank and their Company after they have severed their connections with their Company. They can still be working 24 X 7 behind the scenes to pursue the illegal designs of their Company and their successor directors. So the appellants cannot gain anything from the circumstance that loans were sanctioned to the borrower Company years after they had distanced themselves on papers from the affairs of the Company which they had floated and which the DRT has rightly observed was floated for the intentions of cheating financial institutions one day.
After going through the records of the case and the reasons given by the learned DRT for fastening the financial liability upon the appellants and holding them also liable for the dues which the borrower Company owes to the respondent Bank and considering the submissions of the counsel for the parties I find myself in agreement with the submissions of the learned senior counsel for the appellants that they have been able to make out a strong prima facie case for being examined in depth by this appellate Tribunal. The question whether the appellants were always and still are the brains behind the running of the borrower Company will of course be examined in depth once the appeal is entertained by this Tribunal and it is found that this a fit case where corporate veil should be lifted to reach upto the truth.
However, the appellants have not been able to make out a case of any financial hardship justifying reduction of the pre-deposit from 50% to any other lower figure. In the waiver application except for a sentence that in case the appellants are called upon to make a pre-deposit they will be put in a financial hardship nothing else has been pleaded as to their financial resources though it is tier own case that after leaving the borrower Company which was floated by them they have been doing their own independent businesses. They have not placed on record any financial documents or other documents relating to their businesses which claim to be carrying on. Nor was any case of financial hardship put forth by the learned senior counsel for the appellants. His endeavour was to persuade this Tribunal to come to the conclusion that ex facie the DRT's order is unsustainable. He also contended that he was fully conscious of the limitation of this Tribunal in the matter of grant of waiver of the condition of pre deposit to the appellants.
The waiver applications are accordingly dismissed and the appellants are consequently directed to make mandatory pre-deposit of 50% of the amount of debt in question within a period of four weeks in the form of bank draft in the name of Registrar, DRAT, Delhi. In case pre-deposit is made the amount shall be kept in FDR with a nationalized Bank for a period which would fetch maximum rate of interest. In case this direction is not complied with the appeal shall be liable to rejected as not entertainable.
List this appeal now for arguments on 02.12..2019 but hearing shall take place only if within the given time the appellants make the pre-deposit.