Imposing Mandatory Condition For Non-Substantive Appeal Renders Statutory Right U/S 22(2)(G) RDB Act Illusory: Telangana High Court

The Telangana High Court held that 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) of the Recovery of Debts and Bankruptcy Act, 1993 (RDB Act) illusory, harsh, and burdensome.

The Court was hearing a Writ Petition seeking to quash the Order of the Debts Recovery Appellate Tribunal (DRAT), Kolkata.

A Division Bench of Justice Moushumi Bhattacharya and Justice Gadi Praveen Kumar observed, “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.”

The Bench was of the view that denial of the right to correct the procedural infirmity in the specific context of refusal to condoning the delay in seeking to recall an ex-parte order must be put in its proper place in the scheme of the RDB Act.

Advocate V. Murali Manohar represented the Petitioner while Advocate V.L.V. Devi represented the Respondents.

Case Background

The Respondent-State Bank of India (SBI) filed an Application in the Debts Recovery Tribunal (DRT) against the Petitioner and others for recovery of Rs. 47,13,93,098.80 ps. The DRT held that the Defendants were jointly and severally liable to pay the said amount and that the Bank is entitled to proceed against the person and properties of the Defendants towards realization of the debt due. The Petitioner filed an application under Section 22(h) of the RDB Act for setting aside the ex-parte order.

The Petitioner also filed an application under Section 5 of the Limitation Act, 1963 for condoning the delay since there was a delay of 1484 days. The DRT dismissed his application holding that he had failed to establish sufficient cause for condoning the delay. He challenged this before the DRAT, which directed him to pre-deposit 25% of Rs. 66,86,20,751/- within a period of four weeks. Hence, he was before the High Court.

Reasoning

The High Court in the above context of the case, said, “… considering the nature of the appeal filed by the petitioner from the docket order dated 01.10.2024, we have no doubt that the appeal did not fall within the contours of section 21 of the RDB Act. The appeal was for procedural fairness i.e., to give the petitioner an opportunity to contest the O.A. filed by the Bank on merits. The absence of opportunity arose out of the ex parte order of the DRT dated 31.01.2020 whereby the applicant Bank was held entitled to proceed against the defendant Nos.1 to 4 including the petitioner/defendant No.4. The order records that the defendant Nos.1 to 5 were set ex parte on 08.11.2019.”

The Court noted that the determination of debt by the DRT in the application filed by the Respondent/SBI was admittedly an ex parte adjudication.

“The order dated 31.01.2020 is self-evident in that the ex parte order was not a contested adjudication. The said order was passed in the absence of the petitioner who was one of the affected parties. The law provides for a remedy to seek setting aside of an ex parte decree in Order IX Rule 13 of the CPC”, it further noted.

The Court added that the opportunity of the aggrieved party is mirrored in Section 22(2)(g) of the RDB Act and in essence, Section 22(2)(g) preserves the power of the Tribunal and the Appellate Tribunal to recall an ex parte order.

“Even otherwise, ex parte orders are an exception and not the rule. Courts have held that such orders lack the flavour of finality in the absence of the contesting party. In other words, Courts have looked askance at orders passed on a one-sided presentation of a dispute”, it reiterated.

The Court also explained that Section 18 of the SARFAESI Act is substantially similar to Section 21 of the RDB Act by way of requiring the Appellant to make a pre-deposit of fifty percent of amount of debt for the Appeal to be entertained by the Appellate Tribunal.

“The Courts made a distinction between an appeal arising out of determination of debt and a miscellaneous appeal where the latter would not come within the condition of section 21 of the RDB Act”, it observed.

Conclusion

Moreover, the Court said that 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”, it concluded.

Accordingly, the High Court allowed the Writ Petition and set aside the DRAT’s Order.

Cause Title- Gade Sreenivas Reddy v. The State Bank of India and Others (Case Number: WRIT PETITION No.12395 of 2025)

Appearance:

Petitioner: Advocate V. Murali Manohar

Respondents: Advocates V.L.V. Devi and G. Prabhakar Sarma.

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