Pay Before Appeal, Supreme Court Tells Borrowers

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In a positive development for lenders, the Supreme Court has held that borrowers will have to deposit the outstanding debt before filing appeals at the Debt Recovery Appellate Tribunal.

The requirement of pre-deposit cannot be done away with, the apex court has held. A three-judge bench of Chief Justice of India SA Bobde, Justice AS Bopanna and Justice V Ramansubramanian overturned a Delhi High Court order that had set aside the requirement and allowed the appeal to proceed at the DRAT.

The ruling will make it difficult for borrowers to file frivolous appeals and wasting the court’s time, Bishwajit Dubey, partner at Cyril Amarchand Mangaldas, said.

The top court bench examined Section 21 of the Recovery of Debts and Bankruptcy Act, 1993 which provides for depositing the amount of debt due on filing the appeal. The section, the court noted, said an “appeal shall not be entertained”. Therefore, according to the apex court, the DRAT by law is injuncted from entertaining an appeal by a borrower who has not deposited with it 50% of the amount of debt due.

The deposit amount, the apex court said, can be reduced up to 25% but the appellate tribunal will have to give reasoned orders when it chooses to do so.

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