The High Court of Karnataka, Bengaluru AIR 2019 Kant 23, 5 October 2018 Petitioner: Vijay Mallya Respondent: State Bank Of India Bench: Hon'ble Justice Dinesh Maheshwari, CJ. Hon'ble Justice Krishna s Dixit, JJ.
These two petitions between the same parties and involving inter-related issues have been considered together, and are taken up for disposal by this common order.
The petitioner-Dr.Vijay Mallya proposed to maintain an appeal before the Debt Recovery Appellate Tribunal, Chennai (DRAT), being AIR No.605/2017, against the order dated 19.01.2017, as passed by the Debt Recovery Tribunal, Karnataka, Bangalore (DRT) in O.A.No.766/2013. The said appeal having been dismissed on 02.01.2018 for want of appearance and for noncompliance of office objections, the petitioner filed an application seeking its restoration and another application for condonation of delay whereupon, the DRAT, by its order dated 28.03.2018, directed the petitioner to deposit a sum of Rs. 3,101 Crore on or before 25.04.2018 and observed that in case of failure in compliance, the appeal will be liable to be dismissed automatically. This order dated 28.03.2018 has been challenged by the petitioner in W.P.No.16351/2018.
The petitioner filed another application before the DRAT, being I.A.No.430/2018, seeking enlargement of time for making the deposit as fixed by the order dated 28.03.2018 with the submissions that the said order was under challenge in this Court.
The DRAT, by its order dated 25.04.2018, dismissed the said application while observing that there remains no substance in prayers made in appeal or in restoration or delay condonation whatsoever. This order dated 25.04.2018 has been challenged by the petitioner in W.P.No.22111/2018.
(a) The respondent No.13-Kingfisher Airlines Ltd., a Public Limited Company incorporated under the Companies Act, 1956 and now under liquidation, (hereafter also referred to as Kingfisher Airlines) had availed Working Capital and Term Loan Facilities from the Consortium of respondent-Banks, way back in the year 2005. The said loan/credit facilities were re-structured pursuant to a MASTER DEBIT RECAST AGREEMENT dated 21.12.2010, accompanied by various other Supplementary Agreements as its corollaries. In relation to the credit facilities aforesaid, respondent No.14-United Breweries (Holdings) Ltd. provided a Corporate Guarantee, and the petitioner, being the Group Chairman of various companies under the umbrella of the Group called UB Group of Companies furnished his Personal Guarantee.
(b) The borrower Kingfisher Airlines committed default in repayment against the credit facilities aforesaid, which resulted in classifying the Loan Account as the Non-Performing Asset (NPA) by various notices issued during the period between 02.11.2011 and 31.03.2013. Respondent No. 1-State Bank of India, in its capacity as the Lenders Agent, issued a Loan Recall Notice dated 02.04.2013 to Kingfisher Airlines and to the Guarantors. The Personal Guarantee furnished by the petitioner was also invoked by calling upon him to make payment of a sum of Rs. 6,493.29 Crore. By way of the reply dated 17.04.2013, the petitioner denied his liability, while alleging, inter alia, that the Contract of Guarantee was vitiated by coercion/undue influence.
(c) The Consortium of respondent-Banks with the respondent No. 1-State Bank of India as the Lenders Agent, in addition to invoking other modes of recovery, instituted O.A. No.766/2013 under Section 19 of the Recovery of Debts due to Banks and Financial Institutions Act, 1993, (the Act of 1993) in the Debt Recovery Tribunal, Karnataka, Bangalore for recovery of the dues of Rs. 6203,35,03,879.42 (Rupees Six Thousand Two Hundred and Three Crore, Thirty-Five Lakh, Three Thousand, Eight Hundred and Seventy Nine and Paise Forty Two), as on 31.05.2013 with interest at the rate of 15.20 % per annum with monthly rests and for other consequential reliefs. This O.A. was resolutely opposed by the Borrower and Guarantors by filing the Written Statements.
(d) The DRT, after adverting to the pleadings of the parties and after appreciating the material placed on record, entered a judgment and order dated 19.01.2017 holding the respondent No.13-Kingfisher Airlines Ltd., respondent No.14- United Breweries (Holdings) Ltd., respondent No.15-Kingfisher Finvest (India) Ltd., and the petitioner-Dr.Vijay Mallya, jointly and severally liable for the recovery of the said sum of Rs. 6203,35,03,879.42 with interest at the rate of 11.50% with yearly rests, from the date of application until the date of complete realization. Other consequential reliefs were also granted.
(e) The petitioner-Dr.Vijay Mallya, aggrieved by the aforesaid order of the DRT, preferred an appeal before the DRAT on 04.10.2017 under Section 20 of the Act of 1993, and the same was registered as AIR No.605/2017. After scrutiny, the registry of DRAT notified certain objections in the Memo of Appeal so filed by the petitioner. The objections having not been complied with, the appeal came to be dismissed by the order dated 02.01.2018 for non-prosecution.
(f) On 05.03.2018, the petitioner filed an application seeking restoration of the appeal with another application for condonation of delay in filing the restoration application. The petitioner claims that thereafter, i.e., on 21.03.2018, he had complied with the office objections raised in the main Appeal.
(g) While dealing with the applications so moved by the petitioner, the DRAT, by its order dated 28.03.2018, directed him to deposit a sum of Rs. 3,101 Crore, on or before 25.04.2018 as a condition precedent for entertaining the appeal as per the terms of Section 21 of the Act of 1993; and subject to the rider that in default, the appeal will stand dismissed automatically without reference to the Bench.
(h) The petitioner did not make any deposit in terms of the aforesaid peremptory order dated 28.03.2018 and consequently, the appeal stood dismissed. Thereafter, the petitioner filed an application seeking restoration of the dismissed appeal; and another application for condonation of delay was also filed. The DRAT, by its order dated 25.04.2018, dismissed both these applications.
The learned Senior Counsel Sri. K.G.Raghavan, appearing for the petitioner has assailed the impugned orders of the DRAT on the following contentions:
(a) That, the respondent-Banks had filed the O.A., inter alia, against the petitioner on 26.06.2013; the amendment to Section 21 of the Act of 1993, limiting the maximum waiver of the pre-deposit amount to 25% of the amount due under the DRT order impugned in appeal, being prospective in operation i.e., w.e.f. 01.09.2016, the DRAT could not have founded its orders on the said amendment inasmuch as the right of appeal accrues to the litigating party when the original proceedings are instituted, though it becomes exercisable only after an adverse order is made therein. According to the learned counsel, the right to seek waiver or reduction of pre-deposit for filing the appeal being a matter of substantive law, the 2016 Amendment to Section 21 of the Act of 1993 is only prospective in operation and does not apply to the appeal in question that arises out of the proceedings originally instituted before the said Amendment.
Therefore, the DRAT has acted illegally in proceeding as if the Amended provisions apply and hence, in refusing to waive the condition of pre-deposit. The learned counsel has relied upon the decision in Ramesh Singh & Another vs. Cinta Devi & Others, (1996) 3 SCC 142.
(b) The respondent Nos.14 & 15 having deposited a sum of about Rs. 1,280 Crore under the very same loan transaction with the Registry of this Court in terms of various orders in various other proceedings initiated by the respondent- Banks, the DRAT is not justified in insisting upon the petitioner to deposit a sum of Rs. 3,101 Crore and that too, when all the properties of the petitioner are under attachment by orders of the Courts in India and U.K. in connected/collateral proceedings.
The DRAT ought to have evaluated both the elements of (a) prima facie, case, and (b) of financial hardship, in view of the decision in Sterlite Technologies Limited vs. Union of India & Others, (2012) 2 MhLJ 112.
(c) The DRAT having had the discretion to grant a complete waiver of pre-deposit under the unamended Section 21 of the Act of 1993, ought to have granted such waiver in view of the fact that petitioners all the properties in India and abroad have been subject to freezing order by the Courts in India and U.K. The DRAT having not adverted to this important fact has made the impugned orders, which amount to the DRATs refusal to exercise discretion when the same was warranted by the factual matrix of this case. In fact, the financial hardship pleaded by the petitioner has not been adverted to at all.
(d) The act of DRAT in mandating the deposit of a sum of Rs. 3,101 Crore as a condition precedant for entertaining the appeal constitutes an onerous condition on the petitioner and unreasonably restricts his statutory right of appeal, particularly when his properties stand freezed under different orders passed by different Court/Authorities. Such an aspect, having not been adverted to by the DRAT, there is total non-application of mind and vitiates the order impugned.
(e) The DRAT could not have made the order for predeposit inasmuch only the applications for condonation of delay and for recall of the earlier order dated 02.01.2018 dismissing the appeal for non-prosecution were under consideration; and in view of the stage and nature of proceedings that were being treated by the DRAT, there was no justification in making the order for pre-deposit and in rejecting the appeal for noncompliance of this unjustified order requiring pre-deposit
Sri. S.S.Naganand, the learned Senior Counsel appearing for the Consortium of respondent-Banks has refuted the contentions aforesaid; and has made the following submissions in support of the orders impugned:
(a) The culpable conduct of the petitioner, which is self-evident in the orders of the Courts in India and in the U.K, disentitles him to the grant of discretionary remedy at the hands of this Court in its extraordinary jurisdiction under Articles 226 and 227 of the Constitution of India. Learned counsel has relied upon the decision of the Supreme Court in the case of Prestige Lights Ltd., vs. State Bank of India, (2007) 8 SCC 449.
(b) Although it is true that the right of appeal, having accrued to a party when the original proceedings are instituted, becomes exercisable after suffering an adverse order later; and amendment of the law relating to the right of appeal is ordinarily prospective in operation unless otherwise indicated but then, the 2016 Amendment to Section 21 of the Act of 1993, limiting waiver of pre-deposit to the extent of 25%, is retrospective in operation since it does not impinge upon the substantive right of appeal as such, but touches only the condition of pre-deposit for entertaining the Appeal and therefore, falls within the domain of procedural law. Learned counsel has relied upon the decision in the Board of Control for Cricket in India Vs. Cochi Cricket Pvt. Ltd & Etc.,2018 SCC Online(SC) 232.
(c) The contention that the Borrowers and the Guarantors have already deposited a considerable amount in the Registry of this Court in terms of various orders in various proceedings instituted by the respondent-Banks under the very same loan transactions, apart from being untrue, is legally untenable. The said argument is liable to be rejected for lacking in material particulars such as what sums of money, by which order of the Court, arising from which case and by whom are deposited in this Court. This apart, these contentions were not urged before the DRAT.
(d) The contention that the requirement of pre-deposit of 50% of the decretal sum virtually amounts to unreasonably whittling down the petitioners substantive right of appeal by the course of procedure adopted by the DRAT, is legally untenable; the Parliament in its legislative wisdom has granted the right of appeal subject to conditions and the DRAT has, in the sound exercise of its discretion, made the impugned order requiring the pre-deposit for entertaining the appeal. This apart, a little before the DRT passed the impugned judgment and order on 19.01.2017, the petitioner had huge money and disposable properties both in India and abroad that were not subject to any freezer order at the relevant point of time. Moreover, the petitioner had also received a huge sum of US$ 40 million; he had other huge monetary transactions but all these facts were withheld from the Courts and the petitioner fraudulently transferred an enormous amount of money to the trusts created for the benefit of his children. These facts are mentioned in the orders passed by the Apex Court in relation to the petitioner. Therefore, the petitioner is not even entitled to suggest any ground of the alleged financial hardship.
(e) The contention that the DRAT could not have made the order for pre-deposit when it was considering the petitioner’s application for recalling the order of dismissal of the appeal is too technical and is without substance. The DRAT has made the said order, not as a pre-condition for recalling the dismissal order but for entertaining the appeal itself. An argument to the contrary cannot be made without straining the intent and content of the order impugned in the writ petition.
The contention of the petitioner that the DRAT could not have directed the petitioner to deposit a huge sum of Rs. 3,101 Crore as a pre-condition for allowing his application for restoration of the appeal that was dismissed for non-compliance of office objections and for non-prosecution appears to be too technical and without substance. The appeal was filed on 04.10.2017; the appeal was dismissed on 02.01.2018 for noncompliance of office objections and non-prosecution; the application for restoration was filed on 05.03.2018; the office objections in the appeal were rectified on 21.03.2018. These admitted facts gave rise to a legitimate doubt as to the bonafide of the proceedings and the seriousness of the petitioner in pursuing his remedies. Keeping these factors in view, the DRAT, in its discretion, had directed the petitioner to make the pre-deposit. This requirement cannot be construed as a precondition for restoring the appeal but has to be understood as the requirement of Section 21 of the Act for maintaining the appeal. An argument to the contrary would fall foul of law and justice. Noticeable it is that even before this Court, the petitioner did not come forward to deposit any amount to show his bonafide. Therefore, it cannot be said that the approach of the DRAT is flawsome. For the very same reason, the discretionary order subsequently made by the DRAT on 25.04.2018 dismissing petitioners application in IA No.430/2018 for extension of time also cannot be faltered. In the given set of facts and circumstances, the observations in the Sterlite Technologies Limited case do not enure to the benefit of the petitioner.
As to the conduct of the petitioner
The next contention of the petitioner that a considerable amount is lying in deposit in the Registry of this Court in various proceedings arising out of the very same loan transaction, is liable to be rejected for want of material particulars thereof. The petitioner has not furnished the list of cases wherein there were directions to make a deposit and of various sums of money allegedly deposited in compliance thereof and also the status of the said cases and the said deposits. In fact, even the DRT in its impugned order has provided for filing of memo of calculation which the petitioner had not chosen to file. This Court, in the absence of relevant material, cannot form any opinion as to the effect of the deposits allegedly having been made in the Registry of this Court. Even assuming that the said contention is true, the same does not amount to compliance with the statutory condition of pre-deposit, regard being had to the whoppingly huge amount due under the impugned order of the DRT.
The next contention of the petitioner that all his properties and money have been under attachment/freezing orders of Courts in India and in the U.K, does not avail to him. The DRT made the money decree on 19.01.2017. As per the material placed on record, in the meantime, the petitioner is said to have received US$ 40 million from Diageo (approximately above Rs. 260 crores). The Commercial Court in U.K in its freezing order dated 16/17.04.2018 has further mentioned that the petitioner had bought a Ferrari 246 GTS with an estimated value of GBP 4,80,000 (approximately Rs. 4,17,60,000/-); he had entered into a Hire Purchase Agreement dated 12.08.2016 which records a payment of GBP 1,35,000 (approximately Rs. 1,17,45,000/-). As on the date of passing of the order by the DRT, there was no Freezing Injunction Order by the Courts in the U.K. This Freezing Order was first made only on 24.11.2017 i.e., about ten months after the DRT made its order. These facts prima facie discredit the petitioners version that he does not have any money to deposit.
The learned Senior Counsel appearing for the Consortium of Banks has submitted that the Commercial Court in U.K. has made “Freezing Injunction” Order dated 24.11.2017 which is affirmed in appeal; the said Order mentions about questionable transactions involving transfer of huge sums of money made by the petitioner before and after the DRT Order; the said Order also mentions about the Supreme Court Order dated 09.05.2017 finding the petitioner guilty of contempt of Court. The Supreme Court in its order dated 26.04.2016 observed that the petitioner clandestinely did not disclose his assets abroad despite its direction dated 07.04.2016 and that there was no bona fide in petitioners offer for Settlement of the claim in question; and lastly, the Court vide order dated 20.10.2016 in a Contempt Case directed the petitioners personal appearance but, the petitioner disobeyed this order also. We do not intend to deliberate much on this aspect of the matter.
In the above circumstances, these Writ Petitions being devoid of merits, stand dismissed.