DRAT Can Recall Appeal Dismissed For Pre-Deposit Non-Compliance: Patna High Court

The Patna High Court has recently held that the Debts Recovery Appellate Tribunal (DRAT), in exercise of its review powers under Section 22(2) of the Recovery of Debts and Bankruptcy Act, 1993, can recall an appeal dismissed for non-compliance with the pre-deposit requirement.

"Once such dismissal falls within the category contemplated under Section 22(2)(g), the Tribunal cannot be said to be denuded of its jurisdiction to recall or set aside the same. The reasoning adopted by the learned Single judge, that there exists no provision for recall or that the Tribunal becomes functus officio, overlooks this express statutory conferment of power under Section 22(2). The doctrine of finality, though significant, cannot be applied in a manner so as to render a statutory provision otiose," the court held.

A Division Bench of Justice Sudhir Singh and Justice Sunil Dutta Mishra was hearing a Letters Patent Appeal filed by Tirupati Storage and Allied Pvt. Ltd. and others, challenging the judgment dated September 4, 2024 passed by a learned Single Judge, which had set aside the DRAT's order restoring an appeal after more than eight years.

The dispute arose from recovery proceedings initiated by UCO Bank, Frazer Road Branch, Patna, after the loan account of Tirupati Storage and Allied Pvt. Ltd. was declared a non-performing asset. The Debt Recovery Tribunal (DRT), Patna, by judgment dated September 17, 2012, allowed the bank's claim and issued a recovery certificate for Rs. 1.53 crore while rejecting the borrowers' counterclaim.

The appeal filed by Tirupati Storage and Allied Pvt. Ltd. and others before the DRAT was dismissed on March 23, 2015 for non-compliance with the mandatory pre-deposit requirement under Section 21 of the Act, despite the Tribunal having earlier directed a deposit of 50% of the decretal amount on February 13, 2015 and granting further time.

After several years, Tirupati Storage and Allied Pvt. Ltd. and others deposited approximately ₹76 lakh in June 2023 and sought restoration of the appeal. The DRAT, by order dated September 29, 2023, allowed the restoration application and revived the appeal. However, this order was set aside by the Single Judge, who held that the tribunal lacked jurisdiction to recall its earlier order after such a long lapse of time and after the proceedings had attained finality.

Before the High Court, counsel for Tirupati Storage and Allied Pvt. Ltd. and others argued that the pre-deposit requirement had been complied with and that the Tribunal possessed the power to recall its orders under Section 22(2) of the Act. It was further contended that Section 21 does not prescribe any limitation for making the pre-deposit nor does it mandate dismissal of an appeal for non-compliance.

Counsel appearing for UCO Bank, Frazer Road Branch, Patna, contended that the proceedings had attained finality after dismissal of earlier writ proceedings and that the DRAT could not reopen the matter after more than eight years.

On the issue as to whether the DRAT had the jurisdiction to recall an order dismissing an appeal for non-compliance of pre-deposit and whether such dismissal attained finality. Answering both in favour of Tirupati Storage and Allied Pvt. Ltd. and others, the Court held that Section 22(2) confers powers akin to those of a civil court, including the power to review decisions and set aside orders of dismissal for default. The Court observed:

“A plain and purposive reading of the aforesaid provision makes it abundantly clear that the Tribunal and the Appellate Tribunal are not mere adjudicatory bodies with limited jurisdiction, but are vested with substantive powers akin to those of a Civil Court, including the power to review their own decisions and to set aside orders passed for default. The legislative intent behind incorporating such provisions is to ensure that procedural lapses do not result in irreparable prejudice and that matters are, as far as possible, decided on merits.”

The Court further held that dismissal for non-compliance of pre-deposit is not an adjudication on merits but a procedural consequence:

“Such dismissal is, therefore, in the nature of a dismissal for default or non-compliance of a procedural condition.”

Interpreting Section 21, the court noted that while an appeal “shall not be entertained” without pre-deposit, the provision does not prescribe any limitation period, nor does it mandate automatic or irreversible dismissal. It held that non-compliance may justify the tribunal in declining to proceed with the appeal at that stage but does not extinguish the right of appeal.

Accordingly, the court held that once Tirupati Storage and Allied Pvt. Ltd. and others complied with the pre-deposit requirement and approached the Tribunal, the DRAT was within its jurisdiction to restore the appeal.

Setting aside the judgment of the Single Judge, the Court upheld the DRAT's order restoring the appeal and allowed the Letters Patent Appeal.