# M/s Eastern Export House & Anr v. Debt Recovery Appellate Tribunal & Ors

- **Citation:** (2016) 4 ILRA 170
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2016-03-02
- **Bench:** Ran Vijai Singh
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/m-s-eastern-export-house-anr-v-debt-recovery-appellate-tribunal-ors-43563
- **Pages:** 8

## Text

170 INDIAN LAW REPORTS ALLAHABAD SERIES

13. As far as non-payment of wages from February, 2015 onwards is concerned, the
competent authority shall look into the matter and take a decision in this regard expeditiously; say
within a period of next two months from the date of receipt of a certified copy of this order.

14. The writ petition stands allowed in the aforesaid terms.
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ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 02.03.2016

BEFORE

THE HON'BLE RAN VIJAI SINGH, J.

Writ C No.- 7244 Of 2016

M/s Eastern Export House & Anr. ...Petitioners
Versus
Debt Recovery Appellate Tribunal & Ors. ...Respondents

Counsel for Petitioners:
Rajesh Kesharwani, Arun Kumar Gupta

Counsel for Respondents:
Ashish Agrawal, Sandeep Arora

HELD:

1. Under Section 21 of the DRRBFI Act, 1993, the Appellate Tribunal has the power to waive or reduce the
statutory pre-deposit of 75%, but while exercising such power it must consider BOTH financial hardship AND
the prima facie merits of the case.

2. The Appellate Tribunal committed an error by only considering the financial hardship/closure of business
and directing a deposit of 50%, without examining the prima facie merits raised by the petitioners.

3. Legal principles laid down in *ITC Limited* and *Pole-ADS Advertising (P) Ltd.* require the authority to
apply its mind to the merits while deciding a waiver request-mere hardship is not sufficient.

4. The Tribunal is required to record reasons showing due application of mind while granting, reducing, or
refusing waiver.

5. The Appellate Tribunal failed to evaluate important aspects, including settlement proposals, payments
made, export insurance issues, and allegations of misconduct by the Bank.

6. Consequently, the impugned order dated 22.1.2016 was held unsustainable and was quashed.

7. The Tribunal must pass a fresh order after hearing both sides, without granting unnecessary adjournments.
Any adjournment, if granted, must carry a cost of at least ₹2,000.
4 All. M/s Eastern Export House & Anr. Vs Debt Recovery Appellate Tribunal & Ors.
171
8. Until the waiver application is decided afresh, no coercive action shall be taken against the petitioners.

Case Law Discussed:

1. ITC Limited v. CC (Appeals), CE (ELT 2005 (184) 347).
2. Pole-ADS Advertising (P) Ltd. v. State of U.P., 2006 NTN (Vol. 30) 105.
3. Kirloskar Electric Company v. IDBI Bank Ltd., Karnataka High Court (2014).
4. Assistant Collector of Central Excise v. Dunlop India Ltd., AIR 1985 SC 330.
5. State of M.P. v. M.V. Vyavsaya Co., AIR 1997 SC 993.
6. Upadhyay & Co. v. State of U.P., (1999) 1 SCC 81.

(Delivered by Hon'ble Ran Vijai Singh, J.)

1. Heard Sri A.K.Gupta along with Sri Rajesh Kesharwani, learned counsel for the petitioners
and Sri Ashish Nigam holding brief of Sri Sandeep Arora, learned counsel for the respondent-bank.

2. By means of the present writ petition the petitioners have prayed for issuing a writ of
certiorari quashing the order dated 22.1.2016 passed by the Debt Recovery Appellate Tribunal,
Allahabad (in short DRAT) in Appeal No. R-83/2015 (M/s Eastern Export House and another vs.
Union of India) by which the Appellate Tribunal has required the petitioners to deposit 50% of the
entire amount of loan as determined by the Debt Recovery Tribunal (in short DRT).

3. While assailing the impugned order learned counsel for the petitioner submitted that the
Appellate Tribunal has erred in not waiving the entire prerequisite statutory amount under section
21 of the Recovery of Debts Due to Bank and Financial Institutions Act, 1993 (in short DRRBFI
Act, 1993).

4. The facts giving rise to the present case are that the petitioner no.1 claims itself to be a firm
involved in the business of export of woollen carpets and is aggrieved by the impugned order dated
22.1.2016 by which the Appellate Tribunal has required the petitioners to deposit 50% of the entire
amount of loan as determined by the DRT. It is stated that the firm had exported woollen carpets on
the basis of 90 days payment against the document and its entire transactions were insured with the
Export Credit Guarantee Corporation (in short ECGC). The entire premium as required was also
deposited with the Union Bank of India Bhadohi Branch Bhadohi. The premium credit limit was
also ensured by the Whole Turn Over Packing Credited Guarantee (in short W.T.P.C.G.).

5. It is also stated that the Bank has shown Zero balance in the year 2001 even then the Bank
filed O.A. No. 115/04 (Union Bank of India vs. M/s Eastern Export House). The case was
contested but the DRT has allowed the claim of the Bank for recovery of a sum of Rs.
1,32,45,340/- with interest vide order dated 12.12.2013.

6. Aggrieved by the aforesaid order the petitioners herein have filed appeal under section 20 of
the DRRBFI Act, 1993. The petitioners have also filed an application on 5.2.2014 for waiving the
statutory deposit, which in view of section 21 of the DRRBFI Act, 1993 was 75% of the loan
172 INDIAN LAW REPORTS ALLAHABAD SERIES
amount, on the ground that the firm was closed due to the financial crunch as the entire stocks of
the petitioners were destroyed and on account of that the firm has suffered heavy loss. Non
cooperation of the Bank was also emphasized. It is also contended that the petitioners exported the
woollen carpets on the basis of the 90 days payment against the documents through bank as the
same was purchased by the bank. The export goods were ensured with ECGC for Rs. one crores for
the period from 1.1.2001 to 31.1.2003 and the petitioners had paid the premium for the same. The
P.C. limit was fully ensured by WTPCG, therefore, the bank should have filed the claim after
expiry of four months from the due date of payment. It has also been stated that the Bank has
received the entire payment of the exported goods and did not adjust the same in the loan account
of the petitioners. The plea of fraud played by the bank upon the petitioner was also alleged.

7. The Appellate Tribunal after noting the submission of the petitioners and taking note of the
proviso to Section 21 of the DRRBFI Act, 1993 has observed that financial hardship and closure of
business cannot be a ground for complete waiver of the entire prerequisite statutory amount.

8. While assailing this order, Sri Gupta, learned counsel for the petitioners submitted that the
Appellate Tribunal has erred in considering the prima facie, merit of the case and passed the
impugned order. He further submitted that the merit of the case ought to have been considered
while considering the application of waiver. In support of his submission, he has placed reliance
upon the judgment of a Division Bench of this Court in ITC Limited vs. CC (Appeals) and CE
(ELT 2005 (184) 347) and another judgment of leared Single Judge of this Court in Pole-ADS
Advertising (P) Ltd. vs. State of U.P. and others (2006 NTN (Vol.30)- 105).

9. Refuting the submission of the learned counsel for the petitioners, Sri Nigam, who appears
for the respondent submitted that the decision of the Division Bench in the case of ITC Limited
(supra) was rendered in the matter of Central Excise and not in relation to the DRRBFI Act, 1993,
therefore, the ratio laid down in that case cannot be made applicable in the facts and circumstances
of the present case. He has also placed reliance upon judgment of the Karnataka High Court in Writ
Petition No. 4972 of 2014 (Kirloskar Electric Company vs. Idbi Bank Limited) decided on 18th
June, 2014.

10. For deciding the controversy it would be appropriate to quote few relevant provisions of
the DRRBFI Act, 1993, the Central Excise Act, 1944 as well as the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (in short Act,
2002).

11. Section 21 of the DRRBFI Act, 1993 reads as under:

"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
4 All. M/s Eastern Export House & Anr. Vs Debt Recovery Appellate Tribunal & Ors.
173
Tribunal seventy-five 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, waive or
reduce the amount to be deposited under this section."

12. Section 35 F of the Central Excise Act, 1944 reads as under:

"SECTION 35F. Deposit, pending appeal, of duty demanded or penalty levied. -

Where in any appeal under this Chapter, the decision or order appealed against relates
to any duty demanded in respect of goods which are not under the control of Central Excise
authorities or any penalty levied under this Act, the person desirous of appealing against such
decision or order shall, pending the appeal, deposit with the adjudicating authority the duty
demanded or the penalty levied :

Provided that where in any particular case, the Commissioner (Appeals) or the Appellate
Tribunal is of opinion that the deposit of duty demanded or penalty levied would cause undue
hardship to such person, the Commissioner (Appeals) or, as the case may be, the Appellate
Tribunal, may dispense with such deposit subject to such conditions as he or it may deem fit to
impose so as to safeguard the interests of revenue.

Provided further that where an application is filed before the Commissioner (Appeals)
for dispensing with the deposit of duty demanded or penalty levied under the first proviso, the
Commissioner (Appeals) shall, where it is possible to do so, decide such application within thirty
days from the date of its filing.

Explanation. - For the purposes of this section "duty demanded" shall include, -

(i) amount determined under section 11D;

(ii) amount of erroneous Cenvat credit taken;

(iii) amount payable under rule 57CC of Central Excise Rules, 1944;

(iv) amount payable under rule 6 of Cenvat Credit Rules, 2001 or Cenvat Credit Rules,
2002 or
Cenvat Credit Rules, 2004;

(v) interest payable under the provisions of this Act or the rules made thereunder."

13. Section 18 of the Act, 2002 reads as under:
174 INDIAN LAW REPORTS ALLAHABAD SERIES

"18. Appeal to Appellate Tribunal

(1) Any person aggrieved, by any order made by the Debts Recovery Tribunal under
section 17, may prefer an appeal alongwith such fee, as may be prescribed to the Appellate
Tribunal within thirty days from the date of receipt of the order of Debts Recovery Tribunal:

PROVIDED that different fees may be prescribed for filing an appeal by the borrower or
by the person other than the borrower:

PROVIDED FURTHER that no appeal shall be entertained unless the borrower has
deposited with the Appellate Tribunal fifty per cent. of the amount of debt due from him, as claimed
by the secured creditors or determined by the Debts Recovery Tribunal, whichever is less:

PROVIDED ALSO that the Appellate Tribunal may, for the reasons to be recorded in
writing, reduce the amount to not less than twenty-five per cent. of debt referred to in the second
proviso. (2) Save as otherwise provided in this Act, the Appellate Tribunal shall, as far as may be,
dispose of the appeal in accordance with the provisions of the Recovery of Debts Due to Banks and
Financial Institutions Act, 1993 (51 of 1993) and rules made thereunder."

14. From the bare reading of Section 21 of the DRRBFI Act, 1993 it would transpire that the
appeal shall not be entertained by the Appellate Tribunal unless the appellant deposits 75% of the
amount of debt as determined by the Tribunal under section 19. However, according to the proviso
to that section the Tribunal has been empowered to waive or reduce the amount of debt.

15. From the perusal of second proviso to section 18 of the Act, 2002 it would transpire that
the appeal cannot be entertained unless the borrower deposits 50% of the amount of debt due from
him as claimed by the secured creditors or determined by the DRT whichever is less with the
Appellate Tribunal. According to second proviso, for the reasons to be recorded, the amount of
debt may be reduced by the Tribunal but not less than 25%.

16. Whereas from the perusal of the proviso contained under section 35-F of the Excise Act
the Appellate Tribunal may dispense with the required deposit of the entire amount or the penalty
they levied considering the undue hardship of the person filing the appeal or to impose conditions
in order to safeguard the interest of the revenue.

17. From the perusal of section 21 of the DRRBFI Act, 1993, Section 18 of the Act 2002 and
section 35-F of Central Excise Act, 1944 it is clear that in all the cases before filing an appeal some
amount of the required amount has to be deposited and similarly the Appellate Tribunal/Authority
has been empowered to reduce the amount of debt or to put conditions in order to safeguard the
revenue. Neither under the Central Excise Act, 1944 nor under the Act, 2002 there is provision of
complete waiver. The power of complete waiver has been conferred upon the Appellate Tribunal
only under the DRRBFI Act, 1993. While conferring the absolute power of waiver, legislature must
have been conscious in order to safeguard the interest of the borrower too, therefore, while
4 All. M/s Eastern Export House & Anr. Vs Debt Recovery Appellate Tribunal & Ors.
175
exercising the power under section 21 of the DRRBFI Act, 1993 the appellate authority must have
proceeded with caution taking note of the object and spirit of the proviso which talks about the
complete waiver or reduction of the required statutory amount. In the Division Bench decision of
this Court in ITC Limited (supra) following observation has been made:

"Similar view has been reiterated in Assistant Collector of Central Excise, Chandan
Nagar Vs. Dunlop India Ltd. & Ors., AIR 1985 SC 330; State of Madhya pradesh Vs. M/s. M.V.
Vyavsaya Co., AIR 1997 SC 993; Upadhyay & Co. Vs. State of U.P. & Ors., (1999) 1 SCC 81,
deprecating the tendency of the Courts granting stay of recovery by mere filing of the case as it
exposes the "impairment of the public interest.

In view of the above, the aforesaid authorities make it clear that the Court should not
grant interim relief/stay of the recovery merely by asking of a party. It has to maintain a
balance between the rights of an individual and the State so far as the recovery of sovereign
dues is concerned. While considering the application for stay/waiver of a pre-deposit, as
required under the law, the Court must apply its mind as to whether the appellant has a strong
prima facie case on merit. In case it is covered by the judgment of a Court/Tribunal binding
upon the Appellate Authority, it should apply its mind as to whether in view of the said
judgment, the appellant is likely to succeed on merit. If an appellant having strong prima facie
case, is asked to deposit the amount of assessment so made or penalty so levied, it would cause
undue hardship to him, though there may be no financial restrain on the appellant running in a
good financial condition. The arguments that appellant is in a position to deposit or if he
succeeds in appeal, he will be entitled to get the refund, are not the considerations for deciding
the application. The order of the Appellate Authority itself must show that it had applied its
mind to the issue raised by the appellant and it has been considered in accordance with the
law. The expression "undue hardship" has a wider connotation as it takes within its ambit the
case where the assessee is asked to deposit the amount even if he is likely to exonerate from the
total liability on disposal of his appeal. Dispensation of deposit should also be allowed where
two view are possible. While considering the application for interim relief, the Court must
examine all pros and cons involved in the case and further examine that in case recovery is not
stayed, the right of appeal conferred by the legislature and refusal to exercise the discretionary
power by the authority to stay/waive the pre-deposit condition, would be reduced to
nugatory/illusory. Undoubtedly, the interest of the Revenue cannot be jeopardized but that
does not mean that in order to protect the interest of the Revenue, the Court or authority
should exercise its duty under the law to take into consideration the rights and interest of an
individual. It is also clear that before any good could be subjected to duty, it has to be
established that it has been manufactured and it is marketable and to prove that it is
marketable, the burden is on the Revenue and not on the manufacturer.

In view of the above, we are of the considered opinion that as the Appellate
Authority has not addressed to itself any of the issues involved in the appeal rather has
gone to the issue of financial hardship which was unwarranted and uncalled for in the fact
176 INDIAN LAW REPORTS ALLAHABAD SERIES
situation of this case. The order impugned cannot be sustained in the eyes of law and we
have no option but to allow this petition and set aside the order impugned."

18. Following the aforesaid judgement learned Single Judge of this Court in Pole-ADS
Advertising (P) Ltd.(supra) has also held that while considering the application of waiver
prima facie, merit of the case has to be seen. Here in this case, as has been discussed
above, apart from financial crunch and closure of the business for last many years the
petitioners have also pleaded merit of the case including the Bank's own initiation for
accepting the proposal of settlement for which the petitioners have deposited Rs.
4,50,000/-, the papers of which has been brought on record as Annexures 14 and 15 of the
writ petition.

19. From the perusal of the impugned order passed by the Appellate Tribunal it
transpires that while considering the waiver application of the petitioners the Appellate
Tribunal has only considered the hardship and closure of the business and directed the
petitioners to deposit 50% of the amount but it has not at all considered prima facie merit
of the case.

20. Learned counsel for the respondents contended that the order has been passed by
recording reasons and the amount of statutory deposit has been reduced. On being
confronted as to under which circumstance the entire statutory amount /pre requisite
condition can be waived and on what ground the amount can only be reduced, learned
counsel for the respondent could not show any statutory provision or any judicial
pronouncement on the point enumerating the circumstances under which the entire amount
can be waived and under which the amount can be reduced. Whereas, in the case of ITC
Limited (supra) this court has touched this aspect of the matter, may be under the different
statute, but the principles laid down by the Division Bench are near to the truth in the
context of the present case too as in the present case there is provision for complete waiver
provided the Appellate Tribunal is satisfied, whereas in the Central Excise Act there is no
provision for complete waiver. The petitioners' case stands on better footing looking into
the provision to section 21 of DRRBFI Act, 1993, therefore, in my considered opinion the
Appellate Tribunal has erred in not considering that aspect of the matter including prima
facie, merit of the case while passing the impugned order, therefore, the same cannot be
sustained in the eye of law.

21. In the result the writ petition succeeds and is allowed. The order dated 22.1.2016
passed by the Debt Recovery Appellate Tribunal, Allahabad in Appeal No. R-83/2015 (M/s
Eastern Export House and another vs. Union of India) is hereby quashed. The Tribunal is
directed to pass a fresh order after hearing learned counsel for the parties in accordance
with law without granting any unnecessary adjournment to any of the party. In case any
adjournment is sought that may be granted only after imposing cost not less than Rs.
2000/- per adjournment with the direction to deposit the cost by the next date fixed. It is
4 All. Ashok Kumar Singh Sengar Vs Om Prakash Chaturvedi & Ors.
177
also observed that till the petitioners waiver application is disposed of by the Appellate
Tribunal, no coercive action shall be taken against the petitioner to recover the amount.
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ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 16.03.2016

BEFORE

THE HON'BLE SUNEET KUMAR, J.

Matters Under Article 227 No.- 7312 Of 2015

Ashok Kumar Singh Sengar ...Petitioner
Versus
Om Prakash Chaturvedi & Ors. ...Respondents

Counsel for Petitioner:
Manjari Singh, Kunal Ravi Singh

Counsel for Respondents:
Atul Kumar Upadhyaya

HELD:

1. The sole question before the Court was whether the respondents had correctly valued their appeal at ₹5
lakhs for purposes of jurisdiction.

2. The suit was valued at ₹5 lakhs (half share of sale deed), and the counter-claim was valued at ₹10 lakhs.
The trial court decreed the suit and dismissed the counter-claim.

3. Respondents filed an appeal only against the decree of the suit-not against the dismissal of the counterclaim-therefore valuation of the appeal had to match the valuation of the suit alone.

4. The petitioner's contention that the appeal must be valued at ₹15 lakhs (suit + counter-claim) was
rejected; since the counter-claim was not challenged, its valuation could not be added for determining
jurisdiction.

5. Under Order 20 Rule 19(2) CPC, even where a set‐off or counter‐claim exists, the decree is subject to the
same appellate provisions as if no set‐off/counter‐claim had been filed.

6. A counter‐claim is treated as a cross‐suit but no separate decree is drawn; only one decree is framed in a
suit involving a counter‐claim.

7. For determining appellate jurisdiction, Section 21 of the Bengal, Agra & Assam Civil Courts Act, 1887
requires that the valuation of the *original suit* controls the forum of appeal-not the valuation of the appeal
itself.