High Court (India)

October 12, 2019

Where an amendment affects vested rights, the amendment would be operated prospectively unless expressly made retrospective: Delhi HC

[ by Legal Era News Network ]


The petitioner – an employee of the sister concern of a company (Respondent No. 2) had availed of some credit facility from Canara Bank (Respondent No. 1), in connection with which security documents were executed way back in December 1994. She claimed that the notices issued by the Bank for recall of the loan advanced to the company were not received by her.

The bank filed an application in the Debt Recovery Tribunal-II Delhi (DRT) in August 1999 against the company and others including the Petitioner. In November 2012, the DRT passed an order holding that the bank was entitled to recover a sum of Rs. 26,83,063/- from the defendants to that application, including the present Petitioner, jointly and severally, together with interest at the rate of 12% per annum from August 1999 till the date of recovery.

Along with the said appeal, the petitioner filed an application under Section 21 of the RDDB & FI Act seeking waiver of the pre-deposit amount. Later, in 2013, the petitioner received a recovery notice whereupon she filed an application before the DRT for setting aside the ex-parte judgment passed in November 2012. However, DRT dismissed the said application in September 2014.

Against the said dismissal, the petitioner filed an appeal under Section 20 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDB & FI Act) before the Debt Recovery Appellate Tribunal (DRAT). While the said appeal and application were pending consideration before the DRAT, a change was brought about in Section 21 of the RDDB & FI Act with effect from 1st September, 2016.

By the said amendment, a marked change was brought about by reducing the pre-deposit amount from 75% to 50% in the main part of Section 21 of RDDB & FI Act but. Thus, the amended Section 21 permitted the DRAT to reduce the amount “by such amount which shall not be less than twenty-five per cent of the amount of such debt so due.” In other words, the discretion of the DRAT was curtailed to only reducing it from 50% to 25% and not completely waiving the pre-deposit.

The Petitioner’s aforementioned application for waiver of pre-deposit was disposed of by the DRAT only in August 2017 – 3 years after it was first filed. The DRAT considered that it had no discretion to grant waiver of the pre-deposit beyond 25% of the amount recoverable and this was in terms of the amended Section 21 of the RDDB & FI Act.

The Delhi High Court relied on Moti Ram v. Suraj Bhan and Ors. where it was held that “it is well-settled that where an amendment affects vested rights the amendment would be operated prospectively unless it is expressly made retrospective or its retrospective operation follows as a matter of necessary implication.”

The Delhi High Court observed that when the Petitioner filed the appeal along with the application for waiver of the pre-deposit in November 2014, the un-amended Section 21 of the RDDB & FI Act was applicable. Therefore the DRAT was obligated to apply the un-amended provision when it finally examined and disposed of the Petitioner;’ application for waiver of the pre-deposit.

The Court was therefore satisfied that the DRAT was in error when in the first instance in August 2017, it disposed of the petitioner’s application for waiver of the pre-deposit amount by applying the amended Section 21 of the RDDB & F.I. Act. For the same reason, the Court set aside the said order as well as the subsequent order dated 1st February, 2018 declining to recall the earlier order.

The petition was disposed off and the Court directed that the Petitioner’s application for waiver of the pre-deposit be placed again before the DRAT.

Justice S. Muralidhar and Justice Talwant Singh presided over the case.

Full View Judgement

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