Supreme Court Directs Deposit and Resolves Dispute in Debt Recovery Case

Introduction

Date of the Judgment: 27 October 2021

Citation: Not Available

Judges: Hon’ble Mr. Justice M.R. Shah and Hon’ble Mr. Justice A.S. Bopanna

When a dispute arises over the amount of debt owed, how should the courts proceed to ensure a fair resolution? The Supreme Court of India recently addressed this question in a case involving XLO India Limited and International Asset Reconstruction Company Private Limited. The core issue revolved around a disagreement on the amount due and payable by XLO India Limited, with the company claiming that the debt had been settled. The Supreme Court, in this case, directed a deposit of a certain amount and set a timeline for the Debt Recovery Tribunal (DRT) to resolve the matter.

Case Background

The case originated from a dispute over the amount owed by XLO India Limited to International Asset Reconstruction Company Private Limited. The Debts Recovery Tribunal (DRT), Jaipur, was hearing Appeal No. 1/2020, where XLO India Limited contested the amount claimed by the International Asset Reconstruction Company Private Limited. During the pendency of the appeal, an order of attachment of shares held by XLO India Limited was passed. The Debts Recovery Appellate Tribunal (DRAT), Delhi, upheld this order. The matter then reached the High Court of Judicature for Rajasthan at Jaipur, which dismissed the writ petition filed by XLO India Limited. Aggrieved by the High Court’s decision, XLO India Limited approached the Supreme Court.

Timeline

Course of Proceedings

The Debts Recovery Tribunal (DRT), Jaipur, was seized of Appeal No. 1/2020, where XLO India Limited contested the amount claimed by the International Asset Reconstruction Company Private Limited. During the pendency of this appeal, an order of attachment of shares held by XLO India Limited was passed. The Debts Recovery Appellate Tribunal (DRAT), Delhi, in its order dated 09.08.2021, upheld the order of attachment of shares. The High Court of Judicature for Rajasthan at Jaipur, in its judgment dated 06.09.2021, dismissed the writ petition filed by XLO India Limited, thereby confirming the order of the DRAT.

Legal Framework

The case primarily involves the interpretation and application of the Recovery of Debts and Bankruptcy Act, 1993, specifically Section 25, which deals with the recovery of debts. The DRAT had directed that recovery proceedings would continue as per Section 25 of the Recovery of Debts and Bankruptcy Act, 1993.

Section 25 of the Recovery of Debts and Bankruptcy Act, 1993, states the modes of recovery of debts.

Arguments

The appellants, XLO India Limited, argued that the amount due and payable had been paid and that the issue was regarding the discharge of debt in the execution proceedings. They contested the claim that approximately Rs. 29 crores was still due.

The respondents, International Asset Reconstruction Company Private Limited, disputed the appellant’s claim and maintained that approximately Rs. 29 crores was still due and payable by XLO India Limited.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame specific issues in the order. However, the core issue before the Court was:

• How to proceed with the debt recovery process when there is a dispute over the amount due and payable and an appeal is pending before the DRT?

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The Supreme Court considered the following authorities:

• Section 25 of the Recovery of Debts and Bankruptcy Act, 1993: The Court considered this section, which outlines the modes of recovery of debts.

The following table shows how the authorities were used by the Court:

Judgment

The following table demonstrates how each submission made by the parties was treated by the Court:

The following table demonstrates how each authority was viewed by the Court:

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the need to balance the interests of both parties while ensuring a speedy resolution of the pending appeal before the DRT. The Court aimed to provide immediate relief to the respondent by allowing the withdrawal of deposited amounts, while also protecting the appellant’s rights by making it subject to the outcome of the appeal. The Court’s emphasis was on ensuring that the DRT decides the pending appeal on merits as expeditiously as possible.

The following table shows the ranking of sentiment analysis of reasons given by the Supreme Court:

The ratio of fact to law in this case is as follows:

The Court’s logical reasoning can be represented as follows:

The Court did not consider any alternative interpretations but focused on an amicable resolution by directing a deposit and setting a timeline for the DRT to decide the appeal.

The Supreme Court disposed of the appeal with the following directions:

• Appellant no.1 was directed to deposit a further sum of Rs. 5 crores with the Presiding Officer, DRT, Jaipur, within four weeks.
• Respondent no.1 was permitted to withdraw the deposited amount of Rs. 5 crores, along with Rs. 1.53 crores with interest and Rs. 25 lakhs lying with the Recovery Officer.
• The withdrawal was made without prejudice to the rights of the parties in the pending appeal.
• The DRT, Jaipur, was directed to dispose of Appeal No. 1/2020 within eight weeks.
• The order of attachment of shares held by appellant no.1 was directed to be continued till the final disposal of Appeal No.1/2020.
• Further recovery proceedings were stayed till the disposal of Appeal No.1/2020.

The Court quoted:

“that appellant no.1 shall deposit a further sum of Rs.5 crores with the Presiding Officer, DRT, Jaipur within a period of four weeks from today, which shall be without prejudice to the rights and contentions of the respective parties in Appeal No.1/2020 and on such deposit, the respondent no.1 is permitted to withdraw the said amount”

“the DRT, Jaipur is directed to finally decide and dispose of Appeal No.1 in accordance with law and on its own merits within a period of eight weeks from today”

“the order of attachment of shares held by appellant no.1, as confirmed by the DRAT is directed to be continued till the final disposal of Appeal No.1/2020. Till Appeal No.1/2020 is decided and disposed of within the time stipulated hereinabove, the further recovery proceedings are directed to be stayed”

Key Takeaways

• When a dispute arises over the amount due in a debt recovery case, the court may direct a deposit to balance the interests of both parties.
• Courts may set timelines for lower tribunals to expedite the resolution of pending appeals.
• Withdrawal of deposited amounts can be permitted without prejudice to the rights of the parties in the pending appeal.
• Orders of attachment can be continued till the final disposal of the appeal.
• Further recovery proceedings can be stayed pending the disposal of the appeal.

Directions

The Supreme Court directed the following:

• Appellant no.1 to deposit Rs. 5 crores with the Presiding Officer, DRT, Jaipur, within four weeks.
• Respondent no.1 was permitted to withdraw the deposited amount of Rs. 5 crores, along with Rs. 1.53 crores with interest and Rs. 25 lakhs lying with the Recovery Officer.
• The DRT, Jaipur, was directed to finally decide and dispose of Appeal No. 1/2020 within eight weeks.
• The order of attachment of shares held by appellant no.1 was directed to be continued till the final disposal of Appeal No.1/2020.
• Further recovery proceedings were stayed till the disposal of Appeal No.1/2020.

Specific Amendments Analysis

There was no discussion on any specific amendments in the judgment.

Development of Law

The ratio decidendi of this case is that in debt recovery cases where there is a dispute over the amount due and an appeal is pending, the court can direct a deposit of funds to balance the interests of both parties while ensuring a speedy resolution of the dispute by setting a timeline for the lower tribunal to decide the matter. This case does not change any previous position of law but reinforces the existing principles of balancing interests and expediting dispute resolution.

Conclusion

The Supreme Court disposed of the appeal by directing XLO India Limited to deposit Rs. 5 crores and allowing International Asset Reconstruction Company Private Limited to withdraw this amount along with other deposited amounts, all subject to the final outcome of the pending appeal before the DRT. The DRT, Jaipur, was directed to decide the appeal within eight weeks. The Court’s decision aimed to balance the interests of both parties while ensuring a speedy resolution of the dispute.