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M/s Eastern Export House & Another Versus Debt Recovery Appellate Tribunal & 2 Others

Waiver of complete pre-deposit - required to deposit 50% of entire amount of loan determined by DRT - tribunal did not waive the entire prerequisite statutory amount under section 21 of the Recovery of Debts Due to Bank and Financial Institutions Act, 1993 - Held that:- 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 .....

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re, the petitioners' case stands on better footing looking into the provision to section 21 of DRRBFI Act, 1993, and, in 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. - Decided in favour of petitioner - WRIT - C No. - 7244 of 2016 - Dated:- 2-3-2016 - RAN VIJAI SINGH, J. For the Petitioner :- Rajesh Kesharwani,Arun Kumar Gupta For t .....

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ern 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). 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, .....

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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.). 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 .....

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e 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, th .....

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ncial hardship and closure of business cannot be a ground for complete waiver of the entire prerequisite statutory amount. 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 relian .....

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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. 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 a .....

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ed with the Appellate 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." 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 appeal .....

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d 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, decid .....

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ereunder." Section 18 of the Act, 2002 reads as under: "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 .....

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ellate 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." 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 provis .....

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ut not less than 25%. 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. 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 tha .....

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of waiver, legislature must have been conscious in order to safeguard the interest of the borrower too, therefore, while 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 .....

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t 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 s .....

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t 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 als .....

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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 Authori .....

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cation 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 ₹ 4,50,000/-, the papers of which has been brought on record as Annexures 14 and 15 of the writ petition. From the perusal of the im .....

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