Telangana High Court

Gade Sreenivas Reddy vs The State Bank Of India on 28 August, 2025

     * THE HON'BLE JUSTICE MOUSHUMI BHATTACHARYA
                          AND
        THE HON'BLE JUSTICE GADI PRAVEEN KUMAR

                +WRIT PETITION No.12395 of 2025


ORDER:

% Dated 28.08.2025

# Between:

Gade Sreenivas Reddy Petitioner AND

The State Bank of India and Others Respondents

! Counsel for the appellant: Sri V.Murali Manohar.

^ Counsel for the respondent No.1: Ms.V.L.V.Devi, learned counsel representing Sri G.Prabhakar Sarma.

< GIST :

> HEAD NOTE :

? Cases referred :

1 MANU/DK/0001/2006 2 (2021) 3 SCC 549 3 2025 SCC OnLine SC 1234 4 2023: DHC : 9308 - DB 5 2019 (4) ALJ 10 6 2013 (2) Cal L.T. 272

MB,J & GPK,J W.P.No.12395 of 2025

THE HON'BLE JUSTICE MOUSHUMI BHATTACHARYA AND THE HON'BLE JUSTICE GADI PRAVEEN KUMAR

WRIT PETITION No.12395 of 2025

Sri V.Murali Manohar, learned counsel appearing for the petitioner.

Ms.V.L.V.Devi, learned counsel representing Sri G.Prabhakar Sarma, learned counsel for the respondent No.1- Bank.

ORDER: (Per Hon'ble Justice Moushumi Bhattacharya)

1. The petitioner prays for quashing of an order dated 06.03.2025

passed by the Debts Recovery Appellate Tribunal at Kolkata ('DRAT')

in I.A.No.567 of 2024 in Miscellaneous Appeal Diary No.972 of 2024.

2. The impugned order was passed in an Interlocutory Application

(I.A.No.567 of 2024) filed by the petitioner (the appellant in the I.A.)

for exemption from making any deposit for the purpose of hearing the

petitioner's Appeal on merits under section 21 of The Recovery of

Debts and Bankruptcy Act, 1993 ('RDB Act'). By the impugned order

dated 06.03.2025, the DRAT disposed of the petitioner's I.A. by

directing the petitioner to make a pre-deposit of 25% of

Rs.66,86,20,751/- within four weeks.

3. For understanding of the factual context, the brief facts leading

to the impugned order are stated below.

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4. The respondent No.1/State Bank of India (SBI) filed an Original

Application (O.A.No.625 of 2019) in the Debts Recovery Tribunal-I at

Hyderabad, against the respondent Nos.2 to 5 and the petitioner

herein for recovery of a sum of Rs.47,13,93,098.80 ps. By an order

dated 31.01.2020, the DRT-I held that the defendant Nos.1 to 4 were

jointly and severally liable to pay the said amount and that the

applicant/Bank is entitled to proceed against the person and

properties of the defendant Nos.1 to 4 towards realization of the debt

due. The order dated 31.01.2020 records that the defendant Nos.1 to

5 were set ex parte on 08.11.2019.

5. The petitioner (defendant No.4 in the O.A) filed an application

(MAIR No.171 of 2024) in O.A.No.625 of 2019, under section 22(h) of

the RDB Act, for setting aside the ex parte order dated 31.01.2020.

The petitioner filed I.A.No.736 of 2024 under section 5 of The

Limitation Act, 1963, for condoning the delay since there was a delay

of 1484 days in filing the application for setting aside the ex parte

order. By the docket order dated 01.10.2024, the DRT-I dismissed the

petitioner's I.A. holding, inter alia, that the petitioner had failed to

establish sufficient cause for condoning the delay of 1484 days in

filing the petition to set aside the ex parte order dated 31.01.2020.

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6. The petitioner challenged the said order before the DRAT which

was numbered as Miscellaneous Appeal Diary No.972 of 2024. The

petitioner filed I.A.No.567 of 2024 for exempting the petitioner from

making any deposit for the purpose of hearing the Appeal on merits

under section 21 of the RDB Act. By the impugned order dated

06.03.2025, the DRAT disposed of the said I.A. by directing the

petitioner to pre-deposit 25% of Rs.66,86,20,751/- within a period of

four weeks.

7. The petitioner has challenged the impugned order on the

ground that the requirement of making a pre-deposit of 25% would

not apply to the facts of the case since the Appeal before the DRAT

was directed against an order refusing to condone the delay in

recalling the ex parte order of the DRT.

Submissions made on behalf of the Parties.

8. The primary submission of learned counsel appearing for the

petitioner is that the Appeal filed before the DRAT arose out of an

order passed in an Interlocutory Application, by which the DRT had

rejected the petitioner's application for condonation of delay in filing a

petition for setting aside an ex parte order. Counsel submits that the

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petitioner's challenge to the order dated 01.10.2024 but was confined

only to the rejection of the petitioner's application for condonation of

delay in filing the setting aside petition. Counsel urges that the

Appeal before the DRAT was not against a determination of disputes

on merits but was only for giving an opportunity to the petitioner to

contest O.A.No.625 of 2019 filed by the respondent No.1/SBI.

Counsel seeks to draw a distinction between an Appeal against a

judgment and decree passed on merits and an Appeal against an

order refusing to recall an ex parte decree.

9. Learned counsel appearing for the respondent No.1/Bank

submits that the petitioner cannot circumvent the statutory mandate

of section 21 of The Recovery of Debts and Bankruptcy Act, 1993, in

terms of payment of deposit of 50%/25%. Counsel further submits

that the impugned order of the DRAT dated 06.03.2025 is

adjudication of a substantive appeal which would be evident from the

reference made by the DRAT to the amount of debt. According to

counsel, no differentiation can be made between a substantive appeal

and a procedural appeal, as sought to be argued on behalf of the

petitioner.

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Decision

10. We have considered the statutory framework under the RDBI

Act against the guiding template of The Code of Civil Procedure, 1908

('CPC'). We give our decision under different heads along with our

interpretation of the relevant provisions.

Section 21 of the RDB Act - The requirement of a Deposit on filing an

Appeal in the Appellate Tribunal.

11. Section 21 of the RDB Act is set out below:

"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 Tribunal fifty 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, reduce the amount to be deposited by such amount which shall not be less than twenty-five per cent. of the amount of such debt so due to be deposited under this section."

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12. A purposive reading of section 21 of the RDB Act makes it clear

that the bar on filing an appeal by a person aggrieved by the order of

the DRT is conditional on two factors:

a. A determination of debt;

b. The Appeal is directed against the determination of

debt.

13. The above would be clear from the language in section 21 uses

the specific phrase 'as determined by the Tribunal under section 19:'

Section 19 of the RDB Act relates to an Application to the Tribunal

(DRT) where a Bank/Financial Institution has to recover any debt

from any person, subject to the jurisdiction requirements under

section 19(1)(a), (aa), (b) and (c). A conjoint reading of sections 19 and

21 would indicate that the nature of the Appeal contemplated under

section 21 is a substantive Appeal arising from a determination of

debt due from the appellant to a Bank, Financial Institution or a

consortium thereof.

14. Therefore, the question that falls for consideration is whether

the Appeal preferred by the writ petitioner before the DRAT against

the order dated 01.10.2024 can be brought within the contemplation

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of section 21 i.e., a substantive appeal arising out of the

determination of a debt by the DRT.

15. In our considered view, the Appeal filed by the petitioner before

the DRAT is not a substantive appeal, but is rather a 'procedural

appeal'. The reasons for this view are stated below. The reasons for

this view are stated below.

16. The relevant facts may be reiterated at this stage. The

petitioner had challenged the docket order of the DRT-I dated

01.10.2024 before the DRAT. The basis of the challenge before the

DRAT was the dismissal of the petitioner's Interlocutory Application

for condoning the delay of 1484 days in filing the application for

setting aside the ex parte order passed by the DRT-I on 31.01.2020 (in

the O.A. filed by the SBI). The petitioner's application was filed under

section 22(h) of the RDB Act read with section 5 of The Limitation Act,

1963.

17. Section 22 of the RDB Act provides for the "Procedure and

Powers of the Tribunal and the Appellate Tribunal". Section 22(1)

provides for the procedural parameters of the DRT and the DRAT with

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reference to The Code of Civil Procedure, 1908. Section 22(1) is set

out below.

"Section 22(1) :- The Tribunal and the Appellate Tribunal shall not be bound by the procedure laid down by the Code of Civil Procedure, 1908 (5 of 1908), but shall be guided by the principles of natural justice and, subject to the other provisions of this Act and of any rules, the Tribunal and the Appellate Tribunal shall have powers to regulate their own procedure including the places at which they shall have their sittings."

18. The relevant part of section 22(2) is set out below.

"Section 22(2):- The Tribunal and the Appellate Tribunal shall have, for the purposes of discharging their functions under this Act, the same powers as are vested in a Civil Court under the Code of Civil Procedure, 1908 (5 of 1908), while trying a suit, in respect of the following matters, namely:"

19. Clause (g) of section 22(2) which is relevant for the dispute is

set out below.

"Section 22(2)(g):- setting aside any order of dismissal of any application for default or any order passed by it ex parte;"

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20. It is clear from the extracted part of section 22(2) that the power

to set aside any order passed by the DRT ex parte can hence be

equated with the power of a Civil Court under Order IX Rule 13 of the

CPC, that is, for setting aside a decree passed ex parte against a

defendant. The relevant part of Order IX Rule 13 is set out below.

"Order IX Rule 13: Setting aside decree ex parte against defendant.--

In any case in which a decree is passed ex parte against a defendant, he may apply to the Court by which the decree was passed for an order to set it aside; and if he satisfies the Court that the summons was not duly served, or that he was prevented by any sufficient cause from appearing when the suit was called on for hearing, the Court shall make an order setting aside the decree as against him upon such terms as to costs, payment into Court or otherwise as it thinks fit, and shall appoint a day for proceeding with the suit:"

21. As stated above, the subject matter of the appeal was

procedural and interlocutory since the appeal filed by the petitioner

was against the refusal of the DRT to condone the delay for setting

aside the ex parte order passed against the petitioner. The prayer in

I.A.No.736 of 2024, which was filed by the petitioner under section 5

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of the Limitation Act read with section 22 (2)(h) of the RDB Act before

the DRT, was for condoning the delay of 1484 days in filing the

application for setting aside the ex parte decree dated 31.01.2020

passed in O.A.No.625 of 2019 against the petitioner in the

respondent/Bank's O.A.

22. The DRT-I dismissed the petitioner's I.A. by the docket order

dated 01.10.2024. The petitioner's appeal before the DRAT arises out

of the said docket order dated 01.10.2024. Hence, the prayers in the

petitioner's I.A. read with the docket order dated 01.10.2024 would

show that the appeal filed by the petitioner before the DRAT had

nothing to do with the substantive adjudication of debt as understood

in section 19 of the RDB Act, under which the Bank/Financial

Institution can make an application to the Tribunal to recover any

debt from any person subject to the satisfaction of the jurisdictional

conditions under section 19(1).

Section 21 of the RDB Act underlines the mandate of a Deposit on

filing of a substantive Appeal against an adjudication of Debt.

23. The language of section 21 clarifies the nature of the appeal,

i.e., an appeal preferred from adjudication of '...the amount of

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debt...due to a bank or a financial institution...'. The appeal under

section 21 involving an adjudication of debt/liability is again

reinforced in section 21 by '...unless such person has deposited with

the Appellate Tribunal fifty per cent of the amount of debt so due from

him as determined by the Tribunal under section 19'. Section 21

contains a bar on the Appellate Tribunal from entertaining any such

appeal unless the person (appellant) has deposited fifty percent of the

amount of debt due to the Bank/Financial Institution under section

19 of the RDB Act.

24. The proviso to section 21 of the RDB Act confers discretion on

the Appellate Tribunal for reducing the amount of deposit for reasons

to be recorded in writing, within a ceiling of twenty-five per cent. The

proviso once again reinforces the nature of the appeal under section

21 in the words '...shall not be less than twenty-five per cent of the

amount of such debt so due to be deposited under this section.'.

25. The proviso clarifies the import of section 21 in respect of the

limit of the deposit which is to be made by the person/appellant. It is

of relevance that the entirety of section 21, including the proviso

thereto, unequivocally defines the core of an appeal under section 21 -

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which is a substantive appeal arising out of an adjudication of liability

under section 19 of the RDB Act.

Section 22(2) of the RDB Act - Common Ground between the RDB Act

and the CPC.

26. Section 22(2) confers equal powers to the DRT and the DRAT as

vested in the Civil Court under the CPC while trying a Suit. Section

22(2) delineates the matters where the DRT/DRAT can exercise the

powers of a Civil Court, namely, under Clauses (a) - (h).

27. Section 22(2) of the RDB Act recognises equal application of the

powers vested in a Civil Court under the CPC to the Tribunal/

Appellate Tribunal for the purpose of discharging their functions in

debt recovery proceedings. Section 22(2) provides for such equal

application of powers, notwithstanding section 22(1), which states

that the Tribunal/Appellate Tribunal shall not be bound by the

procedure laid down by the CPC.

28. In this context, the distinction between an appeal from a

judgment/decree under section 96 read with Order XLI of the CPC

and a civil miscellaneous appeal under Order XLIII Rule 1 of the CPC

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assumes relevance. Section 96 read with Order XLI ('Appeals from

Original Decrees') deal with substantive appeals from an original

decree. Order XLIII Rule 1 of the CPC, on the other hand, deals with

'Appeals from Orders' under section 104 of the CPC.

29. Order XLIII Rule 1(d) makes an order under Order IX Rule 13

(order rejecting an application seeking to set aside an ex parte decree

against defendant) appealable under Order XLIII Rule 1. Thus, a

distinction must be made between appeals under the aforesaid

categories i.e., under section 96 read with Order XLI as opposed to

appeals under Order XLIII Rule 1(d) of the CPC. If this distinction is

applied to the RDB Act, it must logically follow that appeals from final

determinations of debt are subject to section 21 of the RDB Act (akin

to appeals under section 96 of the CPC) as opposed to appeals from

interlocutory/procedural orders. The latter category, falling outside

substantive appeals which should therefore not be subject to the

condition of deposit under section 21 of the RDB Act or the proviso

thereto.

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Distinction between Substantive and Procedural Appeals.

30. The condition of stay of proceedings in an appeal is a further

point of statutory differentiation made between section 96 and Order

XLIII Rule 1 of the CPC.

31. Order XLI Rules 3 and 5 provides for an appeal making a

deposit or furnishing security as a condition for stay of the execution

of the decree. However, no such condition is present for stay/

suspension of an order in respect to an Appeal under Order XLIII rule

1 of the CPC. Importing this analogy to section 21 of the RDB Act

would serve as a further case in point for the petitioner. The

petitioner has gone before the DRAT not from a final adjudication of

debt but from an order rejecting the petitioner's application for setting

aside the ex parte order of the DRT dated 31.01.2020.

32. Moreover, such differentiation is not unknown to the DRAT. In

New India Assurance Co. Ltd. Vs. Union Bank of India 1, the DRAT

drew a distinction between an appeal on the merits of the final order

and an appeal questioning an ex parte decree passed without service

on the defendants in the context of section 21 of the RDB Act.

1 MANU/DK/0001/2006

MB,J & GPK,J

33. Kotak Mahindra Bank (P) Ltd. Vs. Ambuj A. Kasliwal 2, relied on

behalf of the respondent Bank, involved a different facts where an

adjudication was made on the total amount due to the appellant Bank

along with interest and other charges. The DRAT in that case also

gave credit for the amount of Rs.152.81 crores received by the

appellant Bank and had directed fifty per cent of the balance amount

to be deposited by the respondent. The facts in Kotak Mahindra also

did not involve any Interlocutory Application being made by the

respondent.

34. Therefore, considering the nature of the appeal filed by the

petitioner from the docket order dated 01.10.2024, we have no doubt

that the appeal did not fall within the contours of section 21 of the

RDB Act. The appeal was for procedural fairness i.e., to give the

petitioner an opportunity to contest the O.A. filed by the Bank on

merits. The absence of opportunity arose out of the ex parte order of

the DRT dated 31.01.2020 whereby the applicant Bank was held

entitled to proceed against the defendant Nos.1 to 4 including the

petitioner/defendant No.4. The order records that the defendant

Nos.1 to 5 were set ex parte on 08.11.2019.

2 (2021) 3 SCC 549

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The Inherent Infirmities of an Ex Parte Adjudication.

35. In the facts of the present case, the determination of debt by the

DRT on 31.01.2020 in the O.A. filed by the respondent/SBI was

admittedly an ex parte adjudication. As stated above, the order

records that the defendants were set ex parte on 08.11.2019. The

petitioner herein is the defendant No.4 before the DRT.

36. The order dated 31.01.2020 is self-evident in that the ex parte

order was not a contested adjudication. The said order was passed in

the absence of the petitioner who was one of the affected parties. The

law provides for a remedy to seek setting aside of an ex parte decree in

Order IX Rule 13 of the CPC. The opportunity of the aggrieved party

is mirrored in section 22(2)(g) of the RDB Act. In essence, section

22(2)(g) preserve the power of the Tribunal and the Appellate Tribunal

to recall an ex parte order.

37. Even otherwise, ex parte orders are an exception and not the

rule. Courts have held that such orders lack the flavour of finality in

the absence of the contesting party. In other words, Courts have

looked askance at orders passed on a one-sided presentation of a

dispute. Thus, denial of the right to correct the procedural infirmity

in the specific context of refusal to condoning the delay in seeking to

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recall an ex parte order must be put in its proper place in the scheme

of the RDB Act.

38. The proper place would be section 22(2)(g) which facilitates

access to justice by enabling recall of ex parte orders. Placing undue

burden of a pre-deposit for such procedural access would certainly be

onerous on the appellant and discordant to the legislative intention

behind section 22(2)(g) of the RDB Act. To put it simply, imposing a

mandatory condition for a non-substantive appeal to be entertained

by the Appellate Tribunal would render the statutory right under

section 22(2)(g) illusory, harsh and burdensome.

39. In a recent order passed by the Supreme Court on 17.04.2025

in Sunshine Builders and Developers Vs. HDFC Bank Limited 3, it was

observed that a distinction should be made between a final order

passed by the DRT, determining the liability of the borrower or any

other liability of any person and an appeal preferred under section 18

of the SARFAESI Act to the Appellate Tribunal. Section 18 of the

SARFAESI Act is substantially similar to section 21 of the RDB Act by

way of requiring the appellant to make a pre-deposit of fifty percent of

amount of debt for the appeal to be entertained by the Appellate

3 2025 SCC OnLine SC 1234

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Tribunal. A similar question fell before a Division Bench of the Delhi

High Court, the Allahabad High Court and the Calcutta High Court in

State Bank of India Vs. Doon Valley Rice Mills Ltd. 4, Jai Gopal Kansal

Vs. Indian Bank 5, and Sutapa Chatterjee Vs. UCO Bank 6; respectively.

The Courts made a distinction between an appeal arising out of

determination of debt and a miscellaneous appeal where the latter

would not come within the condition of section 21 of the RDB Act.

Conclusion

40. The above discussion and the reasons given therein persuades

us to hold in favour of the petitioner. The appeal filed by the

petitioner before the DRAT is not a substantive appeal from an

adjudication of debt but an appeal for restoration of the principles of

natural justice from an ex parte order excluding the petitioner from

presenting his case. The significance of preserving the principles of

natural justice has specifically been recognised by section 22(1) of the

RDB Act. The petitioner's appeal cannot be brought within the

stranglehold of the deposit requirement under section 21 of the RDB

Act or the proviso contained therein.

4 2023: DHC : 9308 - DB 5 2019 (4) ALJ 10 6 2013 (2) Cal L.T. 272

MB,J & GPK,J

41. The impugned order of the DRAT dated 06.03.2025, directing

the petitioner (appellant) to make a pre-deposit thus calls for

interference. The impugned order dated 06.03.2025 is accordingly set

aside.

42. W.P.No.12395 of 2025 is allowed in terms of the above.

Miscellaneous applications pending, if any, shall stand closed. There

shall be no order as to costs.

_________________________________ MOUSHUMI BHATTACHARYA, J

____________________________ GADI PRAVEEN KUMAR, J 28th August, 2025.

Note: L.R. Copy to be marked.

(B/o.) BMS/VA