The provisions of the RDB Act shall not be attracted where the amount of debt due to any bank is less than twenty lakh rupees

[Case Brief] Kirti Kapoor and Others v/s Union of India

Case name Kirti Kapoor and Others v/s Union of India
Case number D.B. Civil Writ Petition No. 21860/2018
Court High Court of Rajasthan (Jaipur Bench)
Bench Justice Narendra Singh Dhadda & Justice Mohammad Rafiq
Decided on  July 1, 2019
Relevant Act/Sections DRT Act, 1993 – Section 1(4)
Author of the case brief Bhavisha Sharma ([email protected])

Brief Facts and Procedural History:

Central Government, Ministry of Finance (Department of Financial Services) had issued a notification on 6/9/2018 invoking its power under Section 1(4) of the RDB Act, 1993. The notification provides that the provisions of the RDB Act shall not be attracted where the amount of debt due to any bank is less than twenty lakh rupees. Petitioners have invoked the writ jurisdiction of the High Court to challenge the validity of the impugned notification.

Section 1(4) of the Act reads: 

The provisions of this Act shall not apply where the amount of debt due to any bank or financial institution or to a consortium of banks or financial institutions is less than ten lakh rupees or such other amount, being not less than one lakh rupees, as the Central Government may, by notification, specify.

The petitioners argue that the language of Section 1(4) indicates that the Central Government only has the power to decrease the limit of ten lakh rupees upto one lakh rupees. The notification which increases the limit unfairly excludes many debtors though the legislature intended on including them. Relying on several judgements, it is contended that this goes against the purposive reading of the statute. Thus, the court should support a statutory interpretation that is in consonance with the legislative intent of achieving speedy disposal. Further, the power delegated to the Central Government under such Act cannot be uncanalised or unguided, and thus, a reasonable bar must be created on the same. The notification suffers from the vice of excessive delegation and must be struck down. 

Respondent has argued that the words “or such other amount” enables the Central Government to set any limit however it should simply not be less than one lakh rupees as has been given in the act. Further, it was contended that the Tribunals under the Act were constituted to ensure expeditious recovery of debts to put public money for proper use in the development of the country. The increase in the impugned limit is to ensure that this objective is achieved and the Tribunals are not overburdened. As the notification is not tainted with arbitrariness, mala fide, unreasonableness or lack of jurisdiction, it cannot be struck down by the court.

The Additional Solicitor General also contended that though the threshold of ten lakh rupees was justified at the time of promulgation of the act, i.e.  in 1993, the same is not the case today. The inflation indicator was also cited to show that the value of that amount equalled Rupees 49.23 Lakh 2017. Interactive sessions of Department of Financial Services were cited to prove that the chairperson of various DRTs have repeatedly asked for a raise of the minimum limit to prevent overburdening and maintain expeditious proceedings. Relying on the presumption of constitutionality of any statute, Respondent contended that the Petitioners have not satisfied their burden of proving the unconstitutionality and hence, the notification cannot be struck down.

Issues before the High Court:

  1. Is Section 1(4) of the DRT Act unconstitutional by the vice of excessive delegated legislation?
  2. Whether the Central Government was competent to raise the threshold limit to twenty lakh rupees under Section 1(4) of the Act through the impugned notification?

Ratio of the Court:

  1. Yes. Section 1(4) is not a case of Delegated Legislation but only a conditional legislation wherein a condition is specified and the central government, within the contours of that condition, is authorised to give effect to the scheme of the act. The High Court relied on the Supreme Court case of State of Bombay v/s Narottam Jethabhai and Others. The differentiation between delegation of legislative powers and delegation of choosing the manner of giving effect to a law in the manner as envisaged by the legislature has been discussed. Relying on the case of State of Tamin Lnadu v/s K Sabanayagam and Another, the Supreme Court divided Conditional Legislations into three Categories
      1. Super-structure of the statute has been provided by the legislature but its applicability to a given area or a given time has been delegated to an executive authority.
      2. Act has been promulgated but the authority to decide when it should be partially withdrawn to exclude a class of persons who are otherwise inculcated in the act has been delegated. This is subject to the condition precedent applicable to the execrcise of such power. 
      3. Power given by conditional legislation shall be exercised by the delegated authority on the basis of objective facts to benefit one class of persons by excluding a rival class.

Hearing the parties is not obligatory in Case 1 and Case 2, and noting that the present case falls under the ambit of Case 2, the only requirement is the satisfaction of the condition precedent. If the same has been met by the delegatee, there is no reason to question the decision made thereunder. Court observed that the legislature has sufficiently laid down the policy and objective of the legislation, and as the old threshold hindes the court in effectively disposing of matters, Central Government can exercise the authority it has under Section 1(4) of the Act to ensure effective disposals.

  1. Court relied on judgements holding that while interpreting the statute, judiciary should not add words in a statute which are not present in the normal language of the statute, unless the same is indispensably required to give full effect to the legislative intent. As the words of the statute only specify a minimum limit of Section 1(4) and nothing else, Central Government has the authority to increase the limit to 20 lakh Rupees, if it believes that the same will further the ultimate purpose of the statute. A reason for this amendment can be made out as according to the number of application, 41% of applications filed with the DRT are in the segment of 10 lakh rupees to 20 lakh rupees. However, as per value, they amount to only 5% of the total value of recovery filed in that given period. This shows how this segment overburdens the tribunals without playing a major role in achieving its objectives and distracts the Tribunal from focusing on high recovery cases. Further, according to the data available, 80% of cases in this monetary segment are fully secured, and thus have recourse under SARFAESI Act, 2002. Thus, most cases will not have to go through civil courts and an alternative effective remedy is available. This shows that the notification is well-reasoned an non-arbitrary. 

Decision Held:

The notification was held to be legally valid and the petition was dismissed by the court.

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