SECTION 21 OF RDB ACT, 1993 – VIPS LAW BLOG
– Vinay Boora*
Keywords – 50% Pre-deposit, DRAT appeal, Alternative remedy, Writ petition, Section 21 of RDB Act
The Recovery of Debts and Bankruptcy Act 1993 (RDB Act) mandates a pre-deposit of 50% of the amount of debt due to a bank or a financial institution, as determined by the Debt Recovery Tribunal (DRT) under Section 19 of the RDB Act, which, after recording reasons in writing, may be reduced up to 25% and shall not be reduced any further or entertained at all by the Debt Recovery Appellate Tribunal (DRAT) without the aforementioned pre-deposit under Section 21 of the RDB Act. However, such a stringent precondition did not exist before the 2016 amendments to the RDB Act, which deliberately omitted the word “waive” from Section 21. The legislative intent, as clear from the Statement of Objects and Reasons, was to discourage dilatory appeals and expedite the adjudication of recovery applications, and as highlighted in Harjit Singh Sohal v. Indian Bank, the object of Section 21 apparently is to keep in balance the right of appeal and protect the right of the banking industry to have speedy recovery of the debt due. However, while the amendment may have expedited the process, it simultaneously rendered an unintended but serious consequence, making the remedy of appeal illusory in cases where the determination of debt under section 19 itself is vitiated, where the appellant must accept the legality of the computation in order to challenge its legality. This conundrum is exemplified in the recent 2025 judgment of the Bombay High Court in the case of Shriniwas Ramdas Dubas v. Bank of Maharashtra.
This article analyses the dilution of the appellate safeguard under Section 21, caused by its procedural dependence on debt determination under Section 19. First, it identifies the statutory gap in appellate procedure. Second, it analyses the circumstances where this gap becomes evident. Third, it sets out a viable remedy course available within the present statutory framework.
Why the law fails
Before 2016, DRAT had the discretion to waive the deposit requirement entirely under section 21 of the RDB Act and considered various factors, including, but not limited to, debtors’ financial situations and the time required to make the deposit. However, the 2016 amendments replaced discretion with a mandate by allowing only a very limited reduction in pre-deposit. This amendment requires and presumes the existence of a valid and reasoned debt determination by the DRT.
Post-amendment to Section 21, it is procedurally dependent on the adjudication under Section 19 by the DRT. The statutory requirement of pre-deposit assumes that the DRT has completed its judicial process, i.e identifying the issues, appreciating the evidence, applying the law, and arriving at a reasoned and quantified determination of liability. Where this foundational process gets compromised, the appellate precondition imposed under section 21 turns into a substantive bar. In such cases, the failure at the stage of determination is automatically transmitted to the appellate stage, rendering Section 21 a balancing provision rather than an exclusionary one where: (a) the order is non-speaking, (b) the proceeding culminates in ex parte proceedings without judicial scrutiny, or (c) the debt is not computed at all or is prima facie erroneous. In such conditions, insisting on a deposit calculated on a defective or indeterminate figure effectively conditions access to appeal on compliance with an illegality, rendering the statutory remedy illusory rather than efficacious. (emphasis supplied)
Non-speaking order
It is settled law that not only administrative but also judicial orders shall be supported by reasons. As held in Sant Lal Gupta v. Modern Coop. Group Housing Society Ltd., Reasons are the “heartbeat of every conclusion” and substitute subjectivity with objectivity. Mere reproduction of submissions, without analysis or findings, does not constitute a speaking order.
Furthermore, the Supreme Court has consistently held that the absence of reasoning reflects a lack of application of the mind, rendering such orders unsustainable. Where the DRT disposes of an Original Application (OA) without discussion, appreciation of evidence, or legal reasoning, the resulting determination of “debt due” lacks juridical legitimacy.
Ex Parte adjudication or non-admission of submissions from one side
The fact that proceedings are ex parte does not dilute judicial responsibility. On the contrary, as held in Maya Devi v. Lalta Prasad, the absence of the defendant casts a greater obligation on the court to fully satisfy itself of the factual and legal veracity of the claimant’s claims and casts a greater responsibility and onerous obligation to be fully satisfied that the claim has been proved and substantiated “to the hilt”. An ex parte recovery certificate issued without scrutiny cannot be considered a valid basis for invoking the pre-deposit requirement under Section 21.
Furthermore, failure to make a written submission, either due to delay or any other circumstances, cannot be an excuse for any dilution in the adjudication of the concerned issues. As held by the Supreme Court in Punjab and Sind Bank v. Sh Harish Bhasin and ors., “Mere observation as to the misconduct of the Respondent herein is not sufficient to allow an O.A. by the DRT.” On the contrary, the failure to file a written statement brings Order 8, Rule 10 of the CPC into operation; the fact that the defendant was set ex parte does not warrant a punishment in the form of an automatic decree.
Non-computation or Erroneous computation of debt
The most trouble arises where the DRT fails to compute the debt altogether or computes it erroneously without explaining the basis, interest calculation, or period of accrual. In R. Dhanalakshmi v. Union Bank of India, the Kerala High Court bypassed a DRAT direction to pre-deposit a sum computed by adding interest from the date of a Section-13(2) notice up to an unspecified future date, holding that the DRAT could not impose a pendente-lite, unspecified interest figure to make the appeal unworkable. In such cases, the appellant is required to deposit a percentage of an amount whose legal existence is itself under challenge.
This creates a circular impossibility; the appellant must accept the legality of the computation in order to challenge its legality. Thus, when the quantification of liability itself is either absent or legally unsound, the insistence on a pre-deposit does not merely regulate access to appeal; it extinguishes it. (emphasis supplied)
Writ Jurisdiction and the Doctrine of Exhaustion of Remedies
Article 226 confers plenary jurisdiction upon High Courts, and is not limited by any other provision of the Constitution. However, the High Courts have imposed certain restrictions upon themselves, one of which is that if an efficacious and effective remedy is available, the High Court would not normally exercise its jurisdiction, which has become a norm, although not a mandate, as early as in State of U.P. v. Mohd. Nooh. Thus, the rule of exhaustion of alternative remedies is not a mandate but a rule of prudence.
In Whirlpool Corporation v. Registrar of Trade Marks, the Supreme Court crystallised the exceptions where writ jurisdiction may be exercised despite available alternative remedies, including: (a) violation of natural justice, (b) lack of jurisdiction, or (c) challenge to the vires of an Act. Subsequently, Harbanslal Sahnia v. Indian Oil Corporation Ltd. reaffirmed that “denial of natural justice” justifies writ intervention. Non-speaking orders, mechanical adjudication, and recovery certificates issued without proper reasoning squarely fall within these exceptions. This position has been reiterated in Punjab and Sind Bank v. Harish Bhasin, where the Court held that misconduct alone cannot justify the issuance of a recovery certificate without reasoned adjudication. (emphasis supplied)
Furthermore, the Supreme Court, with a full bench in M.G. Abrol, Addl. Collector of Customs v. Shantilal Chhotelal & Co., held that when respondents have no effective remedy, for they could not file an appeal without depositing as a condition precedent, the large amount of penalty imposed on them, the High Court can exercise its jurisdiction under Article 226 as the existence of an effective remedy does not oust its jurisdiction, but it’s one of the circumstances that the court should take into consideration while exercising its discretionary jurisdiction. More recently, in Shriniwas Ramdas Dubas v. Bank of Maharashtra, the Bombay High Court allowed a writ petition precisely on the ground of a non-speaking order, holding that the DRT must adjudicate on merits and provide sufficient reasons. (emphasis supplied)
Conclusion
Section 21 of the RDB Act, as amended in 2016, seeks to deter frivolous appeals through a mandatory pre-deposit. However, this mechanism presupposes a lawful and reasoned determination of debt under Section 19. But where the DRT issues non-speaking orders, conducts ex parte adjudication without scrutiny, or fails to compute the debt correctly, the appellate remedy before the DRAT becomes illusory. While courts have recognised violations of natural justice as an exception to the exhaustion doctrine, non-computation or erroneous computation of debt remains insufficiently addressed. Unless this defect is acknowledged, Section 21 risks operating as a barrier rather than a safeguard and calls for a narrowly carved legislative exception to correct this anomaly. Effectively, this confines the statutory right of appeal to only those appellants with sufficient financial capacity to comply with the pre-deposit requirement, thereby rendering the remedy illusory for those unable to comply with it and leaving the High Court, exercising a narrow and discretionary jurisdiction under Article 226, as the only available forum.
*[The Author is a third-year student pursuing B.A LL.B. (Hons.) from the NALSAR University of Law, Hyderabad ]
