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2016 (11) TMI 1731 - HC - Indian LawsGrant of complete waiver of deposit under section 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - default in payment of liabilities - HELD THAT:- The statements of object and reasons of the SARFAESI Act indicate that the financial sector, being one of the key drivers in India's efforts to achieve success in rapidly developing its economy, did not have a level playing field as compared to other participants in the financial markets of the world. There was no legal provision for facilitating securitisation of financial assets of banks and financial institutions, and unlike international banks, the banks and financial institutions in India did not have the power to take possession of securities and sell them. The Legislature felt that our existing legal framework had not kept pace with the changing commercial practices and financial sector reforms, which resulted in delays in recovery of defaulting loans. This in turn had the effect of mounting levels of non-performing assets of banks and financial institutions. In order to bring the Indian Banking Sector on par with International Standards, the Government set up two Narasimhan Committees and the Andhyarujina Committee for the purposes of examining banking sector reforms. Section 18(1) clearly stipulates, any person aggrieved by any order made by the DRT under Section 17, may prefer an appeal to the DRAT within 30 days from the date of receipt of the order of the DRT. The 2nd proviso to Section 18(1) stipulates that no appeal shall be entertained by the DRAT unless the borrower has deposited with it 50% of the amount of debt due from him, as claimed by the secured creditors or as determined by the DRT, whichever is less. The 3rd proviso to Section 18(1) gives a discretion to the DRAT to reduce the aforesaid amount to not less than 25%, provided the DRAT gives reasons for the same which are to be recorded in writing. What becomes clear from the aforesaid provisions is that there is a jurisdictional bar from entertaining an appeal filed by the borrower from an order passed under Section 17, unless the borrower deposits 50% of the amount of debt due from him, as claimed by the secured creditors or as determined by the DRT, whichever is less - There is also a discretion granted to the DRAT to reduce this amount to 25% provided it finds adequate reasons for doing so and gives reasons, that are recorded in writing. If this deposit is not made, then the DRAT has no jurisdiction to entertain the appeal of the borrower. There was non-compliance of Rules 6(2) and 8(6) of the SARFEASI Rules. It is true that the said rules [Rules 6(2) and 8(6)] are mandatory and ordinarily have to be complied with by the secured creditor before it proceeds to sell its secured assets. Rule 6(2) comes into play when the secured creditor seeks to sell movable property and Rule 8(6) comes into play when the borrower is selling immovable property. The facts of this case clearly show that the 1st Respondent - borrower itself, to pay the dues of Respondent Nos. 2 to 5, had agreed to sell the subject properties. In fact, the 1st Respondent - borrower proposed that the subject properties would be sold to M/s. Shubham Developers for Rs. 7.47 crores and thereafter to Respondent No. 6 for Rs. 6.76 Crores. When these transactions did not fructify, Respondent Nos. 2 to 5 revoked the OTS sanctioned in favour of the 1st Respondent - borrower and thereafter proceeded to sell the subject properties under the provisions of the SARFAESI Act - This being the factual position, it is clear that the 1st Respondent - borrower had given up its right of redemption [as contemplated under Rules 6(2) and 8(6)] by itself offering to sell the subject properties to pay the dues of Respondent Nos. 2 to 5. Application disposed off.
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