2023 (1) TMI 445 - SC - Indian Laws
Interpretation of statute - calculation of amount of pre-deposit u/s 18 of the SARFAESI Act - 50% of which amount the borrower is required to deposit as pre-deposit - Section 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - possession of one of the mortgaged property was taken by the Bank as amount demanded was not paid under Section 13(2) of the SARFAESI Act.
Whether while calculating the amount of “debt due”, the amount deposited by the auction purchaser on purchase of the secured assets is required to be adjusted and/or appropriated towards the amount of pre-deposit to be deposited by the borrower under Section 18 of the SARFAESI Act? - Whether the “debt due” under Section 18 of the SARFAESI Act would include the liability + interest?
HELD THAT:- As per Section 18 of the SARFAESI Act, any person aggrieved, by any order made by the DRT under section 17, may prefer an appeal within thirty days to an appellate Tribunal (DRAT) from the date of receipt of the order of DRT. Second proviso to section 18 provides that no appeal shall be entertained unless the “borrower” has deposited with the Appellate Tribunal fifty percent of the amount of “debt due” from him, as claimed by the secured creditors or determined by the DRT, whichever is less and only and only then, an appeal under Section 18 of the SARFAESI Act is permissible against the order passed by the DRT under Section 17 of the SARFAESI Act. Under Section 17, the scope of enquiry is limited to the steps taken under Section 13(4) against the secured assets. Therefore, whatever amount is mentioned in the notice under Section 13(2) of the SARFAESI Act, in case steps taken under Section 13(2)/13(4) against the secured assets are under challenge before the DRT will be the ‘debt due’ within the meaning of proviso to Section 18 of the SARFAESI Act.
As per the second proviso to Section 18 of the SARFAESI Act, it is the “borrower” who has preferred an appeal before the Appellate Tribunal and the “borrower” who shall have to deposit 50% of the amount of “debt due” from him. If the words used in the second proviso to Section 18 of the SARFAESI Act are “borrower has to deposit”, it is not appreciable how the amount deposited by the auction purchaser on purchase of secured assets can be adjusted and/or appropriated towards the amount of pre-deposit, to be deposited by the borrower. It is the “borrower” who has to deposit the 50% of the amount of “debt due” from him. At the same time, if the borrower wants to appropriate and/or adjust the amount realised from sale of the secured assets deposited by the auction purchaser, the borrower has to accept the auction sale. In other words, the borrower can take the benefit of the amount received by the creditor in an auction sale only if he unequivocally accepts the sale.
In the case of ESKAYS CONSTRUCTION PVT. LTD. VERSUS SOMA PAPERS & INDUSTRIES LTD. AND ORS. [2016 (11) TMI 1731 - BOMBAY HIGH COURT], the Bombay High Court considered in detail Section 18. After considering the decision of this Court in the case of NARAYAN CHANDRA GHOSH VERSUS UCO BANK [2011 (3) TMI 1478 - SUPREME COURT], it was observed and held that provisions of Section 18, more particularly the second and the third proviso thereto are mandatory in nature and that the DRAT has no power to grant full waiver of deposit - we are in full agreement with the view taken by the Bombay High Court in the case of Eskays Construction Pvt. Ltd. (supra). We are of the firm opinion and view that in a case where the borrower challenges the auction sale, thereafter it will not be open for the borrower to pray to use the sale proceeds received from the sale of the secured properties to be adjusted/given credit in an application for waiver of pre-deposit.
In the present case, the respective High Courts have seriously erred in directing to adjust/appropriate the amount realised by auction sale of the secured properties/deposited by the auction purchasers while considering the 50% of the amount as pre-deposit to be deposited by the borrower, while preferring an appeal before the DRAT. Even the High Court of Delhi has erred in excluding the amount payable towards interest while considering the “debt due”. As per Section 2(g) of the Act 1993, “debt” means liability inclusive of interest as claimed by the bank/financial institution.