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2016 (3) TMI 382 - BOMBAY HIGH COURT

2016 (3) TMI 382 - BOMBAY HIGH COURT - TMI - Determination of amount deposited under SARFAESI Act - what sum (claimed by the secured creditor) is to be taken into consideration by the DRAT whilst determining the amount that ought to be deposited by the borrower under section 18 of the SARFAESI Act (before its appeal can be entertained)? - whether the DRAT was justified in ordering the Petitioner to deposit a sum of ₹ 20,00,000/-? - Held that:- Section 13(2) notice issued by the Respondent .....

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, 2012), the Respondent Bank forfeited the deposits of the Petitioner lying with it in the sum of ₹ 5,29,441/-and gave credit for the same in the loan account. Thereafter, one of the guarantors (viz. Mr K.P. Malkani) sold one of the mortgaged properties with the consent of the Respondent Bank and the sale proceeds thereof to the tune of ₹ 1,18,00,000/- were deposited with the Respondent Bank on 24th March, 2012.

After giving due credit for the aforesaid amounts (Rs. .....

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On the said date, the outstanding of the Respondent Bank was in excess of ₹ 96,14,085/- as no payments were made by the Petitioner between the date when the section 13(2) notice was issued (14th August, 2007) and the date of filing of the appeal and waiver application (4th March, 2010).

However, this waiver application was heard by the DRAT on 30th June 2014. By the time, the DRAT heard the waiver application, the Petitioner had made part payments of ₹ 1,23,00,000/- (a .....

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y of the Appellate Tribunal within a period of eight weeks from the date of the said order in two equal installments. We find that the said order is not only in conformity with the provisions of section 18 of the SARFAESI Act but does complete justice between the parties as it gives credit for the amounts paid by the Petitioner to the Respondent Bank before directing the Petitioner to deposit a sum of ₹ 20,00,000/- as a condition precedent to entertaining its appeal. In this view of the .....

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oner : Mr M.K. Shah For The Respondent : Mr Pratap Patil Judgment [ Per B. P. Colabawalla J. ] :- 1. This Review Petition seeks review of the order dated 10th June, 2015 passed by us in the above Writ Petition. On the date when the order under review was passed, none appeared on behalf of the Petitioner. We had perused the order passed by this Court on 21st July, 2014 when this Court had granted time to the Petitioner to deposit the amount of ₹ 20,00,000/- in the Debt Recovery Appellate Tr .....

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e Petitioner appeared before us and submitted that this order may be reviewed as he was not heard before passing the said order. Since this order was passed in the morning session, we had stated that the Petitioner was at liberty to apply for review of this order by filing an appropriate application. It is in this light that the Review Petition has been filed before us. 2. Since the grievance of the Petitioner is that he was not heard before passing the order dated 10th June, 2015 and the issues .....

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date of section 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, the SARFAESI Act ). We must mention here that the above referred Miscellaneous Application was a waiver application filed by the Petitioner seeking full waiver of deposit. By its order dated 30th June 2014, the DRAT, after hearing the parties, directed the Petitioner to deposit a sum of ₹ 20,00,000/- with the Registrar of the DRAT within a period of eig .....

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count No.147. The aforesaid facility was secured by mortgage of immovable as well as hypothecation of movable property. The immovable properties mortgaged was land admeasuring about 32.5R, situated at Survey No.65, Hissa No.5 (old Survey No.829, Hiss No.5) and land admeasuring of 1H and 57.7R situated at Chovishwadi, Taluka Haveli, District Pune (hereinafter referred to as the mortgaged properties ). 5. Admittedly, the Petitioner defaulted in repayment and therefore the Respondent - Bank obtaine .....

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- Bank was ₹ 96,14,085.61. In this view of the matter, the Respondent -Bank initiated proceedings under the provisions of the SARFAESI Act by issuing a notice under section 13(2) thereof on 14th August, 2007. In the said notice the Petitioner was called upon to pay the said sum of ₹ 96,14,085.61 (as on 31st July, 2007) together with interest thereon within 60 days of receipt of the said notice failing which the Respondent - Bank would proceed to take measures under section 13(4) of .....

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id Securitisation Application, the Respondent - Bank also filed its affidavit in reply inter alia contending that there was no merit in the Securitisation Application and that the same ought to be dismissed. After hearing the parties, the DRT, Pune, by its detailed reasoned order dated 13th January, 2010 dismissed the Securitisation Application filed by the Petitioner. 7. Being aggrieved by this order of the DRT, Pune, the Petitioner filed an appeal under section 18 of the SARFAESI Act before th .....

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sought a full waiver of deposit. The relevant averments in the said waiver application read as under:- That appellant has filed the present appeal challenging the order of the DRT, Pune, dismissing securitization application of the appellant. Therefore, in fact there is no any necessity to deposit any amount as required by law. As there is no any amount determined under sec.17 by DRT there cannot be said any dues. Therefore the said condition of deposit of amount is required to be waived. 8. Af .....

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after the issuance of the notice dated 14th August, 2007 under section 13(2) of the SARFAESI Act, no payments were made by the Petitioner till 28th February, 2012. The outstanding dues of the Respondent - Bank as on 29th February, 2012 was to the tune of ₹ 1,65,36,770.61. The Petitioner had deposits with the Respondent - Bank of ₹ 5,29,441/- which were forfeited by it on the said date and credit for the same was given to the Petitioner. Thereafter, one of the guarantors to the transa .....

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fidavit in reply to this Review Petition, it is the case of the Respondent - Bank that as on 17th July 2015, the total outstanding dues of the Petitioner (after giving credit of all amounts paid/deposited) are to the tune of ₹ 63,48,914.61. 10. Be that as it may, since the outstanding amounts as on 31st March, 2012 were ₹ 52,14,200.61, the DRAT, Mumbai took the aforesaid figure into consideration before ordering the Petitioner to deposit a sum of ₹ 20,00,000/- for the purposes .....

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85.61. He therefore submitted that having deposited amounts with the Respondent - Bank more than what was claimed in the section 13(2) notice, the DRAT ought to have directed full waiver of deposit and not put the onerous condition of a further deposit of ₹ 20,00,000/- as was sought to be done in its order dated 30th June, 2014. He submitted that as per the provisions of section 18 and more particularly the 2nd proviso thereto, no appeal could be entertained unless the borrower had deposit .....

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the amount claimed by the Respondent - Bank in the section 13(2) notice was ₹ 96,14,085.61. After this, the Petitioner had deposited with the Respondent - Bank a sum of approximately ₹ 1,23,00,000/- and therefore the Petitioner was not required to deposit any further amount as stipulated in the 2nd proviso to section 18. To put it simply, it was the argument of Mr Shah that the amount that is to be taken into consideration for the purposes of ordering deposit under section 18 of the .....

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reviewed and the reliefs sought for in the Writ Petition ought to be granted in favour of the Petitioner and the order of the DRAT dated 30th June, 2014 is required to be quashed and set aside. In support of the aforesaid proposition, Mr Shah relied upon the following decisions:- (i) Sivakumar Textiles v/s Debt Recovery Appellate Tribunal, Chennai and others; AIR 2012 MADRAS 57 (ii) Poonam Manshani v/s J. & K. Bank Ltd. and another; AIR 2010 DELHI 28 and (iii) Narayan Chandra Ghosh v/s UCO .....

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has to take into account the interest accrued on the said sum till the date of filing of the appeal. 13. To understand the present controversy, it would be necessary to refer to the provisions of section 18 of the SARFAESI Act. Section 18 reads as under:- 18. Appeal to Appellate Tribunal.-(1) Any person aggrieved, by any order made by the Debts Recovery Tribunal under Section 17, may prefer an appeal along with such fee, as may be prescribed to an Appellate Tribunal within thirty days from the .....

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the reasons to be recorded in writing, reduce the amount to not less than twenty-five per cent of debt referred to in the second proviso. (2) Save as otherwise provided in this Act, the Appellate Tribunal shall, as far as may be, dispose of the appeal in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) and rules made thereunder. (emphasis supplied) 14. Section 18(1) provides that any person aggrieved by any order made by the .....

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ured creditors, or determined by the DRT, whichever is less. The 3rd proviso gives power to the DRAT to reduce the deposit amount from 50% to 25% provided reasons for the same are recorded in writing by the DRAT. As stipulated in the 3rd proviso, the DRAT has no power to reduce the amount of deposit less than 25% of the debt referred to in the 2nd proviso. Section 18(2) stipulates that save or otherwise provided in the Act, the DRAT shall, as far as may be, dispose of the appeal in accordance wi .....

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e Recovery of Debts Due to Banks and Financial Institutions Act 1993 (51 of 1993); 16. As can be seen from the definition, the word debt shall have the meaning assigned to it in clause (g) of section 2 of the RDDB Act. Section 2(g) of the RDDB Act reads thus:- (g) debt means any liability (inclusive of interest) which is claimed as due from any person by a bank or a financial institution or by a consortium of banks or financial institutions during the course of any business activity undertaken b .....

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iability (inclusive of interest) which is claimed as due from any person by a bank or a financial institution during the course of any business activity undertaken by such bank or financial institution under any law for the time being in force, in cash or otherwise, whether secured or unsecured, or assigned, or whether payable under a decree or order of any civil court or any arbitration award or otherwise or under a mortgage and subsisting on, and legally recoverable on, the date of the applica .....

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uld have to deposit 50% of the amount of debt due from him as claimed by the secured creditors. The provision on a plain reading does not in any way exclude taking into consideration the future interest that is accrued on the debt owed by the borrower to the secured creditor. In fact, the definition of the word debt means any liability (inclusive of interest) which is claimed as due from any person by a bank or a financial institution. Therefore, if the claim made by the secured creditor in the .....

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to section 18 of the SARFAESI Act. The amount of deposit would have to be determined on the basis of the amount of debt due by the borrower to the secured creditor on the date when the appeal is filed in DRAT. This would not only include the amount mentioned in the section 13(2) notice but also interest accrued thereon till the date of filing of the appeal under section 18 of the SARFAESI Act. To our mind, this is the only interpretation that is possible of the 2nd proviso to section 18 of the .....

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s language of the said section. 19. We must mention here that after the issuance of the notice under section 13(2) and before the appeal is filed in the DRAT under section 18 of the SARFAESI Act, if the borrower has made any part payment of the debt due to the secured creditors, then credit for the same would have to be given to the borrower and for the purposes of deposit under the 2nd proviso to section 18(1), the reduced amount (after giving credit) would have to be taken into consideration f .....

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s the borrower of the Petitioner - Godavari Laxmi Cooperative Bank Ltd., and had filed proceedings under section 17 of SARFAESI Act consequent to the issuance of a notice under section 13(4) thereof. By judgment and order dated 7-3-2011, the DRT, Aurangabad dismissed the Securitisation Application of Respondent No.2. Being aggreived thereby, Respondent No. 2 preferred an appeal under the provisions of section 18 of the SARFAESI Act before the DRAT, Mumbai along with an application seeking waiver .....

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, Aurangabad consequent to the notice issued by the petitioner under section 13(4) of the Act, 2002. Section 13(4) of the Act of 2002 relates to the amount claimed by the bank in notice issued under section 13(2) of the Act of 2002. The counsel further submits that in the possession notice, the petitioner bank had referred to outstanding amount of ₹ 45,61,459.54 + interest and the present outstanding amount of ₹ 24,61,985.54 + interest + expenses as on 30-11-2009. It is submitted tha .....

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y further amount. 8. We have perused the original record and proceedings, the impugned order, reply filed by respondent, and the relevant notice issued by the petitioner to the respondent No. 2. We have perused the judgment cited supra. 9. There is no dispute between the parties that the bank had issued notice under section 13(2) of the Act of 2002 on 11-5-2007. The petitioner-bank had also resorted to measures as prescribed under section 13(4) of the Act of 2002 by issuing a possession notice o .....

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rdingly, the charge was kept upon the subject property by intimating public in general. The bank had described the immovable property over which the charge was kept in the notice issued under section 13(4) on 26-12-2009. Under the provisions of section 17 of the Act of 2002, any person aggrieved by any of the measures referred to in sub section 4 of section 13, is entitled to approach D.R.T. Under the provisions of section 18 of the said Act, any person aggrieved by any order passed by D.R.T. un .....

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ioner from respondent No. 2 for the purposes of entertaining the appeal by Appellate Tribunal would be amount of ₹ 24,61,985.54 Ps. (emphasis supplied) 21. Applying the principles of law laid down earlier, we will now examine whether the DRAT was justified in ordering the Petitioner to deposit a sum of ₹ 20,00,000/-. As set out above, the section 13(2) notice issued by the Respondent - Bank to the Petitioner was dated 14th August, 2007. In the said notice the amount claimed as due fr .....

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#8377; 5,29,441/-and gave credit for the same in the loan account. Thereafter, one of the guarantors (viz. Mr K.P. Malkani) sold one of the mortgaged properties with the consent of the Respondent - Bank and the sale proceeds thereof to the tune of ₹ 1,18,00,000/- were deposited with the Respondent - Bank on 24th March, 2012. After giving due credit for the aforesaid amounts (Rs.5,29,441/- plus ₹ 1,18,00,000/-), the amount outstanding as on 24th March, 2012 was ₹ 52,24,200.16. A .....

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ere made by the Petitioner between the date when the section 13(2) notice was issued (14th August, 2007) and the date of filing of the appeal and waiver application (4th March, 2010). However, this waiver application was heard by the DRAT on 30th June 2014. By the time, the DRAT heard the waiver application, the Petitioner had made part payments of ₹ 1,23,00,000/- (approximately) towards its debt due to the Respondent - Bank. It is in this view of the matter that the DRAT whilst determinin .....

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that the said order is not only in conformity with the provisions of section 18 of the SARFAESI Act but does complete justice between the parties as it gives credit for the amounts paid by the Petitioner to the Respondent - Bank before directing the Petitioner to deposit a sum of ₹ 20,00,000/- as a condition precedent to entertaining its appeal. In this view of the matter, we do not think that any case has been made out by the Petitioner for review of our order dated 10th June, 2015. 22. .....

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g the aforesaid proposition. However, the question still remains whether the amount claimed in the 13(2) notice would be inclusive of future interest or otherwise. If the claim for future interest has been made in the notice under section 13(2), then the same would certainly have to be taken into account for determining the figure that would be required to be deposited by the borrower before his appeal can be entertained. This is more so when one looks at the definition of the word debt as defin .....

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itioner any further. 23. The second judgment relied upon by Mr Shah was a decision of the Delhi High Court in the case of Poonam Manshani. AIR 2010 DELHI 28 It appears from the said decision that the Delhi High Court has taken a view that the expression amount of debt due from him, as claimed by the secured creditors or determined by the Debts Recovery Tribunal, whichever is less would have to be determined ignoring the interest component. On a close scrutiny of the aforesaid decision, we find n .....

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he amount that is to be taken into consideration for the purpose of arriving at the figure to be deposited by the borrower under the 2nd proviso to section 18(1) of the SARFAESI Act. In fact, on a perusal of the said judgment, we do not find any reason given for making such an exclusion. We, therefore, with great respect to the Delhi High Court, are unable to agree with the ratio laid down in the aforesaid decision. 24. The last judgment relied upon by Mr Shah was a decision of the Supreme Court .....

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can waive only to the extent of 25% as set out in the 3rd proviso to section 18(1) of the SARFAESI Act. This is clear from paragraphs 7, 8 and 9 of the said decision and which read as under:- 7. Section 18(1) of the Act confers a statutory right on a person aggrieved by any order made by the Debts Recovery Tribunal under Section 17 of the Act to prefer an appeal to the Appellate Tribunal. However, the right conferred under Section 18(1) is subject to the condition laid down in the second proviso .....

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red to in the second proviso. Thus, there is an absolute bar to the entertainment of an appeal under Section 18 of the Act unless the condition precedent, as stipulated, is fulfilled. Unless the borrower makes, with the Appellate Tribunal, a pre-deposit of fifty per cent of the debt due from him or determined, an appeal under the said provision cannot be entertained by the Appellate Tribunal. The language of the said proviso is clear and admits of no ambiguity. 8. It is well-settled that when a .....

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hatsoever for not giving full effect to the provisions contained in Section 18 of the Act. In that view of the matter, no court, much less the Appellate Tribunal, a creature of the Act itself, can refuse to give full effect to the provisions of the statute. We have no hesitation in holding that deposit under the second proviso to Section 18(1) of the Act being a condition precedent for preferring an appeal under the said section, the Appellate Tribunal had erred in law in entertaining the appeal .....

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