TMI Blog2016 (4) TMI 917X X X X Extracts X X X X X X X X Extracts X X X X ..... DRT under Section 17 of the Act. Under Section 17, the scope of enquiry is limited to the steps taken under Section 13(4) against the secured assets. The partial deposit before the DRAT as a pre-condition for considering the appeal on merits in terms of Section 18 of the Act, is not a secured asset. It is not a secured debt either, since the borrower or the aggrieved person has not created any security interest on such pre-deposit in favour of the secured creditor. If that be so, on disposal of the appeal, either on merits or on withdrawal, or on being rendered infructuous, in case, the appellant makes a prayer for refund of the predeposit, the same has to be allowed and the pre-deposit has to be returned to the appellant, unless the Appellate Tribunal, on the request of the secured creditor but with the consent of the depositors, had already appropriated the pre-deposit towards the liability of the borrower, or with the consent, had adjusted the amount towards the dues, or if there be any attachment on the pre-deposit in any proceedings under Section 13(10) of the Act read with Rule 11 of The Security Interest (Enforcement) Rules, 2002, or if there be any attachment in any other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the secured creditor, whichever is less. The Appellate Tribunal may reduce the amount to twenty five per cent. What is the fate of such deposit on the disposal of the appeal is the question arising for consideration in this case. 3. Being a pure legal issue, it may not be necessary for us to refer to the factual position in detail. The first respondent, being a borrower and aggrieved by the steps taken by the secured creditor, filed Securitisation Application No. 152 of 2010 before the Debt Recovery Tribunal, Ahmedabad. Though, initially an interim relief was granted, the same was vacated by order dated 20.01.2011. Therefore, the first respondent moved the Debt Recovery Appellate Tribunal, Mumbai under Section 18 of the SARFAESI Act. In terms of the proviso under Section 18, the first respondent made a deposit of ₹ 50 lakhs before the Appellate Tribunal. During the pendency of the appeal before the DRAT, Securitisation Application itself came to be finally disposed of before the Debt Recovery Tribunal at Ahmedabad, setting aside the sale. Realising that the appeal did not survive thereafter, the first respondent sought permission to withdraw the same and also for refu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iction his case falls or shall be sent by registered post addressed to the Registrar of Debts Recovery Tribunal. (2) The provisions of the Debts Recovery Tribunal (Procedure) Rules, 1993 made under Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993), shall mutatis mutandis apply to any application filed by under sub-rule (1). (3) An application under sub-rule (1) shall be accompanied with fee as provided in rule 7 of the Debts Recovery Tribunal (Procedure) Rules, 1993. 6. Learned Senior Counsel further submits that the Bank has a lien on the amount under Section 171 of The Indian Contract Act, 1872. The decision of the High Court of Gujarat in Babu Ganesh Singh Deepnarayan v. Union of India and another AIR 2009 Guj. 98, which has been followed by the Division Bench in the impugned judgment, does not reflect the true legal position, it is further submitted. 7. Babu Ganesh (supra) was a case involving a challenge on the vires of the second proviso under Section 18 of the SARFAESI Act, on the mandatory pre-deposit. While upholding the provision, at paragraphs-5 and 6, it was observed that, in case the appeal is dismissed, the amounts d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not considered sufficient. Thus, the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 was introduced for a special and speedier mechanism for the recovery. Almost a decade of experience proved that the recovery process was not achieving the intended objects and hence, the SARFAESI Act to regulate securitisation and reconstruction of financial assets and enforcement of security interest was enacted. The Act incorporates a system whereby direct action for recovery of secured debt may be initiated against the secured assets of a borrower after the debt is declared to be a non performing asset (NPA). 9. Borrower is defined under Section 2(1)(f), which reads as follows: 2(1)(f) borrower means any person who has been granted financial assistance by any bank or financial institution or who has given any guarantee or created any mortgage or pledge as security for the financial assistance granted by any bank or financial institution and includes a person who becomes borrower of a securitisation company or reconstruction company consequent upon acquisition by it of any rights or interest of any bank or financial institution in relation to such financial assista ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the secured creditor shall be entitled to exercise all or any of the rights under sub-section (4). (3) The notice referred to in sub-section (2) shall give details of the amount payable by the borrower and the secured assets intended to be enforced by the secured creditor in the event of non-payment of secured debts by the borrower. (3A) If, on receipt of the notice under sub-section (2), the borrower makes any representation or raises any objection, the secured creditor shall consider such representation or objection and if the secured creditor comes to the conclusion that such representation or objection is not acceptable or tenable, he shall communicate within one week of receipt of such representation or objection the reasons for non- acceptance of the representation or objection to the borrower: Provided that the reasons so communicated or the likely action of the secured creditor at the stage of communication of reasons shall not confer any right upon the borrower to prefer an application to the Debts Recovery Tribunal under section 17 or the Court of District Judge under section 17A. (4) In case the borrower fails to discharge his liability in full w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the rights conferred on the secured creditor under or by this section, the secured creditor shall be entitled to proceed against the guarantors or sell the pledged assets without first taking any of the measures specified in clauses(a) to (d) of sub-section (4) in relation to the secured assets under this Act. 16. Section 17 of the Act provides for a right to appeal to the DRT in respect of the grievances on the measures taken by the secured creditor under Section 13 of the Act. To quote for easy reference, Section 17 of the Act: 17. Right to appeal.-(1) Any person (including borrower), aggrieved by any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor or his authorised officer under this Chapter, may make an application alongwith such fee, as may be prescribed to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measure had been taken: Provided that different fees may be prescribed for making the application by the borrower and the person other than the borrower. Explanation: For the removal of doubts, it is hereby declared that the communication of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplication with the Debts Recovery Tribunal, shall not exceed four months from the date of making of such application made under sub-section (1). (6) If the application is not disposed of by the Debts Recovery Tribunal within the period of four months as specified in sub-section (5), any party to the application may make an application, in such form as may be prescribed, to the Appellate Tribunal for directing the Debts Recovery Tribunal for expeditious disposal of the application pending before the Debts Recovery Tribunal and the Appellate Tribunal may, on such application, make an order for expeditious disposal of the pending application by the Debts Recovery Tribunal. (7) Save as otherwise provided in this Act, the Debts Recovery Tribunal shall, as far as may be, dispose of the application in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and the rules made thereunder. 17. Though Section 17 of the Act is titled as a Right to appeal , the liberty granted to the aggrieved person is to make an application to the DRT and the parties are at a liberty to lead evidence before the tribunal. And thus, it is act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... similar provision in the Uttar Pradesh Sales Tax Act,1948 where it was held that in such context, the expression has the meaning of admitting to consideration . The relevant discussion is available at paragraphs - 9 and 10: 9. The word 'entertain' is explained by a Divisional Bench of the Allahabad High Court as denoting the point of time at which an application to set aside the sale is heard by the court. The expression 'entertain', it is stated, does not mean the same thing as the filing of the application or admission of the application by the court. A similar view was again taken in Dhoom Chand Jain v. Chamanlal Gupta Anr. AIR 1962 All. 543, in which the learned Chief Justice Desai and Mr. Justice Dwivedi gave the same meaning to the expression 'entertain'. It is observed by Dwivedi J. that the word 'entertain' in its application bears the meaning 'admitting to consideration'. and therefore when the court cannot refuse to take an application which is backed by deposit or security, it cannot refuse judicially to consider it. In a single bench decision of the same court reported in Bawan Ram Anr. v. Kuni Beharilal A.I.R. 1961 All. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... higher Court of the decision of an inferior court. The appeal is the judicial examination; the memorandum of appeal contains the grounds on which the judicial examination is invited. For purposes of limitation and for purposes of the rules of the Court it is required that a written memorandum of appeal shall be filed. When the proviso speaks of the entertainment of the appeal, it means that the appeal such as was filed will not be admitted to consideration unless there is satisfactory proof available of the making of the deposit of admitted tax. 21. We are also conscious of the fact that such a precondition is present in several statutes while providing for statutory appeals, like The Income-Tax Act, 1961, The Central Excise Act, 1944, The Consumer Protection Act, 1986, The Motor Vehicles Act, 1988, etc. However, unlike those statutes, the purpose of the SARFAESI Act is different, it is meant only for speedy recovery of the dues, and the scheme under Section 13(4) of the Act, permits the secured creditor to proceed only against the secured assets. Of course, the secured creditor is free to proceed against the guarantors and the pledged assets, notwithstanding the steps under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. 24. Section 171 of The Indian Contract Act, 1872 provides for retention of the goods bailed to the bank by way of security for the general balance of account. The pre-deposit made by a borrower for the purpose of entertaining the appeal under Section 18 of the Act is not with the bank but with the Tribunal. It is not a bailment with the bank as provided under Section 148 of The Indian Contract Act, 1872. Conceptually, it should be an argument available to the depositor, since the goods bailed are to be returned or otherwise disposed of, after the purpose is accomplished as per the directions of the bailor. 25. In the case before us, the first respondent had in fact sought withdrawal of the appeal, since the appellant had already proceeded against the secured assets by the time the appeal came up for consideration on merits. There is neither any order of appropriation during the pendency of the appeal nor any attachment on the pre-deposit. Therefore, the deposit made by the first respondent is liable to be returned to the first respondent. 26. Though for different reasons as well, we endorse the view taken by the High Court. Thus, there is no merit in the appeal. It ..... X X X X Extracts X X X X X X X X Extracts X X X X
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