2018 (10) TMI 1825 - HC - Indian Laws

Maintainability of appeal filed u/s 18 of the SARFAESI Act 2002 - compliance with the pre-deposit - violation of principles of natural justice - opportunity of hearing on the issue not provided - HELD THAT - On careful perusal of Section 18 of the SARFAESI Act 2005, it could be seen that the Act does not provide for a complete waiver and it only gives power to the Appellate Tribunal under the proviso to Section 18 to exercise its discretion to reduce the amount, not lesser than 25% of the amount due, as claimed by the secured creditors. As such, the amount claimed by the respondent bank is around ₹ 229,52,99,307.86. DRAT while considering I.A. filed, seeking waiver of pre deposit under Section 18, has exercised such discretion and ordered the petitioners to make pre deposit of ₹ 70 crores, giving time for paying the said amount in two equal installments - Once the statute provides certain conditions, the same shall be followed strictly. In other words, what is not provided under the statute, cannot be claimed as a matter of right by anyone, and therefore, the claim of the petitioners herein, seeking 100% waiver, would certainly go contrary to the provision, Section 18 of the SARFAESI Act 2002. Even taking for granted that the grounds raised by the petitioners, as to whether the order passed by DRT, is sustainable or not, which can be tested before the DRAT, Chennai, by adhering to the condition to be complied with under Section 18, wherein, the appellant has to make a pre deposit of ₹ 50% for entertaining an appeal or an amount not less than 25% of the amount claimed or determined by the Tribunal, as the case may be. Since 15 crores has already been recovered towards the principle amount, as claimed under Section 13(2) of the Act, it would be appropriate to direct the petitioner to pay a sum of ₹ 57 crores as pre deposit in two equal installments. Accordingly, the petitioner is directed to pay the 1st installment within 8 weeks from the date of receipt of a copy of this order and the second installment to be paid within 8 weeks thereof - Upon complying with such conditions of pre deposit, DRAT, Chennai, is directed to entertain the appeal by taking the case on file and conclude the same within a period of 3 months from the date on which the second installment is paid by the petitioner. The order passed by the DRAT cannot be interfered in entirely and accordingly, modified. Interim Stay granted on 10.04.2008, which is still in force, is vacated - petition dismissed.

Summary

Issues Involved:
1. Validity of the classification of the petitioner's account as NPA.
2. Legality of the demand notices issued under Section 13(2) of the SARFAESI Act.
3. Maintainability of the Securitisation Application challenging the demand notices.
4. Requirement and amount of pre-deposit under Section 18 of the SARFAESI Act for filing an appeal before DRAT.
5. Alleged violation of principles of natural justice by DRT.

Detailed Analysis:

1. Validity of the classification of the petitioner's account as NPA:
The petitioners contended that the classification of their account as NPA (Non-Performing Asset) by the respondent bank was not in accordance with the provisions of law and the guidelines issued by the Reserve Bank of India. They argued that prior to the notice dated 14.07.2016, the bank had not informed them that their account had become NPA as of 30.05.2016.

2. Legality of the demand notices issued under Section 13(2) of the SARFAESI Act:
The petitioners challenged the demand notices dated 14.07.2016 and 17.12.2016 issued under Section 13(2) of the SARFAESI Act, claiming that the notices were invalid and unsustainable. They argued that the subsequent notice on 17.12.2016 was invalid since an earlier notice had already been issued on 14.07.2016.

3. Maintainability of the Securitisation Application challenging the demand notices:
The petitioners filed a Securitisation Application (S.A.No.30 of 2017) under Section 17 of the SARFAESI Act to set aside the demand notice dated 17.12.2016 and to declare the possession notice dated 20.03.2017/21.03.2017 as invalid. The DRT-I passed an interim order on 07.04.2017 and later, on 18.01.2018, ruled on the maintainability of the relief sought, stating that the application challenging the notice under Section 13(2) was not maintainable.

4. Requirement and amount of pre-deposit under Section 18 of the SARFAESI Act for filing an appeal before DRAT:
The petitioners filed an appeal (AIR.(SA).No.99 of 2018) before the DRAT, Chennai, under Section 18 of the SARFAESI Act, seeking to set aside the DRT-I's order. They also filed an application for a complete waiver of the pre-deposit requirement. DRAT, Chennai, directed the petitioners to make a pre-deposit of ?70 crores in two equal installments, which the petitioners challenged in the present Writ Petition.

5. Alleged violation of principles of natural justice by DRT:
The petitioners contended that DRT-I had violated the principles of natural justice by not affording them an opportunity to argue on the preliminary issue of the maintainability of the notices issued under Section 13(2) and 13(4) of the SARFAESI Act.

Judgment Analysis:

Pre-deposit Requirement:
The court examined Section 18 of the SARFAESI Act, which mandates a pre-deposit of 50% of the debt amount for filing an appeal before DRAT, with the discretion to reduce it to not less than 25%. The court noted that the DRAT had already shown leniency by reducing the pre-deposit to ?70 crores, which is approximately 25% of the total due amount of ?240 crores.

Principles of Natural Justice:
The court acknowledged the petitioners' claim that DRT-I did not provide an opportunity to argue on the preliminary issue. However, it emphasized that the statute does not provide for a complete waiver of the pre-deposit requirement.

Final Decision:
The court concluded that the order of DRAT, Chennai, directing the petitioners to deposit ?70 crores was justified and could not be entirely interfered with. However, considering that ?15 crores had already been recovered by the bank, the court modified the pre-deposit requirement to ?57 crores, to be paid in two equal installments within specified timeframes. Upon compliance, DRAT, Chennai, was directed to entertain the appeal and conclude it within three months.

Conclusion:
The Writ Petition was dismissed with the modification that the petitioners were required to deposit ?57 crores in two installments. The interim stay granted earlier was vacated, and connected miscellaneous petitions were closed.