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2020 (7) TMI 741 - HC - Indian LawsImposition of a pre-deposit in appellate proceedings before the DRAT - Section 18(1) of the SARFAESI Act - HELD THAT - Upon examining Section 18(1), it is found that the first proviso indicates that different fees would be prescribed for filing of appeals by borrowers and by persons other than borrowers. This proviso has been inserted because an appeal under Section 18 may be filed by any aggrieved person. By way of illustration, a lessee, a person, other than the borrower, claiming title over the mortgaged/charged property, or any any other person affected by the measures under Section 13(4) of the SARFAESI Act could be an aggrieved person. Thus, such aggrieved persons are not always borrowers. Consequently, the second proviso regarding pre-deposit applies only when the appellant is a borrower. The word borrower is defined in such a manner as to include a guarantor. This stands to reason inasmuch as a guarantor's liability is co-extensive with that of the principal debtor under Section 128 of the Indian Contract Act, 1872. Under the second proviso to Section 18(1) of the SARFAESI Act, a borrower is required to pre-deposit 50% of the amount of the debt due from him either as claimed by the secured creditor or as determined by the DRT, whichever is less. The third proviso empowers the DRAT to reduce the pre-deposit to an amount not less than 25% of the debt for reasons to be recorded in writing. The pre-deposit provision (the second and third proviso) in Section 18 is applicable only to borrowers, as defined in the SARFAESI Act. In addition, the DRAT is vested with the discretion to reduce such pre-deposit to not less than 25% of the debt. Hence, the provision cannot be said to be arbitrary, onerous or unreasonable. Mr. Subramaniyan had also contended that his appeal before the DRAT was in respect of the dismissal of an application under Section 5 of the Limitation Act and, therefore, the order of the DRT should not be construed as an order under Section 17 of the SARFAESI Act - Once the Section 5 application is rejected, it is tantamount to a rejection by the DRT of the Section 17 application and a refusal to interfere with the measures taken by the secured creditor under Section 13(4). Thereafter, the only statutory recourse available to the borrower is to appeal under Section 18 to the DRAT, which functions as an appellate forum and not as a court of first instance - there are no reason to strike or even read down Section 18(1) of the SARFAESI Act and the second proviso thereto - petition dismissed.
Issues Involved:
1. Validity of measures taken under Section 13(4) of the SARFAESI Act. 2. Validity of proceedings initiated under Section 14 of the SARFAESI Act. 3. Requirement of pre-deposit under Section 18 of the SARFAESI Act. 4. Constitutional validity of Section 18(1) of the SARFAESI Act and the second proviso thereto. 5. Allegations of re-litigation and abuse of process. Detailed Analysis: 1. Validity of Measures Taken Under Section 13(4) of the SARFAESI Act: The Petitioner, a guarantor, claimed he did not receive notice under Section 13(2) of the SARFAESI Act when his brother-in-law defaulted on credit facilities. He only became aware of the proceedings when he received a communication from the bank about the sale of the mortgaged property under Section 13(4). The sale was challenged before the Debts Recovery Tribunal (DRT), but the petition was dismissed for default and subsequent restoration petitions were dismissed for non-prosecution. 2. Validity of Proceedings Initiated Under Section 14 of the SARFAESI Act: The Indian Bank initiated proceedings under Section 14 to obtain vacant possession of the property, and the District Magistrate and District Collector, Namakkal, passed orders accordingly. This order was challenged and the court granted liberty to challenge it legally. However, the petition filed to condone the delay in challenging this order was dismissed, and subsequent appeals were also dismissed, leading to the current challenge. 3. Requirement of Pre-deposit Under Section 18 of the SARFAESI Act: The Petitioner contended that the requirement to pre-deposit 25% of the debt due to file an appeal under Section 18 of the SARFAESI Act was not applicable since the appeal was against an order under Section 5 of the Limitation Act, not Section 17 of the SARFAESI Act. The DRAT, however, directed the Petitioner to deposit ?1.51 lakhs, treating him at par with the borrower. 4. Constitutional Validity of Section 18(1) of the SARFAESI Act and the Second Proviso Thereto: The Petitioner challenged the constitutional validity of Section 18(1) and the second proviso, arguing that the pre-deposit requirement violated Article 14 of the Constitution and contravened the Supreme Court's judgment in Mardia Chemicals. The court examined the provision and found that it differentiates between borrowers and other aggrieved persons, with the pre-deposit requirement applying only to borrowers, including guarantors as defined under Section 2(f) of the SARFAESI Act. The court concluded that the provision was not arbitrary, onerous, or unreasonable and upheld its validity. 5. Allegations of Re-litigation and Abuse of Process: The court noted that this was the third writ petition filed by the Petitioner regarding the pre-deposit requirement. Citing the Supreme Court's judgment in K.K. Modi v. K.N. Modi and Others, the court identified this as an abuse of the process of the court, as the same issues had been previously litigated and decided. The court emphasized that re-litigation constitutes an abuse of process, especially when the same issues are sought to be re-agitated. Conclusion: The court dismissed the writ petition, upholding the validity of Section 18(1) of the SARFAESI Act and the second proviso. The court found no merit in the Petitioner's contentions and emphasized the need to prevent abuse of the judicial process through re-litigation.
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