2016 (3) TMI 382 - HC - Indian Laws

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 Bank to the Petitioner was dated 14th August, 2007. In the said notice the amount claimed as due from the Petitioner was ₹ 96,14,085.61 together with future interest. From the date of the section 13(2) notice (i.e. 14th August, 2007) to 28th February 2012, admittedly no payments were made by the Petitioner. As on 29th February, 2012 the outstanding dues owed by the Petitioner along with the interest accrued thereon came to ₹ 1,65,36,770.61. On the very same date (i.e. 29th February, 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.5,29,441/- plus ₹ 1,18,00,000/-), the amount outstanding as on 24th March, 2012 was ₹ 52,24,200.16. Admittedly, no further payments were made by the Petitioner. The DRAT has taken into consideration this figure of ₹ 52,24,200/- for determining the amount that had to be deposited under the 2nd proviso to section 18(1) of the SARFAESI Act. It is pertinent to note that the appeal and the waiver application preferred by the Petitioner before the DRAT, were filed on 4th March, 2010. 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/- (approximately) towards its debt due to the Respondent - Bank. It is in this view of the matter that the DRAT whilst determining the amount to be deposited under the 2nd proviso to section 18(1) of the Act took into consideration the figure of ₹ 52,14,200/-. Looking to these facts and the clear language of the 2nd proviso to section 18(1) of the SARFAESI Act, we do not think that the DRAT committed any error in directing the Petitioner to deposit a sum of ₹ 20,00,000/- with the Registry 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 matter, we do not think that any case has been made out by the Petitioner for review of our order dated 10th June, 2015. No illegality and / or perverse in order dated 30th June, 2014 passed by the DRAT. Consequently, we do not find any error in our dated 10th June, 2015 requiring interference in review jurisdiction. The Review Petition is accordingly dismissed.

Summary

Issues Involved:
1. Review of the order dated 10th June, 2015.
2. Legality of the DRAT order dated 30th June, 2014.
3. Interpretation of section 18 of the SARFAESI Act regarding the amount to be deposited.

Issue-wise Detailed Analysis:

1. Review of the Order Dated 10th June, 2015:
The petitioner sought a review of the order dated 10th June, 2015, claiming they were not heard before the order was passed. The court acknowledged that the petitioner was not present during the original hearing and allowed the review petition to examine if the order required revision. The court heard the petitioner's counsel extensively to determine the necessity of reviewing the order.

2. Legality of the DRAT Order Dated 30th June, 2014:
The petitioner challenged the DRAT's order, which directed them to deposit Rs. 20,00,000/- as a condition for entertaining their appeal. The petitioner argued that the order was contrary to section 18 of the SARFAESI Act. The DRAT had initially directed the petitioner to deposit the amount in two equal installments within eight weeks, failing which the appeal would be dismissed. The petitioner contended that as they had already deposited amounts exceeding the sum claimed in the section 13(2) notice, the DRAT should have granted a full waiver of the deposit.

3. Interpretation of Section 18 of the SARFAESI Act:
The court examined the provisions of section 18 of the SARFAESI Act, which mandates that no appeal shall be entertained unless the borrower deposits 50% of the amount of debt due, as claimed by the secured creditors or determined by the DRT, whichever is less. The petitioner argued that since they had deposited more than the amount claimed in the section 13(2) notice, they should not be required to deposit any further amount. The court clarified that the term "debt" includes any liability inclusive of interest, as defined in section 2(ha) of the SARFAESI Act, which refers to section 2(g) of the RDDB Act. The court held that the amount to be deposited should include the interest accrued on the debt till the date of filing the appeal.

The court also referenced the definition of "debt" under section 2(g) of the RDDB Act, which includes any liability inclusive of interest claimed by a bank or financial institution. The court concluded that the deposit amount should be based on the total debt due, including accrued interest, and not just the amount mentioned in the section 13(2) notice.

Conclusion:
The court found that the DRAT's order directing the petitioner to deposit Rs. 20,00,000/- was justified and in conformity with section 18 of the SARFAESI Act. The court dismissed the review petition, stating that the DRAT's order was not illegal or perverse and did complete justice between the parties by giving credit for the amounts already paid by the petitioner. The court also addressed the judgments cited by the petitioner, distinguishing them based on the interpretation of the term "debt" and the inclusion of interest in the amount to be deposited. The review petition was dismissed, and the parties were directed to bear their own costs.