2016 (9) TMI 966 - SC - Indian Laws

Refund of the amount deposited in compliance of the requirement of the second proviso to section 18(1) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, for maintaining an appeal denied - Held that - Similar issue in the case of Axis Bank vs. SBS Organics Private Limited & Anr. 2016 (4) TMI 917 - SUPREME COURT wherein held the Appeal under section 18 of the Act is permissible only against the order passed by the 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 pre-deposit, 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 proceedings known to law. Accordingly, we dispose of this appeal, set aside the impugned judgment of the High Court as well as the order of the DRAT impugned before the High Court and remit the matter to DRAT for consideration afresh.

Summary

Issues:
1. Interpretation of section 18(1) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
2. Refund of the amount deposited for maintaining an appeal.
3. Applicability of the judgment in Axis Bank vs. SBS Organics Private Limited & Anr.

Interpretation of section 18(1) of the Act:
The Supreme Court addressed the issue of interpreting section 18(1) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The Court highlighted that an appeal under section 18 is allowed only against the order passed by the Debt Recovery Tribunal under section 17, which is limited to the steps taken against secured assets. The Court clarified that the partial deposit made before the Debt Recovery Appellate Tribunal (DRAT) is not a secured asset or debt, as no security interest is created on the deposit. Therefore, upon disposal of the appeal, if the appellant requests a refund of the pre-deposit, it should be allowed unless certain conditions are met, such as appropriation towards the borrower's liability with consent or attachment under specific provisions.

Refund of the deposited amount:
The appellant in this case sought a refund of the amount deposited in compliance with the second proviso to section 18(1) of the Act for maintaining an appeal. The High Court had declined to interfere with the DRAT's decision not to refund the deposit. However, the Supreme Court, relying on the judgment in Axis Bank vs. SBS Organics Private Limited & Anr., emphasized that if the appellant requests a refund of the pre-deposit after the appeal is disposed of, the refund should be granted unless certain circumstances exist, such as appropriation by the DRAT towards the borrower's liability with consent or attachment under specific provisions.

Applicability of Axis Bank judgment:
The Supreme Court referred to its judgment in the case of Axis Bank vs. SBS Organics Private Limited & Anr. to establish the principle that if an appellant requests a refund of the pre-deposit made before the DRAT upon disposal of the appeal, the refund should generally be allowed unless specific conditions apply. Based on this precedent, the Supreme Court set aside the impugned judgment of the High Court and the DRAT's order, remitting the matter back to the DRAT for fresh consideration. The Court granted liberty to all parties to present their arguments before the DRAT, which is directed to pass new orders in accordance with the law.

In conclusion, the Supreme Court's judgment clarified the interpretation of section 18(1) of the Act, emphasized the right to seek a refund of the deposited amount, and applied the principles established in the Axis Bank case to provide relief to the appellant by remitting the matter back to the DRAT for reconsideration.