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TMI Blog2018 (11) TMI 1897X X X X Extracts X X X X X X X X Extracts X X X X ..... the SARFAESI Act? - HELD THAT:- On a perusal of the second proviso to Section 18, it is clear that the same pre-supposes two eventualities; (i) that debt is due from the petitioner as claimed by the respondent No.1 Bank or; (ii) debt has been determined by the Debt Recovery Tribunal, and the same is liable to be paid / recovered on the date when the appeal is entertained by the DRAT. In either of the eventualities 50% of the amount of debt need to be made as pre-deposit - It is a conceded case of the respondents that none of the eventualities exist as the amount due to the Bank has been recovered. The application has been opposed by the respondents and decided by the DRAT primarily on an apprehension that since, the petitioner has challenged the auction, the same may be set aside. In other words, the sale remains in a nebulous stage and the sale will achieve finality / confirmed only when the legal proceedings come to an end. The amount of pre-deposit has to be made in DRAT and not in the Bank. But still when no amount is due from the petitioner whether the pre-deposit can still be insisted upon. The argument can be made that the condition of pre-deposit is to discourage frivo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of Rule 8 of the SARFAESI Rules, as the respondent No.1 Bank has failed to give prior 30 days notice to the petitioner before fixing sale. The Bank hurriedly sold the property to a third party (respondent No.2, herein) at throw away price of ₹ 11.77 crores. The OTS proposal submitted by the petitioner was rejected. Suffice it to state that the petitioner filed an application under Section 17 of the SARFAESI Act challenging the sale of the property by the respondent No.1 Bank. The said SA No.120/2015 was dismissed by the DRT-I, Chandigarh on October 20, 2016, against the said order the petitioner had filed an appeal under Section 20 of the SARFAESI Act along with an application, M.A. 630/2016 for waiver of the condition of pre-deposit. 4. It is noted by the DRAT that the property in dispute already stands auctioned in favour of the respondent No.2 for a sum of ₹ 11.77 crores whereas the amount shown in the auction notice to be recoverable from the petitioner was ₹ 6,84,28,157.56/-. The case of the petitioner before the DRAT for waiver of pre-deposit was that since the property in dispute has already been sold and the bank has recovered ₹ 11.77 crores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts relied upon on behalf of the petitioner. 7. The DRAT relied upon the judgment of the Bombay High Court in W.P. No. 1315/2014 dated November 31, 2016, Eskays Construction Pvt. Ltd. vs. Sona Papers Industries Ltd., wherein it was held that the auction money cannot be considered while calculating the amount of pre-deposit, when the auction sale itself is under challenge at the instance of the borrower. 8. That apart, the DRAT rejected the plea made on behalf of the petitioner that excess amount recovered by the Bank by sale of the property in dispute along with interest thereon which the Bank is liable to pay on that amount because of it having kept the same illegally, at least is liable to be adjusted while calculating the amount of pre-deposit. The Tribunal also held that it is not a good case where it should exercise the discretion in reducing the amount of pre-deposit even by 25%. 9. Mr. Mehra, learned Senior Counsel appearing for the petitioner submits that the DRAT fell in error in rejecting the MA filed by the petitioner for waiver of pre-deposit as according to him, the issue is no more res integra as the Supreme Court in Civil Appeal No. 2074-2078/2011 in Persn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation where an amount more than the amount due from the borrower had already been realized by auction sale, insistence on the deposit referred to under proviso to section 18 would be contrary to the legislative intent as also the express provision as is evident from the use of the words 50% of the amount of debt due from him 8. Smt. Sarla Devi Mishra vs. Debts Recovery Appellate Tribunal, Allahabad in WP No.45995/2015 decided on August 20, 2015 Sum recovered by the Bank is more than 100% of the debt claimed from the petitioner, therefore, the petitioner is not required to deposit any sum under section 18 of the Act to maintain the appeal 9. Nathi Lal Rathore vs. DRAT, Allahabad, WP No. 32026/2016 decided on October 05, 2016 Amount deposited post 13(2) notice should be adjusted at the time of deciding the issue of pre- deposit under Section 18 of the SARFAESI Act, 2002. 11. According to him, in view of the position of law above, the petitioner is not required to make any pre-deposit. 12. On the other hand, Mr. Sanjeev Sagar, learned counsel appearing for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of pre-deposit envisaged under Section 18 of the SARFAESI Act. The issue that needs to be decided in the facts of this case is whether for entertaining the appeal by the Appellate Tribunal, the petitioner is required to deposit 50% of the amount of debt due from the petitioner as claimed by the secured creditors or determined by the Recovery Tribunal, in terms of second proviso to Section 18 of the SARFAESI Act. 15. To answer the question, it is necessary to reproduce hereunder Section 18 of the SARFAESI Act: 18. Appeal to Appellate Tribunal.-(1) Any person aggrieved, by any order made by the Debts Recovery Tribunal [under section17, may prefer an appeal along with such fee, as may be prescribed] to an Appellate Tribunal within thirty days from the date of receipt of the order of Debts Recovery Tribunal. [Provided that different fees may be prescribed for filing an appeal by the borrower or by the person other than the borrower:] [Provided further that no appeal shall be entertained unless the borrow has deposited with the Appellate Tribunal fifty per cent. Of the amount of debt due from him, as claimed by the secured creditors or determined by the Debts Recovery Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated in the earlier paragraph and the same has to be interpreted in the manner it exist, by giving a plain meaning. 19. We are conscious of the fact that the amount of pre-deposit has to be made in DRAT and not in the Bank. But still when no amount is due from the petitioner whether the pre-deposit can still be insisted upon. The argument can be made that the condition of pre-deposit is to discourage frivolous litigation which if permitted, would defeat the very purpose of the enactment of early settlement of the disputes. The argument is appealing but the same shall not hold good in the facts of the case with which we are concerned. Otherwise, the provision of appeal for persons / entities like the petitioner, shall become otiose / illusory. In fact, the insistence of pre-deposit shall be inequitable in the facts. Nothing precludes DRAT while deciding the appeal, if it finds that the appeal filed by the petitioner is frivolous, to impose such cost as deemed fit, to be recovered from the excess amount already lying deposited with the Bank. 20. Further, the Supreme Court in Axis Bank (supra), has clearly held that pre-deposit is not a secured asset and on the disposal of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Tribunal, Allahabad and Others 2015 SCC OnLine All 8084, wherein the facts are identical to the facts of this case and the Court by noting the position of law as referred to above has allowed the petition and directed the DRAT to reconsider the application of waiver of the petitioner therein by setting aside the earlier order of the DRAT insisting on the pre-deposit. We concur with the view taken by the Allahabad High Court and a similar view as also taken by the Division Bench of Punjab and Haryana High Court in S.R. Forging Limited vs. UCO Bank 2013 SCC OnLine P H 3902, wherein it was held as under: Challenge in the present petition is to the orders passed by the Debts Recovery Appellate Tribunal Delhi (for short the 'Tribunal') dated 30.4.2012 (Annexure P-14) and dated 13.7.2012 (Annexure P- 15), whereby the appeal filed by the petitioners- herein was not entertained for failure to comply with the requirement of law i.e. the deposit of 50% of the due amount before entertainment of the appeal. Challenge in the appeal was to the sale proceedings whereby a bid of ₹ 17.75 crores as against the reserved price of ₹ 17.17 crores was received in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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