9911796707
TMI Blog2016 (11) TMI 1731X X X X Extracts X X X X X X X X Extracts X X X X ..... nancial institutions. In order to bring the Indian Banking Sector on par with International Standards, the Government set up two Narasimhan Committees and the Andhyarujina Committee for the purposes of examining banking sector reforms. Section 18(1) clearly stipulates, any person aggrieved by any order made by the DRT under Section 17, may prefer an appeal to the DRAT within 30 days from the date of receipt of the order of the DRT. The 2nd proviso to Section 18(1) stipulates that no appeal shall be entertained by the DRAT unless the borrower has deposited with it 50% of the amount of debt due from him, as claimed by the secured creditors or as determined by the DRT, whichever is less. The 3rd proviso to Section 18(1) gives a discretion to the DRAT to reduce the aforesaid amount to not less than 25%, provided the DRAT gives reasons for the same which are to be recorded in writing. What becomes clear from the aforesaid provisions is that there is a jurisdictional bar from entertaining an appeal filed by the borrower from an order passed under Section 17, unless the borrower deposits 50% of the amount of debt due from him, as claimed by the secured creditors or as determined by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 009 the DRAT granted a complete waiver of deposit under section 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, the SARFAESI Act ). By the order dated 7 January, 2014 the DRAT entertained the appeal filed by the borrower (Respondent No. 1 herein) on merits and thereafter set aside the order and judgment dated 26 March, 2008 passed by the Presiding Officer, Debt Recovery Tribunal-I, Mumbai ( DRT ) in Securitization Application No. 17 of 2007. 3. The brief facts giving rise to the present controversy are as under:- (a) The Petitioner is a company incorporated under the provisions of the Companies Act, 1956. It is an auction purchaser of a property being all that piece and parcel of land situate, lying and being at Villages: Dashak and Panchak, Nashik, together with structures standing thereon bearing Survey No. 8, Hissa No. 1, Survey No. 8, Hissa No. 2A, Survey No. 8, Hissa No. 2B and Survey No. 8, Hissa No. 3, admeasuring in aggregate 28,200 square meters (the immoveable property ) from Respondent Nos. 2 to 5. In addition to this immoveable property, the Petitioners, in the very same auction also pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of the Sick Industrial Companies (Special Provisions) Act, 1985 (for short, the SICA, 1985 ). Despite the aforesaid, Respondent No. 1 by its letters dated 30 January, 2006 and 16 February, 2006 submitted a proposal for a One Time Settlement ( OTS ). Whilst this OTS was pending, on 27 February, 2006 Respondent No. 2 took possession of the subject properties by exercising powers under Section 13(4) of the SARFAESI Act. (e) Thereafter, various attempts were made to settle the matter. It appears that the OTS made by Respondent No. 1 was sanctioned and Respondent No. 1 had agreed to sell the subject properties to one M/s. Shubham Developers, for an amount of Rs. 7.47 Crores. It also appears that Respondent No. 1 had agreed to sell the subject properties to Respondent No. 6 for an amount of Rs. 6.76 Crores. However, these transactions did not fructify. (f) As the dues of the Respondent Banks were not paid as per the OTS sanctioned, Respondent No. 2 revoked the said OTS on 29 December, 2006 and also gave a notice of sale of the said property. In furtherance thereof, Respondent No. 2 also obtained a valuation report dated 18 April, 2007 from the Government approved valuer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two days and the balance consideration of Rs. 6,56,25,000/- within a period of 15 days therefrom. These amounts were duly paid by the Petitioners within the stipulated time, and therefore, Respondent No. 2 issued a Sale Certificate in favour of the Petitioners. The requisite stamp duty of Rs. 43,75,000/- was also paid on the Sale Certificate. This Sale Certificate has also been duly registered under the provisions of the Indian Registration Act, 1908 on 8 April, 2009. A copy of this Sale Certificate can be found at Exh I to the Petition. (i) In the interregnum, Respondent No. 1 sought to challenge the auction by filing Securitisation Application No. 17 of 2007 and also applied for interim relief. Since, no interim relief was granted by the DRT, the sale was completed in favour of the Petitioner, as more particularly set out earlier. Since the Petitioners were the successful bidder in the auction conducted by Respondent Nos. 2 to 5, and since the Securitisation Application No. 17 of 2007 was pending before the DRT, the Petitioners applied for being impleaded as a party to the said Securitization Application. This application of the Petitioners was ultimately allowed by the DRA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well as the sale of subject properties to the Petitioner was in violation of rule 6(2) and rule 8(6) of the SARFAESI Rules. It was however clarified that Respondent No. 2 herein could proceed to re-sell the subject properties after strictly complying with the provisions of Rules 6, 8 and 9 of the SARFAESI Rules. Being aggrieved by these two orders (dated 1 April, 2009 and 7 January, 2014) passed by the DRAT, the Petitioner is before us in our writ jurisdiction under Article 226 of the Constitution of India. We must note over here that, even Respondent No. 2 herein (Bank of India) has filed its independent Writ Petition No. 5139 of 2014 challenging the very same orders passed by the DRAT. (l) For the sake of completeness, we must also mention that it is the case of the Petitioner that it has applied for the development of the immoveable property to the Nashik Municipal Corporation. The development permissions have been granted by the said Corporation to the Petitioner on 23 March, 2011. It is also averred that after commencing development of a project known as Mittal Reviera on the immoveable property, it has received substantial bookings and the Petitioners have accepted huge a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions and was liable to be set aside. Consequently, he submitted that if this order is set aside, then necessarily the order dated 7 January, 2014, also has to go. This is for the simple reason that the appeal filed by the 1st Respondent herein before the DRAT could not have been entertained on merits, before a deposit as contemplated under Section 18 of the SARFAESI Act was complied with by the 1st Respondent herein. 5. Even on the merits of the matter, Mr. Dhakephalkar submitted that the order dated 7 January, 2014 passed by the DRAT was unsustainable. He submitted that the DRAT had basically set aside the sale in favour of the Petitioner on two grounds, namely, (i) that the description of the subject properties was vague and not properly described in the sale notice, vitiating the sale; and (ii) that there was non-compliance of Rules 6(2) and 8(6) of the SARFAESI Rules which were mandatory in nature and had to be complied with by the Respondent Banks before they could effect the sale of the subject properties under the provisions of the SARFAESI Act. Mr. Dhakephalkar submitted that on both counts, the order of the DRAT dated 7 January, 2014 was vulnerable to challenge. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded that the description of the subject properties was vague and/or incorrect or that the immovable property described therein admeasuring 28,200 square meters was not demarcated. He submitted that, therefore, it was too late in the day for the 1st Respondent - borrower to contend that the description of the subject properties was vague and not properly described, which would vitiate the sale. 8. In any event, Mr. Dhakephalkar submitted that an appropriate description of the properties in the sale notice is for the benefit of the prospective purchasers so that they are put to notice as to what exactly they intend purchasing. The borrower can hardly be heard to make a grievance that the sale of the subject properties is vitiated on the ground that it was not properly described and/or was vague. The borrower, who admittedly had large amounts due and payable to the Respondent banks, can hardly be heard to make this grievance, was the submission of Mr. Dhakephalkar. He, therefore, submitted that even on the merits of the matter, namely, on the issue of the description of the subject properties in the sale notice being vague (and on which ground the DRAT set aside the sale), is wholl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ground that there was violation of Rules 6(2) and 8(6) of the SARFAESI Rules. 10. On the other hand, Ms Jyotsna Vyas, learned counsel appearing on behalf of the 1st Respondent - borrower, submitted that both the orders passed by the DRAT (namely 1 April, 2009 and 7 January, 2014) were fully justified in law and required no interference by us in our extraordinary, equitable and discretionary jurisdiction under Article 226 of the Constitution of India. As far as the first order dated 1 April, 2009 is concerned, Ms Vyas submitted that this was an order passed on the application for waiver of deposit. She submitted that it is true that Section 18 of the SARFAESI Act stipulates that no appeal filed by the borrower can be entertained by the DRAT, unless the borrower deposits with the DRAT, 50% of the amount of debt due from him, as claimed by the secured creditors or as determined by the DRT, whichever is less. However, this does not mean that even in a case where the properties of the borrower are sold and the entire dues of the banks are recovered from that sale, the borrower still has to deposit 50% as contemplated under section 18. She submitted that in the facts of the prese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ules 6(2) and 8(6) of the SARFAESI Rules is without any merit. The 1st Respondent - borrower has never waived any of its rights, as sought to be contended by Mr. Dhakephalkar, was the submission. For all the aforesaid reasons, Ms Vyas submitted that this Petition has no merit and ought to be dismissed with costs. 13. We have heard the learned counsel for the parties at length and perused the papers and proceedings in the Writ Petition along with the annexures thereto. Before we deal with the rival contentions, it would be necessary to set out the purpose and object for which the SARFAESI Act was brought into force. The statements of object and reasons of the SARFAESI Act indicate that the financial sector, being one of the key drivers in India's efforts to achieve success in rapidly developing its economy, did not have a level playing field as compared to other participants in the financial markets of the world. There was no legal provision for facilitating securitisation of financial assets of banks and financial institutions, and unlike international banks, the banks and financial institutions in India did not have the power to take possession of securities and sell them. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e entertained unless the borrower 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 Tribunal, whichever is less: Provided also that the Appellate Tribunal may, for the reasons to be recorded in writing, reduce the amount to not less than twenty-five per cent of debt referred to in the second proviso. (2) Save as otherwise provided in this Act, the Appellate Tribunal shall, as far as may be, dispose of the appeal in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) and rules made thereunder. (emphasis supplied) 15. Section 18(1) clearly stipulates, any person aggrieved by any order made by the DRT under Section 17, may prefer an appeal to the DRAT within 30 days from the date of receipt of the order of the DRT. The 2nd proviso to Section 18(1) stipulates that no appeal shall be entertained by the DRAT unless the borrower has deposited with it 50% of the amount of debt due from him, as claimed by the secured creditors or as determined by the DRT, whichever is less. The 3rd proviso to S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever, under the third proviso to the sub-section, the Appellate Tribunal has the power to reduce the amount, for the reasons to be recorded in writing, to not less than twenty-five per cent of the debt, referred to in the second proviso. Thus, there is an absolute bar to the entertainment of an appeal under Section 18 of the Act unless the condition precedent, as stipulated, is fulfilled. Unless the borrower makes, with the Appellate Tribunal, a pre-deposit of fifty per cent of the debt due from him or determined, an appeal under the said provision cannot be entertained by the Appellate Tribunal. The language of the said proviso is clear and admits of no ambiguity. 8. It is well-settled that when a statute confers a right of appeal, while granting the right, the legislature can impose conditions for the exercise of such right, so long as the conditions are not so onerous as to amount to unreasonable restrictions, rendering the right almost illusory. Bearing in mind the object of the Act, the conditions hedged in the said proviso cannot be said to be onerous. Thus, we hold that the requirement of pre-deposit under sub-section (1) of Section 18 of the Act is mandatory and there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntertaining its appeal under Section 18 of the SARFAESI Act. 18. Faced with this situation, Ms Vyas submitted that the DRAT has granted full waiver of deposit in peculiar facts and circumstances of the present case. She submitted that considering the fact that the Respondent Banks had already sold the subject properties (secured assets) for a consideration that fully secured their claim, there was no requirement for the 1st Respondent - borrower to deposit any amount as contemplated under Section 18 of the SARFAESI Act. We are unable to accept this submission. In our view it would be ludicrous to suggest that the money realised by the Respondent banks from sale of their secured assets could be used by the borrower to fulfill the condition of pre-deposit under Section 18. We must hasten to add that it would be a different matter if the sale is accepted and confirmed by the borrower. In the facts of the present case, the 1st Respondent - borrower wants to use the sale proceeds received from sale of the subject properties to be adjusted/given credit for in the application for waiver of deposit and at the very same time challenges the sale of very same subject properties. This is to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct properties was vague and not properly described, thereby vitiating the sale. On going through the record produced before us, we are unable to agree with the DRAT. The description of the subject properties has been set out by us earlier in this judgment. The description of the subject properties in the sale notice (page 116 of the paper book) clearly describes the property including of land, buildings along with plants and machinery located at G.D. Somani Marg, Jail Road, Panchak Village, Nasik Road, Dist. Nasik, Pin 422 101 within registration Sub-district/District Nasik, Maharashtra. The area is also mentioned as 28,200 square meters. We do not think that reading the sale notice, there is any vagueness in description of the subject properties. What is pertinent to also note that even in the possession notice, as contemplated under Rule 8(1) of the SARFAESI Rules, the description of the subject properties has been given in almost identical terms. It is not the case of the 1st Respondent - borrower that it has not received this possession notice. In fact the question of taking over possession of the subject properties has never been put in issue by the 1st Respondent - borrower a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se two rules is to ensure that one last opportunity is given to the borrower to pay the dues of the secured creditor before the secured assets are sold. In other words, a right of redemption is given to the borrower. However, despite the fact that these rules are mandatory and are for the benefit of the borrower, it does not mean that the same cannot be waived. It is a settled position in law and even if a provision is mandatory, it can always be waived by a party/parties for whose benefit such a provision has been made. Rules 6(2) and 8(6) clearly being for the benefit of the borrower, he could lawfully waive the rights granted to him under the said Rules. These provisions neither expressly nor contextually indicate otherwise. Obviously, the question whether there is waiver or not, depends on the facts of each case and no hard and fast rule can be laid down in this regard. This proposition is too well settled. However, if one needs to refer to any decision in support of the said proposition, a reference to a decision of the Supreme Court in the case of General Manager, Sri Siddeshwara Cooperative Bank Ltd. v. Ikbal Ors. (2013) 10 SCC 83 would be apposite. This decision was given ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
