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TMI Blog2023 (1) TMI 445X X X X Extracts X X X X X X X X Extracts X X X X ..... pt of the order of DRT. Second proviso to section 18 provides that no appeal shall be entertained unless the borrower has deposited with the Appellate Tribunal fifty percent of the amount of debt due from him, as claimed by the secured creditors or determined by the DRT, whichever is less and only and only then, an appeal under Section 18 of the SARFAESI Act is permissible against the order passed by the DRT under Section 17 of the SARFAESI Act. Under Section 17, the scope of enquiry is limited to the steps taken under Section 13(4) against the secured assets. Therefore, whatever amount is mentioned in the notice under Section 13(2) of the SARFAESI Act, in case steps taken under Section 13(2)/13(4) against the secured assets are under challenge before the DRT will be the debt due within the meaning of proviso to Section 18 of the SARFAESI Act. As per the second proviso to Section 18 of the SARFAESI Act, it is the borrower who has preferred an appeal before the Appellate Tribunal and the borrower who shall have to deposit 50% of the amount of debt due from him. If the words used in the second proviso to Section 18 of the SARFAESI Act are borrower has to deposit , it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... group of appeals, namely, interpretation of Section 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the SARFAESI Act ), all these appeals are decided and disposed of together by this common judgment and order. 2. Feeling aggrieved and dissatisfied with the impugned judgment and order dated 22.12.2020 passed by the High Court of Delhi at New Delhi in Writ Petition (Civil) No. 6060/2020, both, the borrower as well as the secured creditor have preferred Civil Appeal Nos. 8969 and 8970 of 2022. 3. Civil Appeal Nos. 8972, 8973 and 8974 of 2022 have been preferred against the common impugned judgment and order dated 12.04.2022 passed by the High Court of Madhya Pradesh, Bench at Indore in respective Writ Petition Nos. 5494/2021, 5470/2021 and 5478/2021, by which the High Court has dismissed the said writ petitions preferred by the original writ petitioners auction purchasers and has confirmed the orders passed by the Debt Recovery Appellate Tribunal, Allahabad (for short, DRAT ), by which the DRAT while entertaining the appeals under Section 18 of the SARFAESI Act held that the borrower i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the properties in question within a period of 60 days along with 10% of the proposed sale consideration. Since the borrower failed to comply with the order of the DRT, the mortgaged properties were put to auction. Attempts made by the owners of the property to challenge the proposed auction failed inasmuch as the application moved before the DRT and the appeal preferred before the DRAT were both dismissed. The writ petition filed by the owners before the High Court also came to be dismissed as withdrawn on 17.02.2016. That thereafter, the property in question was put to auction after getting the property valued and obtaining a valuation report of the property in question, namely, property bearing No. 170, Deepali, Pitampura, Delhi- 110034. In the meantime, the Andhra Bank assigned all its debts and underlying securities to Prudent ARC Limited, the appellant in Civil Appeal No. 8970/2022. The borrower filed Writ Petition (Civil) No. 12791/2018 before the High Court challenging the assignment of debts by Andhra Bank, which came to be dismissed by the High Court on 28.11.2018. An intra-court appeal also came to be dismissed. 4.3 That thereafter, the borrower filed an interlocut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The DRAT allowed the waiver of the statutory pre-deposit by observing that the amount already realised by selling the mortgaged property/secured property is required to be adjusted towards the pre-deposit and/or the same can be said to be a deposit of 50% of the amount as pre-deposit, as envisaged under Section 18 of the SARFAESI Act. 4.6 Feeling aggrieved and dissatisfied with the order passed by the DRAT allowing waiver of the statutory pre-deposit on the aforesaid ground, the secured creditor/assignee filed the subject writ petition before the High Court being Writ Petition No. 6060/2020. By the impugned judgment and order, the High Court has partly allowed the said writ petition preferred by the secured creditor/assignee by directing that the borrower is required to deposit 50% of the remaining 4.1 crores being debt due (after deducting/adjusting Rs. 12.5 crores realised/recovered by selling the mortgaged property). The High Court has also observed that it shall be open to DRAT to reduce the said predeposit amount to 25%, after recording reasons in writing for the said reduction. The aforesaid order is passed by the High Court, after observing and concluding as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereafter the bank published the possession notice in daily newspapers on 24.03.2020. Subsequently, the bank issued a sale notice under Section 8(6) of the Security Interest Enforcement Rules, 2002 and put the mortgaged property to auction on 17.08.2020. 5.1 The borrowers again approached the DRT by way of SA No. 240/2020 on 14.08.2020. The bank conducted the auction proceedings on 17.08.2020 in which the appellants herein original writ petitioners before the High Court, as one of the bidders, was declared as a successful highest bidder, having bid of Rs. 1,55,10,000/-. That thereafter the auction purchaser deposited the entire bid amount. The sale in favour of the auction purchaser came to be finalised and the sale certificate was registered on 23.11.2020 in favour of the auction purchaser and he was put in possession of the secured asset. 5.2 Vide order dated 13.11.2020, the DRT dismissed SA No. 240/2020. Being aggrieved by the order dated 13.11.2020 passed by the DRT, the borrower approached the DRAT by way of Appeal No.344/2020 along with an application seeking waiver of the pre-deposit of the amount under Section 18 of the SARFAESI Act. By order dated 9.2.2021, the DRAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Bankruptcy Act, 1993 (hereinafter referred to as the Act 1993 ). That the debt due required to be calculated to determine the pre-deposit amount shall have to be calculated deducting the money received by the bank/financial institution during the pendency of the proceedings before the DRT. 6.3 It is next submitted that while passing the impugned judgment and order, the High Court has erred in not applying the literal rule of interpretation for construing the second proviso to Section 18 of the SARFAESI Act for ascertaining true and correct meaning on the expression of debt due . 7. Learned counsel appearing on behalf of the financial institution and the auction purchaser have vehemently submitted that the High Court has materially erred in directing the borrower to deposit 50% of the remaining Rs. 4.1 crores only as pre-deposit. It is contended that the said order is under challenge by the financial institution in the present case and it is the case on behalf of the financial institution that the High Court ought to have directed the borrower to deposit 50% of the original amount of debt of Rs. 16.61 crores. 7.1 It is submitted that the High Court has very seriously ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to discourage frivolous litigation from being initiated by the borrower. It is submitted that therefore, this Court in the case of Axis Bank v. SBS Organics Private Limited, (2016) 12 SCC 18 has held that the amount of pre-deposit is refundable to the borrower after disposal of appeal. 8.1 It is next submitted that the language of Section 18 of the SARFAESI Act is very clear and unambiguous. It says that the borrower shall deposit , which means such amount is required to be brought in by the borrower and the amount standing with creditor through auction sale cannot be for the benefit of the borrower. That the borrower can take benefit of the amount received by the creditor in an auction sale only if he unequivocally accepts the sale. It is submitted that if the borrower wants to question the sale, then he cannot claim the amount of deposit for his benefit. The borrower cannot be allowed blow hot and cold. 8.2 Reliance is placed on the decision of this Court in the matter of M/s Shilpa Shares and Securities v. National Cooperative Bank Ltd., (S.L.P (Civil) No. 14717/2022, decided on 21.11.2022) wherein it has been held that the amount deposited pursuant to the order of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the SARFAESI Act and section 2(g) of the Recovery of Debts and Bankruptcy Act, 1993, which would have a direct bearing are required to be referred to. The said provisions read as under: 18. Appeal to Appellate Tribunal.-(1) Any person aggrieved, by any order made by the Debts Recovery Tribunal [under section 17, 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 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, di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther secured or unsecured, or assigned, or whether payable under a decree or order of any civil court or any arbitration award or otherwise or under a mortgage and subsisting on, and legally recoverable on the date of the application. That the debt means any liability inclusive of interest. As per Section 18 of the SARFAESI Act, any person aggrieved, by any order made by the DRT under section 17, may prefer an appeal within thirty days to an appellate Tribunal (DRAT) from the date of receipt of the order of DRT. Second proviso to section 18 provides that no appeal shall be entertained unless the borrower has deposited with the Appellate Tribunal fifty percent of the amount of debt due from him, as claimed by the secured creditors or determined by the DRT, whichever is less and only and only then, an appeal under Section 18 of the SARFAESI Act is permissible against the order passed by the DRT under Section 17 of the SARFAESI Act. Under Section 17, the scope of enquiry is limited to the steps taken under Section 13(4) against the secured assets. Therefore, whatever amount is mentioned in the notice under Section 13(2) of the SARFAESI Act, in case steps taken under Section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 creditor or as determined by the DRT, whichever is less, however, that does not mean that in a case where the properties of the borrower are sold and the entire dues of the bank are recovered from that sale, the borrower still has to deposit 50% as contemplated under Section 18 of the SARFAESI Act. While negativing the said submission, the Bombay High Court considered the purpose and object of the SARFAESI Act in paragraph 14 as under: 14. 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tipulates 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 the DRT, whichever is less. There is also a discretion granted to the DRAT to reduce this amount to 25% provided it finds adequate reasons for doing so and gives reasons, that are recorded in writing. If this deposit is not made, then the DRAT has no jurisdiction to entertain the appeal of the borrower. The crucial words debt due from him have to be interpreted consistent with the object and purpose sought to be achieved by the SARFAESI Act. Unless the debt due is secur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the DRAT. Even the High Court of Delhi has erred in excluding the amount payable towards interest while considering the debt due . As per Section 2(g) of the Act 1993, debt means liability inclusive of interest as claimed by the bank/financial institution. 17. In view of the above and for the reasons stated above, the respective appeals preferred by the financial institution/assignee and auction purchasers being civil Appeal Nos. 8970, 8972, 8973 and 8974 of 2022 are hereby allowed. The appeal preferred by the borrower against the judgment and order passed by the Delhi High Court being Civil Appeal No. 8969/2022 deserves to be dismissed and is accordingly dismissed. It is observed and held that the borrower has to deposit 50% of the amount of debt due as claimed by the bank/financial institution/assignee along with interest as claimed in the notice under Section 13(2) of the SARFAESI Act and the borrower is not entitled to claim adjustment/appropriation of the amount realised by selling the secured properties and deposited by the auction purchaser when the auction sale is also under challenge. 18. Civil Appeal Nos. 8970, 8972, 8973 8974 of 2022 are accordingly allow ..... X X X X Extracts X X X X X X X X Extracts X X X X
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