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M/s. Amy Agro Pvt. Ltd. v/s State Bank of Patiala & Others

    CWP No. 4099 of 2015

    Decided On, 27 October 2015

    At, High Court of Himachal Pradesh

    By, THE HONOURABLE CHIEF JUSTICE MR. MANSOOR AHMAD MIR & THE HONOURABLE MR. JUSTICE TARLOK SINGH CHAUHAN

    For the Petitioner: Ajay Vaidya, Advocate. For the Respondents: None.



Judgment Text

Tarlok Singh Chauhan, J.

1. Challenge in this writ petition is to the order passed by the Debt Recovery Appellate Tribunal, Delhi (for short 'Appellate Tribunal') on 20.8.2015, whereby it has refused to waive off the requirement of 25% of the notice amount as stipulated under Section 18 (1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (for short 'SARFAESI') on the ground that it has no discretion to reduce the amount. The facts as are necessary for the adjudication of the case may be noticed.

2. On 25.8.2009 the petitioner was issued notice under Section 13 (2) of the SARFAESI Act. On 24.2.2010, a meeting was held between the respondent Bank and the Directors of the petitioner-Company and it is alleged that some arrangement was arrived at. The petitioner claimed that it had done the needful but the respondent-Bank did not perform their part as per the arrangement and accordingly vide notice dated 25.11.2010 the respondent took possession of the properties belonging to the petitioner. This resulted in filing of CWP No. 1585 of 2011 but the same was dismissed on 23.9.2011. The petitioner preferred an appeal being LPA No. 526 of 2011 which too was dismissed by this Court. After that the petitioner again approached this Court by filing CWP No. 4673 of 2012 and the same was disposed of by directing the Debt Recovery Tribunal to consider the application filed by the petitioner with regard to the procedure adopted for sale and also with regard to its claim for settlement under OTS Scheme etc. within two months.

3. The petitioner thereafter moved an application before the Debt Recovery Tribunal, Chandigarh (for short 'DRT') under Section 17 of the SARFAESI Act along with an application for condonation of delay which was dismissed on the ground of limitation. In the meanwhile, the properties of the petitioner were put to sale and the sale certificates to this effect are annexed with this writ petition as Annexures P-11 and P-12, respectively.

4. The petitioner against the aforesaid orders filed an appeal before the Debt Recovery Appellate Tribunal at New Delhi. However, vide impugned order dated 20.8.2015 the application filed for seeking exemption from depositing the amount as prescribed under Section 18 of the Act was ordered to be dismissed on the ground that the Tribunal has no jurisdiction to reduce the amount less than 25% of the notice amount.

5. It is therefore the interpretation of Section 18 of the SARFAESI Act that falls for consideration in this writ petition.

6. Section 18 of the SARFAESI Act, reads 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 the 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, 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."

7. The aforesaid provision came up for interpretation before the Hon'ble Supreme Court in Narayan Chandra Ghosh v. UCO Bank, (2011) 4 SCC 548 wherein it was held that the second proviso to Section 18 (1) is mandatory meaning thereby that the condition of pre-deposit under Section 18 (1) is mandatory and that there is a bar to the entertainment of an appeal under Section 18 unless this condition precedent is satisfied. It was held :

"7. Section 18(1) of the Act confers a statutory right on a person aggrieved by any order made by the Debts Recovery Tribunal under Section 17 of the Act to prefer an appeal to the Appellate Tribunal. However, the right conferred under Section 18(1) is subject to the condition laid down in the second proviso thereto. The second proviso postulates 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. However, 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 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 is no reason whatsoever for not giving full effect to the provisions contained in Section 18 of the Act. In that view of the matter, no court, much less the Appellate Tribunal, a creature of the Act itself, can refuse to give full effect to the provisions of the Statute. We have no hesitation in holding that deposit under the second proviso to Section 18(1) of the Act being a condition precedent for preferring an appeal under the said Section, the Appellate Tribunal had erred in law in entertaining the appeal without directing the appellant to comply with the said mandatory requirement.

9. The argument of learned counsel for the appellant that as the amount of debt due had not been determined by the Debts Recovery Tribunal, appeal could be entertained by the Appellate Tribunal without insisting on pre-deposit, is equally fallacious. Under the second proviso to sub-section (1) of Section 18 of the Act the amount of fifty per cent, which is required to be deposited by the borrower, is computed either with reference to the debt due from him as claimed by the secured creditors or as determined by the Debts Recovery Tribunal, whichever is less. Obviously, where the amount of debt is yet to be determined by the Debts Recovery Tribunal, the borrower, while preferring appeal, would be liable to deposit fifty per cent of the debt due from him as claimed by the secured creditors. Therefore, the condition of pre-deposit being mandatory, a complete waiver of deposit by the appellant with the Appellate Tribunal, was beyond the provisions of the Act, as is evident from the second and third proviso to the said Section. At best, the Appellate Tribunal could have, after recording the reasons, reduced the amount of deposit of fifty per cent to an amount not less than twenty five per cent of the debt referred to in the second proviso. We are convinced that the order of the Appellate Tribunal, entertaining appellant's appeal without insisting on pre-deposit was clearly unsustainable and, therefore, the decision of the High Court in setting aside the same cannot be flawed."

8. Earlier to this, a Division Bench of the Bombay High Court in M/s Vinay Container Services Pvt. Ltd. v. Axis Bank, Mumbai (2011) Bom. 37 held that the pre-deposit is mandatory in terms of proviso to Section 18 (1) and the same is applicable even to an appeal against an interim order. The view taken by the Bombay High Court in M/s Vinay's case (supra), was followed by another Division Bench of the same Court in Keystone Constructions v. State Bank of India and others, CWP No. 1382 of 2013, decided on 08.10.2013 and thereafter followed by a Division Bench of the Delhi High Court in Satnam Agri Products Ltd. and others v. Union of India and others, Writ Petition (Civil) No. 7158 of 2014 decided on 10.12.2014.

9. Even otherwise, a plain reading of the aforesaid provision i.e. Section 18 shows that a person aggrieved by an order made by DRT under Section 17 of the Securitisation Act is entitled to prefer an appeal to the Appellate Tribunal and apparently, the provision does not make any distinction between a final order and interlocutory order. Second proviso mandates the deposit of 50% of the amount of debt due from the appellant. However, as per the third proviso, the same may be reduced by the Appellate Tribunal upto 25% for the reasons to be recorded in writing.

10. In light of the settled legal position noticed above and for the reasons stated supra, we are of the considered view that the condition of making pre-deposit in terms of Section 18 (1) of the Securitisation Act is mandatory for entertaining any appeal and there is no reason to exempt the appeals arising out of the orders passed by the DRT on interlocutory applications merely on the ground that the said orders do not have the effect of staying the action or measures taken by the secured creditor under Section 13 (4) of the Securitisation Act for enforcement of security interest.

11. Learned counsel for the petitioner would, however, contend that the impugned order is inequitable and unjust as the condition of pre-deposit would only arise in case the amount due remains unpaid and not when it has already been realized. In support of his submission, reliance is placed on the sale certificates (Annexures P-11 and P-12) to show that an amount of Rs. 31,50,000/- and Rs. 4,50,000/-, respectively has already been realised by the respondents from the sale of the properties belonging to the petitioner. He in order to buttress his submissions, has placed reliance upon the judgment rendered by the Allahabad High Court in Akash Ganga Airlines Ltd. v. Debt Recovery Appellate Tribunal, Allahabad and others, W.P. No. 3973 of 2015, decided on 12.8.2015 and judgment rendered by the Punjab and Haryana High Court in S.R.Forging Ltd. and another v. UCO Bank and others (2013) 1 DRTC, 734.

12. We find no force in these submissions of learned counsel for the petitioner for the reason that this was not even the pleaded case of the petitioner before the Appellate Tribunal wherein he had sought exemption only on the ground that it was in serious financial scarcity and in dire need of financial assistance in order to meet its working capital requirement and other liabilities and had already incurred huge loss and debt because of the arbitrary and illegal conduct of the respondents as would be clear from para-2 of the application, which reads thus:

"2. That appellant is already in serious financial scarcity, and is in dire need of the financial assistance in order to meet its working capital requirement and other liabilities. It had already incurred a huge loss and debts because of the arbitrary and illegal conduct of the respondents herein. Therefore considering the hardship of the appellant this Hon'ble Appellate Tribunal may kindly take a lenient view and dispense with the pre deposit of the amount under Section 18 of the Act."

13. Now, coming to the judgments relied upon by the petitioner, it was noticed that in none of the aforesaid cases have the provisions of Section 18 (1) of the Act held to be directory or not mandatory for entertaining any appeal. Rather, it is

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after taking into consideration the ratio of the judgment of the Hon'ble Supreme Court in Narayan Chandra Ghosh (supra) that it was held that the principles laid down therein would not apply to a case when there is no amount due or where more than the due amount has already been realised by the financial institution. 14. The petitioner though has not cared to place on record the statement of account which may prima-facie establish that either the whole or more than due amount has been paid by the petitioner. But then, the petitioner itself has annexed the copy of recovery notice dated 25.8.2009 (Annexure P-3) issued by the respondent-Bank, which shows that a sum of Rs. 47,66,781.66 paise (Rs. Forty Seven Lacs Sixty Six Thousand Seven Hundred Eighty One and paise Sixty Six only) was due and payable by the petitioner as on 28.2.2009 and that too obviously the interest at the commercial rate must have mounted up on this principal amount. Therefore, no assistance whatsoever can be derived by the petitioner by placing reliance on the judgments referred to above as the same are inapplicable to the facts of the instant case. 15. In view of the aforesaid discussion, we find no merit in this petition and the same is dismissed in limine along with pending applications, leaving the parties to bear their costs. Petition dismissed.
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