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2015 DIGILAW 1407 (ALL)

Sarla Devi Mishra v. State Bank of India

2015-05-27

V.K.MATHUR

body2015
JUDGMENT : V.K. MATHUR, J. (CHAIRPERSON) 1. The Counsel for the parties are heard on the question of waiver. The appellant has filed a waiver application in Appeal preferred under Section 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereafter referred to as SRFAESI Act, 2002) challenging the order passed by the DRT on 2nd March, 2015, by which the securitization application of the appellant was dismissed. The brief facts of the present case are that the respondent No. 2-Bank granted credit facilities as Housing Loan of Rs. 3.72 lacs on 7th August, 2006 to the appellant and the appellant stood as mortgagor by depositing the original title deed of the property standing in her name. 2. The loan account of the appellant was declared as Non-performing Asset (NPA) by the respondent-Bank and the respondent-Bank issued a Demand Notice under Section 13(2) of the SARFAESI Act, 2002 on 7th October, 2010 for a sum of Rs. 5.59 lacs plus interest. 3. The appellant has further stated that as per the respondent-Bank, the possession of the property in question was taken on 21st March, 2012 by issuing the possession notice under Section 13(4) of the SARFAESI Act, 2002. 4. Thereafter, the respondent-Bank published the "E" Auction Notice on 20th October, 2013 in the Newspaper by fixing the date of auction on 27th November, 2013. 5. It has further been stated that the appellant filed a writ petition No. 64033 of 2013 on 30th November, 2013 before the Hon'ble High Court, Allahabad to challenge the "E" Auction Notice which was decided on 22nd November, 2013 with a direction regarding payment of outstanding dues of the Bank in eight quarterly installments and Rs. 50,000/- to be paid on or before 27th November, 2013. The appellant further filed an Application No. 363395 of 2013 in Writ Petition No. 64033 of 2013 for extension of time on 151h December, 2013 before the Hon'ble High Court, Allahabad which was decided on 17th December, 2013 by extending time for one week to deposit Rs. 50,000/- provided "E" auction, if any, held on 27th November, 2013 has not yet been confirmed. The appellant deposited a sum of Rs. 50,000/- on 21st December, 2013 with the Bank. 6. The appellant has further stated that after depositing a sum of Rs. 50,000/- provided "E" auction, if any, held on 27th November, 2013 has not yet been confirmed. The appellant deposited a sum of Rs. 50,000/- on 21st December, 2013 with the Bank. 6. The appellant has further stated that after depositing a sum of Rs. 50,000/- with the Bank on 21st December, 2013, the respondent-Bank vide letter dated 26th December, 2013 informed the appellant that the sale dated 27th November, 2013 was confirmed on 16th December, 2013 in favour of the auction purchaser. The appellant thereafter filed a Contempt Application No. 772 of 2014 on 11th February, 2014 before the Hon'ble High Court which was decided on 13th February, 2014 with the observation that there was no violation of the order as such contempt cannot be alleged. 7. The appellant filed the Securitization Application No. 94/2014 on 6th March, 2014 before the learned DRT, Allahabad to challenge the sale notice dated 20th October, 2013, but the same was dismissed on the ground of delay vide impugned order dated 2nd March, 2015. Aggrieved by this older the appellant has filed the present Appeal before this Tribunal on 6th April, 2015 under Section 18 of the SARFAESI Act, 2002 along with the waiver application. 8. Learned Counsel for the appellant has argued that the amount regarding pre-deposit under Section 18 of the SARFAESI Act, 2002 be completely waived since the respondent Bank has recovered more than 50% of the amount mentioned in the demand notice under Section 13(2) of the SARFAESI Act, 2002. It is also being submitted that the respondent-Bank has recovered a sum of Rs. 9.50 lacs which is more than the demand notice for a sum of Rs. 5.59 lacs and therefore, there was no requirement for the appellant to deposit any further amount for entertaining the present Appeal. 9. Learned Counsel for the appellant placed reliance in the case of Gopal Ji Guptas. DRAT, Allahabad, I (2014) BC 259 : 2013(2) D.R.T.C. 773 (All.), wherein the Bank had demanded from the Petitioner a sum of Rs. 60.00 lacs and odd along with the future interest whereas the respondent Bank had auctioned the property of the Petitioner and had recovered a sum of Rs. 50.00 lacs and odd which was more than 50% of the total amount sought to be recovered. 60.00 lacs and odd along with the future interest whereas the respondent Bank had auctioned the property of the Petitioner and had recovered a sum of Rs. 50.00 lacs and odd which was more than 50% of the total amount sought to be recovered. It was held that there was no requirement for the petitioner to deposit any further amount for entertainment of his Appeal under the second proviso of Section 18 of the SARFAESI Act, 2002. In S.R. Forging Ltd. v. UCO Bank, 2013 (1) D.R.T.C. 734 (P. & H.) It was held that once more than 50% of debt due received from Petitioners, purpose of proviso stood satisfied. In Person Medicinal Plant P. Ltd. v. Indian Bank, decided by the Hon'ble Apex Court on 25th February, 2011 in which a letter was sent by Chief Manager, Indian Bank to the appellant-Company that the amount due as on 30th November, 2010 was Rs. 3,467.89 lacs after appropriation of a sum of Rs. 410.00 lacs collected after filing of Suit and Rs. 5525.00 lacs being the sale proceeds of property said above. Learned Solicitor General submits that if the Bank is allowed to appropriate this amount, then he has no objection to the Appeal of the appellant being heard on merit by the DRAT. It was directed that the Indian Bank would be at liberty to appropriate the amount which is already with the Bank, however, this would be subject to the final decision of the Appeal by the DRAT. 10. Learned Counsel for the respondent-Bank argued that the amount deposited by the auction purchaser cannot be adjusted towards the deposit to be made by the borrowers/guarantors while preferring the Appeal under Section 18 of the SARFAESI Act, 2002. It has further been stated that there cannot be complete waiver of pre-deposit as has been prayed by the appellant and it was further stated that the application of the appellant for complete wavier of pre-deposit be dismissed. 11. Learned Counsel for the respondent-Bank has placed reliance in the case of Narayan Chandra Ghosh v. UCO Bank, IV (2011) SLT 229 : II (2011) CLT 355 (SC) : AIR 2011 SC 1913 and Indian Bank v. Debts Recovery Appellate Tribunal, I (2011) BC 514 (DB) (Mad). 12. 11. Learned Counsel for the respondent-Bank has placed reliance in the case of Narayan Chandra Ghosh v. UCO Bank, IV (2011) SLT 229 : II (2011) CLT 355 (SC) : AIR 2011 SC 1913 and Indian Bank v. Debts Recovery Appellate Tribunal, I (2011) BC 514 (DB) (Mad). 12. The legal question which requires consideration is whether there can be any complete waiver of deposit amount to be made by the borrower/guarantor while preferring an Appeal before the Debts Recovery Appellate Tribunal, as contemplated under Section 18(1) of the SARFAESI Act, 2002. 13. It is relevant to refer the provisions of Section 18 and Section 2(f) of the SARFAESI Act, 2002 which are 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 debts 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, or the reasons to be recorded in writing, reduce the amount to not less than twenty-five per cent of debts 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." "2(f) "Borrower" means any person who has been granted financial assistance by any Bank or Financial Institution or who has given any guarantee or created any mortgage or pledge as security for the financial assistance granted by any Bank or Financial Institution and includes a person who becomes borrower of a Securitization Company or Reconstruction Company consequent upon acquisition by it of any rights or interest of any Bank or institution in relation to such financial assistance." 14. In Narayan Chandra Ghosh v. UCO Bank (supra), the Hon'ble Apex Court in para Nos. 8 and 9 has held as under: "8. 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. 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. 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 has 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 Subsection (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 provisos 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." 15. In Indian Bank v. Debts Recovery Appellate Tribunal, I (2011) BC 514 (DB) (Mad.), it was held as under; "14. From this definition clause it is clear that the 'borrower' includes the guarantor also. In Indian Bank v. Debts Recovery Appellate Tribunal, I (2011) BC 514 (DB) (Mad.), it was held as under; "14. From this definition clause it is clear that the 'borrower' includes the guarantor also. Therefore, it goes without saying that the obligation created on the person who has availed loan from the Bank or the Financial Institution, under Second Proviso to Section 18(1) to deposit fifty per cent, of the amount of debt to avail the Appeal remedy before the Appellate Tribunal also applies equally to the guarantor and no difference or distinction could be made between a debtor and a guarantor, while entertaining the Appeal under Section 18(1) of the SARFAESI Act. That being the legal situation, we have no hesitation to hold that the respondent No. 1/Appellate Tribunal has committed a gross legal error in ordering to give credit of the amount deposited by the auction purchaser to the guarantor, as the auction purchaser cannot be brought within the fold of 'borrower' defined under the SARFAESI Act" 16. In Indian Bank v. Blue Jaggers Estates Ltd., III (2010) BC 694 (SC) : VI (2010) SLT 26 : 2010 (3) Bankers' Journal 9 (SC) the Hon'ble Apex Court has held as under: "17.......The Court cannot lose sight of the fact that the Bank is a trustee of public funds. It cannot compromise the public interest for benefitting private individuals. Those who take loan and avail financial facilities from the Bank are duty bound to repay the amount strictly in accordance with the terms of the contract. Any lapse in such matters has to be viewed seriously and the Bank is not only entitled but duty bound to recover the amount by adopting all legally permissible methods. The Parliament enacted the Act because it was found the legal mechanism available till then was wholly insufficient for recovery of the outstanding dues of Banks and Financial Institutions. 18. The reasons assigned by the High Court for declaring that the requirement of pre-deposit will be deemed to have been satisfied do not stand scrutiny. The High Court failed to notice that in terms of the order passed in Writ Petition No. 20772 of 2008, the auction of the mortgaged properties was subject to confirmation by the Appellate Tribunal, which had not passed any order in that regard. 19. The High Court failed to notice that in terms of the order passed in Writ Petition No. 20772 of 2008, the auction of the mortgaged properties was subject to confirmation by the Appellate Tribunal, which had not passed any order in that regard. 19. In the result the civil Appeal arising out of SLP (C) No. 4981 of 2010 is allowed. The impugned order of the High Court is set aside insofar it declares that the direction given by the Appellate Tribunal to the respondents to deposit Rs. 3 crores stands complied. The respondents are given four weeks' time to deposit Rs. 3 crores in terms of conditional interim order dated 21st July, 2008 passed by the Appellate Tribunal, failing which the Appeal filed by them against the order passed by the Tribunal in S.A. No. 221 of 2008 shall stand dismissed and the appellant shall be free to recover all the outstanding dues." 17. In the present case, the appellant had not complied with the order dated 22nd November, 2013 of the Hon'ble High Court, Allahabad in C.W.P. No. 64033 of 2013 directing the appellant that the entire amount shall be repaid in 8 (eight) equal installments. The first installment of Rs. 50,000/- was to be paid on or before 27th November, 2013 and thereafter, within every three months. However, the appellant deposited Rs. 50.000/- on 21st December, 2013 with the Bank. The Contempt Petition No. 772 of 2014 filed by the appellant was decided on 13th February, 2014 by the Hon'ble High Court, Allahabad wherein the Counsel for the respondent Bank stated that the sale certificate had been issued prior to the deposit of Rs. 50,000/-. The sale certificate was issued on 16th December, 2013, whereas the amount of Rs. 50,000/- was deposited by the appellant on 21st December, 2013. In this view of the matter, it was held that the contempt cannot be alleged and accordingly, the notices were discharged. 18. It is to be pointed out at this juncture that as per the second proviso of Subsection (1) of Section 18 of the SARFAESI Act, 2002 no Appeal shall be entertained unless the borrower has deposited with the Appellate Tribunal 50% of the amount due from him as claimed by the secured creditor or determined by the Debts Recovery Tribunal. It is to be pointed out at this juncture that as per the second proviso of Subsection (1) of Section 18 of the SARFAESI Act, 2002 no Appeal shall be entertained unless the borrower has deposited with the Appellate Tribunal 50% of the amount due from him as claimed by the secured creditor or determined by the Debts Recovery Tribunal. As per the third proviso of Sub-section (1) of Section 18, the Appellate Tribunal may, for the reasons to be recorded in writing, reduce the amount to not less than 25% of debt referred to in the second proviso. 19. The language used in Section 18 of the SARFAESI Act, 2002 is very plain and clear that the Appellate Tribunal is not vested with any discretion, except to reduce the pre-deposit amount to the extent of 25% of the debt due from the appellant for reasons to be recorded in writing. 20. In view of the law laid down by the Hon'ble Supreme Court in Narayan Chandra Ghosh v. UCO Bank (supra) and Indian Bank v. Blue Jagger Estates Ltd. (supra), the borrower while preferring the Appeal would be liable to deposit 50% 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 was beyond the proviso of Section 18 of the SARFAESI Act, 2002 and at best the amount of deposit of 50% could be reduced to an amount not less than 25% of the debt due after recording reasons. 21. The facts of the case as projected by the appellant discloses the possession over the property which was given as security was taken and the property was sold to the auction purchaser for which the sale certificate was issued by the respondent Bank on 16th December, 2013, whereas the amount of Rs. 50,000/- was deposited by the appellant on 21st December, 2013. 22. In the light of the above said decisions, the Appellate Tribunal cannot completely waive the pre-deposit amount in exercise of powers under second and third provisos of Sub-section (1) of Section 18 of the SARFAESI Act, 2002. The decisions cited by the learned Counsel for the appellant in the facts and circumstances of the present case are distinguishable. 22. In the light of the above said decisions, the Appellate Tribunal cannot completely waive the pre-deposit amount in exercise of powers under second and third provisos of Sub-section (1) of Section 18 of the SARFAESI Act, 2002. The decisions cited by the learned Counsel for the appellant in the facts and circumstances of the present case are distinguishable. In the result, in the facts and circumstances of the case as enumerated above, the appellant is directed to deposit 35% of the amount claimed by the respondent Bank as per demand notice for a sum of Rs. 5.59 lacs within a period of four weeks from the date of this order in the form of Demand Draft in the name of the Registrar of this Tribunal, who shall keep the same in FDR for a period of six months in the Nationalized Bank in auto renewal scheme. List this case on 9th July, 2015 for compliance.