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2019 DIGILAW 3122 (MAD)

S. Ganesh v. Indian Bank

2019-11-13

C.SARAVANAN, VINEET KOTHARI

body2019
ORDER : VINEET KOTHARI, J. PRAYER: Writ Petition filed under Article 226 of the Constitution of India seeking issuance of a writ of certiorarified mandamus to call for the records in I.A.No.713 of 2019 in A.I.R.No.552/2015, on the file of the Debt Recovery Appellate Tribunal, Chennai ordered on 16.10.2019 and quash the same as illegal and direct the 8th respondent to number the appeals without any pre-deposit as ordered. This Writ Petition has been filed by the Petitioner aggrieved by the impugned order dated 16.10.2019 by which the learned DRAT has reiterated the requirement of pre-deposit of Rs.13.75 lakhs by the Petitioner within a period of four weeks. 2. The learned counsel for the Petitioner/Auction Purchaser submitted that in view of the decision in Mardia Chemicals Limited v. Union of India ( (2004) 4 SCC 311 ) and the decision of a Division Bench of this Court in Sree Jeya Soundharam Textile Mills Pvt. Ltd v. Canara Bank and others (C.R.P.(NPD) No.1492 of 2017, etc. decided on 11.4.2019) which has been followed by this Bench in the case of M/s.Ashok Wood Works and another v. Indian Overseas Bank (W.P.No.22981 of 2019 dated 30.9.2019), no pre-deposit was required to be made by the Petitioner, being neither the Borrower nor the Guarantor but, being a third party to the proceedings viz., the auction purchaser and therefore, the Interlocutory Application Application filed by the Petitioner before the DRAT does not require any pre-deposit, as per aforesaid judgments. 3. Despite the above decision of this court dated 11.4.2019 and the fact that the Petitioner had already deposited 50% of such amount viz., Rs.13.75 lakhs in scheduled time, by the impugned order dated 16.10.2019, the Petitioner was directed by the DRAT to deposit the remaining amount of Rs.13.75 lakhs. Though the order of the Division Bench dated 11.4.2019 has been referred in the impugned order itself, but without any discussion thereon, the learned Debt Recovery Appellate Tribunal has once again gone back to the outstanding amount of the Bank and insisted for pre-deposit of Rs.13.75 which is contrary to the decisions of the Division Bench of this Court. 4. We make it clear that the said decision of the Division Bench dated 11.4.2019 has been followed and reiterated by this Bench subsequently, but, still, we are faced with the impugned order passed by the DRAT. 5. 4. We make it clear that the said decision of the Division Bench dated 11.4.2019 has been followed and reiterated by this Bench subsequently, but, still, we are faced with the impugned order passed by the DRAT. 5. We reiterate below the ratio of the two judgments rendered by the Division Bench and this Bench:- In the case of Sree Jeya Soundharam Textile Mills '22. For the reasons stated above, we decide the issue with regard to making of pre-deposit for preferring an appeal before the Debt Recovery Appellate Tribunal as follows: (i) The borrowers and guarantors are liable to make pre-deposit as per the provisions of Section 18 of the SARFAESI Act or under Section 21 of the Recovery of Debts and Bankruptcy Act, 1993 for preferring an appeal before the Debt Recovery Appellate Tribunal. (ii) The 3rd parties, who had purchased the property prior to the date of mortgage or derived/accrued title or right or tenancy right over the property prior to the date of mortgage, are not liable to make any pre-deposit for preferring an appeal before the Debt Recovery Appellate Tribunal, provided that they establish before the Debt Recovery Appellate Tribunal that they derived/accrued title or right or tenancy right over the property prior to the date of mortgage and that the property was mortgaged with the Bank without their knowledge. If such 3rd parties file applications for waiver and if they establish that they have purchased the property or that they derived/accrued title, right or tenancy right prior to the date of mortgage and the property was mortgaged with the Bank without their knowledge, the Debt Recovery Appellate Tribunal shall give a finding with regard to the same and give exemption to such 3rd parties from making pre-deposit. (iii) The 3rd parties who had purchased the property either after the date of mortgage or derived/accrued title or right or tenancy right in respect of the property in question or after the initiation of SARFAESI proceedings are liable to make the pre-deposit and they should be treated on par with the borrower and the guarantor as per the provisions of both the Acts for the purpose of making pre-deposit. (iv) The Debt Recovery Appellate Tribunal shall consider the waiver applications filed by the 3rd parties, on merits and in accordance with law, following the principles laid down in this judgment and pass appropriate speaking orders giving findings with regard to the rights of the 3rd parties. (v) The secured creditors viz., the Banks and Financial Institutions or a Consortium or Group of Banks and Financial Institutions are not liable to make any pre-deposit for preferring an appeal before the Debt Recovery Appellate Tribunal. (vi) The auction purchaser is not liable to make any pre-deposit while preferring an appeal to the Debt Recovery Appellate Tribunal as against the order passed by the Debts Recovery Tribunal. (vii) The appellant who has filed an appeal before the Debt Recovery Appellate Tribunal as against the Interlocutory order passed by the Debts Recovery Tribunal, is not liable to make the pre-deposit if the liability is not determined by the Debts Recovery Tribunal in the interlocutory order. (viii) In any other category other than the categories mentioned above, the Debt Recovery Appellate Tribunal shall decide the waiver application as per the principles laid down in this judgment.' In the case of M/s.Ashok Wood Works '3. The said judgment was rendered by the Division Bench by dealing with the provisions of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (in short SARFAESI Act). But, we find the relevant provision of Section 18(1) of the SARFAESI Act is in pari materia with Section 21 of the RDDBFI Act. 4. The said provision of Section 18 of SARFAESI Act is quoted below for reference: 18. But, we find the relevant provision of Section 18(1) of the SARFAESI Act is in pari materia with Section 21 of the RDDBFI Act. 4. The said provision of Section 18 of SARFAESI Act is quoted below for reference: 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. 5. The provision of Section 21 of RDDBFI Act is also quoted below for ready reference: 21. Deposit of amount of debt due, on filing appeal. Where an appeal is preferred by any person from whom the amount of debt is due to a bank or a financial institution or a consortium of banks or financial institutions, such appeal shall not be entertained by the Appellate Tribunal unless such person has deposited with the Appellate Tribunal seventy-five per cent of the amount of debt so due from him as determined by the Tribunal under section 19: Provided that the Appellate Tribunal may, for reasons to be recorded in writing, waive or reduce the amount to be deposited under this section. 6. 6. A bare perusal of Section 21 of the RDDBFI Act would go to show that such appeal shall not be entertained by the Appellate Tribunal unless such person has deposited with the Appellate Tribunal 50% of the debt so due from him as determined by the Tribunal under Section 19 of the RDDBFI Act. The words debt so due from him is a contingency which has not even happened in the present case. Admittedly, in the Original Application, the amount has not been determined and the proceedings were at the stage of determination of such amount due in favour of the Bank/Financial Institution where the borrowers also wanted to lodge their counter claim in the matter. Since admittedly the present order of the Debts Recovery Tribunal which was challenged before the Appellate Tribunal was only on the interlocutory application seeking to lodge the counter claim by the borrowers, such an order would not require any pre-deposit since the position of law has been clarified by the Co-ordinate Bench of this Court, with which we respectfully agree. 7. We are of the view that the impugned order cannot be sustained. We, however, find that the order was passed on 06.03.2019 and the rejection of the appeal by the Appellate Tribunal was on 03.04.2019, whereas the Division Bench judgment in the case of Sree Jeya Soundharam Textile Mills Pvt. Ltd. (supra) was dated 11.04.2019, after the impugned order passed by the Appellate Tribunal. Therefore, we allow the present writ petition and set aside the impugned order passed by the Debt Recovery Appellate Tribunal dated 06.03.2019 and the consequential order dated 03.04.2019 passed by the said Tribunal and remand the matter back to the Debt Recovery Appellate Tribunal to hear and decide the question of pre-deposit again in accordance with law in the light of the judgment of the Division Bench of this Court in the Case of Sree Jeya Soundharam Textile Mills Pvt. Ltd. (supra). The Debt Recovery Appellate Tribunal, Chennai, is directed to decide the matter as expeditiously as possible, preferably within a period of three months from today.' 6. In view of the above decisions, the order passed by the DRAT cannot be sustained. The Debt Recovery Appellate Tribunal, Chennai, is directed to decide the matter as expeditiously as possible, preferably within a period of three months from today.' 6. In view of the above decisions, the order passed by the DRAT cannot be sustained. The Writ Petition is, accordingly, allowed and the impugned order of DRAT dated 16.10.2019 is set aside with a request to the learned DRAT to decide the Appeal of the Petitioner on merits without insisting for any pre-deposit from the Petitioner. No costs. The connected Miscellaneous Petition is closed. Copy of this order may be sent to the Respondents and DRAT, Chennai forthwith.