Kamal Kishore Saspal vs Development Credit Bank Ltd

P.K. Bhasin, J

I.A. No. 264 of 2016-For Waiver of Pre-deposit

The appellant in order to have this appeal entertained has prayed for granting him waiver from the compliance of the condition of making a pre-deposit of 50% of the amount of debt which was being claimed from him by the respondent Bank from whom he had obtained financial aid of crores of rupees. He had to file this appeal because the DRT had rejected his application filed by him for a direction to the respondent Bank to produce in Court all the records pertaining to the auction of two of his properties out of which one was equitably mortgaged by him in favour of the Bank and in respect of the other one he had created a negative lien in order to secure the repayment of the Bank's dues.

That application was filed by the appellant in the Securitisation Application (S.A.) which was filed by him under Section 17(1) of the SARFAESI Act when the respondent Bank had initiated steps under SARFAESI Act to recover its outstanding dues which the appellant had failed to clear despite his having been served with a demand notice under Section 13(2) of SARFAESI Act by the Bank after declaring his asset as a Non-Performing Asset (NPA). The amount which was claimed from the appellant by the respondent Bank in its notice under Section 13(2) was Rs. 3,89,49,379.34 due as on 31.5.2013 plus interest thereon @ 14% p.a. (Base rate + 2% penal interest at monthly rest till payment). The appellant's case is that the Bank had assured to settle the dues with him in case he would surrender the two properties one of which was mortgaged in its favour and the other one in respect of which he had created negative lien only in its favour. He himself surrendered both the properties but instead of settling the matter with him the Bank clandestinely sold both the properties at a throw away prices without even letting him know anything about the sale transactions. After selling the two properties of the appellant and giving adjustment of the sale price of Rs. 4,12,21,109/- received by the Bank a sum of Rs. 2,40,99,109/- was still payable by the appellant, as per the Bank's case. Thus in the S.A. the appellant prayed for setting aside of the sales of the two properties in question raising different grounds of challenge.

When the appellant sought production of auction related documents by the Bank the DRT declined to give a direction to the Bank and passed the following order on 3.3.2016, which is now under challenge in the present appeal:

"I.A. No. 2261 & 2262 of 2015

The present application is filed by the applicant seeking summoning of records pertaining to the auction proceedings.

During the course of the arguments, the learned Counsel for respondent Bank submits that they have issued the notice under Section 13(2) and the same is placed on records at page No. 84 which shows that notice was duly communicated upon the applicant which is statutory provision of the Act thereafter the Bank has taken the steps under SARFAESI Act qua the property in question to proceed further in accordance with law and dome the newspaper publication now the applicant came forward with the application for summoning the records of the Bank.

After hearing both sides at length and perusing the records, this Tribunal is of the view that the Bank's record cannot be given unless and until the applicant is having the better buyer than the respondent Bank. If this type of applications are being entertained by this Tribunal than a Pandora box will be open to all and matter cannot be come to its end. The applicant has raised this issue just an afterthoughts as he has never made representation before the Bank that he has got better buyer or Bank has selling his property on lesser price now auction has successfully completed even this Tribunal put quarry whether he is having any buyer better price than the Bank's value, the answer was negative. Hence, in my considered view the present application is nothing but a roving inquiry.

In view of the above, the present application is filed to convenience this Tribunal. Hence, the present I.As. are hereby dismissed.

The learned Counsel for auction purchaser submits he needs the complete paper book of the present petitioner. Let the copy of the paper book be supplied to the learned Counsel for auction purchaser before the next date of hearing.

Matter be listed on 24.5.2016 for further proceedings."

I have considered the oral as well as written submissions of the Counsel for the appellant and also the submissions made by the Counsel for the respondent Bank.

It was not disputed by the learned Counsel for the appellant that the requirement of the condition of pre-deposit of 50% of the amount of debt demanded by the Bank or as determined by DRT, whichever is less, is mandatory for the entertainment of any appeal against any order, miscellaneous or final, passed by DRT in a Securitisation Application under SARFAESI Act. This was so held by the Hon'ble Supreme Court also in Narayan Chandra Ghosh v. UCO Bank, IV (2011) SLT 229 : 11 (2011) CLT 355 (SC) : (2011) 4 SCC 548.

However, the appellant claims waiver of the requirement on the ground that since his two properties stand sold already and the amount received from sale of those properties is to be taken into consideration and if that is done the condition of pre-deposit of 50% of the amount of debt claimed in notice of the respondent Bank under Section 13(2) already stands satisfied.

On the other hand learned Counsel for the respondent submitted that the auction proceeds cannot be utilised by the appellant towards the compliance of the condition of pre-deposit as that pre-deposit has to be made by an appellant approaching the Appellate Tribunal from his own funds and the deposit has to be with the Appellate Tribunal and not with the secured creditor. In support of this submission Mr. Nabi, learned Counsel for the Bank relied upon one decision of Madras High Court, 2010(5) Current Tamil Nadu Cases 25, Indian Bank v. Debt Recovery Appellate Tribunal, wherein also it was held that auction proceeds cannot be taken benefit of by a borrower-appellant whenever question of compliance of the condition of pre-deposit for the entertainment of statutory appeal under the provisions of SARFAESI Act arises for consideration before the Appellate Tribunal (DRAT). It was also submitted by Mr. Nabi that this very Tribunal has already taken a view that auction money cannot be reduced from the amount of debt claimed by the Bank in cases where the mortgagor is impugning the auction and is fighting to get back the auctioned property before the DRT. This view, submitted by the learned Counsel, was taken by this Tribunal relying upon the decision of the Hon'ble Supreme Court reported as III (2010) BC 694 (SC) : VI (2010) SLT 26 : (2010) 8 SCC 129, Indian Bank v. Blue Jaggers Estates Limited & Ors. wherein it was held that till such time auction attains finality the sale proceeds cannot be taken into consideration by the Appellate Tribunal (DRAT) while examining the question of compliance of the condition of pre-deposit. It was also submitted that though this view of this Tribunal stands challenged in High Court but its operation has not been stayed so far and, therefore, this Tribunal should continue to adopt the same approach in all such like cases and otherwise also deviation from that view will not be permissible in law nor desirable. Finally, Mr. Nabi also contended that even if the appellant were to be given benefit of the safe proceeds of his two properties he will still have to deposit over a crore of rupees with this Tribunal since even after adjusting the amount of sale proceeds against the payable amount of Rs. 4,12,21,109 a sum of Rs. 2,40,99,109/- still is payable by the appellant to the respondent Bank.

Learned Counsel for the appellant however, would still submit that this Tribunal's view in this regard is not the correct view and since some High Courts have held that auction proceeds recovered by the secured creditor have to be reduced from the amount of debt being claimed by the secured creditor at the stage of consideration of the appellant-borrower's prayer for waiver of the condition of pre-deposit this Tribunal should go by those judgments.

This Tribunal has already taken the view following the judgment of the Supreme Court in Blue Jagger's case (supra) that sale proceeds of auctioned property cannot be taken into consideration while considering the question of compliance of mandatory requirement of pre-deposit till the auction is finally confirmed. The Hon'ble Supreme Court has also been of the view in its earlier pronouncements that auction sale is confirmed when the appeal against, if filed by the judgment debtor, is decided and so long sale remains under challenge it will not acquire the status of a confirmed sale and remains in a 'nebulous' state. This was so held in the judgments reported in I (1990) BC 1 (SC) : 1989 (SLT Soft) 165 : (1989) 4 SCC 344, Maganlal v. M/s. Jaiswal Industries, Neemach & Ors. and V.K. Palaniappa Chettiar (Dead) v. Ramasami Gounder & Anr., III (2001) SLT 435 : 11 (2001) CLT 190 (SC) : 2001 (4) SCC 413. In the present case the appellant-mortgagor has not accepted the auction sale of his properties and is fighting legal battle to have those sales set aside and if he succeeds the Bank will have to return the sale proceeds to the auction purchasers and if that happens the appellant would have succeeded in getting decisions in his appeal without any pre-deposit having been made from his own money. That cannot happen in view of the decision of the Apex Court in the case of Narayan Chandra Ghosh (supra). The appellant's Counsel had cited some judgments but I need not refer to them since in none of them this aspect based on the above referred judgments of the Supreme Court was considered and decided. After having surrendered the properties voluntarily if the appellant had forgotten about those properties the matter might have been different but he is now fighting to get the sales of his properties set aside and, therefore, those sales have not attained finality so far.

This waiver application is accordingly rejected and the appellant shall consequently now make the pre-deposit of 50% of the amount of debt which was claimed from him by the respondent Bank in its notice under Section 13(2) of SARFAESI Act. This direction is to be complied with within four weeks and in case deposit is so made the amount shall be kept in a fixed deposit with a nationalised for a period which will fetch maximum rate of interest. In case of non-compliance of the condition of pre-deposit the appeal shall become liable to be rejected as not entertainable.