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Judgment
Ashok Menon, Chairperson
This is an Application filed by the Appellant for a stay of the impugned order dated 14/09/2022 passed in I.A. No. 1538/2022 in SA No. 151 of 2022 on the files of Debts Recovery Tribunal, Nagpur ('DRT' for short).
The Applicants in the Securitisation Application (SA) before the DRT had filed I.A. No. 637/2022 for a stay of the Sarfaesi measures initiated against them by the Appellant, a financial institution. On 25/07/2022 when the said I.A. No. 637/2022 came up for hearing, the Ld. Presiding Officer directed the Applicants to pay a sum of ₹1 crore and on deposit of that amount, the secured assets which have been taken possession by the secured creditor were directed to be restored to the Applicants. The Applicants had in accordance with the order passed in I.A. No.637/22 paid the amount. Aggrieved by that order, the Appellants had earlier come up in appeal by filing Miscellaneous Appeal No. 104/2022. When that appeal came up for hearing, this Tribunal observed that under section 17 (3) of the SARFAESI Act the DRT is empowered to restore the possession of the secured assets which has been wrongly taken possession of, but for that, there must be a finding that the Sarfaesi measures were defective and on that ground, the SA resulted in favour of the Applicant. In the instant case, the Ld. Presiding Officer had invoked the powers under section 17(3)(c) at the interlocutory stage, which apparently appears to be flawed, and therefore, the said action of the Ld. Presiding Officer was undone and the appeal was disposed of with a direction to the DRT to dispose of the SA itself as expeditiously as possible, at any rate, within a period of one month.
When the SA came up for hearing before the DRT, the Applicants in the SA filed I.A. No. 1538/2022 submitting that the sum of ₹1 crore deposited by them as a condition to restore possession of the property may be refunded to them in view of the setting aside of the order in Appeal. Considering the submissions on both sides, the Ld. Presiding Officer directed the Appellant to refund the deposited amount of ₹1 crore to the Applicants, forthwith.
Aggrieved by that order, to return the amount which has been adjusted towards the debt due, the Appellant is in appeal once again and submits that the Applicants in the S.A. had undertaken to deposit a sum of ₹1 crore towards the debt and that they were also agreeable to pay monthly instalments of ₹6,36,620/-with effect from August 2022. They also agreed to settle the loan amount with the Appellant under an OTS scheme within 6 months. In view of the fact that the Respondents herein have admitted their liability and considering the huge amount that is due towards the debt, the appeal may be allowed and the Respondents herein prevented from getting a refund of the amount they have paid.
Heard the learned counsel appearing for the Appellant and the Respondents.
The learned counsel appearing for the Respondents submits that the deposit is made by the Respondents as a condition precedent for granting a stay. There was also an undertaking to pay further amounts in instalments as per the OTS proposal made by the Respondents to the Appellants. However, the Appellant did not accept the OTS proposal and as a result of that, further payments were also not made. There was no point in complying with the proposal as the OTS proposal was not acceptable to the Appellants, submits the Ld. Counsel for the Respondents. Moreover, in the earlier Appeal, Misc. Appeal No. 104/2022, this Tribunal had directed the S.A. itself to be disposed of. There was however no direction for the return of the amount that was paid as a condition for the stay. Hence, the Respondents applied for a return of that amount. The Ld. Presiding Officer allowed the prayer directing the return of the amount to the Respondents.
The Ld. Counsel for the Respondents relies on the decision of the Hon'ble Supreme Court reported in M/s Kut Energy Private Limited and Ors vs. Authorised Officer, Punjab National Bank, Large Corporate Branch, Ludhiana and Ors AIR 2019 SC 4994 to argue for the proposition that the amount deposited by the Respondents is neither a secured asset nor a secured debt and hence, the amount cannot be appropriated by the bank. The facts and the above-cited decision shows that an OTS proposal made to the bank was rejected. The facts in the cited decision indicate that when the matter came up for a preliminary hearing before the High Court of Himachal Pradesh, accepting the proposal of the debtor to deposit a sum of ₹140 crores, the Court directed the deposit of the said amount in instalments. Three instalments amounting to a total of ₹40 crores were deposited in accordance with the directions. Prior to the deposit of the 4th instalment of ₹100 crores, the bank rejected the OTS and challenged the order of the High Court. The application filed by the debtor for a refund of the amount deposited was rejected by the High Court stating that if the bank's suit is decreed, fully or partially, the amount of ₹40 crores, deposited by the petitioners is liable to be adjusted/appropriated towards the decretal amount. However in the event of dismissal of such suit, with the finding of the borrower of the guarantor is no longer under any liability, the amount so deposited by them can be refunded to them. The prayer made by the debtor for a refund of the amount was thus turned down. In an appeal before the Hon'ble Apex Court, it reversed the finding of the High Court on the basis of the earlier decision of the Apex Court in Axis Bank vs. SBS Organics Pvt. Ltd and Ano (2016) 12 SCC 18 wherein the question that arose for consideration was whether the money deposited in order to maintain an Appeal under section 18 of the SARFAESI Act before the Debts Recovery Appellate Tribunal could be adjusted towards the amount due to the concerned bank and whether the concerned bank had a lien over the money so deposited. It was held that the nature of the pre-deposit in terms of section 18 was neither a 'secured asset' nor was it a 'secured debt' and in the circumstances, the prayer for a refund of the amount in the deposit was required to be allowed. The Apex Court had also considered the submissions that the concerned bank had no lien over the amount in terms of section 171 of the Contract Act, 1872. This finding was reiterated by the Hon'ble Apex Court in Kumar Aluminium vs. Asset Reconstruction Company India Ltd. and Ors (2016)9 SCC 361. After considering the decision in Axis Bank (supra), the Hon'ble Supreme Court has in M/s Kut Energy Private Limited (supra) held thus:
“11. In the present case, the deposit of ₹ 40 crores in terms of the order of the High Court on 11/10/2017 was only to show the bona fides of the Appellants when a revised offer was made by them. The deposit was not towards satisfaction of the debt in question and that is precisely why the High Court had directed that the deposit would be treated to be deposited in the Registry of the High Court.”
In the instant case also, the facts are analogous. The Respondents had made a proposal for OTS an undertaking to deposit some amount in instalments and in order to prove their bona fides, they deposited a sum of ₹1 crore. The OTS proposal was not acceptable to the Appellant and therefore, further payments were not made. The deposit in the instant case was also made by the Respondents to prove their bona fides with respect to the OTS proposal made by them. Under the circumstances, I find that the Ld. Presiding Officer was justified in directing the amount to be returned to the Respondents. There is no reason for interference, the appeal is only to be dismissed and I do so.
Resultantly, the appeal is dismissed. The amount of ₹1 crore shall be refunded within three weeks. The direction for expeditious disposal of the
Securitisation Application to the DRT shall continue.