Raisina Bengali School vs ASREC (India) Ltd.

Ranjit Singh, J

The Tribunal below has allowed the application filed by the respondent Financial Institution seeking permission to place on record of the SA, the written statement filed by the appellant in the OA and replication filed by the respondent Bank. The appellant accordingly has challenged this order through the present appeal. The Registry raised an office objection in regard to the pre-deposit of 50% of the notice amount which the appellant had net complied with. An application is filed seeking waiver of the requirement of pre-deposit.

The Counsel for the appellant submitted before the Registrar that the appellant is not the borrower and the borrower is Raisina Bengali School, CR Park. The plea was also that the Managing Committee was not authorized to raise loan. The Registrar has rejected this plea after making observation in regard to the purpose for which this loan was raised. The appeal was accordingly listed subject to this objection raised by the Registry.

At the outset, the Counsel for the appellant is asked to make submissions on the issue of waiver of requirement of pre-deposit. The Counsel for the appellant sticks to the stand which the appellant has raised before the Registrar. It is stated that the appellant is not the borrower. In this regard, the Counsel for the appellant has made reference to certain documents like notice under Section 13(2) which is addressed to Mr. B.C. Mondal, Member, Raisina Bengali School, Managing Committee, CR Park, New Delhi. Even the respondent Financial Institution had addressed a letter to M/s. Raisina Bengali School, CR Park, on 1st December, 2012. In the application filed under Section 14, Mr. B.C. Mondal, Member, Managing Committee, Raisina Bengali School, CR Park, New Delhi is impleaded as one of the respondents. On this basis, the Counsel for the appellant would submit that the appellant society is not the borrower and, thus, cannot be required to make pre-deposit.

Whether the appellant is required to make pre-deposit to maintain the appeal or not, therefore, would call for determination.

The present appeal is filed by Mr. Ashish Haldar, President Government Body, Raisina Bengali School (Society), Mandir Marg, New Delhi. If the plea is that notice under Section 13(2) is not to the appellant, then the appellant cannot have any grievance to file SA. In that event, even the SA may not be maintainable.

The appellant otherwise has filed this SA to impugn the measures/possession/recourse notice dated 24th June, 2013. Plea in the SA is that this notice is grossly perverse, illegal, arbitrary and mala fide. The measures initiated by the respondent Financial Institution are termed as bad and illegal by referring to certified copy of the order received from the Court of ACMM on the ground that the respondent financial institution had only negative lien in regard to the property. As per the appellant, the subject property is not mortgaged but only a negative lien was created on 4th August, 2005. The appellant has alleged that this mortgage/negative lien was created without any sanction of the authority or permission by some of the members of the Managing Committee of the school, It is on this count that the recourse taken by the Financial Institution is alleged to be in violation of the statutory requirement.

In short, the plea of the appellant is that some office bearers of the Managing Committee of Raisina Bengali School, CR Park, New Delhi had availed some loan facilities from Union Bank of India. The Bank had assigned the debt to ASREC (India) Limited on 8th February, 2013. The appellant Society is a registered Society and apex body of Raisina Bengali School, Mandir Marg and Raisina Bengali School, CR Park. It is averred that the Managing Committee of Raisina Bengali School, CR Park is only to look after the management of the school and had no power to create any mortgage. On this basis, the action initiated by the respondent Financial Institution is challenged by the appellant.

Issue whether negative lien or mortgage had been competently created would be determined by the Tribunal below while deciding the SA. The order impugned is only where the Tribunal below has al lowed the prayer of the Bank to take on record of the SA the/Written statement filed by the appellant in the OA and the replication filed by the Bank. The appellant has made a grievance against this order by filing the appeal under Section 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, the SARFAESI Act).

The issue raised by the appellant to urge that there is no need to make a pre-deposit is on the ground that the mortgage has been created by the person who was not competent to do so. The appellant is concededly apex body which is running the school. Whether the person creating mortgage/negative lien was competent or not is not the issue under consideration here. The issue is whether to maintain the appeal under Section 18 of the SARFAESI Act where possession notice is challenged by the appellant claiming to be the owner of the property which is concededly mortgage/under negative lien can be so maintained without making a pre-deposit.

The property rightly or wrongly mortgaged is the one against which the appellants are seeking relief. The appeal is under Section 18 of the SARFAESI Act. The issue whether to maintain such appeal requirement of seeking waiver of pre-deposit would arise or not has been considered by this Tribunal recently in a case of Ms Shree Acids & Chemical Ltd. & Anr. v. M/s. ASREC (India) Ltd. & Ors., Misc. Appeal No. 100 of 2013, decided on 26th May, 2014. The view expressed in this case is as under:

"I have minutely examined and considered the submissions made and has also examined the various judgments which have been placed before me. The Counsel for the appellant has referred to the view of this Tribunal expressed in the cases of Shree Engineering Industries Pvt. Ltd. & Anr. v. United Bank of India, II (2012) BC 3 (DRAT), and Rajasthan Art Emporium v. Bank of India & Anr., II (2012) BC 13 (DRAT). In both these cases this Tribunal has taken a view that the appellants were required to comply with the requirement of pre-deposit as referred to in second proviso to Section 18(1) of the SARFAESI Act. While discussing the legal position, this Tribunal has no doubt observed that in case where interim or interlocutory orders are passed which does not affect the action or measures taken by the secured creditor, condition of pre-deposit would not be applicable. This view cannot be reconciled with the law laid down by the Hon'ble Supreme Court in Narayan Chandra Ghosh v. UCO Bank & Ors., II (2011) CLT 355, and some other judgments in the cases of like Vinay Container Services Pvt. Ltd. & Ors. v. Axis Bank, IV (2011) BC 445 (DB); Swadeshi Cement Ltd. v. Asset Care Enterprises Limited, W.P. (Civil) No. 13143 of 2009, decided on 30.4.2010 and Salyaval Venbkat Krishna Rao & Ors. v. Union of India & Ors., AIR 2011 Delhi 1, that have been referred to above. All these judgments were placed before this Tribunal while passing the orders in the case of Shree Engineering Industries Pvt. Ltd. and Rajasthan Art Emporium. Judgment of Bombay High Court in the case of Forum Diamonds & Ors. v. Bank of Baroda & Ors. II (2010) BC 585 was also placed before this Tribunal where the plea that unless amount is determined and finding is recorded about the actual amount due, the provision of Section 18 of the SARFAESI Act would not come into play had not been accepted. As observed by the Court in this case, the Legislature in its wisdom has used the words "or" and the same has to be construed and read as "or" and not as "and". It is held that either of the amounts i.e. the amount claimed by the secured creditor or the amount determined by the DRT can be the basis of determining 50% or 25% of the debts as the case may be.

To overcome the judgments placed before it, this Tribunal has observed that except in the case of R.V. Saxena v. Union of India, 127 (2006) DLT 267 (DB), none of the cases cited before the Tribunal had considered the question of requirement of pre-deposit for entertaining the appeal before the Appellate Tribunal. To my thinking issue of requirement of pre-deposit clearly arose in the case of Narayan Chander Ghosh and the Court seems to have expressed itself in clear and unambiguous terms. This Tribunal in the cases of Shree Engineering and Rajasthan Art Emporium has noticed and reproduced some of the relevant finding but apparently has given no reason to distinguish the ratio emerging from this case. The observation may not have been in respect of an order passed on interim application but the views are clear and ambiguous.

Section 18 of the Act apparently has not made any distinction in regard to final or interim order In para 11 of Shree Engineering case, this Tribunal has reproduced the observation made by the Supreme Court that there is an absolute bar to the entertainment of appeal under Section 18 of the Act unless the condition precedent, as stipulated, is fulfilled. If that be so, can it be said that the Apex Court in this case was not considering the issue of pre-deposit in respect of an order passed under Section 17 of the Act. The Supreme Court in this case has even observed that when statute confers right of appeal, while granting the right, the legislature can impose conditions for exercise of such rights. The conditions as imposed in Section 18 of the Act were held not to be onerous.

Besides Forum Diamonds & Ors. v. Bank of Baroda & Ors., II (2010) BC 585; M/s. Swadeshi Cement case (supra), Vinay Container case (supra) R.V. Saxena v. Union of India, 127 (2006) DLT 267 (DB) and judgment of Madras High Court in the case of Indian Bank Assets Recovery Management Branch v. Homosons Apparels, MANU/TN/325/2008 case had been cited before this Tribunal while deciding Shree Engineering and Rajasthan Art Emporium cases. The ratio of law emerging from these cases is found reproduced in the two cases decided by this Tribunal. I have not been able to find reasons, if any, recorded by this Tribunal to distinguish these cases to take a different view. The only reason given is that none of the cases except for R.V. Saxena case, the issue of pre-deposit against interim order was being considered. As already noticed, the issue of pre-deposit being essential condition has been considered in all the cases. In some of the cases it is held that section can not be rewritten and that the plain words used in the section have to be given effect to."

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"That being so, the right to appeal has to be strictly considered in terms of the statutory provision which confers the right of appeal. Section 18 of the SARFAESI Act has conferred right of appeal upon any person aggrieved. Thus, it is not only the borrower, but other affected person can also file appeal under the section. As per the wording of the section, it is clear enough that any person aggrieved by any order made the Debts Recover)' Tribunal has a right to file appeal. This section has further clarified the order which can be challenged in appeal. The words used in this section are "by any order made by the Debts Recovery Tribunal". Thus, appeal can be filed against any order be it a final or interim/interlocutory order where action or measure is initiated by the secured creditor under Section 13. This section does not make any distinction while conferring the right of appeal against an order. It is any order which is passed under Section 17 by the Debts Recovery Tribunal that is made appealable. If any interim order is passed on any matter whatsoever that will be covered by the words "any order made by the Debts Recovery Tribunal" and if these words are interpreted, to mean that it will not cover within its meaning interim or ancillary orders then it may well be said that such order may have to be held as not appealable at all. Reading the section in this manner to say that some orders are not appealable may do violence to the clear words used in this section. Once the section has made 'any' order appealable no distinction can be made to say certain order are not appealable once all order are made appealable when an aggrieved person files an appeal against any interlocutory or ancillary order on the ground that the appeal is maintainable against any order then such appeal is to be only filed and maintained under Section 18 of the Act. Such an appellant may not then be permitted to urge that this order would not be covered by the proviso contained in this section requiring him to make a deposit as a condition precedent for entertaining the appeal. One cannot file appeal under a section and then plead that the other part of the section will not apply to the appeal. Such position has to be provided in the section and cannot be introduced through interpretation. Thus considered in the light of the law laid down by the Hon'ble Supreme Court in regard to Section 18 of the SARFAESI Act, it would become clear that the requirement of pre-deposit cannot be wished away."

This view has been expressed by this Tribunal primarily after relying on the judgment of Hon'ble Supreme Court in the case Naryan Chandra Ghosh (supra). The judgment passed by this Tribunal was impugned before Delhi High Court and is upheld as the writ stands dismissed. Thus, the view clearly which would emerge from the settled legal position is that in order to maintain the appeal under Section 18, the appellant would have to comply with the requirement of Section 18(2) so far as the issue of making a pre-deposit is concerned.

The appellant was given option to move an application seeking waiver of the requirement of pre-deposit. Such request could easily have been made even on the grounds as are urged now. The appellant was even apprised that the Tribunal can give some time to the appellant to make the pre-deposit. The Counsel, however, submits that this Tribunal may pass the order and the appellants are not keen or interested in making any pre-deposit.

In my view, the appellants are required to make pre-deposit or seek its waiver in order to maintain the present appeal which is under Section 18 of the SARFAESI Act in view of the law laid down in various judgments as noticed above. Since the appellants have expressed their unwillingness to make any pre-deposit, the appeal is dismissed being not maintainable.