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Judgment
Ashok Menon, Chairperson
This is an application filed u/s 18(1) of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (in short "SARFAESI Act"). The Appellants had filed Securitization Application No. 35/2021 before DRT-II Mumbai u/s 17(1) of SARFAESI Act challenging the measures taken by the authorized officer and scheduling the auction of the secured assets of the Appellants on 26.02.2021 at the behest of the First Respondent (Defendant ICICI Bank Ltd.). The sale took place and the third Respondent herein became the successful bidder. The Appellants sought to amend the application by filing I.A. No. 407/2021 (amendment application) to incorporate certain facts and also to implead the auction purchaser as a party.
The Respondent Bank opposed the application stating that it seeks to introduce new facts which cannot be allowed. Considering the objections raised and on hearing the arguments on both sides, the learned Presiding Officer observed that the application cannot be allowed and accordingly it was dismissed with costs on 03.03.2022. Aggrieved by the impugned order, the Appellants preferred this Appeal. As submitted, the sale was conducted and the second Respondent M/s. Goldmine Telefilms Pvt. Ltd. purchased secured assets being the highest bidder for a total sum of Rs.14,21,00,000/-. The Appellants intended to incorporate the subsequent events, as well as to implead the auction purchaser as a necessary party to the S.A. as they were challenging the sale too. It is stated that while deciding amendment application, Ld. Presiding Officer went into the merits of the matter, which should not have been done at the time of consideration of the amendment application. It would not have been proper to decide the S.A. without the auction purchaser on the party array.
It is stated that Sec. 13(2) notice dated 22.06.2018 under the SARFAESI Act demanded payment of a sum of Rs.6,32,32,991/-from the Appellants and the second Respondent bid for purchased the property for a sum of Rs.14,21,00,000/- which is an amount way over what was demanded in the notice u/s 13(2). The balance amount is retained with the first Respondent Bank as a surplus amount. Under circumstances, Appellant prays that they are entitled to a complete waiver, as no amount is due from them. It is also stated that the second Appellant is a senior citizen, suffering from serious malignant disease and is undergoing treatment. There is sufficient prima facie case made out by the Appellants and the balance of convenience is also in their favour, hence, this appeal.
The first Respondent Bank has vehemently opposed the application for waiver of pre-deposit and has filed a reply stating that the application for waiver is not sustainable given the mandatory provision u/s 18 of the SARFAESI Act, and that the Appellant is bound to pre-deposit 50% of the amount claimed or decided and that the subject property was already sold in auction to the highest bidder which is the second Respondent herein. The consideration amount has been deposited, the sale confirmed and the sale certificate issued on 10.03.2022, as seen from exhibit-B annexed to the reply. It is settled law that the Appellants are liable to pre-deposit 50% of the amount due which includes interest accrued, and adds up to Rs.17,54,19,693.13 as of 31.03.2022. Hence, the Appellants may be called upon pay 50% of that amount, states the Respondent Bank. It is further stated that from out of the entire sale proceeds, the Respondent Bank has appropriated a sum of Rs.2,31,20,016.12 towards the outstanding balance of Loan Account No. LBMUM00001922985 and Rs.9,34,70,002.27 was appropriated toward the outstanding balance of Loan Account No. LBMUM00001922986. The remaining proceeds after appropriation towards the outstanding loans, which come to Rs.2,44,44,231.61 has been appropriated towards Dealer Funding Loan Account No. 010251005107. The Statement of Account about the Loan Accounts referred to above is produced as Exhibits C & D.
Shri Kinkhabwala, the Ld. counsel for the Appellants argues that the Appellants are not liable to pay anything since the Bank has realized more amount than what was due u/s 13(2) notice of SARFAESI Act, even if something is to be deposited it may be confined to only 25% of Rs.6,32,32,991/- the amount claimed in the notice u/s 13 (2). The Ld. Counsel also points to the Exhibit B notice u/s 13(2) attached Memo of Appeal which demands only the 3 aforesaid amount, without any demand for further interest specifically. Ld. Counsel draws attention to paragraph 9 which reads thus:-
“Under the circumstances, we hereby call upon you to repay the aforesaid entire dues of Rs.6,32,32,991.00 within 60 (sixty) days from the date of this notice, details whereof are mentioned hereunder in Annexure "D", failing which the bank shall be constrained to enforce its security interest without intervention of the court or tribunal, and will have no other alternatives, but to exercise any and other rights as mentioned in sub-section 4 of the Section 13 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 which will include one or more of the measures as described under Chapter III of the said Act, including but not limited to, taking over possession of and /or management of the secured Asset for realizing its dues at the Borrower's own risks as to the costs and consequences thereof.”
Shri Kinkhabwala also relies upon the decision dated 22.12.2011 in Sterlite Technologies Ltd V/s Union of India W.P. (L) No. 2758 of 2011 of the Bombay High Court wherein it is held thus:-
“For the limited purpose of considering whether a dispensation should be granted, the Appellate Tribunal has necessarily to evaluate as to whether a prima facie case is made out and the reasons which are to be formulated have to be confined only to that determination. If the proposition which has been laid down by the DRAT were to be accepted as good law that would mean that a litigant who does not plead financial hardship is disabled from urging that the requirement of pre-deposit should be reduced or waived within the parameters laid down by the statute. That is not reflective of the legal position. In considering as to whether a waiver should be granted, both the elements of a prima facie case and the question of financial hardship would have to be considered by the Appellate Tribunal. Where as in the present case, the Appellant does not plead financial hardship that is a relevant consideration which has to be taken into consideration and placed in the balance by the Appellate Tribunal. But that is not dispositive of the jurisdiction of the Appellate Tribunal. The Appellate Tribunal in its appellate jurisdiction is required to evaluate as to whether a prima facie case has been made out for the grant of waiver.”
Shri Kinkhabwala has also relied upon the decision of the Hon'ble Bombay High Court in M/s. MRB Roadconst. Pvt. Ltd. V/s Rupee Co-operative Bank Ltd. [(2016) SCC OnLine Bom. 85] to argue that interest on the dues mentioned in the notice is payable only if it is demanded. He points to the relevant portion in the judgment wherein it held thus:-
“18. On a plain reading of the 2nd proviso to section 18(1) of the SARFAESI Act read with the definition under the word “debt” as defined in section 2(g) of the RDDB Act, it is clear that before an appeal can be entertained by the DRAT, the borrower has to deposit 50% of the amount of debt due from him as claimed by the secured creditors or as determined by the DRT whichever is less. If there is no determination of the debt by the DRT under the provisions of the RDDB Act, then the borrower would have to deposit 50% of the amount of debt due from him as claimed by the secured creditors. The provision on a plain reading does not in any way exclude taking into consideration the future interest that is accrued on the debt owed by the borrower to the secured creditor. In fact, the definition of the word “debt” means any liability (inclusive of interest) which is claimed as due from any person by a bank or a financial institution. Therefore, if the claim made by the secured creditor in the section 13(2) notice includes future interest, the same would certainly be included in the “amount of the debt due” from the borrower to the secured creditor as contemplated under the 2nd proviso to section 18(1) of the SARFAESI Act. There is therefore no justification to hold that it is only the figure that is mentioned in the section 13(2) notice that is to be taken into consideration and not the future interest accrued on the said sum, whilst determining the deposit amount under the 2nd proviso to section 18 of the SARFAESI Act. The amount of deposit would have to be determined on the basis of the amount of debt due by the borrower to the secured creditor on the date when the appeal is filed in DRAT. This would not only include the amount mentioned in the section 13(2) notice but also interest accrued thereon till the date of filing of the appeal under section 18 of the SARFAESI Act. To our mind, this is the only interpretation that is possible of the 2nd proviso to section 18 of the SARFAESI Act. If we were to accept the contention of the Petitioner that the amount to be deposited by the borrower [under the 2nd proviso to section 18(1)] would be only on the basis of the sum/figure as mentioned in the section 13(2) notice and not the interest accrued thereon after the date of the said notice, the same would be violating the plain language of the statute. To interpret the 2nd proviso to section 18(1) in this fashion, to our mind, would clearly violate the plain and unambiguous language of the said section.” (Emphasis supplied)
The learned counsel further draws attention to the following observation made in para 22 of the judgment wherein referring to the decision of Madras High Court in the case of Sivakumar Textiles [AIR 2012 Madras 57] it is further held thus:-
"On careful perusal of the aforesaid decision, what can be culled out, therefrom is that the amount of "debt" due from the borrower as claimed by the secured creditor" would have no other meaning except the amount claimed in the notice under section 13 (2). We have no difficulty in accepting the aforesaid proposition. However, the question still remains whether the amount claimed in the 13 (2) notice would be inclusive of future interest or otherwise. If the claim for future interest has been made in the notice under section 13 (2), then the same would certainly have to be taken into account for determining the figure that would be required to be deposited by the borrower before his appeal can be entertained.” (Emphasis supplied)
Mr. Rishabh Shah the Ld. counsel for the Respondent Bank submits that given the decision of M/s. MRB Roadconst. Pvt. Ltd. (supra), payment of 50%amount claimed together with interest till filing of an appeal is mandatory. He also relied upon the decision of Khaja Industries V/s State of Maharashtra & Anr. [2007 (6) Mh.L.J. 712], in support of his argument that there is nothing in the section that even remotely suggests that notice u/s 13(2) is bad if the amount stated therein as due is not the exact amount due.
On an anxious consideration of the arguments advanced by both sides and on perusal of the documents relied upon by the parties, I find that the Appellants have probably succeeded in satisfying a prima facie case in challenging the impugned Order in requesting for impleading the auction purchaser also. However, I am not enthused by the arguments of the Ld. counsel Mr. Kinkhabwala on the point that the Appellants are liable to pay only 25% of the amount which is claimed in the notice sans the future interest that has accrued. Para 8 of the notice under section 13 (2) reads thus:-
“On account of defaults committed by you, are jointly & severally liable to pay to us the total outstanding dues of Rs.6,32,32,991.00 along with applicable interest, penal interest, charge etc. as on June 22, 2018. You are also liable to pay interest from June 22, 2018, at the contractual rates until payment / realization of the bank's entire outstanding. We state that said outstanding amount is arrived after giving credits to all the part-payment made by you."
Para 9 of the notice relied upon by Mr Kinkhabwala has to be read together with the above-extracted para 8, which would indicate that what is demanded by Respondent Bank is the amount together with future interest. The interest calculated up to the date of notice has been quantified at Rs.6,32,32,991/- and Appellants were asked to pay the amount within 60 days. The correct method of reading a document is that the document has to be read as a whole to ascertain the true import. It cannot be compartmentalized, dissected, segregated and then read. It is not permissible to take a passage and read it out of context in isolation and the spirit of it should be taken note of and not be carried away by the mere letters found therein. There is no gainsaying that the Appellants are not liable to pay interest that accrued subsequently.
Appellants are also not entitled to claim the benefit of the amount which has been realized by auctioning the property because they are challenging the sale and the measures taken under the SARFAESI Act. That is the reason why they seek to implead the auction purchaser. Under the circumstances, the amount which was realized in the auction cannot be deducted from the amount that is due.
Considering the entire facts and circumstances of the case, I call upon the Appellants to pay a sum of Rs.4,50,00,000/- as pre-deposit u/s 18(1) of the SARFAESI Act in two equal tranches of Rs.2,25,00,000/- each. The first tranche of Rs.2,25,00,000/- shall be deposited on or before 13.06.2022 and the second tranche of Rs.2,25,00,000/- shall be deposited on or before 27.06.2022. Default in payment of the tranches on time would result in the Appeal being dismissed.
On the payment of the first tranche within the time stipulated, there shall be a stay of all further proceeding with regards to the subject property under the SARFAESI Act.
As and when the said amounts are deposited, they shall be invested in term deposits in the name of Registrar, DRAT, Mumbai, with any nationalized bank, initially for 13 months and thereafter it will be renewed periodically.
Post on 14.06.2022 for reporting compliance concerning payment of the first instalment.