Sukumar Nandlal Shah vs Indian Overseas Bank & Ors

Ashok Menon, Chairperson

These are three Appeals filed by the very same Appellant who is aggrieved with the interlocutory orders as also the dismissal of S.A. No. 151/2015 on the files of Debts Recovery Tribunal No.II, Mumbai.

I.A. on Diary No. 662/2022 is an application filed under section 18 of the Securitization and Reconstruction of Financial Assets and Enforcement of Securities Act, 2002 (the SARFAESI Act for short) for waiver of pre-deposit.

I would first consider the application for waiver of pre-deposit. The Applicant states that the Respondent Bank has levied extremely onerous conditions in the terms of the loan availed by the Applicant and that unfair terms were levied in order to maximize the incidence of interest burden upon the Applicant to his detriment. The actions of the Respondent Bank are said to be malafide. The Applicant is broken and penniless and is not in a position to pay any amount towards the pre-deposit contemplated under the second proviso to Section 18 (1) of the SARFAESI Act. It is also contended that the balance of convenience is in favour of the Appellant and, therefore, this Tribunal may be pleased to grant a waiver of deposit.

I heard the learned counsel for the Appellant Shri. Mathew Nedumpara extensively, and also the learned counsel Shri. T. N. Tripathi for the Respondent Bank, who has vehemently opposed the claim of the Appellant for a total waiver of pre-deposit.

The legal position is no longer res integra. In Vinay Container Services Pvt. Ltd., Navi Mumbai Vs. Axis Bank, Mumbai AIR 2011 Bom 37 the Division Bench of the Hon’ble Bombay High Court has held thus:

“8. Section 18 provides a right of appeal to a person aggrieved by any order made by the Debts Recovery Tribunal under Section 17. The right of appeal under Section 18 arises in respect of "any order made by the Debts Recovery Tribunal" albeit under Section 17. The section refers to any order and those words are comprehensive enough to include a final as well as an interlocutory order. There is no reason or justification for this Court to exclude an interlocutory order from the purview of sub-section (1) of Section 18. The plain language of Section 18 must be interpreted and given effect to. A restriction not envisaged cannot be read into Section 18. The Court cannot re-write legislation. An order under Section 17 of the Act undoubtedly includes an order finally disposing of the proceeding, on a proceeding questioning the measures taken by the secured creditor under sub-section (4) of Section 13. But, equally, the Tribunal while exercising its power in an Appeal under Section 17 has the jurisdiction to pass interlocutory orders which are in aid of and ancillary to the exercise of the jurisdiction. That the Tribunal's jurisdiction under Section 17 encompasses the passing of an interlocutory order as well is no longer res integra, but is now well settled by the judgment of the Supreme Court in Mardia Chemicals Limited vs. Union of India (Supra) While summarizing its conclusion, the Supreme Court observed as follows:

"That the Tribunal in exercise of its ancillary powers shall have jurisdiction to pass any stay/interim order subject to the condition as it may deem fit and proper to impose."

The second proviso to section 18 postulates 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. The Appellate Tribunal has the power to reduce the amount, for reasons to be recorded in writing, to not less than twenty-five per cent of the debt referred to in the second proviso. Under the second proviso, the amount of fifty per cent which is required to be deposited by the borrower, is computed either with reference to (i) the amount of debt due from him as claimed by the secured creditors or (ii) the amount of debt due from him as determined by the Debts Recovery Tribunal. The lesser of the two amounts has to be deposited as a condition precedent to the appeal being entertained. In a situation where the amount of the debt is yet to be determined by the Debts Recovery Tribunal, obviously, the second limb can have no application. As already noted earlier, the scope of an appeal under Section 17, where a measure has been adopted by the secured creditor under Section 13(4) is the determination as to whether the measure has been adopted in accordance with the provisions of the Act and the rules. Where the amount of the debt is yet to be determined by the Tribunal and an appeal is preferred before the Appellate Tribunal by the borrower, the condition of pre- deposit would continue to apply by virtue of sub- section (1) of Section 18. In such a situation, the borrower would be liable to deposit fifty per cent of the amount of debt due from him inasmuch as there is no determination at that stage by the Tribunal of the amount of the debt.”

In view of the above, even interim orders of the Tribunal can be entertained before the Appellate Tribunal only on payment of pre-deposit. In the instant case, Appeal at Lodging No. 524 of 2022 is filed against the dismissal of the Securitisation Application for default of appearance of the Applicant. Though the Appellant has filed an application for restoration before the D.R.T., he has also availed his concurrent remedy by preferring an Appeal.

The other Appeals challenge the orders of the Ld. P.O. in not extending the stay granted to stall the Sarfaesi measures initiated by the Bank against the Appellant, and for vacating the stay. Those orders are also interlocutory orders and, if challenged in Appeal require mandatory compliance of the second proviso to Section 18 (1) of the SARFAESI Act.

The Appellant has not demonstrated any reason for not paying the pre-deposit amounts. All that he has pleaded in the application is impecuniosity. That may be one of the reasons for getting the pre-deposit amount reduced to the extent of 25% at the discretion of this Tribunal. But, a prima facie case to maintain the Appeal has also to be pleaded and established. Nothing is either pleaded or established regarding the existence of a prima facie case. Though the learned counsel Mr Mathew has argued at length about the impropriety in dismissing the S.A. for default, he has not made out any acceptable argument.

There are also decisions of the Hon’ble Supreme Court regarding the mandatory requirement under Section 18 (1) of the SARFAESI Act. In Narayan Chandra Ghosh Vs. UCO Bank & Ors. (2011) 4 SCC 548 which was followed in Union Bank of India Vs. Rajat Infrastructure Pvt. Ltd. & Ors. (2020) 3 SCC 770 it was held repeatedly by the Hon’ble Supreme Court that keeping in view of the language of Section 18 of the SARFAESI Act, even if the amount or debt due has not been determined by the D.R.T., the Appeal could not be DRAT without insisting on pre-deposit. DRAT, at best could, after recording the reasons reduce the amount to 25% but cannot waive the deposit totally.

Hence, the Appeal at Diary No. 524 of 2022 can be entertained only if the Appellant pays the amount required to be deposited under the second proviso to Section 18 (1) of the SARFAESI Act. As per the demand notice issued by the Respondent Bank under Section 13(2) of the SARFAESI Act on 12.05.2014 there was a demand of ₹31,30,70,809.66. Subsequent interest would have also accrued till the date of filing the Appeal. No other document pertaining to the amount due as of the date of Appeal is made available.

The Appellant has not made any case sufficient to get the mandatory pre-deposit reduced from 50%. Hence, I call upon the Appellant to deposit a sum of ₹17 Crores before this Tribunal under the second proviso to Section 18 (1) of the SARFAESI Act within a period of two weeks i.e. on or before 22.08.2022, failing which, the Appeal shall stand dismissed.

The other two Appeals are not maintainable for the reason that the interlocutory orders passed by the D.R.T. cannot be restored unless the S.A. itself is restored to file. Hence, those Appeals at Diary No. 497/2022 and Appeal on Diary No. 502/2022 stand dismissed.

Post on 23.08.2022 for compliance of payment of pre-deposit.