Writ petition by a secured creditor challenging the DRAT order entertaining a third party's appeal against dismissal of its securitisation application without directing pre-deposit under the SARFAESI Act. The court held that the pre-deposit requirement applies only to a borrower or guarantor, and dismissed the petition.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment reserved on: November 14, 2018 Judgment delivered on: December 12, 2018
INDIABULLS HOUSING FINANCE LTD
..... Petitioner
Through: Mr. Ashwini Kumar Mata, Sr. Adv. with Ms. Aastha Lumba, Adv.
versus
VAIBHAV JHAWAR AND ORS.
..... Respondents
Through: Mr. S.L. Gupta, Mr. N. Raja Singh, Ms. Manisha Chaudhary and Mr. Mithlesh Pal, Advs. for R1 to R5. Mr. Gaurav Gupta and Mr. Jaspal Singh, Advs. for R7 to R12 and R15 to R18.
CORAM: HON'BLE THE CHIEF JUSTICE HON'BLE MR. JUSTICE V. KAMESWAR RAO
J U D G M E N T
V. KAMESWAR RAO, J
of the petitioner herein insisting on the pre-deposit of half of the
W.P.(C) No. 4237/2018 Page 1 of 23
amount, which had been claimed by the petitioner under Section 13(2) of the SARFAESI Act for entertaining the appeal of the respondent.
FACTS:-
4,16,04,827/-. The DRT-I set aside the sale notice dated July 24, 2017 on the ground that the complete description of the property had not been given. The petitioner again issued a demand notice for recovery of an amount of 12,33,78,319/- along with future interest. It is the case of the petitioner that it took symbolic possession of the secured asset for non-compliance of demand notice by theW.P.(C) No. 4237/2018 Page 2 of 23
borrower. It appears, a sale notice of the secured asset was issued by the petitioner with auction date of October 30, 2017.
respondent Nos. 1 to 5 preferred an appeal before the DRAT impugning the order dated February 17, 2018 passed by the learned DRT, New Delhi. The DRAT vide the impugned order, entertained the appeal without directing the respondent Nos.1 to 5 to make pre-deposit as required under the SARFAESI Act. The case of the respondent Nos.1 to 5 before the Ld. DRAT was that they have invested a sum of `5.71 crores with the borrowerrespondent No.6 M/s Surya Construction Pvt. Ltd. The said loan was without any interest clause. The grievance of the respondent Nos.1 to 5 in the SA was that the property has been sold at much lower price. In other words, the grievance of the respondent Nos.1 to 5 was that, had the property been sold at a fair market value, it would have fetch much more than what was recoverable from the borrower and in that way, the dues which the borrower owes to the respondent Nos.1 to 5 would have also been recovered and the circumstances gives the appellant, a locus standi to challenge the action of the petitioner.
W.P.(C) No. 4237/2018 Page 4 of 23
and Ors. W.P.(C) No. 11766/2016 decided on February 01,
2017 to reject the plea on behalf of the petitioner challenging the locus standi of the respondent nos. 1 to 5, herein, before it.
respondents was dismissed while deciding the application filed by the petitioner Under Order 7 Rule 11 of the CPC.
W.P.(C) No. 4237/2018 Page 6 of 23
According to him, in view of the above, any aggrieved person is liable to make pre-deposit before an appeal is heard by the DRAT, as a precondition, under Section 18 of the SARFAESI Act.
W.P.(C) No. 4237/2018 Page 7 of 23
at hand and thereafter when the securitisation application is either allowed or dismissed, there arises a liability on the part of the third party to make a pre-deposit in consonance with the provisions and legislative intent of the Act.
W.P.(C) No. 4237/2018 Page 8 of 23
learned Appellate Tribunal by stating that the same is in conformity with the provisions of Section 18 of the SARFAESI Act, 2002.
make pre-deposit of half of the amount of the debt, which has been claimed by the petitioner herein under Section 13(2) of the SARFAESI Act. To answer this issue, it is necessary to reproduce Section 18 of the SARFAESI Act, as under:-
Provided that different fees may be prescribed for filing an appeal by the borrower or by the person other than the borrower:
Provided further 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
W.P.(C) No. 4237/2018 Page 9 of 23
secured creditors or determined by the Debts Recovery Tribunal, whichever is less: Provided also that the Appellate Tribunal may, for the reasons to be recorded in writing, reduce the amount to not less than twenty ‑ five per cent. of debt referred to in the second proviso.
2(f) "borrower" means any person who has been granted financial assistance by any bank or financial institution or who has given any guarantee or created any mortgage or pledge as security for the financial
W.P.(C) No. 4237/2018 Page 10 of 23
assistance granted by any bank or financial institution and includes a person who becomes borrower of a securitisation company or reconstruction company consequent upon acquisition by it of any rights or interest of any bank or financial institution in relation to such financial assistance;
the same would include a guarantor as well but not a person other than borrower / guarantor. The only interpretation given to second proviso to Section 18(1) shall be that if a person other than borrower / guarantor files an appeal before the Arbitral Tribunal then the stipulation of the pre-deposit of 50% (or 25%) of the amount of debt due from him as claimed by the secured creditors or determined by the DRT shall not be insisted upon. This is the only interpretation, which can be given to second proviso to Section 18(1) read with Section 2(f) of the SARFAESI Act.
and to what extent each component / part of the statute influences
W.P.(C) No. 4237/2018 Page 11 of 23
the meaning of the other part, would be different in each given
case” . Justice G.P. Singh states in Principles of Statutory
Interpretation (Eighth Edition, 2001),
"It may look somewhat paradoxical that plain meaning rule is not plain and requires some explanation. The rule, that plain words require no construction, starts with the premise that the words are plain, which is itself a conclusion reached after construing the words. It is not possible to decide whether certain words are plain or ambiguous unless they are studied in their context and construed....
In selecting out of different interpretations 'the court will adopt that which is just, reasonable and sensible rather than that which is none of those things' as it may be presumed 'that the Legislature should have used the word in that interpretation which least offends our sense of justice'.
"The courts strongly lean against a construction which reduces the statute to a futility. A statute or any enacting provision therein must be so construed as to make it effective and operative 'on the principle expressed in the maxim: ut res magis valeat quam pereat'."
"If the language used is capable of bearing more than one construction, in selecting the true meaning regard must be had to the consequences resulting from adopting the alternative constructions. A construction that results in hardship, serious inconvenience, injustice, absurdity or anomaly or which leads to inconsistency or uncertainty and friction in the system which the statute purports to regulate has to be rejected and preference should be given to that construction which avoids such results."
W.P.(C) No. 4237/2018 Page 12 of 23
In the words of Tindal, C.J., in Sussex Peerage case, "If the words of the statute are in themselves precise and unambiguous, then no more can be necessary than to expound those words in their natural and ordinary sense. The words themselves so alone in such cases best declare the intent of the lawgiver.
20. In Nairin v. University of St. Andrews reported in 1909
AC 147 , the Apex Court held that,
"Unless there is any ambiguity it would not be open to the Court to depart from the normal rule of construction which is that the intention of the Legislature should be primarily gathered from the words which are used. It is only when the words used are ambiguous that they would stand to be examined and construed in the light of surrounding circumstances and constitutional principle and practice."
21. In Ram Rattan v. Parma Nand reported in AIR 1946 PC
51 , the Hon'ble Mr. Justice S.R. Das, held as follows:
"The cardinal rule of construction of statutes is to read the statutes literally, that is, by giving to the words their ordinary, natural and grammatical meaning. If, however, such a reading leads to absurdity and the words are susceptible of another meaning, the Court may adopt the same. But if no such alternative construction is possible, the Court must adopt the ordinary rule of literal interpretation. In the present case, the literal construction leads to no apparent absurdity and therefore, there can be no compelling reason for departing from that golden rule of construction."
22. In Kanai Lal Sur v. Paramnidhi Sadhukhan reported in
W.P.(C) No. 4237/2018 Page 13 of 23
AIR 1957 SC 907 , the Supreme Court held that,
"it must always be borne in mind that the first and primary rule of construction is that the intention of the Legislature must be found in the words used by the Legislature itself. If the words used are capable of one construction only then it would not be open to the courts to adopt any other hypothetical construction on the ground that such hypothetical construction is more consistent with the alleged object and policy of the Act.
The words used in the material provisions of the statute must be interpreted in their plain grammatical meaning and it is only when such words are capable of two constructions that the question of giving effect to the policy or object of the Act can legitimately arise. When the material words are capable of two constructions, one of which is likely to defeat or impair the policy of the Act whilst the other construction is likely to assist the achievement of the said policy, then the courts would prefer to adopt the latter construction.
It is only in such cases that it becomes relevant to consider the mischief and defect which the, Act purports to remedy and correct."
SC 1241 , the Apex Court held that in considering the expression
used by the Legislature, the Court should have regard to the aim,
object and scope of the statute to be read in its entirety.
AIR 1972 SC 2284 , the Apex Court held that "where the statute's
meaning is clear and explicit, words cannot be interpolated."
W.P.(C) No. 4237/2018 Page 14 of 23
Excise and others reported in 1993 Supp (3) SCC 716 : AIR
W.P.(C) No. 4237/2018 Page 15 of 23
1993 SC 2288 , the Apex Court held that, where the words of the
statute are plain and clear, there is no room for applying any of the principles of interpretation, which are merely presumption in cases of ambiguity in the statute. The Court would interpret them as they stand.
29. In Nasiruddin v. Sita Ram Agarwal reported in (2003) 2
SCC 577 , the Supreme Court held as follows:
"35. In a case where the statutory provision is plain and unambiguous, the court shall not interpret the same in a different manner, only because of harsh consequences arising therefrom....
37. The court's jurisdiction to interpret a statute can be invoked when the same is ambiguous. It is well known that in a given case the court can iron out the fabric but it cannot change the texture of the fabric. It cannot enlarge the scope of legislation or intention when the language of the provision is plain and unambiguous. It cannot add or subtract words to a statute or read something into it which is not there. It cannot rewrite or recast legislation. It is also necessary to determine that there exists a presumption that the legislature has not used any superfluous words. It is well settled that the real intention of the legislation must be gathered from the language used. . ..... But the intention of the legislature must be found out from the scheme of the Act."
reported in (2006) 2 SCC 670 , the Supreme Court held that,
W.P.(C) No. 4237/2018 Page 16 of 23
"12. It is said that a statute is an edict of the legislature. The elementary principle of interpreting or construing a statute is to gather the mens or sententia legis of the legislature. It is well-settled principle in law that the court cannot read anything into a statutory provision which is plain and unambiguous."
31. In A.N. Roy Commissioner of Police v. Suresh Sham
Singh reported in AIR 2006 SC 2677 , the Apex Court held that,
"It is now well settled principle of law that, the Court cannot change the scope of legislation or intention, when the language of the statute is plain and unambiguous. Narrow and pedantic construction may not always be given effect to. Courts should avoid a construction, which would reduce the legislation to futility. It is also well settled that every statute is to be interpreted without any violence to its language. It is also trite that when an expression is capable of more than one meaning, the Court would attempt to resolve the ambiguity in a manner consistent with the purpose of the provision, having regard to the great consequences of the alternative constructions."
32. In State of Haryana v. Suresh reported in 2007 (3) KLT
213 , the Supreme Court held that,
"One of the basic principles of Interpretation of Statutes is to construe them according to plain, literal and grammatical meaning of the words. If that is contrary, to or inconsistent with any express intention or declared purpose of the Statute, or if it would involve any absurdity, repugnancy or inconsistency, the grammatical sense must then be modified, extended or abridged, so far as to avoid such an inconvenience, but no further. The onus of showing that the words do not mean what they say
W.P.(C) No. 4237/2018 Page 17 of 23
lies heavily on the party who alleges it must advance something which clearly shows that the grammatical construction would be repugnant to the intention of the Act or lead to some manifest absurdity."
Paragraphs 52 held as follows:
"52. No doubt ordinarily the literal rule of interpretation should be followed, and hence the court should neither add nor delete words in a statute. However, in exceptional cases this can be done where not doing so would deprive certain existing words in a statute of all meaning, or some part of the statute may become absurd."
34. In Mohd. Shahabuddin v. State of Bihar, reported in
(2010) 4 SCC 653 , the Supreme Court held that,
"179. Even otherwise, it is a well-settled principle in law that the court cannot read anything into a statutory provision which is plain and unambiguous. The language employed in a statute is a determinative factor of the legislative intent. If the language of the enactment is clear and unambiguous, it would not be proper for the courts to add any words thereto and evolve some legislative intent, not found in the statute. Reference in this regard may be made to a recent decision of this Court in Ansal Properties & Industries Ltd. v. State of Haryana [MANU/SC/0113/2009 : 2009 (3) SCC 553]
180. Further, it is a well-established principle of statutory interpretation that the legislature is specially precise and careful in its choice of
W.P.(C) No. 4237/2018 Page 18 of 23
language. Thus, if a statutory provision is enacted by the legislature, which prescribes a condition at one place but not at some other place in the same provision, the only reasonable interpretation which can be resorted to by the courts is that such was the intention of the legislature and that the provision was consciously enacted in that manner. In such cases, it will be wrong to presume that such omission was inadvertent or that by incorporating the condition at one place in the provision the legislature also intended the condition to be applied at some other place in that provision."
35. In Satheedevi v. Prasanna reported in (2010) 5 SCC 622 ,
the Hon'ble Supreme Court held as follows:
"12. Before proceeding further, we may notice two well-recognised rules of interpretation of statutes. The first and primary rule of construction is that the intention of the legislature must be found in the words used by the legislature itself. If the words used are capable of one construction, only then it would not be open to the courts to adopt any other hypothetical construction on the ground that such hypothetical construction is more consistent with the alleged object and policy of the Act. The words used in the material provisions of the statute must be interpreted in their plain grammatical meaning and it is only when such words are capable of two constructions that the question of giving effect to the policy or object of the Act can legitimately arise-Kanai Lal Sur v. Paramnidhi Sadhukhan [MANU/SC/0097/1957 : AIR 1957 SC 907]
13. The other important rule of interpretation is that the court cannot rewrite, recast or reframe the legislation because it has no power to do so. The court cannot add words to a statute or read words which are not there in it. Even if there is a defect or an omission in the statute, the court cannot correct
W.P.(C) No. 4237/2018 Page 19 of 23
the defect or supply the omission - Union of India v. Deoki Nandan Aggarwal [MANU/SC/0013/1992 : 1992 Supp (1) SCC 323] and Shyam Kishori Devi v. Patna Municipal Corpn. [MANU/SC/0191/1966 : AIR 1966 SC 1678]"
is no ambiguity in the provisions of Section 18 of the SARFAESI
Act. The provisions of Section 18 of the SARFAESI Act, are determinative of the fact that the legislature intended that it is only the borrower and the guarantor, who should be under obligation to make the pre-deposit. The same is clear on a literal and grammatical meaning of the words “borrower” and “any person aggrieved” as found mentioned in Section 18 and 2 (f) of the Act. There is no inconsistency within the provision of Section 18(1) of the Act.
W.P.(C) No. 4237/2018 Page 20 of 23
question arose as to what shall be the fate of pre-deposit on the disposal of the appeal. It was in that context, the Supreme Court made observations as relied upon by Mr. Mata that an appeal can be entertained only if the borrower deposits 50% of the amount determined by the DRT. Suffice it to state, the observations of the Supreme Court made have to be read in that context in which the issue has arisen in the said case. The said judgment has no applicability in the facts of this case.
the petitioner is neither the borrower nor the guarantor and
W.P.(C) No. 4237/2018 Page 21 of 23
therefore, there is no necessity for filing any waiver application before the DRAT. The High Court relied upon the judgment of the Supreme Court in Narayan Chandra Ghosh (supra). The High Court considered Section 18(1), which inter-alia contemplates that any person aggrieved by the order passed by the DRT may file an appeal before the DRAT, there should be compliance of pre-deposit as contemplated in the said Section. A perusal of the judgment would reveal that the High Court has not considered the effect of the second proviso to Section 18(1) of the SARFAESI Act, which according to us shall be a relevant provision to interpret the substantive portion of Section 18(1) as well. The said judgment is per incuriam.
W.P.(C) No. 4237/2018 Page 22 of 23
of the DRAT, whereby he was directed to pay an amount of `5 Crores by way of pre-deposit. As stated above, there is no dispute nor can it be said that a borrower is not required to make pre-deposit.
the appeal filed by the respondents 1 to 5 including their locus standi .
V. KAMESWAR RAO, J
CHIEF JUSTICE
DECEMBER 12, 2018 /ak
W.P.(C) No. 4237/2018 Page 23 of 23
1 issue framed by the court
Whether respondents who are neither borrowers nor guarantors are liable to make a pre-deposit of 50% of the debt under the second proviso to Section 18(1) of the SARFAESI Act for their appeal to be en
Colour shows how this judgement treated each authority
Manju Devi and Ors v. M/s RBL Bank Ltd. and Ors.Referred¶6
Manju Devi and Ors v. M/s RBL Bank Ltd. and Ors. W.P.(C) No. 11766/2016 decided on February 01, 2017
Axis Bank v. SBS Organics Private Ltd. and Anr.Distinguished¶38
Axis Bank v. SBS Organics Private Ltd. and Anr. (2016) 12 SCC 18 · Who else cites this
Narayan Chandra Ghosh v. UCO Bank & Ors.Distinguished¶39
Narayan Chandra Ghosh v. UCO Bank & Ors. Civil Appeal No. 2681 of 2011
Sanjeev Sikka and Anr. vs. Reserve Bank of India and Ors.Referred¶10
Sanjeev Sikka and Anr. vs. Reserve Bank of India and Ors. W.P.(C) No. 312/2018
K. Kalpana v. The Authorised Officer, State Bank of India and OrsPer incuriam¶40
K. Kalpana v. The Authorised Officer, State Bank of India and Ors W.P. No. 21560/2014
P. Murugan V. The Registrar, Debts Recovery Appellate Tribunal and Ors.Distinguished¶41
P. Murugan V. The Registrar, Debts Recovery Appellate Tribunal and Ors. W.P. No. 28528/2014
Biren Harish Vakharia v. State Bank of IndiaDistinguished¶42
Biren Harish Vakharia v. State Bank of India Special Civil Application No. 15547/2011
Nairin v. University of St. AndrewsRelied on¶20
Nairin v. University of St. Andrews 1909 AC 147
Ram Rattan v. Parma NandRelied on¶21
Ram Rattan v. Parma Nand AIR 1946 PC 51 · Who else cites this
Kanai Lal Sur v. Paramnidhi SadhukhanRelied on¶22
Kanai Lal Sur v. Paramnidhi Sadhukhan AIR 1957 SC 907 · Who else cites this
State of W.B. v. Union of IndiaRelied on¶23
State of W.B., v. Union of India AIR 1963 SC 1241 · Who else cites this
S. Narayanaswami v. G. PanneerselyamRelied on¶24
S. Narayanaswami v. G. Panneerselyam AIR 1972 SC 2284 · Who else cites this
C.I.T., Madras v. T. Sundram Iyengar (P) Ltd.Relied on¶25
C.I.T., Madras v. T. Sundram Iyengar (P) Ltd., 1976 (1) SCC 77 · Who else cites this
Ku. Sonia Bhatia v. State of U.P.Relied on¶26
Ku. Sonia Bhatia v. State of U.P., and others 1981 (2) SCC 585 : AIR 1981 SC 1274 · Who else cites this
Nelson Motis v. Union of IndiaRelied on¶27
Nelson Motis v. Union of India AIR 1992 SC 1981 · Who else cites this
M/s. Oswal Agro Mills Ltd. v. Collector of Central ExciseRelied on¶28
M/s. Oswal Agro Mills Ltd., v. Collector of Central Excise and others 1993 Supp (3) SCC 716 : AIR 1993 SC 2288 · Who else cites this
Nasiruddin v. Sita Ram AgarwalRelied on¶29
Nasiruddin v. Sita Ram Agarwal (2003) 2 SCC 577 · Who else cites this
Vemareddy Kumaraswamy Reddy v. State of A.P.Relied on¶30
Vemareddy Kumaraswamy Reddy v. State of A.P., (2006) 2 SCC 670 · Who else cites this
A.N. Roy Commissioner of Police v. Suresh Sham SinghRelied on¶31
A.N. Roy Commissioner of Police v. Suresh Sham Singh AIR 2006 SC 2677 · Who else cites this
State of Haryana v. SureshRelied on¶32
State of Haryana v. Suresh 2007 (3) KLT 213
Gujarat Urja Vikas Nigam Ltd. v. Essar Power Ltd.Relied on¶33
Gujarat Urja Vikas Nigam Ltd. v. Essar Power Ltd., (2008) 4 SCC 755 · Who else cites this
Mohd. Shahabuddin v. State of BiharRelied on¶34
Mohd. Shahabuddin v. State of Bihar, (2010) 4 SCC 653 · Who else cites this
Satheedevi v. PrasannaRelied on¶35
Satheedevi v. Prasanna (2010) 5 SCC 622 · Who else cites this
3 provisions across 1 enactments
Indiabulls Housing Finance Ltd.
Vaibhav Jhawar
M/s Surya Construction Pvt. Ltd.
V. Kameswar Rao
As recorded by the court registry
A petition under Article 226 of the Constitution asking a High Court to issue a writ against the State or a public authority in a civil matter.
Judgements on the same questions, provisions and authorities, from every court