Dismissed

Aromatic Intermediates v. Kotak Mahindra Bank Limited

DRAT14 Jun 2022IA/72/2022

Case brief

AI extract

What is this about?

The Appellate Tribunal rejected the appellant's application to waive the Section 18(1) pre-deposit under the SARFAESI Act. The Tribunal held that the deposit amount includes future interest as per the notice and found no prima facie case for waiver due to the appellant's prolonged litigation.

What did the court decide?

Appellants directed to deposit Rs.80,34,74,751/- in two equal instalments with no stay of possession proceedings.

Aromatic Intermediates versus Kotak Mahindra Bank Limited — Banking and Recovery | DRAT (2022)

¶1

BEFORE THE DEBTS RECOVERY APPELLATE TRIBUNAL, AT: MUMBAI Present: Mr. Justice Ashok Menon, Chairperson

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I.A. No. 72/2022

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Appeal No. 22/2022

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Between

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M/s. Aromatic Intermediates & Chemicals, … Appellant/s Through its Proprietor,

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Shri. Narendra Jayantilal Trivedi & Ors.

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V/s.

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The Authorized Officer, Kotak Mahindra Bank Ltd.

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…Respondent/s

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Mr. Umesh Shetty a/w Mr. Jamshed Ansari, Advocate for Appellants.

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Mr. Rohit Gupta a/w Ms. Shobha Chavan, i/b M/s. V. Deshpande & Co., Advocate for Respondent.

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-: Order dated: 14/06/2022:-

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Heard Sri Umesh Shetty the learned counsel for Appellant and Sri Rohit Gupta the learned counsel for the Respondent on this application for waiver of pre-deposit u/s 18 (1) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the SARFAESI Act).

¶15

Aggrieved by the dismissal of their Securitization Application (S.A.) No. 171/2016 on the files of Debts Recovery Tribunal No. I, Ahmedabad (D.R.T.-I, Ahmedabad) by the order dated 19.04.2021, with costs of Rs.25,000/-, the applicants are in appeal.

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The facts of the case can be encapsulated thus:

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In the year 1979 the first Appellant, a sole proprietorship, approached the State Bank of India for availing credit facilities which were granted a total loan of Rs.29 Lakhs under different heads of credit facilities. Appellant No.2 and one Smt. Kokilaben N. Trivedi, who is now no more, and presently represented by the third Appellant, stood as Guarantors for repayment of the aforesaid loan. Immovable properties were mortgaged and the stocks, book debts, receivables, plant and machinery etc; were hypothecated in favour of the State Bank of India.

¶19

The Appellants had allegedly defaulted payment of the amount due and in the year 1986, the State Bank of India declared the Loan Account as Non Performing Assets (N.P.A.). The S.B.I filed Special Civil Suit No. 937 of 1986 before the City Civil Court, Ahmedabad, for recovery of Rs.44,01,159.47. That Suit was subsequently transferred to the D.R.T. given the enactment of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as the RDDB&FI Act) and was numbered by the D.R.T. as Transfer Application (T.A.) No. 95 of 1995. During the pendency of the Special Civil Suit, the Civil Court vide order dated 19.04.1994 permitted the State Bank of India to take physical possession of the mortgaged property which included factory land and buildings situated at G.I.D.C. Industrial Estate, Vatva, Ahmedabad and also the hypothecated goods through the Court Receiver which were subsequently sold by the Court Receiver in a public auction.

¶20

The Appellants contend that neither the S.B.I. nor their successor, the present Respondent, has at any time disclosed the total amount recovered by them in the auction that was admittedly conducted. Subsequently, the D.R.T. Had through the receiver sold the factory land and the buildings situated therein and the amount

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that was recovered by them in that auction sale is also not disclosed. The T.A. No. 95/1995 was decreed by the D.R.T.-I, Ahmedabad, in favour of the State Bank of India allowing them to realize a sum of Rs.44,01,159.47 by selling the secured assets.

¶23

Recovery proceedings were initiated before the Recovery Officer (R.O.), D.R.T.-I, Ahmedabad, on 16.04.2003. In the year 2006, while the proceedings were pending before the R.O., the loan account was assigned to the present Respondent, Kotak Mahindra Bank Ltd.

¶24

The Respondent Bank initiated action under the SARFAESI Act and issued a demand notice on 30.06.2011. The Appellants challenged the legality of that notice by filing S.A. No. 94/2011 and the same was dismissed by the D.R.T.-I, Ahmedabad, in 2015. The Respondent Bank thereafter proceeded to issue notice u/s 13 (4) of the SARFAESI Act on 16.07.2015 for taking over possession. In the meanwhile, the Appellants raised objections before the Recovery Officer regarding the Order he had passed against them on 06.01.2015, and vide Order dated 15.07.2016, the R.O. Modified his earlier Order. That is challenged in an appeal filed by the Bank before the DRT and is pending consideration. Application made before the Court of the Chief Metropolitan Magistrate u/s 14 of the SARFAESI Act as C.M.A. No. 256/2015. was allowed vide order dated 16.08.2016, and the Respondent Bank was allowed to take over physical possession of the secured assets.

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Aggrieved with the taking over the possession of the secured assets u/s 14 of the SARFAESI Act, the Appellant filed S.A. No. 171 of 2016 before the D.R.T.-I, Ahmedabad, on 24.09.2016 challenged the action and measures on various grounds. While the said S.A. was pending, the Appellants also approached the Hon'ble High Court of Gujarat challenging the Order of the CMM to the extent of not appointing a subordinate officer for the execution of the Order. The High Court disposed of the criminal application vide Order dated 02.12.2016, and under that, the CMM authorized the Registrar of that Court to take possession of the secured assets. The interlocutory application filed in S.A No. 171/2016 before DRT was rejected. Application No. 643/2017 filed before CMM for clarification of the Order was rejected on 04.02.2017. Thereafter, the Appellants filed Special Civil Application (S.C.A.) No. 2763 of 2017 seeking compliance of Order dated 15.07.2016 of the Recovery Officer, despite the appeal before the DRT being pending. In the said proceedings, the Order of the CMM in Criminal Application No. 643/2017 and the Order of the DRT in S.A. No. 171 of 2016 dated 19.04.2021 dismissed the S.A with costs of Rs. 25,000/-, were also challenged. Hon'ble High Court of Gujarat also rejected their S.C.A. No. 2763 of 2017 vide order dated 07.10.2021 with the exemplary cost of Rs. 1,00,000/-. Appellants challenged that order of the Single Judge of the Hon'ble High Court by filing Letter Patent Appeal (L.P.A.) No. 75 of 2022. The Division Bench, Hon’ble High Court was pleased to grant an ex-parte interim relief in favour of the Appellants on 25.01.2022 staying the dispossession and the payment of cost.

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Aggrieved by the order dated 19.04.2021, the Appellants have preferred present an Appeal. The grounds which are taken up by the Appellants are that possession notice issued u/s 13 (4) of the SARFAESI Act on 16.07.2015 was barred limitation u/s 35 of the SARFAESI Act, read with Article 136 of the Limitation Act, 1963 on the premise that limitation has to run from the date of passing of the decree dated 03.03.2000. It is submitted that the Ld. P.O. failed to appreciate that issuance of possession notice u/s 13 (4) of the SARFAESI Act is akin to the execution of the decree and the limitation concerning the decree starts from the date when judgment was passed. The Ld. P.O. also failed to appreciate the fact that the selling of two immovable properties and machinery hypothecated, the Bank has also recovered a substantial amount of money and there was hardly any amount outstanding now. The Demand Notice dated 30.06.2011 was highly exaggerated. It is also to be appreciated that the property viz. 212, 213, Azad Society, Ambawdi, Ahmedabad, is not a mortgaged property and hence Possession Notice dated 16.07.2015 is bad. Under the circumstances, it is prayed that an Appeal is to be allowed and the impugned order is set aside.

¶29

The Appellants have filed an aforesaid application for waiver of pre-deposit u/s 18 (1) of the SARFAESI Act. The Appellants in the state that two immovable properties, machinery and other hypothecated goods belonging to the Appellants have been sold and a substantial amount has been recovered by the Respondent Bank and there is hardly any amount outstanding from them. The Appellants have challenged the impugned order dated 19.04.2021

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passed in the S.A. Any condition to deposit the amount u/s 18 (1) of the SARFAESI Act, therefore, will close the doors of justice upon the Appellants and justice will become unaffordable to the Appellants, therefore, they pray that pre-deposit, as provided u/s 18 (1) of the SARFAESI Act, may be ordered to be waived.

¶32

The Respondent Bank has filed an Affidavit in Reply to the application for waiver of pre-deposit. The Respondents have challenged the locus of Appellant Nos.2 and 3 to file this Appeal because they can be aggrieved by the measures taken by the Respondent Bank under the SARFAESI Act concerning the property mortgaged by the Appellant No.1. They are only guarantors and legal heirs of the guarantors. The Respondent would point out that permission granted by the Hon’ble High Court of Gujarat vide order dated 04.03.2022 passed in L.P.A. No. 75 of 2022 is to challenge the impugned order of the D.R.T. dated 19.04.2021 before the appropriate forum and that right was only to Appellant No.1 and not to other Appellants who were not even parties to the aforesaid L.P.A. Appellant No.1 is a sole proprietorship. The proprietorship has no separate entity or existence. The Order of the Single Bench of the Hon'ble High Court in S.C.A has not been produced by the Appellants, nor have they produced the order dated 04.03.2022 disposing of the said L.P.A. challenging the order in the S.C.A. mentioned above. The Appellants have, therefore, not approached this Tribunal with clean hands. Despite the dismissal of the S.A. No. 171 of 2016 by the D.R.T.-I, Ahmedabad, vide impugned order dated 19.04.2021, the Appellant No.1 continued his challenge of the

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steps under the SARFAESI Act by filing S.C.A. No. 2763 of 2017 which was dismissed by the Hon’ble High Court on 07.10.2021 which is on a date after the dismissal of the D.R.T. notwithstanding the order of the D.R.T. the Appeal was filed before the Hon'ble High Court of Gujarat as L.P.A. which was to be dismissed and subsequently withdrawn. The exparte Order of the Division Bench of the High Court of Gujarat at Exh. C was challenged in S.L.P. No. 2228 of 2022 and vide order dated 22.02.2022 which is exhibited as D, the Hon'ble Supreme Court was pleased to issue notice inter alia directing the Hon'ble High Court of Gujarat as follows :

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“In the meantime, the Division Bench of the High Court either to finally decide and dispose of the LPA and/or at least the application for interim relief to be decided on or before 09.03.2022 and the order that may be passed to be placed before the Court on the next date of hearing.”

¶36

The L.P.A. was listed on several dates and finally, it came before the Division Bench on 04.03.2022, the first Appellant sought permission to withdraw L.P.A. with certain conditions and the Division Bench permitted the Appellant to withdraw the L.P.A. and earlier proceeded to extend interim relief, reduced the cost imposed by the Single Judge of Hon'ble High Court of Gujarat in the S.C.A. and further proceeded to set aside that Order by directing the appropriate forum before whom the Appellants were permitted to approach to decide the case without being influenced by the order of the Ld. Single Judge. That order of the Division Bench is exhibited as Exh. E. Aggrieved by that order at Exh. E reducing the costs and also extend the stay, the Respondents filed S.L.P. No. 4724 of 2022 before the Hon'ble Supreme Court and after disposal of the Letters

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Patent by the Division Bench, SLP © 2228/2022 was filed before the Hon'ble Apex Court and both the Appeals were disposed of by Judgment dated 13.05.2022.

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The Respondents would submit that all the issues raised by the Appellants have been dismissed and set aside in the impugned judgment of 19.04.2021 and the Hon’ble High Court of Gujarat has also considered the impugned order dated 07.10.2021. Even though the Division Bench had set aside the order of the Single Judge, the Hon’ble Supreme Court set aside the Order of the Division Bench observing thus:

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"In view of the above and for the reasons stated above, the Civil Appeal arising out of SLP (C) No. 2228/2022 is disposed of as having become infructuous. The impugned order dated 04.03.2022 passed by the Division Bench of the High Court of Gujarat at Ahmedabad in Letters Patent Appeal No. 75/2022 in so far as in terms of paragraphs 3(ii), 3(iii) and in paragraph 4 which reads as under, is hereby quashed and set aside:-

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“3(ii) Till the next date of hearing, interim relief if any, granted and which is in existence, is extended upto 14.03.2022.

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3(iii) As far as the cost imposed by the learned Single Judge is concerned, the same is reduced to Rs.25,000?-(Rupees Twenty Five Thousand only) and the same shall be paid to respondent No. 1 by RGTS on or by 11.03.2022.

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It is needless to say that the appropriate forum, which is going to examine the order dated 19.04.2016 passed by the Debt Recovery Tribunal-1 Ahmedabad in Case No. S.A.171 of 2016, shall deal with the case independently without being influenced by the observations made by the Single Judge, vide order dated 07.10.2021 passed in Special Civil Application No. 2763 of 2017 and without being influenced by the order of cost imposed by this Appellate Bench.

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Further, the ex-parte interim order in the Letters Patent Appeal also stands vacated.

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The present Civil Appeals arising out of SLP (C) No. 2228 /2022 and SLP (C) No. 4724/2022, are allowed/ disposed of to the aforesaid extent with cost, which is quantified at Rs. 1,00,000/- to be deposited by the respondent No. 1 with the Gujarat High Court Legal Services Committee, within a period of four weeks from today”

¶47

The Ld counsel Sri Gupta submits that the contention of the Appellants regarding limitation is preposterous. This Appeal is only a ruse to protract the matter further. The Appellants are not entitled to any indulgence on pre-deposit because a reading of Section 18 of the SARFAESI Act makes it clear that Appeal shall not be entertained unless the Appellant deposits with the Appellate Tribunal 50% of the amount debt due from him. At best it can be reduced to 25% by the Tribunal for reasons to be recorded. The notice u/s 13 (2) of the SARFAESI Act dated 30.06.2011 claims a sum of Rs.27,35,85,200.62 together with further interest and expenses and costs. This claim was based on the Recovery Certificate issued in favour of the State Bank of India / the Assignor of the Respondent Bank. When the present Appeal was filed on 05.04.2022, the Respondent is entitled to receive a sum of Rs.160,69,49,503/- calculated as per the Recovery Certificate in its favour, 50% of that amount would come to Rs.80,34,74,751/-. The Appellants cannot proceed with Appeal unless the aforesaid amount of pre-deposit is deposited. The allegation that the Respondent has recovered a substantial amount as of 30.06.2011 and hardly any amount was outstanding, cannot be accepted, submits Sri Gupta.

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Sri Umesh Shetty, the Ld counsel for the Appellant argued that Section 18 of the SARFAESI Act would indicate that the amount to be deposited is only to be based on the notice issued u/s 13 (2) on 30.06.2011 and that amount itself is highly inflated. According to the learned counsel, the original amount lend to the Appellants was only Rs.29.50 Lakhs. The value of the property mortgaged including stocks, machinery and movables hypothecated come to Rs.2.50 Crores. The Civil Suit which was filed before the City Civil Court as Special Civil Suit No. 937 of 1986 was transferred to D.R.T., Ahmedabad after the said Tribunal was established and was numbered as Transfer Application No. 95 of 1995. The same was decreed on 03.03.200 for an amount of Rs.44,01,159.47 and a Recovery Certificate was issued thereafter a Demand Notice was issued by the R.O. in the Recovery Proceeding on 30.06.2011. An objection was filed by the first Appellant to the notice issued u/s 13 (2) of the SARFAESI Act and the Appellants thereafter filed S.A. No. 94 of 2011 challenging the notice issued u/s 13 (2) of the SARFAESI Act before the D.R.T., Ahmedabad on 05.12.2011, which was rejected as being premature on 01.06.2015. The Appellants sought to review that order by filing Review Application (R.A.) No. 9 of 2015 and that R.A. was rejected on 20.08.2015. Thereafter in the R.P. No. 360 of 2001 the R.O. directed the Bank to give details of the recoveries and that order was challenged before the D.R.T. by the Bank in the year 2016. On 16.07.2015 notice u/s, 13 (4) of the SARFAESI Act was issued by the Respondent Bank for possession of property situated in Azad Society, Ambawadi, Ahmedabad and orders were by the Ld. Chief Metropolitan

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Magistrate (C.M.M.) u/s 14 of the SARFAESI Act on 16.08.2016. Thereafter on 23.09.2016, the Appellants filed S.A. No. 171 of 2016 challenging the steps taken for possession under the SARFAESI Act by the Ld. C.M.M. The Ld counsel further submits that T.A. No. 95 of 1995 was decreed by the D.R.T., Ahmedabad, on 03.03.2000 and notice u/s 13 (4) of the SARFAESI Act was issued by the Respondent Bank only on 16.07.2015 and thereafter it is beyond the period of limitation prescribed for execution of the decree and the learned counsel submits that the proceedings under the SARFAESI Act are barred by limitation.

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The second limb of the learned counsel's argument is that interest @ 16.50% cannot be added on Rs.44,01,159.47 which was decreed. The Appellants is, therefore, entitled only to deposit 25% or 50% of the said amount which has been decreed. In support of his argument, the counsel relied on the decision of the Hon'ble Supreme Court in Narayan Chandra Ghosh V/s. UCO Bank & Ors. [ (2011) 4 SCC 548 ] wherein it is held thus :

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“7. Section 18(1) of the Act confers a statutory right on a person aggrieved by any order made by the Debts Recovery Tribunal under Section 17 of the Act to prefer an appeal to the Appellate Tribunal. However, the right conferred under Section 18(1) is subject to the condition laid down in the second proviso thereto. The second proviso 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. However, under the third proviso to the sub-section, the Appellate Tribunal has the power to reduce the amount, for the reasons to be recorded in writing, to not less than twentyfive per cent of the debt, referred to in the second proviso.

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Thus, there is an absolute bar to the entertainment of an appeal under Section 18 of the Act unless the condition precedent, as stipulated, is fulfilled. Unless the borrower makes, with the Appellate Tribunal, a pre-deposit of fifty per cent of the debt due from him or determined, an appeal under the said provision cannot be entertained by the Appellate Tribunal. The language of the said proviso is clear and admits of no ambiguity."

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The learned counsel for Appellants also relies on the decision of the Hon'ble High Court of Judicature at Bombay in M/s. Sterlite Technologies Ltd. Vs. Union of India & Ors. [ 2012 (4) ALL MR 784 ] wherein it was observed that whether a waiver is sought, both the elements of a prima facie case and the question of financial hardship would have to be considered by the Appellate Tribunal, and it was further held that at the stage when the Appellate Tribunal considers an application for dispensing with the condition of deposit, the Appellate Tribunal is not expected to render a final finding on the merits of the contentions urged concerning the judgment of the Tribunal and that has to await the final determination of the appeal and that only the question as to whether a prima facie case has been made out has to be evaluated by the Appellate Tribunal.

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The Ld. counsel submits that no interest can be added to the amount mentioned in notice u/s 13 (2) of the SARFAESI Act and that between the amount claimed and determined by the D.R.T. The lesser amount among the two will have to be taken. In support of his argument, the learned counsel relies on the decision of the Hon'ble High Court of Chhatisgarh, Bilaspur, in Shri. Mohan Products Pvt. Ltd. & Ors. Vs. State Bank of India & Ors. [ 2020 SCC OnLine Chh 2302 ] wherein it was declared thus :

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“We declare that 50% of the amount to be deposited by the borrower for entertaining the appeal preferred before the DRAT, in terms of the second proviso to Section 18(1) of the SARFAESI Act, is 50% of the amount of debt due from him as claimed by the secured creditors in the notice issued under Section 13(2) of the SARFAESI Act and never beyond.”

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In arriving at this conclusion the Hon'ble High Court of Chhattisgarh has retrospectively disagreed with the finding rendered by a Division Bench of the Bombay High Court in Eskays Construction Pvt. Ltd. Vs. Soma Papers & Industries Ltd. & Others [reported in AIR 2017 Bombay 10] and M/s MRB Roadconst Pvt. Ltd. Vs. Rupee Co-op. Bank Ltd. [reported in AIR 2016 (NOC) 334 (BOM.)] and have concurred with a view expressed by Division Bench of Madras High Court in Sivakumar Textiles vs. Debt Recovery Appellate Tribunal, Chennai & Others AIR 2012 Madras 57 and in Mrs. Mekala Raj vs. The Presiding Officer Debt Recovery Appellate Tribunal Ethiraj Salai Chennai & Others (2017) SCC Online Mad 16033, as well as that of a Division Bench of the Delhi High Court in Poonam Manshani vs. J&K Bank Ltd. & Anr. AIR 2010 Delhi28. The learned counsel also relied on the decision of the High Court of Kerala in Ummer Farooque Vs. Catholic Syrian Bank Ltd. & Ors. 2019 SCC OnLine Ker 23133 wherein relying on the decision of the Madras High Court in Sivakumar Textiles (Supra) it was observed thus :

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"20.10 The emphasis in the second proviso is that the borrower deposits with the Appellate Tribunal 50% of the amount of debt due from the borrower as claimed by the secured creditors. So the 50% amount on the debt is claimed by the bank or determined by DRT. There is no third angle, i.e., as determined by DRAT. This Court is of

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the view that the calculation and inclusion of interest by DRAT amounts to the determination of debt by DRAT, and the third angle is not available from the text or syntax of the second proviso."

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Mr Umesh Shetty relies on these decisions and argues that the Appellants are only liable to deposit 25% of the amount which has been decreed by the D.R.T. and submits that in case the plea of limitation is to be accepted, they are not liable to pay any amount.

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In reply, Sri Rohit Gupta for Respondent submits that delay was caused not by any inaction on the part of the Respondent, but due to the various proceedings initiated by the Appellants to protract the proceedings. From 1986 onwards, proceedings are pending against the Appellants before different forums and they have succeeded in thwarting the attempts so far. The Securitization Application was dismissed on 01.06.2015 and thereafter the Appellants filed a Review Application on 03.07.2015 and the same was dismissed on 27.08.2015. The notice u/s 13 (2) of the SARFAESI Act was issued in S.A. No. 94/20. The notice u/s 13 (4) of the SRAFAESI Act was issued on 16.07.2015. The learned counsel for the Respondent has relied upon the decision of the Hon'ble High Court of Gujarat in Ivee Injectaa Ltd. & Anr. Vs. Junagadh Vibhagiya Nagrik Sahakari Bank Ltd.2005 SCC OnLine Guj 275 wherein the question of limitation u/s36 of the SARFAESI Act and Articles 62, 63 and 136 of the Limitation Act are discussed.

¶66

What is pertinent is the issuance of notice u/s 13 (2) of the SARFAESI Act and it is to be issued within 12 years of the passing of the decree. The Bank is entitled to execute the decree within a period of limitation prescribed for execution of the decree which is 14

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12 years from the date of the default in payment of the amount under the decree. The Court has also observed that the Securitisation Act confers power on the mortgagees, which are financial institutions, to enforce security without the intervention of any Court or Tribunal and notwithstanding anything contained in Sections 69 and 69A of the Transfer of Property Act, 1882 for enforcement of security are to be taken after giving the borrower a notice, in writing, to discharge in full his liabilities of the secured creditors within 60 days from the date of notice is necessary and if the borrower gives a reply raising any dispute about the amount due including dispute about interest, the financial institution will have to meaningfully consider the reply and take the decision and thereafter proceed under sub-section (4) of Section 13 which can be challenged u/s 17 of the SARFAESI Act before the D.R.T. Hence, when the secured creditor has already obtained a decree of a Civil Court/Debts Recovery Tribunal, issuance of notice under Section 13(2) of the Securitisation Act is not to be construed as institution of a suit in a Civil Court for enforcement of the mortgage, but the proceeding would be in the nature of execution of the decree.

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The learned counsel has also relied on the decision of the Kerala High Court in E. P. Sreedharan Vs. The Manager, Indian Bank & Anr. 2011 SCC OnLine Ker 3959 wherein a contention was raised that the limitation period runs from the date on which loan account was classified as non-performing assets (N.P.A.) The Court concluded that from Section 36 of the SARFAESI Act it is evident that the claim in respect of the 'financial asset' should be made within

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a prescribed period of limitation and since the decree is also a 'debt' and 'financial asset'. The claim concerning the 'financial asset' is to be made based on notice u/s 13 (2) of the SARFAESI Act. So the limitation can only be reckoned from the date of the decree.

¶71

After having anxiously considered the submissions made by both sides, and the materials on record, I find that even after the issuance of notice u/s 13 (2) of the SARFAESI Act, there were intervening stay and filing of Writ Petitions by the Appellants which caused the delay, and the Respondent was not able to proceed further because of the stalling of the proceedings. Hence, it cannot be said that there is a delay or bar of limitation in seeking possession of the property or executing the decree.

¶72

Coming to the amount to be ascertained for Section 18 of the SARFAESI Act, I find that 'debt' defined in S.2(g) of the Recovery of Debts and Bankruptcy Act, 1993 (hereinafter referred to as the RDB Act) is adopted in the SARFAESI Act, and under Section 2 (ha). Section 2 (g) of the RDB Act debt is liability inclusive of interest. The Division Bench of the Hon'ble High Court of Bombay has in MRB Road Const (Supra) considering the scope of Section 18 (1) of the SARFAESI Act, held that the amount that is to be considered by DRAT while directing payment is the amount claimed or the amount determined together with the future interest that has accrued. the decision of Madras High Court in Sivakumar Textiles (Supra) has also been discussed and it is held as thus :

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"22. Having said this, we shall now deal with the judgments relied upon by Mr Shah. The first judgment

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relied upon by Mr Shah was a decision of the Madras High Court in the case of , Sivakumar Textiles, AIR 2012 Madras 57 . 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 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. This is more so when one looks at the definition of the word "debt" as defined under the SARFAESI Act which means any liability inclusive of interest claimed as due from any person by a bank or financial institution during the course of any business activity undertaken by the said bank or financial institution. We must also mention that on a scrutiny of the said decision, we do not find any reference being made to the definition of the word "debt" appearing in section 2(ha) of the SARFAESI Act. We, therefore, find that this decision would not carry the case of the Petitioner any further."

¶76

In the instant case, the notice u/s 13 (2) mentioned that amount due as on the date of the notice is to be paid together with future interest due and if the claim for future interest has been made in the notice u/s 13 (2) and the same certainly will 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.

¶77

The decision of the Division Bench of the Bombay High Court will be binding upon this Tribunal. It is not understood whether the notice that is issued in those decisions relied upon by the learned counsel for the Appellants had calculated the interest and whether there was a decree before that. In the instant case, there was a decree

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and in consequence, to that notice u/s, 13 (2) of the SARFAESI Act was issued which included a demand for future interest. Under the circumstances, Appellants would be required to pay interest on the amount. Notice dated 30.06.2011 in the instant case demanded a sum of Rs.27,35,85,200.62 together with further interest and expenses and costs. This claim was based on the Recovery Certificate issued in favour of State Bank of India and when the Appeal was filed on 06.04.2022, the Respondent is entitled to receive a sum of Rs.160,69,49,503/- calculated as per the Recovery Certificate.

¶80

Given the Judgment of the Hon'ble Apex Court in the SLPs setting aside the order of the Division Bench of the High Court of Gujarat, the embargo in relying upon the decision of the Single Bench Judgment in S.C.A No. 2763 is no longer in place. I would, therefore, extract a couple of paragraphs from that Judgment at Ext. B. It reads thus:

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"22. Having heard learned advocates for the respective parties and having considered the material on record it appears that the petitioner has filed this petition only intending to stall the recovery proceedings initiated by the respondent bank under the provisions of the SARFAESI Act. This aspect is dealt with by the Tribunal in the order dated 19-04.2021 in detail while dismissing the Securitisation Application No. 171 of 2016 preferred by the Aromatics Intermediates and Chemicals through petitioner and other guarantors with a cost of Rs. 25,000/-"

¶82

After having extensively quoted the order of the DRT, the Learned Single Judge holds thus:

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"24. From the narration of the facts made by the DRT, it is clear that the petitioner has only one goal and agenda as not to pay any single rupee after the decree passed by the

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DRT in the year 2000. The petitioner has remained successful for almost 21 years for not paying any amount of the outstanding dues as per the decree passed by the DRT which has achieved finality. In such circumstances, without adverting to the further facts and taking into consideration the finding of the DRT which is not under challenge and which has achieved finality, the petition is dismissed with cost of Rs. 1 lakh. The amount of cost to be deposited with the Gujarat State Legal Services Authority within a period of four weeks from the date of receipt of this order.”

¶86

The Appellants have succeeded in dragging the matter right from 1986 to this date. I am, therefore, of the opinion that they are not entitled to any indulgence from this Tribunal to get the amount of pre-deposit reduced. There is no prima facie case made out by the Appellants, and the financial condition of the Appellants also does not appear to be under any strain.

¶87

The submission of Sri Shetty that the amount realised from the sale of some secured assets needs to be deducted, is not acceptable because the Appellants have challenged all proceedings including the auction sale.

¶88

The Appellants are, therefore, directed to deposit a sum of Rs.80,34,74,751/- in two equal instalments. The first instalment shall be deposited on or before 28.06.2022 and the second instalment shall be deposited on or before 12.07.2022.

¶89

Even in case the above amounts are deposited, the Appellants are not entitled to any stay of further proceedings initiated by the Bank for taking over the possession of the secured property because they have succeeded in getting the proceeding stalled for a

¶90

¶91

sufficiently long time. In case of default in any of the above-referred deposits, the Appeal stands dismissed automatically.

¶92

The above amount shall be deposited in the form of a Demand Draft with the Registrar of this Tribunal.

¶93

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.

¶94

Post on 29.06.2022 for reporting compliance with payment of the first instalment.

¶95

Sd/Chairperson

¶96

dpj-1

¶97

Aromatic Intermediates v. Kotak Mahindra Bank Limited

Case brief

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Aromatic Intermediates v. Kotak Mahindra Bank Limited

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